Wesco (6091) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Wesco (Japan)

Based on various researches at Oak Spring University , Wesco is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, challanges to central banks by blockchain based private currencies, wage bills are increasing, talent flight as more people leaving formal jobs, increasing commodity prices, etc

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Introduction to SWOT Analysis of Wesco

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Wesco can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Wesco, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Wesco 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Wesco can be done for the following purposes –
1. Strategic planning of Wesco
2. Improving business portfolio management of Wesco
3. Assessing feasibility of the new initiative in Japan
4. Making a Construction Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Wesco

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Strengths of Wesco | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Wesco are -

Strong track record of project management in the Construction Services industry

– Wesco 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

– Wesco is present in almost all the verticals within the Construction Services industry. This has provided Wesco 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.

Ability to recruit top talent

– Wesco is one of the leading players in the Construction Services 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.

Learning organization

- Wesco 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 Wesco is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Wesco emphasize – knowledge, initiative, and innovation.

Organizational Resilience of Wesco

– The covid-19 pandemic has put organizational resilience at the centre of everthing Wesco does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Low bargaining power of suppliers

– Suppliers of Wesco in the Capital Goods sector have low bargaining power. Wesco has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Wesco to manage not only supply disruptions but also source products at highly competitive prices.

High brand equity

– Wesco has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Wesco to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

High switching costs

– The high switching costs that Wesco 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.

Training and development

– Wesco 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.

Highly skilled collaborators

– Wesco has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Construction Services industry. Secondly the value chain collaborators of Wesco have helped the firm to develop new products and bring them quickly to the marketplace.

Operational resilience

– The operational resilience strategy of Wesco comprises – understanding the underlying the factors in the Construction Services 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.

Analytics focus

– Wesco 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 Construction Services 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.

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Weaknesses of Wesco | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Wesco are -

Slow decision making process

– As mentioned earlier in the report, Wesco has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Construction Services industry over the last five years. Wesco 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.

Increasing silos among functional specialists

– The organizational structure of Wesco is dominated by functional specialists. It is not different from other players in the Construction Services industry, but Wesco needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Wesco to focus more on services in the Construction Services industry rather than just following the product oriented approach.

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at Wesco 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.

Aligning sales with marketing

– From the outside it seems that Wesco needs to have more collaboration between its sales team and marketing team. Sales professionals in the Construction Services industry have deep experience in developing customer relationships. Marketing department at Wesco can leverage the sales team experience to cultivate customer relationships as Wesco is planning to shift buying processes online.

Slow to strategic competitive environment developments

– As Wesco is one of the leading players in the Construction Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Construction Services industry in last five years.

Capital Spending Reduction

– Even during the low interest decade, Wesco 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 Services industry using digital technology.

Interest costs

– Compare to the competition, Wesco 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 bargaining power of channel partners in Construction Services industry

– because of the regulatory requirements in Japan, Wesco 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 Construction Services industry.

No frontier risks strategy

– From the 10K / annual statement of Wesco, it seems that company is thinking out the frontier risks that can impact Construction Services 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.

High operating costs

– Compare to the competitors, Wesco has high operating costs in the Construction Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Wesco lucrative customers.

Compensation and incentives

– The revenue per employee of Wesco is just above the Construction Services 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.

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Wesco Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Wesco are -

Creating value in data economy

– The success of analytics program of Wesco has opened avenues for new revenue streams for the organization in Construction Services industry. This can help Wesco to build a more holistic ecosystem for Wesco products in the Construction Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Using analytics as competitive advantage

– Wesco has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Construction Services sector. This continuous investment in analytics has enabled Wesco to build a competitive advantage using analytics. The analytics driven competitive advantage can help Wesco to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Building a culture of innovation

– managers at Wesco 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 Construction Services industry.

Better consumer reach

– The expansion of the 5G network will help Wesco to increase its market reach. Wesco 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Wesco 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 Wesco to hire the very best people irrespective of their geographical location.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Wesco 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 Wesco to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Manufacturing automation

– Wesco can use the latest technology developments to improve its manufacturing and designing process in Construction Services 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.

Loyalty marketing

– Wesco 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Wesco in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Construction Services industry, and it will provide faster access to the consumers.

Leveraging digital technologies

– Wesco 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.

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 Wesco 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.

Buying journey improvements

– Wesco can improve the customer journey of consumers in the Construction Services 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.

Use of Bitcoin and other crypto currencies for transactions in Construction Services industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Wesco in the Construction Services industry. Now Wesco can target international markets with far fewer capital restrictions requirements than the existing system.

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Threats Wesco External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Wesco are -

High dependence on third party suppliers

– Wesco 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.

Regulatory challenges

– Wesco 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 Construction Services industry regulations.

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. Wesco needs to understand the core reasons impacting the Construction Services industry. This will help it in building a better workplace.

Environmental challenges

– Wesco 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. Wesco can take advantage of this fund but it will also bring new competitors in the Construction Services industry.

Easy access to finance

– Easy access to finance in Construction Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Wesco can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Construction Services industry are lowering. It can presents Wesco with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Construction Services sector.

Stagnating economy with rate increase

– Wesco 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 Construction Services industry.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Wesco 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 Wesco prominent markets.

Increasing wage structure of Wesco

– 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 Wesco.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Wesco 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 Services sector.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Wesco in Construction Services industry. The Construction Services 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.

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 Wesco in the Construction Services sector and impact the bottomline of the organization.

Technology acceleration in Forth Industrial Revolution

– Wesco has witnessed rapid integration of technology during Covid-19 in the Construction Services industry. As one of the leading players in the industry, Wesco needs to keep up with the evolution of technology in the Construction Services 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.

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Weighted SWOT Analysis of Wesco Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Wesco 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 Wesco 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 Wesco 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 Wesco 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 Wesco needs to make to build a sustainable competitive advantage.

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