SWOT Analysis / TOWS Matrix for Sumitomo Forestry (Japan)
Based on various researches at Oak Spring University , Sumitomo Forestry is operating in a macro-environment that has been destablized by – technology disruption, wage bills are increasing, increasing commodity prices, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%,
central banks are concerned over increasing inflation, geopolitical disruptions, etc
Introduction to SWOT Analysis of Sumitomo Forestry
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sumitomo Forestry can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sumitomo Forestry, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sumitomo Forestry 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 Forestry can be done for the following purposes –
1. Strategic planning of Sumitomo Forestry
2. Improving business portfolio management of Sumitomo Forestry
3. Assessing feasibility of the new initiative in Japan
4. Making a Construction Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sumitomo Forestry
Strengths of Sumitomo Forestry | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sumitomo Forestry are -
Effective Research and Development (R&D)
– Sumitomo Forestry has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sumitomo Forestry staying ahead in the Construction Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Sumitomo Forestry 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 Forestry is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sumitomo Forestry emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Sumitomo Forestry has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Construction Services industry. Secondly the value chain collaborators of Sumitomo Forestry have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Sumitomo Forestry 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.
Ability to recruit top talent
– Sumitomo Forestry is one of the leading players in the Construction Services 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.
Superior customer experience
– The customer experience strategy of Sumitomo Forestry in Construction Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Sumitomo Forestry 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.
Operational resilience
– The operational resilience strategy of Sumitomo Forestry comprises – understanding the underlying the factors in the Construction Services 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.
Ability to lead change in Construction Services
– Sumitomo Forestry is one of the leading players in the Construction Services industry in Japan. Over the years it has not only transformed the business landscape in the Construction Services industry in Japan but also across the existing markets. The ability to lead change has enabled Sumitomo Forestry in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Construction Services industry
– Sumitomo Forestry has clearly differentiated products in the market place. This has enabled Sumitomo Forestry to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Sumitomo Forestry to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Sumitomo Forestry in the Capital Goods sector have low bargaining power. Sumitomo Forestry has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sumitomo Forestry to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Sumitomo Forestry has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sumitomo Forestry 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.
Weaknesses of Sumitomo Forestry | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sumitomo Forestry are -
Skills based hiring in Construction Services industry
– The stress on hiring functional specialists at Sumitomo Forestry 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 to strategic competitive environment developments
– As Sumitomo Forestry is one of the leading players in the Construction Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Construction Services industry in last five years.
Employees’ less understanding of Sumitomo Forestry strategy
– From the outside it seems that the employees of Sumitomo Forestry 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.
High bargaining power of channel partners in Construction Services industry
– because of the regulatory requirements in Japan, Sumitomo Forestry is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Construction Services industry.
Compensation and incentives
– The revenue per employee of Sumitomo Forestry is just above the Construction Services 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 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 Forestry supply chain. Even after few cautionary changes, Sumitomo Forestry is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sumitomo Forestry vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Sumitomo Forestry is dominated by functional specialists. It is not different from other players in the Construction Services industry, but Sumitomo Forestry needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sumitomo Forestry to focus more on services in the Construction Services industry rather than just following the product oriented approach.
High cash cycle compare to competitors
Sumitomo Forestry has a high cash cycle compare to other players in the Construction Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Interest costs
– Compare to the competition, Sumitomo Forestry 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.
Products dominated business model
– Even though Sumitomo Forestry has some of the most successful models in the Construction Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Sumitomo Forestry should strive to include more intangible value offerings along with its core products and services.
High dependence on Sumitomo Forestry ‘s star products
– The top 2 products and services of Sumitomo Forestry still accounts for major business revenue. This dependence on star products in Construction Services industry has resulted into insufficient focus on developing new products, even though Sumitomo Forestry has relatively successful track record of launching new products.
Sumitomo Forestry Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sumitomo Forestry are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sumitomo Forestry 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 Forestry to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Sumitomo Forestry 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sumitomo Forestry in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Construction Services industry, and it will provide faster access to the consumers.
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 Sumitomo Forestry 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sumitomo Forestry can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Building a culture of innovation
– managers at Sumitomo Forestry 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 Construction Services industry.
Better consumer reach
– The expansion of the 5G network will help Sumitomo Forestry to increase its market reach. Sumitomo Forestry 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.
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 Forestry can use these opportunities to build new business models that can help the communities that Sumitomo Forestry operates in. Secondly it can use opportunities from government spending in Construction Services sector.
Developing new processes and practices
– Sumitomo Forestry can develop new processes and procedures in Construction Services 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 Forestry has opened avenues for new revenue streams for the organization in Construction Services industry. This can help Sumitomo Forestry to build a more holistic ecosystem for Sumitomo Forestry products in the Construction Services 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 Forestry can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– Sumitomo Forestry 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.
Using analytics as competitive advantage
– Sumitomo Forestry has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Construction Services sector. This continuous investment in analytics has enabled Sumitomo Forestry to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sumitomo Forestry to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Sumitomo Forestry External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sumitomo Forestry are -
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sumitomo Forestry 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 Forestry prominent markets.
Shortening product life cycle
– it is one of the major threat that Sumitomo Forestry is facing in Construction Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Sumitomo Forestry 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 Forestry can take advantage of this fund but it will also bring new competitors in the Construction Services industry.
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 Forestry in the Construction Services sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Sumitomo Forestry may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Construction Services sector.
High dependence on third party suppliers
– Sumitomo Forestry 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.
Regulatory challenges
– Sumitomo Forestry 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 Construction Services industry regulations.
Consumer confidence and its impact on Sumitomo Forestry 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 Construction Services industry and other sectors.
Stagnating economy with rate increase
– Sumitomo Forestry 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 Construction Services industry.
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 Forestry business can come under increasing regulations regarding data privacy, data security, etc.
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 Forestry needs to understand the core reasons impacting the Construction Services industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents Sumitomo Forestry with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction Services sector.
Weighted SWOT Analysis of Sumitomo Forestry Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sumitomo Forestry 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 Forestry 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 Forestry 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 Forestry 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 Forestry needs to make to build a sustainable competitive advantage.