Sumitomo Heavy Industries (6302) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Sumitomo Heavy Industries (Japan)

Based on various researches at Oak Spring University , Sumitomo Heavy Industries is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, there is backlash against globalization, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, etc

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Introduction to SWOT Analysis of Sumitomo Heavy Industries

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sumitomo Heavy Industries can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sumitomo Heavy Industries, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sumitomo Heavy Industries 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Sumitomo Heavy Industries can be done for the following purposes –
1. Strategic planning of Sumitomo Heavy Industries
2. Improving business portfolio management of Sumitomo Heavy Industries
3. Assessing feasibility of the new initiative in Japan
4. Making a Constr. & Agric. Machinery sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sumitomo Heavy Industries

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Strengths of Sumitomo Heavy Industries | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Sumitomo Heavy Industries are -

Diverse revenue streams

– Sumitomo Heavy Industries is present in almost all the verticals within the Constr. & Agric. Machinery industry. This has provided Sumitomo Heavy Industries 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.

Learning organization

- Sumitomo Heavy Industries is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Sumitomo Heavy Industries is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sumitomo Heavy Industries emphasize – knowledge, initiative, and innovation.

Cross disciplinary teams

– Horizontal connected teams at the Sumitomo Heavy Industries 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.

Innovation driven organization

– Sumitomo Heavy Industries is one of the most innovative firm in Constr. & Agric. Machinery sector.

Strong track record of project management in the Constr. & Agric. Machinery industry

– Sumitomo Heavy Industries is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Low bargaining power of suppliers

– Suppliers of Sumitomo Heavy Industries in the Capital Goods sector have low bargaining power. Sumitomo Heavy Industries has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sumitomo Heavy Industries to manage not only supply disruptions but also source products at highly competitive prices.

Ability to lead change in Constr. & Agric. Machinery

– Sumitomo Heavy Industries is one of the leading players in the Constr. & Agric. Machinery industry in Japan. Over the years it has not only transformed the business landscape in the Constr. & Agric. Machinery industry in Japan but also across the existing markets. The ability to lead change has enabled Sumitomo Heavy Industries in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Effective Research and Development (R&D)

– Sumitomo Heavy Industries has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sumitomo Heavy Industries staying ahead in the Constr. & Agric. Machinery industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Training and development

– Sumitomo Heavy Industries 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.

Superior customer experience

– The customer experience strategy of Sumitomo Heavy Industries in Constr. & Agric. Machinery industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Highly skilled collaborators

– Sumitomo Heavy Industries has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Constr. & Agric. Machinery industry. Secondly the value chain collaborators of Sumitomo Heavy Industries have helped the firm to develop new products and bring them quickly to the marketplace.

High brand equity

– Sumitomo Heavy Industries has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sumitomo Heavy Industries to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

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Weaknesses of Sumitomo Heavy Industries | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Sumitomo Heavy Industries are -

Slow to strategic competitive environment developments

– As Sumitomo Heavy Industries is one of the leading players in the Constr. & Agric. Machinery industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Constr. & Agric. Machinery industry in last five years.

Increasing silos among functional specialists

– The organizational structure of Sumitomo Heavy Industries is dominated by functional specialists. It is not different from other players in the Constr. & Agric. Machinery industry, but Sumitomo Heavy Industries needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sumitomo Heavy Industries to focus more on services in the Constr. & Agric. Machinery industry rather than just following the product oriented approach.

Aligning sales with marketing

– From the outside it seems that Sumitomo Heavy Industries needs to have more collaboration between its sales team and marketing team. Sales professionals in the Constr. & Agric. Machinery industry have deep experience in developing customer relationships. Marketing department at Sumitomo Heavy Industries can leverage the sales team experience to cultivate customer relationships as Sumitomo Heavy Industries is planning to shift buying processes online.

Employees’ less understanding of Sumitomo Heavy Industries strategy

– From the outside it seems that the employees of Sumitomo Heavy Industries 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.

Products dominated business model

– Even though Sumitomo Heavy Industries has some of the most successful models in the Constr. & Agric. Machinery industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Sumitomo Heavy Industries should strive to include more intangible value offerings along with its core products and services.

