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 – talent flight as more people leaving formal jobs, there is backlash against globalization, central banks are concerned over increasing inflation, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings,
technology disruption, increasing household debt because of falling income levels, 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 -
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Nikko Co Ltd 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.
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.
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.
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.
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.
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.
Highly skilled collaborators
– Nikko Co Ltd has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Constr. & Agric. Machinery industry. Secondly the value chain collaborators of Nikko Co Ltd have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
Learning organization
- Nikko Co Ltd 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 Nikko Co Ltd is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nikko Co Ltd emphasize – knowledge, initiative, and innovation.
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 -
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.
Slow decision making process
– As mentioned earlier in the report, Nikko Co Ltd has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Constr. & Agric. Machinery industry over the last five years. Nikko Co Ltd 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.
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.
High dependence on Nikko Co Ltd ‘s star products
– The top 2 products and services of Nikko Co Ltd still accounts for major business revenue. This dependence on star products in Constr. & Agric. Machinery industry has resulted into insufficient focus on developing new products, even though Nikko Co Ltd has relatively successful track record of launching new products.
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.
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 cash cycle compare to competitors
Nikko Co Ltd has a high cash cycle compare to other players in the Constr. & Agric. Machinery 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 strategic competitive environment developments
– As Nikko Co Ltd is one of the leading players in the Constr. & Agric. Machinery industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Constr. & Agric. Machinery industry in last five years.
Skills based hiring in Constr. & Agric. Machinery industry
– The stress on hiring functional specialists at Nikko Co Ltd 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.
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 Nikko Co Ltd supply chain. Even after few cautionary changes, Nikko Co Ltd is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nikko Co Ltd vulnerable to further global disruptions in South East Asia.
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 -
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.
Manufacturing automation
– Nikko Co Ltd can use the latest technology developments to improve its manufacturing and designing process in Constr. & Agric. Machinery 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.
Developing new processes and practices
– Nikko Co Ltd can develop new processes and procedures in Constr. & Agric. Machinery 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.
Leveraging digital technologies
– Nikko Co Ltd 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.
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.
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.
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.
Using analytics as competitive advantage
– Nikko Co Ltd has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Constr. & Agric. Machinery sector. This continuous investment in analytics has enabled Nikko Co Ltd to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nikko Co Ltd to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Constr. & Agric. Machinery industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nikko Co Ltd 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. Nikko Co Ltd 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.
Building a culture of innovation
– managers at Nikko Co Ltd 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 Constr. & Agric. Machinery industry.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Constr. & Agric. Machinery industry, but it has also influenced the consumer preferences. Nikko Co Ltd can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Nikko Co Ltd in the Constr. & Agric. Machinery sector and impact the bottomline 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.