Nafco (2790) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Home Improvement)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nafco (Japan)
Based on various researches at Oak Spring University , Nafco is operating in a macro-environment that has been destablized by – wage bills are increasing, increasing energy prices, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, there is backlash against globalization, supply chains are disrupted by pandemic ,
increasing commodity prices, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nafco can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nafco, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nafco 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 Nafco can be done for the following purposes –
1. Strategic planning of Nafco
2. Improving business portfolio management of Nafco
3. Assessing feasibility of the new initiative in Japan
4. Making a Retail (Home Improvement) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nafco
Strengths of Nafco | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nafco are -
Ability to recruit top talent
– Nafco is one of the leading players in the Retail (Home Improvement) 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.
Analytics focus
– Nafco 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 Retail (Home Improvement) 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.
Training and development
– Nafco has one of the best training and development program in Services 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.
Diverse revenue streams
– Nafco is present in almost all the verticals within the Retail (Home Improvement) industry. This has provided Nafco 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.
Strong track record of project management in the Retail (Home Improvement) industry
– Nafco is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Nafco 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 Nafco is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nafco emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of Nafco comprises – understanding the underlying the factors in the Retail (Home Improvement) 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.
Cross disciplinary teams
– Horizontal connected teams at the Nafco are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Sustainable margins compare to other players in Retail (Home Improvement) industry
– Nafco has clearly differentiated products in the market place. This has enabled Nafco to fetch slight price premium compare to the competitors in the Retail (Home Improvement) industry. The sustainable margins have also helped Nafco to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Nafco in Retail (Home Improvement) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Nafco has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nafco staying ahead in the Retail (Home Improvement) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Retail (Home Improvement)
– Nafco is one of the leading players in the Retail (Home Improvement) industry in Japan. Over the years it has not only transformed the business landscape in the Retail (Home Improvement) industry in Japan but also across the existing markets. The ability to lead change has enabled Nafco in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Nafco | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nafco are -
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 Nafco supply chain. Even after few cautionary changes, Nafco is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nafco vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Nafco 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.
Increasing silos among functional specialists
– The organizational structure of Nafco is dominated by functional specialists. It is not different from other players in the Retail (Home Improvement) industry, but Nafco needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nafco to focus more on services in the Retail (Home Improvement) industry rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nafco is slow explore the new channels of communication. These new channels of communication can help Nafco to provide better information regarding Retail (Home Improvement) products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– From the outside it seems that Nafco needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Home Improvement) industry have deep experience in developing customer relationships. Marketing department at Nafco can leverage the sales team experience to cultivate customer relationships as Nafco is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Nafco is one of the leading players in the Retail (Home Improvement) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Home Improvement) industry in last five years.
Ability to respond to the competition
– As the decision making is very deliberative at Nafco, in the dynamic environment of Retail (Home Improvement) industry it has struggled to respond to the nimble upstart competition. Nafco has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners in Retail (Home Improvement) industry
– because of the regulatory requirements in Japan, Nafco 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 Retail (Home Improvement) industry.
Lack of clear differentiation of Nafco products
– To increase the profitability and margins on the products, Nafco needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Nafco has some of the most successful models in the Retail (Home Improvement) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Nafco should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee of Nafco is just above the Retail (Home Improvement) 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.
Nafco Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nafco are -
Leveraging digital technologies
– Nafco 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nafco 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
– Nafco can use the latest technology developments to improve its manufacturing and designing process in Retail (Home Improvement) 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.
Buying journey improvements
– Nafco can improve the customer journey of consumers in the Retail (Home Improvement) 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Home Improvement) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nafco 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. Nafco 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.
Use of Bitcoin and other crypto currencies for transactions in Retail (Home Improvement) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nafco in the Retail (Home Improvement) industry. Now Nafco can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Nafco can develop new processes and procedures in Retail (Home Improvement) 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 Nafco has opened avenues for new revenue streams for the organization in Retail (Home Improvement) industry. This can help Nafco to build a more holistic ecosystem for Nafco products in the Retail (Home Improvement) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Nafco to increase its market reach. Nafco 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nafco 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 Nafco to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nafco in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Home Improvement) industry, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nafco can use these opportunities to build new business models that can help the communities that Nafco operates in. Secondly it can use opportunities from government spending in Retail (Home Improvement) sector.
Learning at scale
– Online learning technologies has now opened space for Nafco 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.
Threats Nafco External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nafco are -
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 Nafco is facing in Retail (Home Improvement) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Nafco 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.
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. Nafco needs to understand the core reasons impacting the Retail (Home Improvement) industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Nafco 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.
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 Nafco business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Nafco
– 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 Nafco.
Regulatory challenges
– Nafco 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 Retail (Home Improvement) industry regulations.
Consumer confidence and its impact on Nafco 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 Retail (Home Improvement) industry and other sectors.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Home Improvement) industry are lowering. It can presents Nafco with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Home Improvement) sector.
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 Nafco.
Technology acceleration in Forth Industrial Revolution
– Nafco has witnessed rapid integration of technology during Covid-19 in the Retail (Home Improvement) industry. As one of the leading players in the industry, Nafco needs to keep up with the evolution of technology in the Retail (Home Improvement) 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.
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.
Weighted SWOT Analysis of Nafco Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nafco 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 Nafco 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 Nafco 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 Nafco 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 Nafco needs to make to build a sustainable competitive advantage.