Skills based hiring in Constr. & Agric. Machinery industry

– The stress on hiring functional specialists at Sumitomo Heavy Industries 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.

Slow decision making process

– As mentioned earlier in the report, Sumitomo Heavy Industries has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Constr. & Agric. Machinery industry over the last five years. Sumitomo Heavy Industries 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 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 Heavy Industries supply chain. Even after few cautionary changes, Sumitomo Heavy Industries is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sumitomo Heavy Industries vulnerable to further global disruptions in South East Asia.

No frontier risks strategy

– From the 10K / annual statement of Sumitomo Heavy Industries, it seems that company is thinking out the frontier risks that can impact Constr. & Agric. Machinery 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.

Compensation and incentives

– The revenue per employee of Sumitomo Heavy Industries is just above the Constr. & Agric. Machinery industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.

Need for greater diversity

– Sumitomo Heavy Industries 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.

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Sumitomo Heavy Industries Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Sumitomo Heavy Industries are -

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 Heavy Industries can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Learning at scale

– Online learning technologies has now opened space for Sumitomo Heavy Industries 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.

Using analytics as competitive advantage

– Sumitomo Heavy Industries has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Constr. & Agric. Machinery sector. This continuous investment in analytics has enabled Sumitomo Heavy Industries to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sumitomo Heavy Industries to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Sumitomo Heavy Industries can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Sumitomo Heavy Industries to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Sumitomo Heavy Industries in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Constr. & Agric. Machinery industry, and it will provide faster access to the consumers.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sumitomo Heavy Industries 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 Heavy Industries to hire the very best people irrespective of their geographical location.

Developing new processes and practices

– Sumitomo Heavy Industries can develop new processes and procedures in Constr. & Agric. Machinery 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Constr. & Agric. Machinery industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sumitomo Heavy Industries 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 Heavy Industries 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 Constr. & Agric. Machinery industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sumitomo Heavy Industries in the Constr. & Agric. Machinery industry. Now Sumitomo Heavy Industries can target international markets with far fewer capital restrictions requirements than the existing system.

Manufacturing automation

– Sumitomo Heavy Industries can use the latest technology developments to improve its manufacturing and designing process in Constr. & Agric. Machinery sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Constr. & Agric. Machinery industry, but it has also influenced the consumer preferences. Sumitomo Heavy Industries can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Leveraging digital technologies

– Sumitomo Heavy Industries 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sumitomo Heavy Industries can use these opportunities to build new business models that can help the communities that Sumitomo Heavy Industries operates in. Secondly it can use opportunities from government spending in Constr. & Agric. Machinery sector.

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Threats Sumitomo Heavy Industries External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Sumitomo Heavy Industries are -

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.

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 Heavy Industries.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Constr. & Agric. Machinery industry are lowering. It can presents Sumitomo Heavy Industries with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Constr. & Agric. Machinery sector.

Easy access to finance

– Easy access to finance in Constr. & Agric. Machinery industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sumitomo Heavy Industries can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Increasing wage structure of Sumitomo Heavy Industries

– 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 Heavy Industries.

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 Heavy Industries in the Constr. & Agric. Machinery sector and impact the bottomline of the organization.

Technology acceleration in Forth Industrial Revolution

– Sumitomo Heavy Industries has witnessed rapid integration of technology during Covid-19 in the Constr. & Agric. Machinery industry. As one of the leading players in the industry, Sumitomo Heavy Industries needs to keep up with the evolution of technology in the Constr. & Agric. Machinery 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.

Consumer confidence and its impact on Sumitomo Heavy Industries 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 Constr. & Agric. Machinery industry and other sectors.

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 Heavy Industries business can come under increasing regulations regarding data privacy, data security, etc.

Instability in the European markets

– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Sumitomo Heavy Industries will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Sumitomo Heavy Industries 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 Heavy Industries prominent markets.

High dependence on third party suppliers

– Sumitomo Heavy Industries 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.

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.

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Weighted SWOT Analysis of Sumitomo Heavy Industries Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sumitomo Heavy Industries 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 Heavy Industries 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 Heavy Industries 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 Heavy Industries 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 Heavy Industries needs to make to build a sustainable competitive advantage.

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