Howa Machinery Ltd (6203) SWOT Analysis / TOWS Matrix / MBA Resources
Misc. Capital Goods
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Howa Machinery Ltd (Japan)
Based on various researches at Oak Spring University , Howa Machinery Ltd is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, technology disruption,
supply chains are disrupted by pandemic , there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Howa Machinery Ltd
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Howa Machinery Ltd can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Howa Machinery Ltd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Howa Machinery 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 Howa Machinery Ltd can be done for the following purposes –
1. Strategic planning of Howa Machinery Ltd
2. Improving business portfolio management of Howa Machinery Ltd
3. Assessing feasibility of the new initiative in Japan
4. Making a Misc. Capital Goods sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Howa Machinery Ltd
Strengths of Howa Machinery Ltd | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Howa Machinery Ltd are -
Learning organization
- Howa Machinery 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 Howa Machinery Ltd is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Howa Machinery Ltd emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Misc. Capital Goods industry
– Howa Machinery Ltd has clearly differentiated products in the market place. This has enabled Howa Machinery Ltd to fetch slight price premium compare to the competitors in the Misc. Capital Goods industry. The sustainable margins have also helped Howa Machinery Ltd to invest into research and development (R&D) and innovation.
Analytics focus
– Howa Machinery Ltd 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 Misc. Capital Goods 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.
Operational resilience
– The operational resilience strategy of Howa Machinery Ltd comprises – understanding the underlying the factors in the Misc. Capital Goods 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.
Low bargaining power of suppliers
– Suppliers of Howa Machinery Ltd in the Capital Goods sector have low bargaining power. Howa Machinery Ltd has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Howa Machinery Ltd to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Howa Machinery 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 Misc. Capital Goods
– Howa Machinery Ltd is one of the leading players in the Misc. Capital Goods industry in Japan. Over the years it has not only transformed the business landscape in the Misc. Capital Goods industry in Japan but also across the existing markets. The ability to lead change has enabled Howa Machinery Ltd in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Ability to recruit top talent
– Howa Machinery Ltd is one of the leading players in the Misc. Capital Goods 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.
High brand equity
– Howa Machinery Ltd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Howa Machinery Ltd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Howa Machinery 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.
Digital Transformation in Misc. Capital Goods industry
- digital transformation varies from industry to industry. For Howa Machinery Ltd digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Howa Machinery 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.
Training and development
– Howa Machinery 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.
Weaknesses of Howa Machinery Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Howa Machinery Ltd are -
Need for greater diversity
– Howa Machinery 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.
Skills based hiring in Misc. Capital Goods industry
– The stress on hiring functional specialists at Howa Machinery 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 Howa Machinery Ltd supply chain. Even after few cautionary changes, Howa Machinery Ltd is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Howa Machinery Ltd vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Howa Machinery Ltd has some of the most successful models in the Misc. Capital Goods industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Howa Machinery Ltd should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Howa Machinery Ltd has a high cash cycle compare to other players in the Misc. Capital Goods industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Ability to respond to the competition
– As the decision making is very deliberative at Howa Machinery Ltd, in the dynamic environment of Misc. Capital Goods industry it has struggled to respond to the nimble upstart competition. Howa Machinery Ltd has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Howa Machinery 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 Misc. Capital Goods industry over the last five years. Howa Machinery 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.
Low market penetration in new markets
– Outside its home market of Japan, Howa Machinery Ltd needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Howa Machinery Ltd products
– To increase the profitability and margins on the products, Howa Machinery Ltd needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– From the 10K / annual statement of Howa Machinery Ltd, it seems that company is thinking out the frontier risks that can impact Misc. Capital Goods 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.
Capital Spending Reduction
– Even during the low interest decade, Howa Machinery Ltd 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 Misc. Capital Goods industry using digital technology.
Howa Machinery Ltd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Howa Machinery Ltd are -
Better consumer reach
– The expansion of the 5G network will help Howa Machinery Ltd to increase its market reach. Howa Machinery 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Howa Machinery Ltd can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Howa Machinery Ltd 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.
Developing new processes and practices
– Howa Machinery Ltd can develop new processes and procedures in Misc. Capital Goods 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Misc. Capital Goods industry, but it has also influenced the consumer preferences. Howa Machinery Ltd can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Howa Machinery 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Howa Machinery Ltd can use these opportunities to build new business models that can help the communities that Howa Machinery Ltd operates in. Secondly it can use opportunities from government spending in Misc. Capital Goods sector.
Learning at scale
– Online learning technologies has now opened space for Howa Machinery 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Howa Machinery 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 Howa Machinery Ltd to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Howa Machinery 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.
Building a culture of innovation
– managers at Howa Machinery 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 Misc. Capital Goods industry.
Manufacturing automation
– Howa Machinery Ltd can use the latest technology developments to improve its manufacturing and designing process in Misc. Capital Goods 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.
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. Howa Machinery Ltd can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Howa Machinery Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Howa Machinery Ltd are -
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 Howa Machinery Ltd business can come under increasing regulations regarding data privacy, data security, etc.
Easy access to finance
– Easy access to finance in Misc. Capital Goods industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Howa Machinery Ltd can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Howa Machinery Ltd.
Increasing wage structure of Howa Machinery Ltd
– 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 Howa Machinery Ltd.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Howa Machinery 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 Misc. Capital Goods sector.
High dependence on third party suppliers
– Howa Machinery Ltd 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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Howa Machinery 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 Howa Machinery Ltd prominent markets.
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. Howa Machinery Ltd needs to understand the core reasons impacting the Misc. Capital Goods industry. This will help it in building a better workplace.
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 Howa Machinery Ltd in the Misc. Capital Goods sector and impact the bottomline of the organization.
Environmental challenges
– Howa Machinery 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. Howa Machinery Ltd can take advantage of this fund but it will also bring new competitors in the Misc. Capital Goods industry.
Regulatory challenges
– Howa Machinery 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 Misc. Capital Goods industry regulations.
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. Howa Machinery 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.
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.
Weighted SWOT Analysis of Howa Machinery Ltd Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Howa Machinery 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 Howa Machinery 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 Howa Machinery 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 Howa Machinery 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 Howa Machinery Ltd needs to make to build a sustainable competitive advantage.