Natoco (4627) SWOT Analysis / TOWS Matrix / MBA Resources
Chemical Manufacturing
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Natoco (Japan)
Based on various researches at Oak Spring University , Natoco is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, central banks are concerned over increasing inflation, geopolitical disruptions, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies,
competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Natoco can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Natoco, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Natoco 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 Natoco can be done for the following purposes –
1. Strategic planning of Natoco
2. Improving business portfolio management of Natoco
3. Assessing feasibility of the new initiative in Japan
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Natoco
Strengths of Natoco | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Natoco are -
Organizational Resilience of Natoco
– The covid-19 pandemic has put organizational resilience at the centre of everthing Natoco does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Natoco 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.
Effective Research and Development (R&D)
– Natoco has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Natoco staying ahead in the Chemical Manufacturing industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management in the Chemical Manufacturing industry
– Natoco is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Natoco 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 Natoco is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Natoco emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of Natoco comprises – understanding the underlying the factors in the Chemical Manufacturing 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.
Superior customer experience
– The customer experience strategy of Natoco in Chemical Manufacturing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Chemical Manufacturing industry
– Natoco has clearly differentiated products in the market place. This has enabled Natoco to fetch slight price premium compare to the competitors in the Chemical Manufacturing industry. The sustainable margins have also helped Natoco to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Natoco 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.
Training and development
– Natoco has one of the best training and development program in Basic Materials 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 Natoco in the Basic Materials sector have low bargaining power. Natoco has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Natoco to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Natoco is one of the most innovative firm in Chemical Manufacturing sector.
Weaknesses of Natoco | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Natoco are -
Slow to strategic competitive environment developments
– As Natoco is one of the leading players in the Chemical Manufacturing industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Chemical Manufacturing industry in last five years.
Employees’ less understanding of Natoco strategy
– From the outside it seems that the employees of Natoco 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.
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 Natoco supply chain. Even after few cautionary changes, Natoco is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Natoco vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that Natoco needs to have more collaboration between its sales team and marketing team. Sales professionals in the Chemical Manufacturing industry have deep experience in developing customer relationships. Marketing department at Natoco can leverage the sales team experience to cultivate customer relationships as Natoco is planning to shift buying processes online.
Increasing silos among functional specialists
– The organizational structure of Natoco is dominated by functional specialists. It is not different from other players in the Chemical Manufacturing industry, but Natoco needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Natoco to focus more on services in the Chemical Manufacturing industry rather than just following the product oriented approach.
Skills based hiring in Chemical Manufacturing industry
– The stress on hiring functional specialists at Natoco 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.
Low market penetration in new markets
– Outside its home market of Japan, Natoco needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Natoco 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.
Ability to respond to the competition
– As the decision making is very deliberative at Natoco, in the dynamic environment of Chemical Manufacturing industry it has struggled to respond to the nimble upstart competition. Natoco has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on Natoco ‘s star products
– The top 2 products and services of Natoco still accounts for major business revenue. This dependence on star products in Chemical Manufacturing industry has resulted into insufficient focus on developing new products, even though Natoco has relatively successful track record of launching new products.
Lack of clear differentiation of Natoco products
– To increase the profitability and margins on the products, Natoco needs to provide more differentiated products than what it is currently offering in the marketplace.
Natoco Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Natoco are -
Low interest rates
– Even though inflation is raising its head in most developed economies, Natoco 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Natoco can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Natoco 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 Natoco to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Natoco 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 Chemical Manufacturing industry.
Buying journey improvements
– Natoco can improve the customer journey of consumers in the Chemical Manufacturing 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Chemical Manufacturing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Natoco 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. Natoco 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.
Developing new processes and practices
– Natoco can develop new processes and procedures in Chemical Manufacturing 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.
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 Natoco 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.
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. Natoco can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Natoco to increase its market reach. Natoco 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.
Using analytics as competitive advantage
– Natoco has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Chemical Manufacturing sector. This continuous investment in analytics has enabled Natoco to build a competitive advantage using analytics. The analytics driven competitive advantage can help Natoco to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Natoco is facing challenges because of the dominance of functional experts in the organization. Natoco can utilize new technology in the field of Chemical Manufacturing industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Natoco 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 Natoco External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Natoco are -
Increasing wage structure of Natoco
– 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 Natoco.
Environmental challenges
– Natoco 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. Natoco can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.
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. Natoco 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.
Easy access to finance
– Easy access to finance in Chemical Manufacturing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Natoco 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 Natoco business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Natoco 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 Natoco prominent markets.
Shortening product life cycle
– it is one of the major threat that Natoco is facing in Chemical Manufacturing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Stagnating economy with rate increase
– Natoco 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 Chemical Manufacturing industry.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Natoco may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemical Manufacturing sector.
Technology acceleration in Forth Industrial Revolution
– Natoco has witnessed rapid integration of technology during Covid-19 in the Chemical Manufacturing industry. As one of the leading players in the industry, Natoco needs to keep up with the evolution of technology in the Chemical Manufacturing 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Chemical Manufacturing industry are lowering. It can presents Natoco with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Chemical Manufacturing sector.
Weighted SWOT Analysis of Natoco Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Natoco 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 Natoco 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 Natoco 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 Natoco 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 Natoco needs to make to build a sustainable competitive advantage.