Yahagi Construction (1870) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Yahagi Construction (Japan)

Based on various researches at Oak Spring University , Yahagi Construction is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, etc

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Introduction to SWOT Analysis of Yahagi Construction

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Yahagi Construction can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Yahagi Construction, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Yahagi Construction 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Yahagi Construction can be done for the following purposes –
1. Strategic planning of Yahagi Construction
2. Improving business portfolio management of Yahagi Construction
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 Yahagi Construction

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Strengths of Yahagi Construction | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Yahagi Construction are -

Highly skilled collaborators

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

Effective Research and Development (R&D)

– Yahagi Construction has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Yahagi Construction 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

– Yahagi Construction has clearly differentiated products in the market place. This has enabled Yahagi Construction to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Yahagi Construction to invest into research and development (R&D) and innovation.

Ability to lead change in Construction Services

– Yahagi Construction is one of the leading players in the Construction Services industry in Japan. Over the years it has not only transformed the business landscape in the Construction Services industry in Japan but also across the existing markets. The ability to lead change has enabled Yahagi Construction in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Training and development

– Yahagi Construction has one of the best training and development program in Capital Goods 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.

Strong track record of project management in the Construction Services industry

– Yahagi Construction is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Digital Transformation in Construction Services industry

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

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

Low bargaining power of suppliers

– Suppliers of Yahagi Construction in the Capital Goods sector have low bargaining power. Yahagi Construction has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Yahagi Construction to manage not only supply disruptions but also source products at highly competitive prices.

Diverse revenue streams

– Yahagi Construction is present in almost all the verticals within the Construction Services industry. This has provided Yahagi Construction 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.

High brand equity

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

Cross disciplinary teams

– Horizontal connected teams at the Yahagi Construction 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.

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

The weaknesses of Yahagi Construction are -

Ability to respond to the competition

– As the decision making is very deliberative at Yahagi Construction, in the dynamic environment of Construction Services industry it has struggled to respond to the nimble upstart competition. Yahagi Construction has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Workers concerns about automation

– As automation is fast increasing in the Construction Services industry, Yahagi Construction 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.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Yahagi Construction is slow explore the new channels of communication. These new channels of communication can help Yahagi Construction to provide better information regarding Construction Services products and services. It can also build an online community to further reach out to potential customers.

No frontier risks strategy

– From the 10K / annual statement of Yahagi Construction, it seems that company is thinking out the frontier risks that can impact Construction Services 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.

Low market penetration in new markets

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

Slow decision making process

– As mentioned earlier in the report, Yahagi Construction has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Construction Services industry over the last five years. Yahagi Construction 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.

High cash cycle compare to competitors

Yahagi Construction has a high cash cycle compare to other players in the Construction Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Capital Spending Reduction

– Even during the low interest decade, Yahagi Construction 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.

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at Yahagi Construction 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.

Aligning sales with marketing

– From the outside it seems that Yahagi Construction 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 Yahagi Construction can leverage the sales team experience to cultivate customer relationships as Yahagi Construction is planning to shift buying processes online.

Need for greater diversity

– Yahagi Construction 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.

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

The opportunities of Yahagi Construction are -

Manufacturing automation

– Yahagi Construction 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.

Learning at scale

– Online learning technologies has now opened space for Yahagi Construction 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.

Use of Bitcoin and other crypto currencies for transactions in Construction Services industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Yahagi Construction in the Construction Services industry. Now Yahagi Construction can target international markets with far fewer capital restrictions requirements than the existing system.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Construction Services industry, but it has also influenced the consumer preferences. Yahagi Construction can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Creating value in data economy

– The success of analytics program of Yahagi Construction has opened avenues for new revenue streams for the organization in Construction Services industry. This can help Yahagi Construction to build a more holistic ecosystem for Yahagi Construction products in the Construction Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Yahagi Construction 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 Yahagi Construction to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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 Yahagi Construction 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.

Building a culture of innovation

– managers at Yahagi Construction 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 Construction Services industry.

Buying journey improvements

– Yahagi Construction can improve the customer journey of consumers in the Construction Services 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 Construction Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Yahagi Construction 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. Yahagi Construction 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Yahagi Construction 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.

Better consumer reach

– The expansion of the 5G network will help Yahagi Construction to increase its market reach. Yahagi Construction 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Yahagi Construction can use these opportunities to build new business models that can help the communities that Yahagi Construction operates in. Secondly it can use opportunities from government spending in Construction Services sector.

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

The threats of Yahagi Construction are -

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents Yahagi Construction with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction Services sector.

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 Yahagi Construction in the Construction Services sector and impact the bottomline of the organization.

High dependence on third party suppliers

– Yahagi Construction 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.

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 Yahagi Construction.

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. Yahagi Construction needs to understand the core reasons impacting the Construction Services industry. This will help it in building a better workplace.

Stagnating economy with rate increase

– Yahagi Construction 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.

Easy access to finance

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

Increasing wage structure of Yahagi Construction

– 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 Yahagi Construction.

Increasing international competition and downward pressure on margins

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

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. Yahagi Construction 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.

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Yahagi Construction 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.

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 Yahagi Construction business can come under increasing regulations regarding data privacy, data security, etc.

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Weighted SWOT Analysis of Yahagi Construction Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Yahagi Construction 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 Yahagi Construction 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 Yahagi Construction 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 Yahagi Construction 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 Yahagi Construction needs to make to build a sustainable competitive advantage.

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