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Nafco (2790) SWOT Analysis / TOWS Matrix / 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 – geopolitical disruptions, increasing transportation and logistics costs, increasing commodity prices, technology disruption, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, challanges to central banks by blockchain based private currencies, etc



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Introduction to SWOT Analysis of Nafco


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.

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.

Highly skilled collaborators

– Nafco has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Home Improvement) industry. Secondly the value chain collaborators of Nafco have helped the firm to develop new products and bring them quickly to the marketplace.

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.

High brand equity

– Nafco has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nafco to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Digital Transformation in Retail (Home Improvement) industry

- digital transformation varies from industry to industry. For Nafco digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nafco 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

– Nafco has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nafco 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.

Organizational Resilience of Nafco

– The covid-19 pandemic has put organizational resilience at the centre of everthing Nafco does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

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.

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.

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.

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.






Weaknesses of Nafco | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Nafco are -

No frontier risks strategy

– From the 10K / annual statement of Nafco, it seems that company is thinking out the frontier risks that can impact Retail (Home Improvement) industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

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.

Low market penetration in new markets

– Outside its home market of Japan, Nafco needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High dependence on Nafco ‘s star products

– The top 2 products and services of Nafco still accounts for major business revenue. This dependence on star products in Retail (Home Improvement) industry has resulted into insufficient focus on developing new products, even though Nafco has relatively successful track record of launching new products.

Employees’ less understanding of Nafco strategy

– From the outside it seems that the employees of Nafco 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.

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.

Skills based hiring in Retail (Home Improvement) industry

– The stress on hiring functional specialists at Nafco 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 cash cycle compare to competitors

Nafco has a high cash cycle compare to other players in the Retail (Home Improvement) 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 Retail (Home Improvement) industry, Nafco 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.

Need for greater diversity

– Nafco 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 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.




Nafco Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis


The opportunities of Nafco are -

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.

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 Nafco 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.

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.

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. Nafco can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Loyalty marketing

– Nafco 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.

Building a culture of innovation

– managers at Nafco 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 Retail (Home Improvement) industry.

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.

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.

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.

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.

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.

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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Nafco is facing challenges because of the dominance of functional experts in the organization. Nafco can utilize new technology in the field of Retail (Home Improvement) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.




Threats Nafco External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis


The threats of Nafco are -

Easy access to finance

– Easy access to finance in Retail (Home Improvement) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nafco can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Stagnating economy with rate increase

– Nafco 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 Retail (Home Improvement) industry.

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.

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.

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.

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 Nafco in the Retail (Home Improvement) sector and impact the bottomline of the organization.

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.

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.

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.

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.

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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Nafco 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 Nafco prominent markets.




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.



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