Arakawa Chemical (4968) SWOT Analysis / TOWS Matrix / MBA Resources
Chemicals - Plastics & Rubber
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Arakawa Chemical (Japan)
Based on various researches at Oak Spring University , Arakawa Chemical is operating in a macro-environment that has been destablized by – increasing energy prices, increasing government debt because of Covid-19 spendings, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic ,
talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Arakawa Chemical can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arakawa Chemical, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arakawa Chemical 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 Arakawa Chemical can be done for the following purposes –
1. Strategic planning of Arakawa Chemical
2. Improving business portfolio management of Arakawa Chemical
3. Assessing feasibility of the new initiative in Japan
4. Making a Chemicals - Plastics & Rubber sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Arakawa Chemical
Strengths of Arakawa Chemical | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arakawa Chemical are -
High brand equity
– Arakawa Chemical has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arakawa Chemical to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Chemicals - Plastics & Rubber industry
– Arakawa Chemical has clearly differentiated products in the market place. This has enabled Arakawa Chemical to fetch slight price premium compare to the competitors in the Chemicals - Plastics & Rubber industry. The sustainable margins have also helped Arakawa Chemical to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Arakawa Chemical is present in almost all the verticals within the Chemicals - Plastics & Rubber industry. This has provided Arakawa Chemical 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
– Arakawa Chemical is one of the leading players in the Chemicals - Plastics & Rubber 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.
Effective Research and Development (R&D)
– Arakawa Chemical has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Arakawa Chemical staying ahead in the Chemicals - Plastics & Rubber industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Arakawa Chemical has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemicals - Plastics & Rubber industry. Secondly the value chain collaborators of Arakawa Chemical have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Arakawa Chemical 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 Chemicals - Plastics & Rubber 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.
Learning organization
- Arakawa Chemical 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 Arakawa Chemical is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Arakawa Chemical emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Arakawa Chemical 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.
Strong track record of project management in the Chemicals - Plastics & Rubber industry
– Arakawa Chemical is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Arakawa Chemical in Chemicals - Plastics & Rubber industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Arakawa Chemical 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.
Weaknesses of Arakawa Chemical | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arakawa Chemical are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Arakawa Chemical is slow explore the new channels of communication. These new channels of communication can help Arakawa Chemical to provide better information regarding Chemicals - Plastics & Rubber products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Arakawa Chemical 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.
Slow decision making process
– As mentioned earlier in the report, Arakawa Chemical has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemicals - Plastics & Rubber industry over the last five years. Arakawa Chemical 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.
Ability to respond to the competition
– As the decision making is very deliberative at Arakawa Chemical, in the dynamic environment of Chemicals - Plastics & Rubber industry it has struggled to respond to the nimble upstart competition. Arakawa Chemical has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– From the 10K / annual statement of Arakawa Chemical, it seems that company is thinking out the frontier risks that can impact Chemicals - Plastics & Rubber 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
Arakawa Chemical has a high cash cycle compare to other players in the Chemicals - Plastics & Rubber industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ less understanding of Arakawa Chemical strategy
– From the outside it seems that the employees of Arakawa Chemical 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.
Skills based hiring in Chemicals - Plastics & Rubber industry
– The stress on hiring functional specialists at Arakawa Chemical 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.
Need for greater diversity
– Arakawa Chemical 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.
Increasing silos among functional specialists
– The organizational structure of Arakawa Chemical is dominated by functional specialists. It is not different from other players in the Chemicals - Plastics & Rubber industry, but Arakawa Chemical needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Arakawa Chemical to focus more on services in the Chemicals - Plastics & Rubber industry rather than just following the product oriented approach.
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 Arakawa Chemical supply chain. Even after few cautionary changes, Arakawa Chemical is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Arakawa Chemical vulnerable to further global disruptions in South East Asia.
Arakawa Chemical Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Arakawa Chemical are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Arakawa Chemical 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Arakawa Chemical can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Arakawa Chemical 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 Arakawa Chemical to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Arakawa Chemical 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 Arakawa Chemical to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Arakawa Chemical can develop new processes and procedures in Chemicals - Plastics & Rubber 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Chemicals - Plastics & Rubber industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Arakawa Chemical 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. Arakawa Chemical 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.
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. Arakawa Chemical can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Arakawa Chemical has opened avenues for new revenue streams for the organization in Chemicals - Plastics & Rubber industry. This can help Arakawa Chemical to build a more holistic ecosystem for Arakawa Chemical products in the Chemicals - Plastics & Rubber industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Arakawa Chemical 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 Chemicals - Plastics & Rubber industry.
Manufacturing automation
– Arakawa Chemical can use the latest technology developments to improve its manufacturing and designing process in Chemicals - Plastics & Rubber 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.
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 Arakawa Chemical 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.
Leveraging digital technologies
– Arakawa Chemical 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Arakawa Chemical can use these opportunities to build new business models that can help the communities that Arakawa Chemical operates in. Secondly it can use opportunities from government spending in Chemicals - Plastics & Rubber sector.
Threats Arakawa Chemical External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Arakawa Chemical are -
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 Arakawa Chemical 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 Chemicals - Plastics & Rubber industry are lowering. It can presents Arakawa Chemical with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemicals - Plastics & Rubber sector.
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. Arakawa Chemical needs to understand the core reasons impacting the Chemicals - Plastics & Rubber industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Arakawa Chemical has witnessed rapid integration of technology during Covid-19 in the Chemicals - Plastics & Rubber industry. As one of the leading players in the industry, Arakawa Chemical needs to keep up with the evolution of technology in the Chemicals - Plastics & Rubber 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Arakawa Chemical in Chemicals - Plastics & Rubber industry. The Chemicals - Plastics & Rubber 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.
Consumer confidence and its impact on Arakawa Chemical 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 Chemicals - Plastics & Rubber industry and other sectors.
Stagnating economy with rate increase
– Arakawa Chemical 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 Chemicals - Plastics & Rubber industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Arakawa Chemical 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 Arakawa Chemical prominent markets.
Increasing wage structure of Arakawa Chemical
– 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 Arakawa Chemical.
Regulatory challenges
– Arakawa Chemical 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 Chemicals - Plastics & Rubber industry regulations.
Shortening product life cycle
– it is one of the major threat that Arakawa Chemical is facing in Chemicals - Plastics & Rubber sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Environmental challenges
– Arakawa Chemical 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. Arakawa Chemical can take advantage of this fund but it will also bring new competitors in the Chemicals - Plastics & Rubber industry.
Weighted SWOT Analysis of Arakawa Chemical Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Arakawa Chemical 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 Arakawa Chemical 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 Arakawa Chemical 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 Arakawa Chemical 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 Arakawa Chemical needs to make to build a sustainable competitive advantage.