Sotoh (3571) SWOT Analysis / TOWS Matrix / MBA Resources
Textiles - Non Apparel
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Sotoh (Japan)
Based on various researches at Oak Spring University , Sotoh is operating in a macro-environment that has been destablized by – technology disruption, increasing transportation and logistics costs, supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices,
challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sotoh can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sotoh, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sotoh 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 Sotoh can be done for the following purposes –
1. Strategic planning of Sotoh
2. Improving business portfolio management of Sotoh
3. Assessing feasibility of the new initiative in Japan
4. Making a Textiles - Non Apparel sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sotoh
Strengths of Sotoh | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sotoh are -
High brand equity
– Sotoh has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sotoh to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Sotoh is one of the most innovative firm in Textiles - Non Apparel sector.
Low bargaining power of suppliers
– Suppliers of Sotoh in the Consumer Cyclical sector have low bargaining power. Sotoh has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sotoh to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Sotoh is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Textiles - Non Apparel industry. The technology infrastructure of Japan is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Digital Transformation in Textiles - Non Apparel industry
- digital transformation varies from industry to industry. For Sotoh digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sotoh 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.
Strong track record of project management in the Textiles - Non Apparel industry
– Sotoh is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Sotoh is present in almost all the verticals within the Textiles - Non Apparel industry. This has provided Sotoh 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.
Highly skilled collaborators
– Sotoh has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Textiles - Non Apparel industry. Secondly the value chain collaborators of Sotoh have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Sotoh 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.
Successful track record of launching new products
– Sotoh has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sotoh 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.
Organizational Resilience of Sotoh
– The covid-19 pandemic has put organizational resilience at the centre of everthing Sotoh does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of Sotoh comprises – understanding the underlying the factors in the Textiles - Non Apparel 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.
Weaknesses of Sotoh | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sotoh are -
Increasing silos among functional specialists
– The organizational structure of Sotoh is dominated by functional specialists. It is not different from other players in the Textiles - Non Apparel industry, but Sotoh needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sotoh to focus more on services in the Textiles - Non Apparel industry rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Sotoh has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Textiles - Non Apparel industry over the last five years. Sotoh 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.
Capital Spending Reduction
– Even during the low interest decade, Sotoh 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 Textiles - Non Apparel industry using digital technology.
Interest costs
– Compare to the competition, Sotoh 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
Sotoh has a high cash cycle compare to other players in the Textiles - Non Apparel industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Compensation and incentives
– The revenue per employee of Sotoh is just above the Textiles - Non Apparel 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.
Ability to respond to the competition
– As the decision making is very deliberative at Sotoh, in the dynamic environment of Textiles - Non Apparel industry it has struggled to respond to the nimble upstart competition. Sotoh has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners in Textiles - Non Apparel industry
– because of the regulatory requirements in Japan, Sotoh 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 Textiles - Non Apparel industry.
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 Sotoh supply chain. Even after few cautionary changes, Sotoh is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sotoh vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– From the 10K / annual statement of Sotoh, it seems that company is thinking out the frontier risks that can impact Textiles - Non Apparel 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.
Skills based hiring in Textiles - Non Apparel industry
– The stress on hiring functional specialists at Sotoh 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.
Sotoh Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sotoh are -
Using analytics as competitive advantage
– Sotoh has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Textiles - Non Apparel sector. This continuous investment in analytics has enabled Sotoh to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sotoh to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sotoh 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 Sotoh to hire the very best people irrespective of their geographical location.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sotoh can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Sotoh to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sotoh 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.
Buying journey improvements
– Sotoh can improve the customer journey of consumers in the Textiles - Non Apparel 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.
Developing new processes and practices
– Sotoh can develop new processes and procedures in Textiles - Non Apparel 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Textiles - Non Apparel industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sotoh 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. Sotoh 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.
Use of Bitcoin and other crypto currencies for transactions in Textiles - Non Apparel industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Sotoh in the Textiles - Non Apparel industry. Now Sotoh 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, Sotoh 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 Sotoh to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Sotoh can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Sotoh can use the latest technology developments to improve its manufacturing and designing process in Textiles - Non Apparel 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sotoh can use these opportunities to build new business models that can help the communities that Sotoh operates in. Secondly it can use opportunities from government spending in Textiles - Non Apparel sector.
Threats Sotoh External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sotoh are -
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.
Consumer confidence and its impact on Sotoh 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 Textiles - Non Apparel industry and other sectors.
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 Sotoh business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Textiles - Non Apparel industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sotoh can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Increasing wage structure of Sotoh
– 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 Sotoh.
Technology acceleration in Forth Industrial Revolution
– Sotoh has witnessed rapid integration of technology during Covid-19 in the Textiles - Non Apparel industry. As one of the leading players in the industry, Sotoh needs to keep up with the evolution of technology in the Textiles - Non Apparel 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.
Stagnating economy with rate increase
– Sotoh 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 Textiles - Non Apparel 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 Sotoh in the Textiles - Non Apparel sector and impact the bottomline of the organization.
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. Sotoh 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.
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 Sotoh.
Regulatory challenges
– Sotoh 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 Textiles - Non Apparel industry regulations.
Environmental challenges
– Sotoh 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. Sotoh can take advantage of this fund but it will also bring new competitors in the Textiles - Non Apparel industry.
Weighted SWOT Analysis of Sotoh Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sotoh 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 Sotoh 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 Sotoh 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 Sotoh 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 Sotoh needs to make to build a sustainable competitive advantage.
