Nippon Chemical Industry (4092) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

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

Based on various researches at Oak Spring University , Nippon Chemical Industry is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, increasing commodity prices, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, wage bills are increasing, increasing transportation and logistics costs, etc

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Introduction to SWOT Analysis of Nippon Chemical Industry

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

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

The strengths of Nippon Chemical Industry are -

Strong track record of project management in the Chemical Manufacturing industry

– Nippon Chemical Industry is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Digital Transformation in Chemical Manufacturing industry

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

Learning organization

- Nippon Chemical Industry 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 Chemical Industry is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nippon Chemical Industry emphasize – knowledge, initiative, and innovation.

Training and development

– Nippon Chemical Industry 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.

Ability to recruit top talent

– Nippon Chemical Industry 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.

Highly skilled collaborators

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

High switching costs

– The high switching costs that Nippon Chemical Industry 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.

Innovation driven organization

– Nippon Chemical Industry is one of the most innovative firm in Chemical Manufacturing sector.

Successful track record of launching new products

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

Diverse revenue streams

– Nippon Chemical Industry is present in almost all the verticals within the Chemical Manufacturing industry. This has provided Nippon Chemical Industry 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.

Cross disciplinary teams

– Horizontal connected teams at the Nippon Chemical Industry are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.

Sustainable margins compare to other players in Chemical Manufacturing industry

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

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

The weaknesses of Nippon Chemical Industry are -

No frontier risks strategy

– From the 10K / annual statement of Nippon Chemical Industry, it seems that company is thinking out the frontier risks that can impact Chemical Manufacturing 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.

Interest costs

– Compare to the competition, Nippon Chemical Industry 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.

High cash cycle compare to competitors

Nippon Chemical Industry 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.

Slow to harness new channels of communication

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

Workers concerns about automation

– As automation is fast increasing in the Chemical Manufacturing industry, Nippon Chemical Industry 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.

Ability to respond to the competition

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

Increasing silos among functional specialists

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

Compensation and incentives

– The revenue per employee of Nippon Chemical Industry is just above the Chemical Manufacturing 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 bargaining power of channel partners in Chemical Manufacturing industry

– because of the regulatory requirements in Japan, Nippon Chemical Industry 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.

Skills based hiring in Chemical Manufacturing industry

– The stress on hiring functional specialists at Nippon Chemical Industry has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.

Slow decision making process

– As mentioned earlier in the report, Nippon Chemical Industry has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemical Manufacturing industry over the last five years. Nippon Chemical Industry 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.

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

The opportunities of Nippon Chemical Industry are -

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 Chemical Industry can use these opportunities to build new business models that can help the communities that Nippon Chemical Industry operates in. Secondly it can use opportunities from government spending in Chemical Manufacturing sector.

Building a culture of innovation

– managers at Nippon Chemical Industry 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.

Better consumer reach

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

Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nippon Chemical Industry in the Chemical Manufacturing industry. Now Nippon Chemical Industry 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, Nippon Chemical Industry 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 Chemical Industry 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 Chemical Industry has opened avenues for new revenue streams for the organization in Chemical Manufacturing industry. This can help Nippon Chemical Industry to build a more holistic ecosystem for Nippon Chemical Industry products in the Chemical Manufacturing industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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

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 Chemical Industry 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Nippon Chemical Industry 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Nippon Chemical Industry is facing challenges because of the dominance of functional experts in the organization. Nippon Chemical Industry 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.

Remote work and new talent hiring opportunities

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

Learning at scale

– Online learning technologies has now opened space for Nippon Chemical Industry 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Chemical Manufacturing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nippon Chemical Industry 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 Chemical Industry 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.

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

The threats of Nippon Chemical Industry are -

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 Chemical Industry needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.

High dependence on third party suppliers

– Nippon Chemical Industry 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.

Increasing wage structure of Nippon Chemical Industry

– 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 Chemical Industry.

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 Chemical Industry can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Barriers of entry lowering

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

Environmental challenges

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

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 Chemical Industry 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, Nippon Chemical Industry may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemical Manufacturing sector.

Shortening product life cycle

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

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 Chemical Industry.

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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Nippon Chemical Industry 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.

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Weighted SWOT Analysis of Nippon Chemical Industry Template, Example

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

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