Nippon Fine Chemical (4362) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Nippon Fine Chemical (Japan)

Based on various researches at Oak Spring University , Nippon Fine Chemical is operating in a macro-environment that has been destablized by – technology disruption, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, there is backlash against globalization, geopolitical disruptions, increasing energy prices, supply chains are disrupted by pandemic , increasing transportation and logistics costs, cloud computing is disrupting traditional business models, etc

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Introduction to SWOT Analysis of Nippon Fine Chemical

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

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Nippon Fine Chemical can be done for the following purposes –
1. Strategic planning of Nippon Fine Chemical
2. Improving business portfolio management of Nippon Fine Chemical
3. Assessing feasibility of the new initiative in Japan
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nippon Fine Chemical

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Strengths of Nippon Fine Chemical | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Nippon Fine Chemical are -

Operational resilience

– The operational resilience strategy of Nippon Fine Chemical comprises – understanding the underlying the factors in the Chemical Manufacturing 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.

Analytics focus

– Nippon Fine 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 Chemical Manufacturing 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.

Superior customer experience

– The customer experience strategy of Nippon Fine Chemical in Chemical Manufacturing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Low bargaining power of suppliers

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

Effective Research and Development (R&D)

– Nippon Fine Chemical has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nippon Fine Chemical staying ahead in the Chemical Manufacturing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Ability to recruit top talent

– Nippon Fine Chemical is one of the leading players in the Chemical Manufacturing 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.

High switching costs

– The high switching costs that Nippon Fine 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.

High brand equity

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

Digital Transformation in Chemical Manufacturing industry

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

Organizational Resilience of Nippon Fine Chemical

– The covid-19 pandemic has put organizational resilience at the centre of everthing Nippon Fine Chemical does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Successful track record of launching new products

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

Training and development

– Nippon Fine 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.

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Weaknesses of Nippon Fine Chemical | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Nippon Fine Chemical are -

High cash cycle compare to competitors

Nippon Fine Chemical has a high cash cycle compare to other players in the Chemical Manufacturing 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, Nippon Fine 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 Chemical Manufacturing industry using digital technology.

Lack of clear differentiation of Nippon Fine Chemical products

– To increase the profitability and margins on the products, Nippon Fine Chemical needs to provide more differentiated products than what it is currently offering in the marketplace.

Slow to harness new channels of communication

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

Increasing silos among functional specialists

– The organizational structure of Nippon Fine Chemical is dominated by functional specialists. It is not different from other players in the Chemical Manufacturing industry, but Nippon Fine Chemical needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nippon Fine Chemical to focus more on services in the Chemical Manufacturing 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 Nippon Fine Chemical supply chain. Even after few cautionary changes, Nippon Fine Chemical is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nippon Fine Chemical vulnerable to further global disruptions in South East Asia.

Employees’ less understanding of Nippon Fine Chemical strategy

– From the outside it seems that the employees of Nippon Fine 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.

Low market penetration in new markets

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

High bargaining power of channel partners in Chemical Manufacturing industry

– because of the regulatory requirements in Japan, Nippon Fine 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 Chemical Manufacturing industry.

High operating costs

– Compare to the competitors, Nippon Fine Chemical has high operating costs in the Chemical Manufacturing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nippon Fine Chemical lucrative customers.

Aligning sales with marketing

– From the outside it seems that Nippon Fine Chemical needs to have more collaboration between its sales team and marketing team. Sales professionals in the Chemical Manufacturing industry have deep experience in developing customer relationships. Marketing department at Nippon Fine Chemical can leverage the sales team experience to cultivate customer relationships as Nippon Fine Chemical is planning to shift buying processes online.

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Nippon Fine Chemical Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Nippon Fine Chemical are -

Loyalty marketing

– Nippon Fine Chemical has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Nippon Fine 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 Nippon Fine 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.

Creating value in data economy

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

Manufacturing automation

– Nippon Fine Chemical can use the latest technology developments to improve its manufacturing and designing process in Chemical Manufacturing 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.

Building a culture of innovation

– managers at Nippon Fine 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 Chemical Manufacturing industry.

Low interest rates

– Even though inflation is raising its head in most developed economies, Nippon Fine 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 Chemical Manufacturing industry, but it has also influenced the consumer preferences. Nippon Fine Chemical can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Using analytics as competitive advantage

– Nippon Fine Chemical has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Chemical Manufacturing sector. This continuous investment in analytics has enabled Nippon Fine Chemical to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nippon Fine Chemical to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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 Fine Chemical can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Buying journey improvements

– Nippon Fine Chemical can improve the customer journey of consumers in the Chemical Manufacturing 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Nippon Fine Chemical is facing challenges because of the dominance of functional experts in the organization. Nippon Fine Chemical can utilize new technology in the field of Chemical Manufacturing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Better consumer reach

– The expansion of the 5G network will help Nippon Fine Chemical to increase its market reach. Nippon Fine 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.

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 Nippon Fine 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.

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Threats Nippon Fine Chemical External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Nippon Fine Chemical are -

Easy access to finance

– Easy access to finance in Chemical Manufacturing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nippon Fine 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. Nippon Fine Chemical needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.

Consumer confidence and its impact on Nippon Fine 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 Chemical Manufacturing industry and other sectors.

Environmental challenges

– Nippon Fine 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. Nippon Fine Chemical can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.

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 Fine Chemical business can come under increasing regulations regarding data privacy, data security, etc.

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. Nippon Fine 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.

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 Fine Chemical in the Chemical Manufacturing sector and impact the bottomline of the organization.

High dependence on third party suppliers

– Nippon Fine Chemical 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Nippon Fine Chemical in Chemical Manufacturing industry. The Chemical Manufacturing 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.

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.

Barriers of entry lowering

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

Regulatory challenges

– Nippon Fine 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 Chemical Manufacturing industry regulations.

Technology acceleration in Forth Industrial Revolution

– Nippon Fine Chemical has witnessed rapid integration of technology during Covid-19 in the Chemical Manufacturing industry. As one of the leading players in the industry, Nippon Fine Chemical needs to keep up with the evolution of technology in the Chemical Manufacturing 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.

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Weighted SWOT Analysis of Nippon Fine Chemical Template, Example

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

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