SWOT Analysis / TOWS Matrix for Aichi Steel Corp (Japan)
Based on various researches at Oak Spring University , Aichi Steel Corp is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs,
competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Aichi Steel Corp can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aichi Steel Corp, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aichi Steel Corp 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 Aichi Steel Corp can be done for the following purposes –
1. Strategic planning of Aichi Steel Corp
2. Improving business portfolio management of Aichi Steel Corp
3. Assessing feasibility of the new initiative in Japan
4. Making a Iron & Steel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Aichi Steel Corp
Strengths of Aichi Steel Corp | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aichi Steel Corp are -
Ability to lead change in Iron & Steel
– Aichi Steel Corp is one of the leading players in the Iron & Steel industry in Japan. Over the years it has not only transformed the business landscape in the Iron & Steel industry in Japan but also across the existing markets. The ability to lead change has enabled Aichi Steel Corp in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Iron & Steel industry
- digital transformation varies from industry to industry. For Aichi Steel Corp digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aichi Steel Corp 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.
Analytics focus
– Aichi Steel Corp 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 Iron & Steel 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.
Innovation driven organization
– Aichi Steel Corp is one of the most innovative firm in Iron & Steel sector.
Ability to recruit top talent
– Aichi Steel Corp is one of the leading players in the Iron & Steel 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.
Learning organization
- Aichi Steel Corp 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 Aichi Steel Corp is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Aichi Steel Corp emphasize – knowledge, initiative, and innovation.
Training and development
– Aichi Steel Corp has one of the best training and development program in Basic Materials 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 Aichi Steel Corp comprises – understanding the underlying the factors in the Iron & Steel 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.
Organizational Resilience of Aichi Steel Corp
– The covid-19 pandemic has put organizational resilience at the centre of everthing Aichi Steel Corp does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Aichi Steel Corp has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Aichi Steel Corp staying ahead in the Iron & Steel industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Aichi Steel Corp is present in almost all the verticals within the Iron & Steel industry. This has provided Aichi Steel Corp 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.
Low bargaining power of suppliers
– Suppliers of Aichi Steel Corp in the Basic Materials sector have low bargaining power. Aichi Steel Corp has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aichi Steel Corp to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of Aichi Steel Corp | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Aichi Steel Corp are -
Increasing silos among functional specialists
– The organizational structure of Aichi Steel Corp is dominated by functional specialists. It is not different from other players in the Iron & Steel industry, but Aichi Steel Corp needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aichi Steel Corp to focus more on services in the Iron & Steel industry rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Aichi Steel Corp 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 Aichi Steel Corp has some of the most successful models in the Iron & Steel industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Aichi Steel Corp should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Aichi Steel Corp has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Iron & Steel industry over the last five years. Aichi Steel Corp 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Aichi Steel Corp is slow explore the new channels of communication. These new channels of communication can help Aichi Steel Corp to provide better information regarding Iron & Steel 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, Aichi Steel Corp needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Aichi Steel Corp has a high cash cycle compare to other players in the Iron & Steel industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High dependence on Aichi Steel Corp ‘s star products
– The top 2 products and services of Aichi Steel Corp still accounts for major business revenue. This dependence on star products in Iron & Steel industry has resulted into insufficient focus on developing new products, even though Aichi Steel Corp has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative at Aichi Steel Corp, in the dynamic environment of Iron & Steel industry it has struggled to respond to the nimble upstart competition. Aichi Steel Corp has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Skills based hiring in Iron & Steel industry
– The stress on hiring functional specialists at Aichi Steel Corp 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
– Aichi Steel Corp 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.
Aichi Steel Corp Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Aichi Steel Corp are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Aichi Steel Corp 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.
Creating value in data economy
– The success of analytics program of Aichi Steel Corp has opened avenues for new revenue streams for the organization in Iron & Steel industry. This can help Aichi Steel Corp to build a more holistic ecosystem for Aichi Steel Corp products in the Iron & Steel industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Aichi Steel Corp can develop new processes and procedures in Iron & Steel 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aichi Steel Corp is facing challenges because of the dominance of functional experts in the organization. Aichi Steel Corp can utilize new technology in the field of Iron & Steel industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Better consumer reach
– The expansion of the 5G network will help Aichi Steel Corp to increase its market reach. Aichi Steel Corp 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.
Buying journey improvements
– Aichi Steel Corp can improve the customer journey of consumers in the Iron & Steel 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.
Manufacturing automation
– Aichi Steel Corp can use the latest technology developments to improve its manufacturing and designing process in Iron & Steel 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Aichi Steel Corp can use these opportunities to build new business models that can help the communities that Aichi Steel Corp operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.
Loyalty marketing
– Aichi Steel Corp 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.
Leveraging digital technologies
– Aichi Steel Corp 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 Aichi Steel Corp 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 Iron & Steel industry.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Iron & Steel industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Aichi Steel Corp 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. Aichi Steel Corp 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.
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 Aichi Steel Corp 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.
Threats Aichi Steel Corp External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Aichi Steel Corp are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Aichi Steel Corp in Iron & Steel industry. The Iron & Steel 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.
Consumer confidence and its impact on Aichi Steel Corp 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 Iron & Steel industry and other sectors.
Increasing wage structure of Aichi Steel Corp
– 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 Aichi Steel Corp.
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.
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 Aichi Steel Corp in the Iron & Steel sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Aichi Steel Corp is facing in Iron & Steel sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Aichi Steel Corp business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aichi Steel Corp 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 Aichi Steel Corp prominent markets.
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. Aichi Steel Corp 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.
Easy access to finance
– Easy access to finance in Iron & Steel industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Aichi Steel Corp can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Aichi Steel Corp.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents Aichi Steel Corp with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel sector.
Environmental challenges
– Aichi Steel Corp 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. Aichi Steel Corp can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.
Weighted SWOT Analysis of Aichi Steel Corp Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Aichi Steel Corp 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 Aichi Steel Corp 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 Aichi Steel Corp 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 Aichi Steel Corp 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 Aichi Steel Corp needs to make to build a sustainable competitive advantage.
