Nippon Denko Co Ltd (5563) SWOT Analysis / TOWS Matrix / MBA Resources
Iron & Steel
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nippon Denko Co Ltd (Japan)
Based on various researches at Oak Spring University , Nippon Denko Co Ltd is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing transportation and logistics costs, central banks are concerned over increasing inflation, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, technology disruption,
geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Nippon Denko Co Ltd
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nippon Denko Co Ltd can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nippon Denko Co Ltd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nippon Denko Co Ltd 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 Nippon Denko Co Ltd can be done for the following purposes –
1. Strategic planning of Nippon Denko Co Ltd
2. Improving business portfolio management of Nippon Denko Co Ltd
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 Nippon Denko Co Ltd
Strengths of Nippon Denko Co Ltd | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nippon Denko Co Ltd are -
Highly skilled collaborators
– Nippon Denko Co Ltd has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Iron & Steel industry. Secondly the value chain collaborators of Nippon Denko Co Ltd have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the Iron & Steel industry
– Nippon Denko Co Ltd is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Nippon Denko Co Ltd 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.
High switching costs
– The high switching costs that Nippon Denko Co Ltd 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.
Ability to recruit top talent
– Nippon Denko Co Ltd 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.
Analytics focus
– Nippon Denko Co Ltd 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.
Successful track record of launching new products
– Nippon Denko Co Ltd has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nippon Denko Co Ltd 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.
Cross disciplinary teams
– Horizontal connected teams at the Nippon Denko Co Ltd 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.
Effective Research and Development (R&D)
– Nippon Denko Co Ltd has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nippon Denko Co Ltd 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.
Low bargaining power of suppliers
– Suppliers of Nippon Denko Co Ltd in the Basic Materials sector have low bargaining power. Nippon Denko Co Ltd has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nippon Denko Co Ltd to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Nippon Denko Co Ltd
– The covid-19 pandemic has put organizational resilience at the centre of everthing Nippon Denko Co Ltd does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Nippon Denko Co Ltd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nippon Denko Co Ltd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Nippon Denko Co Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nippon Denko Co Ltd are -
Low market penetration in new markets
– Outside its home market of Japan, Nippon Denko Co Ltd needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee of Nippon Denko Co Ltd is just above the Iron & Steel 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.
High dependence on Nippon Denko Co Ltd ‘s star products
– The top 2 products and services of Nippon Denko Co Ltd 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 Nippon Denko Co Ltd has relatively successful track record of launching new products.
High bargaining power of channel partners in Iron & Steel industry
– because of the regulatory requirements in Japan, Nippon Denko Co Ltd 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 Iron & Steel industry.
Aligning sales with marketing
– From the outside it seems that Nippon Denko Co Ltd needs to have more collaboration between its sales team and marketing team. Sales professionals in the Iron & Steel industry have deep experience in developing customer relationships. Marketing department at Nippon Denko Co Ltd can leverage the sales team experience to cultivate customer relationships as Nippon Denko Co Ltd is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Nippon Denko Co Ltd is one of the leading players in the Iron & Steel industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Iron & Steel industry in last five years.
Interest costs
– Compare to the competition, Nippon Denko Co Ltd 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.
High operating costs
– Compare to the competitors, Nippon Denko Co Ltd has high operating costs in the Iron & Steel industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nippon Denko Co Ltd lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative at Nippon Denko Co Ltd, in the dynamic environment of Iron & Steel industry it has struggled to respond to the nimble upstart competition. Nippon Denko Co Ltd has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Nippon Denko Co Ltd 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 Iron & Steel industry using digital technology.
Need for greater diversity
– Nippon Denko Co Ltd 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.
Nippon Denko Co Ltd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nippon Denko Co Ltd are -
Loyalty marketing
– Nippon Denko Co Ltd 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nippon Denko Co Ltd 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 Nippon Denko Co Ltd to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Nippon Denko Co Ltd 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Iron & Steel industry, but it has also influenced the consumer preferences. Nippon Denko Co Ltd can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Nippon Denko Co Ltd 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. Nippon Denko Co Ltd 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 Iron & Steel industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nippon Denko Co Ltd in the Iron & Steel industry. Now Nippon Denko Co Ltd can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nippon Denko Co Ltd can use these opportunities to build new business models that can help the communities that Nippon Denko Co Ltd operates in. Secondly it can use opportunities from government spending in Iron & Steel sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nippon Denko Co Ltd in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Iron & Steel industry, and it will provide faster access to the consumers.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nippon Denko Co Ltd is facing challenges because of the dominance of functional experts in the organization. Nippon Denko Co Ltd 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.
Using analytics as competitive advantage
– Nippon Denko Co Ltd has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Iron & Steel sector. This continuous investment in analytics has enabled Nippon Denko Co Ltd to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nippon Denko Co Ltd to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Nippon Denko Co Ltd to increase its market reach. Nippon Denko Co Ltd 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.
Creating value in data economy
– The success of analytics program of Nippon Denko Co Ltd has opened avenues for new revenue streams for the organization in Iron & Steel industry. This can help Nippon Denko Co Ltd to build a more holistic ecosystem for Nippon Denko Co Ltd products in the Iron & Steel industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Nippon Denko Co Ltd 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.
Threats Nippon Denko Co Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nippon Denko Co Ltd are -
High dependence on third party suppliers
– Nippon Denko Co Ltd 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.
Consumer confidence and its impact on Nippon Denko Co Ltd 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.
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 Nippon Denko Co Ltd business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nippon Denko Co Ltd 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.
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 Nippon Denko Co Ltd in the Iron & Steel sector and impact the bottomline of the organization.
Environmental challenges
– Nippon Denko Co Ltd 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. Nippon Denko Co Ltd can take advantage of this fund but it will also bring new competitors in the Iron & Steel industry.
Shortening product life cycle
– it is one of the major threat that Nippon Denko Co Ltd is facing in Iron & Steel sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Nippon Denko Co Ltd needs to understand the core reasons impacting the Iron & Steel industry. This will help it in building a better workplace.
Regulatory challenges
– Nippon Denko Co Ltd 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 Iron & Steel industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Nippon Denko Co Ltd may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Iron & Steel sector.
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.
Technology acceleration in Forth Industrial Revolution
– Nippon Denko Co Ltd has witnessed rapid integration of technology during Covid-19 in the Iron & Steel industry. As one of the leading players in the industry, Nippon Denko Co Ltd needs to keep up with the evolution of technology in the Iron & Steel 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.
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 Nippon Denko Co Ltd.
Weighted SWOT Analysis of Nippon Denko Co Ltd Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nippon Denko Co Ltd 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 Nippon Denko Co Ltd 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 Nippon Denko Co Ltd 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 Nippon Denko Co Ltd 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 Nippon Denko Co Ltd needs to make to build a sustainable competitive advantage.
