Based on various researches at Oak Spring University , IHI Corp. is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, there is increasing trade war between United States & China, increasing energy prices,
increasing household debt because of falling income levels, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that IHI Corp. can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the IHI Corp., and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which IHI Corp. 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 IHI Corp. can be done for the following purposes –
1. Strategic planning of IHI Corp.
2. Improving business portfolio management of IHI Corp.
3. Assessing feasibility of the new initiative in Japan
4. Making a Misc. Capital Goods sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of IHI Corp.
Strengths of IHI Corp. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of IHI Corp. are -
High brand equity
– IHI Corp. has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled IHI Corp. to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– IHI Corp. is present in almost all the verticals within the Misc. Capital Goods industry. This has provided IHI Corp. a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Organizational Resilience of IHI Corp.
– The covid-19 pandemic has put organizational resilience at the centre of everthing IHI Corp. does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Misc. Capital Goods industry
- digital transformation varies from industry to industry. For IHI Corp. digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. IHI Corp. has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
High switching costs
– The high switching costs that IHI Corp. 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.
Superior customer experience
– The customer experience strategy of IHI Corp. in Misc. Capital Goods industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– IHI Corp. has one of the best training and development program in Capital Goods industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Effective Research and Development (R&D)
– IHI Corp. has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – IHI Corp. staying ahead in the Misc. Capital Goods industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the IHI Corp. are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Operational resilience
– The operational resilience strategy of IHI Corp. comprises – understanding the underlying the factors in the Misc. Capital Goods industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Innovation driven organization
– IHI Corp. is one of the most innovative firm in Misc. Capital Goods sector.
Low bargaining power of suppliers
– Suppliers of IHI Corp. in the Capital Goods sector have low bargaining power. IHI Corp. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps IHI Corp. to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of IHI Corp. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of IHI Corp. are -
Ability to respond to the competition
– As the decision making is very deliberative at IHI Corp., in the dynamic environment of Misc. Capital Goods industry it has struggled to respond to the nimble upstart competition. IHI Corp. has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ less understanding of IHI Corp. strategy
– From the outside it seems that the employees of IHI Corp. 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.
Interest costs
– Compare to the competition, IHI Corp. has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Slow decision making process
– As mentioned earlier in the report, IHI Corp. has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Misc. Capital Goods industry over the last five years. IHI Corp. 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, IHI Corp. is slow explore the new channels of communication. These new channels of communication can help IHI Corp. to provide better information regarding Misc. Capital Goods products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, IHI Corp. has high operating costs in the Misc. Capital Goods industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract IHI Corp. lucrative customers.
High dependence on IHI Corp. ‘s star products
– The top 2 products and services of IHI Corp. still accounts for major business revenue. This dependence on star products in Misc. Capital Goods industry has resulted into insufficient focus on developing new products, even though IHI Corp. has relatively successful track record of launching new products.
Need for greater diversity
– IHI Corp. 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 to strategic competitive environment developments
– As IHI Corp. is one of the leading players in the Misc. Capital Goods industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Misc. Capital Goods industry in last five years.
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 IHI Corp. supply chain. Even after few cautionary changes, IHI Corp. is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left IHI Corp. vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of IHI Corp. is dominated by functional specialists. It is not different from other players in the Misc. Capital Goods industry, but IHI Corp. needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help IHI Corp. to focus more on services in the Misc. Capital Goods industry rather than just following the product oriented approach.
IHI Corp. Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of IHI Corp. are -
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help IHI Corp. to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for IHI Corp. 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 IHI Corp. to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of IHI Corp. has opened avenues for new revenue streams for the organization in Misc. Capital Goods industry. This can help IHI Corp. to build a more holistic ecosystem for IHI Corp. products in the Misc. Capital Goods industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– IHI Corp. can develop new processes and procedures in Misc. Capital Goods 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.
Learning at scale
– Online learning technologies has now opened space for IHI Corp. to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Building a culture of innovation
– managers at IHI Corp. can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Misc. Capital Goods industry.
Loyalty marketing
– IHI Corp. 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects IHI Corp. can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Misc. Capital Goods industry, but it has also influenced the consumer preferences. IHI Corp. can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Misc. Capital Goods industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. IHI Corp. 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. IHI Corp. 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 Misc. Capital Goods industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for IHI Corp. in the Misc. Capital Goods industry. Now IHI Corp. can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, IHI Corp. can use these opportunities to build new business models that can help the communities that IHI Corp. operates in. Secondly it can use opportunities from government spending in Misc. Capital Goods sector.
Better consumer reach
– The expansion of the 5G network will help IHI Corp. to increase its market reach. IHI Corp. 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.
Threats IHI Corp. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of IHI Corp. are -
Increasing wage structure of IHI Corp.
– 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 IHI Corp..
Consumer confidence and its impact on IHI Corp. 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 Misc. Capital Goods industry and other sectors.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for IHI Corp. in Misc. Capital Goods industry. The Misc. Capital Goods 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.
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 IHI Corp. business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– IHI Corp. 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 Misc. Capital Goods industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Misc. Capital Goods industry are lowering. It can presents IHI Corp. with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Misc. Capital Goods sector.
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 IHI Corp..
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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. IHI Corp. needs to understand the core reasons impacting the Misc. Capital Goods industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– IHI Corp. has witnessed rapid integration of technology during Covid-19 in the Misc. Capital Goods industry. As one of the leading players in the industry, IHI Corp. needs to keep up with the evolution of technology in the Misc. Capital Goods sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Environmental challenges
– IHI Corp. needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. IHI Corp. can take advantage of this fund but it will also bring new competitors in the Misc. Capital Goods industry.
High dependence on third party suppliers
– IHI Corp. 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.
Weighted SWOT Analysis of IHI Corp. Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at IHI Corp. 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 IHI Corp. 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 IHI Corp. 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 IHI Corp. 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 IHI Corp. needs to make to build a sustainable competitive advantage.
