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 – cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, increasing transportation and logistics costs, there is backlash against globalization, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, supply chains are disrupted by pandemic , technology disruption, 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 -

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.

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.

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.

Sustainable margins compare to other players in Construction Services industry

– Wesco has clearly differentiated products in the market place. This has enabled Wesco to fetch slight price premium compare to the competitors in the Construction Services industry. The sustainable margins have also helped Wesco to invest into research and development (R&D) and innovation.

Superior customer experience

– The customer experience strategy of Wesco in Construction Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Effective Research and Development (R&D)

– Wesco has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Wesco staying ahead in the Construction Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

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.

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.

Digital Transformation in Construction Services industry

- digital transformation varies from industry to industry. For Wesco digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Wesco 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.

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.

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.

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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 to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Wesco is slow explore the new channels of communication. These new channels of communication can help Wesco to provide better information regarding Construction Services products and services. It can also build an online community to further reach out to potential customers.

Workers concerns about automation

– As automation is fast increasing in the Construction Services industry, Wesco 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.

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 Wesco supply chain. Even after few cautionary changes, Wesco is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Wesco vulnerable to further global disruptions in South East Asia.

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.

Products dominated business model

– Even though Wesco has some of the most successful models in the Construction Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Wesco should strive to include more intangible value offerings along with its core products and services.

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.

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.

High cash cycle compare to competitors

Wesco has a high cash cycle compare to other players in the Construction Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

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.

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.

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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 -

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.

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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Wesco is facing challenges because of the dominance of functional experts in the organization. Wesco can utilize new technology in the field of Construction Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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, Wesco can use these opportunities to build new business models that can help the communities that Wesco operates in. Secondly it can use opportunities from government spending in Construction Services sector.

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.

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.

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.

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.

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. Wesco can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Wesco 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

– 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.

Developing new processes and practices

– Wesco can develop new processes and procedures in Construction Services 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.

Learning at scale

– Online learning technologies has now opened space for Wesco 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.

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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 -

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.

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.

Shortening product life cycle

– it is one of the major threat that Wesco is facing in Construction Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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.

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.

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.

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.

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 Wesco business can come under increasing regulations regarding data privacy, data security, etc.

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.

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.

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 Wesco.

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.

Consumer confidence and its impact on Wesco 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 Services industry and other sectors.

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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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