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 – customer relationship management is fast transforming because of increasing concerns over data privacy, increasing commodity prices, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing transportation and logistics costs,
increasing energy prices, there is backlash against globalization, 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 -
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.
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.
Diverse revenue streams
– Nippon Denko Co Ltd is present in almost all the verticals within the Iron & Steel industry. This has provided Nippon Denko Co Ltd 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.
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.
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.
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.
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.
Superior customer experience
– The customer experience strategy of Nippon Denko Co Ltd in Iron & Steel industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
Innovation driven organization
– Nippon Denko Co Ltd is one of the most innovative firm in Iron & Steel sector.
Learning organization
- Nippon Denko Co Ltd 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 Nippon Denko Co Ltd is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nippon Denko Co Ltd emphasize – knowledge, initiative, and innovation.
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.
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 -
Lack of clear differentiation of Nippon Denko Co Ltd products
– To increase the profitability and margins on the products, Nippon Denko Co Ltd needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring in Iron & Steel industry
– The stress on hiring functional specialists at Nippon Denko Co Ltd 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.
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.
Slow decision making process
– As mentioned earlier in the report, Nippon Denko Co Ltd 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. Nippon Denko Co Ltd 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.
No frontier risks strategy
– From the 10K / annual statement of Nippon Denko Co Ltd, it seems that company is thinking out the frontier risks that can impact Iron & Steel 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.
High cash cycle compare to competitors
Nippon Denko Co Ltd 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.
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.
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 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.
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 Nippon Denko Co Ltd supply chain. Even after few cautionary changes, Nippon Denko Co Ltd is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nippon Denko Co Ltd vulnerable to further global disruptions in South East Asia.
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.
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 -
Leveraging digital technologies
– Nippon Denko Co Ltd 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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nippon Denko Co Ltd 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 Nippon Denko Co Ltd to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nippon Denko Co Ltd can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
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.
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.
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. Nippon Denko Co Ltd can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Nippon Denko Co Ltd 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.
Building a culture of innovation
– managers at Nippon Denko Co Ltd 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.
Learning at scale
– Online learning technologies has now opened space for Nippon Denko Co Ltd 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 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 -
Stagnating economy with rate increase
– Nippon Denko Co Ltd 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 Iron & Steel industry.
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.
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.
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.
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.
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.
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. Nippon Denko Co Ltd 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 Nippon Denko Co Ltd.
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.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Iron & Steel industry are lowering. It can presents Nippon Denko Co Ltd with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Iron & Steel sector.
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.