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 – increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, wage bills are increasing, increasing household debt because of falling income levels, 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 -

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.

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.

Highly skilled collaborators

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

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.

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 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.

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.

Innovation driven organization

– Nippon Air Conditioning is one of the most innovative firm in Business Services sector.

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.

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.

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.

Operational resilience

– The operational resilience strategy of Nippon Air Conditioning comprises – understanding the underlying the factors in the Business Services 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.

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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 -

Compensation and incentives

– The revenue per employee of Nippon Air Conditioning is just above the Business Services 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.

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.

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.

No frontier risks strategy

– From the 10K / annual statement of Nippon Air Conditioning, it seems that company is thinking out the frontier risks that can impact Business Services industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.

Capital Spending Reduction

– Even during the low interest decade, Nippon Air Conditioning 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 Business Services industry using digital technology.

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 decision making process

– As mentioned earlier in the report, Nippon Air Conditioning has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Business Services industry over the last five years. Nippon Air Conditioning even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.

High dependence on Nippon Air Conditioning ‘s star products

– The top 2 products and services of Nippon Air Conditioning still accounts for major business revenue. This dependence on star products in Business Services industry has resulted into insufficient focus on developing new products, even though Nippon Air Conditioning has relatively successful track record of launching new products.

High cash cycle compare to competitors

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

High bargaining power of channel partners in Business Services industry

– because of the regulatory requirements in Japan, Nippon Air Conditioning 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 Business Services industry.

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.

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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 -

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.

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.

Building a culture of innovation

– managers at Nippon Air Conditioning 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 Business Services industry.

Learning at scale

– Online learning technologies has now opened space for Nippon Air Conditioning 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, 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.

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 Air Conditioning can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nippon Air Conditioning 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 Nippon Air Conditioning to hire the very best people irrespective of their geographical location.

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.

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.

Loyalty marketing

– Nippon Air Conditioning 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.

Better consumer reach

– The expansion of the 5G network will help Nippon Air Conditioning to increase its market reach. Nippon Air Conditioning will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, 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.

Developing new processes and practices

– Nippon Air Conditioning can develop new processes and procedures in Business Services 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.

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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 -

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 Air Conditioning 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.

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.

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 Nippon Air Conditioning.

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.

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.

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.

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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Nippon Air Conditioning in Business Services industry. The Business Services 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.

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.

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.

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 Air Conditioning needs to understand the core reasons impacting the Business Services industry. This will help it in building a better workplace.

Environmental challenges

– Nippon Air Conditioning 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 Air Conditioning can take advantage of this fund but it will also bring new competitors in the Business Services industry.

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.

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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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