SWOT Analysis / TOWS Matrix for Kumagai Gumi (Japan)
Based on various researches at Oak Spring University , Kumagai Gumi is operating in a macro-environment that has been destablized by – geopolitical disruptions, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, there is backlash against globalization, increasing energy prices, supply chains are disrupted by pandemic ,
increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Kumagai Gumi can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kumagai Gumi, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kumagai Gumi 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 Kumagai Gumi can be done for the following purposes –
1. Strategic planning of Kumagai Gumi
2. Improving business portfolio management of Kumagai Gumi
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 Kumagai Gumi
Strengths of Kumagai Gumi | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kumagai Gumi are -
Low bargaining power of suppliers
– Suppliers of Kumagai Gumi in the Capital Goods sector have low bargaining power. Kumagai Gumi has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Kumagai Gumi to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Kumagai Gumi is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Construction Services industry. The technology infrastructure of Japan is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Ability to lead change in Construction Services
– Kumagai Gumi 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 Kumagai Gumi in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy of Kumagai Gumi 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.
Strong track record of project management in the Construction Services industry
– Kumagai Gumi 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 brand equity
– Kumagai Gumi has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Kumagai Gumi to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Kumagai Gumi is present in almost all the verticals within the Construction Services industry. This has provided Kumagai Gumi 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.
Effective Research and Development (R&D)
– Kumagai Gumi has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Kumagai Gumi 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.
Innovation driven organization
– Kumagai Gumi is one of the most innovative firm in Construction Services sector.
Digital Transformation in Construction Services industry
- digital transformation varies from industry to industry. For Kumagai Gumi digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kumagai Gumi 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.
Learning organization
- Kumagai Gumi 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 Kumagai Gumi is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Kumagai Gumi emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Kumagai Gumi 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 Kumagai Gumi have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Kumagai Gumi | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Kumagai Gumi are -
Interest costs
– Compare to the competition, Kumagai Gumi 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.
Low market penetration in new markets
– Outside its home market of Japan, Kumagai Gumi needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Kumagai Gumi 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.
High bargaining power of channel partners in Construction Services industry
– because of the regulatory requirements in Japan, Kumagai Gumi 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.
Lack of clear differentiation of Kumagai Gumi products
– To increase the profitability and margins on the products, Kumagai Gumi needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of Kumagai Gumi strategy
– From the outside it seems that the employees of Kumagai Gumi 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.
Skills based hiring in Construction Services industry
– The stress on hiring functional specialists at Kumagai Gumi 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.
High operating costs
– Compare to the competitors, Kumagai Gumi has high operating costs in the Construction Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Kumagai Gumi lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Kumagai Gumi has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Construction Services industry over the last five years. Kumagai Gumi even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High cash cycle compare to competitors
Kumagai Gumi 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.
Workers concerns about automation
– As automation is fast increasing in the Construction Services industry, Kumagai Gumi needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Kumagai Gumi Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Kumagai Gumi are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kumagai Gumi can use these opportunities to build new business models that can help the communities that Kumagai Gumi operates in. Secondly it can use opportunities from government spending in Construction Services sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kumagai Gumi 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 Kumagai Gumi 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.
Manufacturing automation
– Kumagai Gumi can use the latest technology developments to improve its manufacturing and designing process in Construction Services 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.
Using analytics as competitive advantage
– Kumagai Gumi 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 Kumagai Gumi to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kumagai Gumi to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Kumagai Gumi 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Kumagai Gumi can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Kumagai Gumi 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.
Leveraging digital technologies
– Kumagai Gumi 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.
Building a culture of innovation
– managers at Kumagai Gumi 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Kumagai Gumi 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 Kumagai Gumi to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Kumagai Gumi can improve the customer journey of consumers in the Construction Services 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.
Use of Bitcoin and other crypto currencies for transactions in Construction Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Kumagai Gumi in the Construction Services industry. Now Kumagai Gumi can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Kumagai Gumi External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Kumagai Gumi are -
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 Kumagai Gumi.
Easy access to finance
– Easy access to finance in Construction Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Kumagai Gumi can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Kumagai Gumi 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 Kumagai Gumi prominent markets.
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 Kumagai Gumi business can come under increasing regulations regarding data privacy, data security, etc.
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 dependence on third party suppliers
– Kumagai Gumi 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.
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. Kumagai Gumi 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Kumagai Gumi in Construction Services industry. The Construction Services industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology acceleration in Forth Industrial Revolution
– Kumagai Gumi has witnessed rapid integration of technology during Covid-19 in the Construction Services industry. As one of the leading players in the industry, Kumagai Gumi needs to keep up with the evolution of technology in the Construction Services 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
– Kumagai Gumi 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. Kumagai Gumi can take advantage of this fund but it will also bring new competitors in the Construction Services industry.
Consumer confidence and its impact on Kumagai Gumi 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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Kumagai Gumi in the Construction Services sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Kumagai Gumi Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Kumagai Gumi 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 Kumagai Gumi 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 Kumagai Gumi 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 Kumagai Gumi 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 Kumagai Gumi needs to make to build a sustainable competitive advantage.
