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 – customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, increasing energy prices, wage bills are increasing,
digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
Low bargaining power of suppliers
– Suppliers of Arakawa Chemical in the Basic Materials sector have low bargaining power. Arakawa Chemical has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Arakawa Chemical to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Arakawa Chemical
– The covid-19 pandemic has put organizational resilience at the centre of everthing Arakawa Chemical does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Operational resilience
– The operational resilience strategy of Arakawa Chemical comprises – understanding the underlying the factors in the Chemicals - Plastics & Rubber 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.
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.
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.
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.
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.
Digital Transformation in Chemicals - Plastics & Rubber industry
- digital transformation varies from industry to industry. For Arakawa Chemical digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Arakawa Chemical 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.
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.
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.
Weaknesses of Arakawa Chemical | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Arakawa Chemical are -
Aligning sales with marketing
– From the outside it seems that Arakawa Chemical needs to have more collaboration between its sales team and marketing team. Sales professionals in the Chemicals - Plastics & Rubber industry have deep experience in developing customer relationships. Marketing department at Arakawa Chemical can leverage the sales team experience to cultivate customer relationships as Arakawa Chemical is planning to shift buying processes online.
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.
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.
Products dominated business model
– Even though Arakawa Chemical has some of the most successful models in the Chemicals - Plastics & Rubber industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Arakawa Chemical should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Arakawa Chemical 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 Chemicals - Plastics & Rubber industry using digital technology.
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.
Compensation and incentives
– The revenue per employee of Arakawa Chemical is just above the Chemicals - Plastics & Rubber 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.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the Chemicals - Plastics & Rubber industry, Arakawa Chemical 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.
High bargaining power of channel partners in Chemicals - Plastics & Rubber industry
– because of the regulatory requirements in Japan, Arakawa Chemical 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 Chemicals - Plastics & Rubber industry.
Arakawa Chemical Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Arakawa Chemical are -
Better consumer reach
– The expansion of the 5G network will help Arakawa Chemical to increase its market reach. Arakawa Chemical 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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Arakawa Chemical in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Chemicals - Plastics & Rubber industry, and it will provide faster access to the consumers.
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.
Learning at scale
– Online learning technologies has now opened space for Arakawa Chemical 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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Chemicals - Plastics & Rubber industry, but it has also influenced the consumer preferences. Arakawa Chemical 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 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.
Buying journey improvements
– Arakawa Chemical can improve the customer journey of consumers in the Chemicals - Plastics & Rubber 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.
Use of Bitcoin and other crypto currencies for transactions in Chemicals - Plastics & Rubber industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Arakawa Chemical in the Chemicals - Plastics & Rubber industry. Now Arakawa Chemical can target international markets with far fewer capital restrictions requirements than the existing system.
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.
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.
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 -
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.
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.
Easy access to finance
– Easy access to finance in Chemicals - Plastics & Rubber industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Arakawa Chemical can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
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.
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 Arakawa Chemical.
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.
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. Arakawa Chemical 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Arakawa Chemical may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemicals - Plastics & Rubber sector.
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.
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.
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.
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.