Vertex (5290) SWOT Analysis / TOWS Matrix / MBA Resources
Construction - Raw Materials
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Vertex (Japan)
Based on various researches at Oak Spring University , Vertex is operating in a macro-environment that has been destablized by – increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions,
increasing government debt because of Covid-19 spendings, 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 Vertex can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Vertex, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Vertex 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 Vertex can be done for the following purposes –
1. Strategic planning of Vertex
2. Improving business portfolio management of Vertex
3. Assessing feasibility of the new initiative in Japan
4. Making a Construction - Raw Materials sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Vertex
Strengths of Vertex | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Vertex are -
Digital Transformation in Construction - Raw Materials industry
- digital transformation varies from industry to industry. For Vertex digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Vertex 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 Vertex 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.
Organizational Resilience of Vertex
– The covid-19 pandemic has put organizational resilience at the centre of everthing Vertex does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Vertex is one of the most innovative firm in Construction - Raw Materials sector.
Successful track record of launching new products
– Vertex has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Vertex 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.
Operational resilience
– The operational resilience strategy of Vertex comprises – understanding the underlying the factors in the Construction - Raw Materials 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.
Highly skilled collaborators
– Vertex has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Construction - Raw Materials industry. Secondly the value chain collaborators of Vertex have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Vertex has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Vertex to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Construction - Raw Materials industry
– Vertex has clearly differentiated products in the market place. This has enabled Vertex to fetch slight price premium compare to the competitors in the Construction - Raw Materials industry. The sustainable margins have also helped Vertex to invest into research and development (R&D) and innovation.
Training and development
– Vertex 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.
Low bargaining power of suppliers
– Suppliers of Vertex in the Capital Goods sector have low bargaining power. Vertex has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Vertex to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Vertex 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 Vertex is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Vertex emphasize – knowledge, initiative, and innovation.
Weaknesses of Vertex | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Vertex are -
Capital Spending Reduction
– Even during the low interest decade, Vertex 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 Construction - Raw Materials industry using digital technology.
High operating costs
– Compare to the competitors, Vertex has high operating costs in the Construction - Raw Materials industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Vertex lucrative customers.
High dependence on Vertex ‘s star products
– The top 2 products and services of Vertex still accounts for major business revenue. This dependence on star products in Construction - Raw Materials industry has resulted into insufficient focus on developing new products, even though Vertex has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee of Vertex is just above the Construction - Raw Materials 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.
Increasing silos among functional specialists
– The organizational structure of Vertex is dominated by functional specialists. It is not different from other players in the Construction - Raw Materials industry, but Vertex needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Vertex to focus more on services in the Construction - Raw Materials industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Vertex, it seems that company is thinking out the frontier risks that can impact Construction - Raw Materials 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.
Workers concerns about automation
– As automation is fast increasing in the Construction - Raw Materials industry, Vertex 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.
Need for greater diversity
– Vertex 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.
Ability to respond to the competition
– As the decision making is very deliberative at Vertex, in the dynamic environment of Construction - Raw Materials industry it has struggled to respond to the nimble upstart competition. Vertex has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of Vertex products
– To increase the profitability and margins on the products, Vertex needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Vertex has some of the most successful models in the Construction - Raw Materials industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Vertex should strive to include more intangible value offerings along with its core products and services.
Vertex Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Vertex are -
Buying journey improvements
– Vertex can improve the customer journey of consumers in the Construction - Raw Materials industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Construction - Raw Materials industry, but it has also influenced the consumer preferences. Vertex can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Vertex 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 Vertex to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Vertex has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Construction - Raw Materials sector. This continuous investment in analytics has enabled Vertex to build a competitive advantage using analytics. The analytics driven competitive advantage can help Vertex to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Creating value in data economy
– The success of analytics program of Vertex has opened avenues for new revenue streams for the organization in Construction - Raw Materials industry. This can help Vertex to build a more holistic ecosystem for Vertex products in the Construction - Raw Materials 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. Vertex can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Construction - Raw Materials industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Vertex 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. Vertex 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Vertex can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Leveraging digital technologies
– Vertex 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Vertex 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.
Manufacturing automation
– Vertex can use the latest technology developments to improve its manufacturing and designing process in Construction - Raw Materials 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Vertex is facing challenges because of the dominance of functional experts in the organization. Vertex can utilize new technology in the field of Construction - Raw Materials industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Vertex 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.
Threats Vertex External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Vertex are -
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 Vertex in the Construction - Raw Materials sector and impact the bottomline of the organization.
Increasing wage structure of Vertex
– 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 Vertex.
Technology acceleration in Forth Industrial Revolution
– Vertex has witnessed rapid integration of technology during Covid-19 in the Construction - Raw Materials industry. As one of the leading players in the industry, Vertex needs to keep up with the evolution of technology in the Construction - Raw Materials 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.
Easy access to finance
– Easy access to finance in Construction - Raw Materials industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Vertex can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Vertex 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 Vertex prominent markets.
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. Vertex 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.
Consumer confidence and its impact on Vertex 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 Construction - Raw Materials industry and other sectors.
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.
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. Vertex needs to understand the core reasons impacting the Construction - Raw Materials industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Vertex is facing in Construction - Raw Materials 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, Vertex may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Construction - Raw Materials sector.
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 Vertex business can come under increasing regulations regarding data privacy, data security, 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 Vertex.
Weighted SWOT Analysis of Vertex Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Vertex 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 Vertex 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 Vertex 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 Vertex 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 Vertex needs to make to build a sustainable competitive advantage.