Nikko Co Ltd (6306) SWOT Analysis / TOWS Matrix / MBA Resources
Constr. & Agric. Machinery
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nikko Co Ltd (Japan)
Based on various researches at Oak Spring University , Nikko Co Ltd is operating in a macro-environment that has been destablized by – technology disruption, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, geopolitical disruptions, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%,
there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nikko Co Ltd can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nikko Co Ltd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nikko Co Ltd operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Nikko Co Ltd can be done for the following purposes –
1. Strategic planning of Nikko Co Ltd
2. Improving business portfolio management of Nikko Co Ltd
3. Assessing feasibility of the new initiative in Japan
4. Making a Constr. & Agric. Machinery sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Nikko Co Ltd
Strengths of Nikko Co Ltd | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nikko Co Ltd are -
Ability to recruit top talent
– Nikko Co Ltd is one of the leading players in the Constr. & Agric. Machinery 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.
Successful track record of launching new products
– Nikko Co Ltd has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nikko Co Ltd 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.
Digital Transformation in Constr. & Agric. Machinery industry
- digital transformation varies from industry to industry. For Nikko Co Ltd digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nikko Co Ltd 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.
High switching costs
– The high switching costs that Nikko Co Ltd 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.
Strong track record of project management in the Constr. & Agric. Machinery industry
– Nikko Co Ltd is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Constr. & Agric. Machinery industry
– Nikko Co Ltd has clearly differentiated products in the market place. This has enabled Nikko Co Ltd to fetch slight price premium compare to the competitors in the Constr. & Agric. Machinery industry. The sustainable margins have also helped Nikko Co Ltd to invest into research and development (R&D) and innovation.
Training and development
– Nikko Co Ltd has one of the best training and development program in Capital Goods 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 Nikko Co Ltd in Constr. & Agric. Machinery industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Constr. & Agric. Machinery
– Nikko Co Ltd is one of the leading players in the Constr. & Agric. Machinery industry in Japan. Over the years it has not only transformed the business landscape in the Constr. & Agric. Machinery industry in Japan but also across the existing markets. The ability to lead change has enabled Nikko Co Ltd in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Nikko Co Ltd is present in almost all the verticals within the Constr. & Agric. Machinery industry. This has provided Nikko Co Ltd 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.
Effective Research and Development (R&D)
– Nikko Co Ltd has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nikko Co Ltd staying ahead in the Constr. & Agric. Machinery industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Nikko Co Ltd in the Capital Goods sector have low bargaining power. Nikko Co Ltd has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nikko Co Ltd to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of Nikko Co Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nikko Co Ltd are -
Ability to respond to the competition
– As the decision making is very deliberative at Nikko Co Ltd, in the dynamic environment of Constr. & Agric. Machinery industry it has struggled to respond to the nimble upstart competition. Nikko Co Ltd has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Nikko Co Ltd 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.
Employees’ less understanding of Nikko Co Ltd strategy
– From the outside it seems that the employees of Nikko Co Ltd 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 Nikko Co Ltd products
– To increase the profitability and margins on the products, Nikko Co Ltd needs to provide more differentiated products than what it is currently offering in the marketplace.
Aligning sales with marketing
– From the outside it seems that Nikko Co Ltd needs to have more collaboration between its sales team and marketing team. Sales professionals in the Constr. & Agric. Machinery industry have deep experience in developing customer relationships. Marketing department at Nikko Co Ltd can leverage the sales team experience to cultivate customer relationships as Nikko Co Ltd is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of Nikko Co Ltd is just above the Constr. & Agric. Machinery 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.
Workers concerns about automation
– As automation is fast increasing in the Constr. & Agric. Machinery industry, Nikko Co Ltd 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nikko Co Ltd is slow explore the new channels of communication. These new channels of communication can help Nikko Co Ltd to provide better information regarding Constr. & Agric. Machinery products and services. It can also build an online community to further reach out to potential customers.
Products dominated business model
– Even though Nikko Co Ltd has some of the most successful models in the Constr. & Agric. Machinery industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Nikko Co Ltd should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– Nikko Co Ltd has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High bargaining power of channel partners in Constr. & Agric. Machinery industry
– because of the regulatory requirements in Japan, Nikko Co Ltd 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 Constr. & Agric. Machinery industry.
Nikko Co Ltd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nikko Co Ltd are -
Use of Bitcoin and other crypto currencies for transactions in Constr. & Agric. Machinery industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Nikko Co Ltd in the Constr. & Agric. Machinery industry. Now Nikko Co Ltd can target international markets with far fewer capital restrictions requirements than the existing system.
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. Nikko Co Ltd can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nikko Co Ltd is facing challenges because of the dominance of functional experts in the organization. Nikko Co Ltd can utilize new technology in the field of Constr. & Agric. Machinery industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Nikko Co Ltd 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 Nikko Co Ltd to increase its market reach. Nikko Co Ltd 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nikko Co Ltd 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 Nikko Co Ltd to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nikko Co Ltd 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 Nikko Co Ltd to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Nikko Co Ltd 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.
Creating value in data economy
– The success of analytics program of Nikko Co Ltd has opened avenues for new revenue streams for the organization in Constr. & Agric. Machinery industry. This can help Nikko Co Ltd to build a more holistic ecosystem for Nikko Co Ltd products in the Constr. & Agric. Machinery 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 Nikko Co Ltd in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Constr. & Agric. Machinery industry, and it will provide faster access to the consumers.
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 Nikko Co Ltd 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, Nikko Co Ltd can use these opportunities to build new business models that can help the communities that Nikko Co Ltd operates in. Secondly it can use opportunities from government spending in Constr. & Agric. Machinery sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nikko Co Ltd can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Nikko Co Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nikko Co Ltd 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. Nikko Co Ltd 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.
Stagnating economy with rate increase
– Nikko Co Ltd 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 Constr. & Agric. Machinery industry.
Environmental challenges
– Nikko Co Ltd 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. Nikko Co Ltd can take advantage of this fund but it will also bring new competitors in the Constr. & Agric. Machinery 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Constr. & Agric. Machinery industry are lowering. It can presents Nikko Co Ltd with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Constr. & Agric. Machinery sector.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Nikko Co Ltd may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Constr. & Agric. Machinery sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nikko Co Ltd in Constr. & Agric. Machinery industry. The Constr. & Agric. Machinery 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.
Shortening product life cycle
– it is one of the major threat that Nikko Co Ltd is facing in Constr. & Agric. Machinery sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Constr. & Agric. Machinery industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nikko Co Ltd can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Nikko Co Ltd business can come under increasing regulations regarding data privacy, data security, etc.
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. Nikko Co Ltd needs to understand the core reasons impacting the Constr. & Agric. Machinery industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Nikko Co Ltd 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 Nikko Co Ltd prominent markets.
Regulatory challenges
– Nikko Co Ltd 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 Constr. & Agric. Machinery industry regulations.
Weighted SWOT Analysis of Nikko Co Ltd Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nikko Co Ltd 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 Nikko Co Ltd 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 Nikko Co Ltd 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 Nikko Co Ltd 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 Nikko Co Ltd needs to make to build a sustainable competitive advantage.
