SWOT Analysis / TOWS Matrix for Sumitomo Densetsu (Japan)
Based on various researches at Oak Spring University , Sumitomo Densetsu is operating in a macro-environment that has been destablized by – increasing energy prices, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing household debt because of falling income levels, geopolitical disruptions, etc
Introduction to SWOT Analysis of Sumitomo Densetsu
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sumitomo Densetsu can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sumitomo Densetsu, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sumitomo Densetsu 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 Densetsu can be done for the following purposes –
1. Strategic planning of Sumitomo Densetsu
2. Improving business portfolio management of Sumitomo Densetsu
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 Densetsu
Strengths of Sumitomo Densetsu | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sumitomo Densetsu are -
Effective Research and Development (R&D)
– Sumitomo Densetsu has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sumitomo Densetsu 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.
Sustainable margins compare to other players in Construction Services industry
– Sumitomo Densetsu has clearly differentiated products in the market place. This has enabled Sumitomo Densetsu to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Sumitomo Densetsu to invest into research and development (R&D) and innovation.
High brand equity
– Sumitomo Densetsu has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sumitomo Densetsu to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Construction Services industry
– Sumitomo Densetsu is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of Sumitomo Densetsu 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.
Innovation driven organization
– Sumitomo Densetsu is one of the most innovative firm in Construction Services sector.
High switching costs
– The high switching costs that Sumitomo Densetsu 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.
Learning organization
- Sumitomo Densetsu 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 Densetsu is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sumitomo Densetsu emphasize – knowledge, initiative, and innovation.
Digital Transformation in Construction Services industry
- digital transformation varies from industry to industry. For Sumitomo Densetsu digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sumitomo Densetsu 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.
Successful track record of launching new products
– Sumitomo Densetsu has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sumitomo Densetsu 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.
Analytics focus
– Sumitomo Densetsu 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.
Low bargaining power of suppliers
– Suppliers of Sumitomo Densetsu in the Capital Goods sector have low bargaining power. Sumitomo Densetsu has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sumitomo Densetsu to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of Sumitomo Densetsu | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sumitomo Densetsu are -
Capital Spending Reduction
– Even during the low interest decade, Sumitomo Densetsu 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.
High bargaining power of channel partners in Construction Services industry
– because of the regulatory requirements in Japan, Sumitomo Densetsu 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.
High dependence on Sumitomo Densetsu ‘s star products
– The top 2 products and services of Sumitomo Densetsu 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 Densetsu has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee of Sumitomo Densetsu 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.
Workers concerns about automation
– As automation is fast increasing in the Construction Services industry, Sumitomo Densetsu 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.
Ability to respond to the competition
– As the decision making is very deliberative at Sumitomo Densetsu, in the dynamic environment of Construction Services industry it has struggled to respond to the nimble upstart competition. Sumitomo Densetsu has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Sumitomo Densetsu 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.
Aligning sales with marketing
– From the outside it seems that Sumitomo Densetsu needs to have more collaboration between its sales team and marketing team. Sales professionals in the Construction Services industry have deep experience in developing customer relationships. Marketing department at Sumitomo Densetsu can leverage the sales team experience to cultivate customer relationships as Sumitomo Densetsu is planning to shift buying processes online.
Skills based hiring in Construction Services industry
– The stress on hiring functional specialists at Sumitomo Densetsu 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
– Sumitomo Densetsu 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.
Products dominated business model
– Even though Sumitomo Densetsu 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 Densetsu should strive to include more intangible value offerings along with its core products and services.
Sumitomo Densetsu Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sumitomo Densetsu are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sumitomo Densetsu 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 Sumitomo Densetsu to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Sumitomo Densetsu 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 Densetsu to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sumitomo Densetsu to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sumitomo Densetsu can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Sumitomo Densetsu 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sumitomo Densetsu 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 Densetsu to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Sumitomo Densetsu 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.
Developing new processes and practices
– Sumitomo Densetsu 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.
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 Densetsu can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Loyalty marketing
– Sumitomo Densetsu 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.
Creating value in data economy
– The success of analytics program of Sumitomo Densetsu has opened avenues for new revenue streams for the organization in Construction Services industry. This can help Sumitomo Densetsu to build a more holistic ecosystem for Sumitomo Densetsu products in the Construction Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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 Densetsu 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Sumitomo Densetsu 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sumitomo Densetsu is facing challenges because of the dominance of functional experts in the organization. Sumitomo Densetsu 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.
Threats Sumitomo Densetsu External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sumitomo Densetsu are -
High dependence on third party suppliers
– Sumitomo Densetsu 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Sumitomo Densetsu 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sumitomo Densetsu 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 Densetsu prominent markets.
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 Densetsu.
Technology acceleration in Forth Industrial Revolution
– Sumitomo Densetsu has witnessed rapid integration of technology during Covid-19 in the Construction Services industry. As one of the leading players in the industry, Sumitomo Densetsu 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
– Sumitomo Densetsu 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 Densetsu can take advantage of this fund but it will also bring new competitors in the Construction Services industry.
Stagnating economy with rate increase
– Sumitomo Densetsu 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.
Increasing wage structure of Sumitomo Densetsu
– 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 Densetsu.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents Sumitomo Densetsu with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction Services sector.
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.
Shortening product life cycle
– it is one of the major threat that Sumitomo Densetsu is facing in Construction Services 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 Sumitomo Densetsu business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Sumitomo Densetsu 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.
Weighted SWOT Analysis of Sumitomo Densetsu Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sumitomo Densetsu 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 Densetsu 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 Densetsu 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 Densetsu 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 Densetsu needs to make to build a sustainable competitive advantage.
