Nippon Air Conditioning (4658) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Nippon Air Conditioning (Japan)

Based on various researches at Oak Spring University , Nippon Air Conditioning is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, wage bills are increasing, central banks are concerned over increasing inflation, there is increasing trade war between United States & China, increasing commodity prices, geopolitical disruptions, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Nippon Air Conditioning

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nippon Air Conditioning can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nippon Air Conditioning, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nippon Air Conditioning 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 Air Conditioning can be done for the following purposes –
1. Strategic planning of Nippon Air Conditioning
2. Improving business portfolio management of Nippon Air Conditioning
3. Assessing feasibility of the new initiative in Japan
4. Making a Business Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nippon Air Conditioning

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

The strengths of Nippon Air Conditioning are -

Effective Research and Development (R&D)

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

High switching costs

– The high switching costs that Nippon Air Conditioning 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.

Learning organization

- Nippon Air Conditioning is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Nippon Air Conditioning is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nippon Air Conditioning emphasize – knowledge, initiative, and innovation.

Organizational Resilience of Nippon Air Conditioning

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

Training and development

– Nippon Air Conditioning has one of the best training and development program in Services industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.

Superior customer experience

– The customer experience strategy of Nippon Air Conditioning in Business Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Diverse revenue streams

– Nippon Air Conditioning is present in almost all the verticals within the Business Services industry. This has provided Nippon Air Conditioning 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.

Analytics focus

– Nippon Air Conditioning 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 Business Services 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.

Digital Transformation in Business Services industry

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

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

Ability to recruit top talent

– Nippon Air Conditioning is one of the leading players in the Business Services 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 brand equity

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

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

The weaknesses of Nippon Air Conditioning are -

Aligning sales with marketing

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

Increasing silos among functional specialists

– The organizational structure of Nippon Air Conditioning is dominated by functional specialists. It is not different from other players in the Business Services industry, but Nippon Air Conditioning needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nippon Air Conditioning to focus more on services in the Business Services industry rather than just following the product oriented approach.

Slow to strategic competitive environment developments

– As Nippon Air Conditioning is one of the leading players in the Business Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Business Services industry in last five years.

Need for greater diversity

– Nippon Air Conditioning 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.

Workers concerns about automation

– As automation is fast increasing in the Business Services industry, Nippon Air Conditioning 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.

Employees’ less understanding of Nippon Air Conditioning strategy

– From the outside it seems that the employees of Nippon Air Conditioning 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.

Lack of clear differentiation of Nippon Air Conditioning products

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

Ability to respond to the competition

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

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 Air Conditioning supply chain. Even after few cautionary changes, Nippon Air Conditioning is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nippon Air Conditioning vulnerable to further global disruptions in South East Asia.

Interest costs

– Compare to the competition, Nippon Air Conditioning 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 to harness new channels of communication

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

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

The opportunities of Nippon Air Conditioning are -

Buying journey improvements

– Nippon Air Conditioning can improve the customer journey of consumers in the Business 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.

Creating value in data economy

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for Nippon Air Conditioning in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Business Services industry, and it will provide faster access to the consumers.

Leveraging digital technologies

– Nippon Air Conditioning 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.

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 Air Conditioning 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.

Increase in government spending

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

Redefining models of collaboration and team work

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

Low interest rates

– Even though inflation is raising its head in most developed economies, Nippon Air Conditioning 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Business Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nippon Air Conditioning 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. Nippon Air Conditioning 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.

Manufacturing automation

– Nippon Air Conditioning can use the latest technology developments to improve its manufacturing and designing process in Business 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Nippon Air Conditioning can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Using analytics as competitive advantage

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

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

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

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Threats Nippon Air Conditioning External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Nippon Air Conditioning are -

High dependence on third party suppliers

– Nippon Air Conditioning 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.

Consumer confidence and its impact on Nippon Air Conditioning 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 Business Services industry and other sectors.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Nippon Air Conditioning 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 Nippon Air Conditioning prominent markets.

Stagnating economy with rate increase

– Nippon Air Conditioning 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 Business Services industry.

Shortening product life cycle

– it is one of the major threat that Nippon Air Conditioning is facing in Business Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 Air Conditioning 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 Business Services industry are lowering. It can presents Nippon Air Conditioning with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Business Services sector.

Regulatory challenges

– Nippon Air Conditioning 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 Business Services industry regulations.

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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Nippon Air Conditioning may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Business Services sector.

Increasing wage structure of Nippon Air Conditioning

– 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 Nippon Air Conditioning.

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.

Technology acceleration in Forth Industrial Revolution

– Nippon Air Conditioning has witnessed rapid integration of technology during Covid-19 in the Business Services industry. As one of the leading players in the industry, Nippon Air Conditioning needs to keep up with the evolution of technology in the Business Services 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 Air Conditioning Template, Example

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

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