Sumitomo Heavy Industries (6302) SWOT Analysis / TOWS Matrix / MBA Resources
Constr. & Agric. Machinery
Strategy / 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 – increasing household debt because of falling income levels, increasing energy prices, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, increasing commodity prices, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy,
geopolitical disruptions, central banks are concerned over increasing inflation, etc
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.
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
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 -
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.
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.
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.
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.
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.
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.
High switching costs
– The high switching costs that Sumitomo Heavy Industries 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.
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.
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.
Digital Transformation in Constr. & Agric. Machinery industry
- digital transformation varies from industry to industry. For Sumitomo Heavy Industries digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sumitomo Heavy Industries 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.
Operational resilience
– The operational resilience strategy of Sumitomo Heavy Industries comprises – understanding the underlying the factors in the Constr. & Agric. Machinery 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.
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 -
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.
High operating costs
– Compare to the competitors, Sumitomo Heavy Industries has high operating costs in the Constr. & Agric. Machinery industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Sumitomo Heavy Industries lucrative customers.
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.
Capital Spending Reduction
– Even during the low interest decade, Sumitomo Heavy Industries 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 Constr. & Agric. Machinery industry using digital technology.
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 Sumitomo Heavy Industries ‘s star products
– The top 2 products and services of Sumitomo Heavy Industries still accounts for major business revenue. This dependence on star products in Constr. & Agric. Machinery industry has resulted into insufficient focus on developing new products, even though Sumitomo Heavy Industries has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative at Sumitomo Heavy Industries, in the dynamic environment of Constr. & Agric. Machinery industry it has struggled to respond to the nimble upstart competition. Sumitomo Heavy Industries has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sumitomo Heavy Industries is slow explore the new channels of communication. These new channels of communication can help Sumitomo Heavy Industries to provide better information regarding Constr. & Agric. Machinery products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of Japan, Sumitomo Heavy Industries needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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 -
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.
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.
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.
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.
Loyalty marketing
– Sumitomo Heavy Industries 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 Sumitomo Heavy Industries can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Buying journey improvements
– Sumitomo Heavy Industries can improve the customer journey of consumers in the Constr. & Agric. Machinery 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.
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.
Better consumer reach
– The expansion of the 5G network will help Sumitomo Heavy Industries to increase its market reach. Sumitomo Heavy Industries 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.
Creating value in data economy
– The success of analytics program of Sumitomo Heavy Industries has opened avenues for new revenue streams for the organization in Constr. & Agric. Machinery industry. This can help Sumitomo Heavy Industries to build a more holistic ecosystem for Sumitomo Heavy Industries products in the Constr. & Agric. Machinery industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sumitomo Heavy Industries can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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.
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 -
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.
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.
Environmental challenges
– Sumitomo Heavy Industries 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. Sumitomo Heavy Industries can take advantage of this fund but it will also bring new competitors in the Constr. & Agric. Machinery industry.
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.
Regulatory challenges
– Sumitomo Heavy Industries needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Constr. & Agric. Machinery industry regulations.
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.
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.
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Sumitomo Heavy Industries is facing in Constr. & Agric. Machinery sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.