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 – challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, wage bills are increasing, increasing commodity prices, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, cloud computing is disrupting traditional business models,
customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, 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 -
High switching costs
– The high switching costs that Kumagai Gumi 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.
Sustainable margins compare to other players in Construction Services industry
– Kumagai Gumi has clearly differentiated products in the market place. This has enabled Kumagai Gumi to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Kumagai Gumi to invest into research and development (R&D) and innovation.
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.
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.
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.
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.
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.
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.
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.
Ability to recruit top talent
– Kumagai Gumi 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.
Training and development
– Kumagai Gumi 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.
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.
Weaknesses of Kumagai Gumi | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Kumagai Gumi are -
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.
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.
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.
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 Kumagai Gumi supply chain. Even after few cautionary changes, Kumagai Gumi is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Kumagai Gumi vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Kumagai Gumi 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 Construction Services industry using digital technology.
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.
Need for greater diversity
– Kumagai Gumi 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.
Ability to respond to the competition
– As the decision making is very deliberative at Kumagai Gumi, in the dynamic environment of Construction Services industry it has struggled to respond to the nimble upstart competition. Kumagai Gumi has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Kumagai Gumi 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. Kumagai Gumi should strive to include more intangible value offerings along with its core products and services.
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.
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.
Kumagai Gumi Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Kumagai Gumi are -
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.
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.
Developing new processes and practices
– Kumagai Gumi 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.
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.
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.
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.
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.
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. Kumagai Gumi can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Construction Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Kumagai Gumi 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. Kumagai Gumi 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.
Loyalty marketing
– Kumagai Gumi 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Kumagai Gumi 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 Kumagai Gumi to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Kumagai Gumi is facing challenges because of the dominance of functional experts in the organization. Kumagai Gumi can utilize new technology in the field of Construction Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
Threats Kumagai Gumi External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Kumagai Gumi are -
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.
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.
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.
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. Kumagai Gumi needs to understand the core reasons impacting the Construction Services industry. This will help it in building a better workplace.
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.
Regulatory challenges
– Kumagai Gumi 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.
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.
Increasing wage structure of Kumagai Gumi
– 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 Kumagai Gumi.
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.
Stagnating economy with rate increase
– Kumagai Gumi 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents Kumagai Gumi with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction Services sector.
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.
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.