Sumitomo Chemical (4005) SWOT Analysis / TOWS Matrix / MBA Resources
Chemical Manufacturing
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Sumitomo Chemical (Japan)
Based on various researches at Oak Spring University , Sumitomo Chemical is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , increasing energy prices, increasing commodity prices,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, etc
Introduction to SWOT Analysis of Sumitomo Chemical
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sumitomo Chemical can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sumitomo Chemical, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sumitomo Chemical operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Sumitomo Chemical can be done for the following purposes –
1. Strategic planning of Sumitomo Chemical
2. Improving business portfolio management of Sumitomo Chemical
3. Assessing feasibility of the new initiative in Japan
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sumitomo Chemical
Strengths of Sumitomo Chemical | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sumitomo Chemical are -
Strong track record of project management in the Chemical Manufacturing industry
– Sumitomo Chemical is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Chemical Manufacturing industry
– Sumitomo Chemical has clearly differentiated products in the market place. This has enabled Sumitomo Chemical to fetch slight price premium compare to the competitors in the Chemical Manufacturing industry. The sustainable margins have also helped Sumitomo Chemical to invest into research and development (R&D) and innovation.
Innovation driven organization
– Sumitomo Chemical is one of the most innovative firm in Chemical Manufacturing sector.
Highly skilled collaborators
– Sumitomo Chemical has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemical Manufacturing industry. Secondly the value chain collaborators of Sumitomo Chemical have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Sumitomo Chemical has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sumitomo Chemical has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
High brand equity
– Sumitomo Chemical has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sumitomo Chemical to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– Sumitomo Chemical is one of the leading players in the Chemical Manufacturing industry in Japan. It is in a position to attract the best talent available in Japan. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Sumitomo Chemical
– The covid-19 pandemic has put organizational resilience at the centre of everthing Sumitomo Chemical does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Sumitomo Chemical has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sumitomo Chemical staying ahead in the Chemical Manufacturing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Chemical Manufacturing
– Sumitomo Chemical is one of the leading players in the Chemical Manufacturing industry in Japan. Over the years it has not only transformed the business landscape in the Chemical Manufacturing industry in Japan but also across the existing markets. The ability to lead change has enabled Sumitomo Chemical in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Sumitomo Chemical is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Chemical Manufacturing industry. The technology infrastructure of Japan is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
High switching costs
– The high switching costs that Sumitomo Chemical has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Weaknesses of Sumitomo Chemical | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sumitomo Chemical are -
No frontier risks strategy
– From the 10K / annual statement of Sumitomo Chemical, it seems that company is thinking out the frontier risks that can impact Chemical Manufacturing industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Need for greater diversity
– Sumitomo Chemical has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow decision making process
– As mentioned earlier in the report, Sumitomo Chemical has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemical Manufacturing industry over the last five years. Sumitomo Chemical even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High cash cycle compare to competitors
Sumitomo Chemical has a high cash cycle compare to other players in the Chemical Manufacturing industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ less understanding of Sumitomo Chemical strategy
– From the outside it seems that the employees of Sumitomo Chemical don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Aligning sales with marketing
– From the outside it seems that Sumitomo Chemical needs to have more collaboration between its sales team and marketing team. Sales professionals in the Chemical Manufacturing industry have deep experience in developing customer relationships. Marketing department at Sumitomo Chemical can leverage the sales team experience to cultivate customer relationships as Sumitomo Chemical is planning to shift buying processes online.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Sumitomo Chemical supply chain. Even after few cautionary changes, Sumitomo Chemical is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sumitomo Chemical vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sumitomo Chemical is slow explore the new channels of communication. These new channels of communication can help Sumitomo Chemical to provide better information regarding Chemical Manufacturing products and services. It can also build an online community to further reach out to potential customers.
Capital Spending Reduction
– Even during the low interest decade, Sumitomo Chemical has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Chemical Manufacturing industry using digital technology.
High dependence on Sumitomo Chemical ‘s star products
– The top 2 products and services of Sumitomo Chemical still accounts for major business revenue. This dependence on star products in Chemical Manufacturing industry has resulted into insufficient focus on developing new products, even though Sumitomo Chemical has relatively successful track record of launching new products.
Skills based hiring in Chemical Manufacturing industry
– The stress on hiring functional specialists at Sumitomo Chemical has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Sumitomo Chemical Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sumitomo Chemical are -
Developing new processes and practices
– Sumitomo Chemical can develop new processes and procedures in Chemical Manufacturing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Creating value in data economy
– The success of analytics program of Sumitomo Chemical has opened avenues for new revenue streams for the organization in Chemical Manufacturing industry. This can help Sumitomo Chemical to build a more holistic ecosystem for Sumitomo Chemical products in the Chemical Manufacturing industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Sumitomo Chemical can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Chemical Manufacturing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sumitomo Chemical can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Sumitomo Chemical can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sumitomo Chemical in the Chemical Manufacturing industry. Now Sumitomo Chemical can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– Sumitomo Chemical can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Better consumer reach
– The expansion of the 5G network will help Sumitomo Chemical to increase its market reach. Sumitomo Chemical will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sumitomo Chemical in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemical Manufacturing industry, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sumitomo Chemical is facing challenges because of the dominance of functional experts in the organization. Sumitomo Chemical can utilize new technology in the field of Chemical Manufacturing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Buying journey improvements
– Sumitomo Chemical can improve the customer journey of consumers in the Chemical Manufacturing industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Using analytics as competitive advantage
– Sumitomo Chemical has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Chemical Manufacturing sector. This continuous investment in analytics has enabled Sumitomo Chemical to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sumitomo Chemical to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sumitomo Chemical to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Sumitomo Chemical to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Sumitomo Chemical has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats Sumitomo Chemical External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sumitomo Chemical are -
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Sumitomo Chemical needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– Sumitomo Chemical can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Chemical Manufacturing industry.
Increasing wage structure of Sumitomo Chemical
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Sumitomo Chemical.
High dependence on third party suppliers
– Sumitomo Chemical high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sumitomo Chemical in Chemical Manufacturing industry. The Chemical Manufacturing industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Sumitomo Chemical in the Chemical Manufacturing sector and impact the bottomline of the organization.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Sumitomo Chemical.
Easy access to finance
– Easy access to finance in Chemical Manufacturing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sumitomo Chemical can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Sumitomo Chemical business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Sumitomo Chemical is facing in Chemical Manufacturing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Sumitomo Chemical demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Chemical Manufacturing industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sumitomo Chemical can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Sumitomo Chemical prominent markets.
Weighted SWOT Analysis of Sumitomo Chemical Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sumitomo Chemical needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Sumitomo Chemical is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Sumitomo Chemical is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Sumitomo Chemical to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Sumitomo Chemical needs to make to build a sustainable competitive advantage.