SWOT Analysis / TOWS Matrix for Nippon Gear (Japan)
Based on various researches at Oak Spring University , Nippon Gear is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, technology disruption, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion,
increasing household debt because of falling income levels, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nippon Gear can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nippon Gear, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nippon Gear 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 Nippon Gear can be done for the following purposes –
1. Strategic planning of Nippon Gear
2. Improving business portfolio management of Nippon Gear
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 Nippon Gear
Strengths of Nippon Gear | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nippon Gear are -
Learning organization
- Nippon Gear 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 Nippon Gear is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nippon Gear emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Nippon Gear has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Misc. Capital Goods industry. Secondly the value chain collaborators of Nippon Gear have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Nippon Gear 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.
Digital Transformation in Misc. Capital Goods industry
- digital transformation varies from industry to industry. For Nippon Gear digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nippon Gear 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.
Cross disciplinary teams
– Horizontal connected teams at the Nippon Gear 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.
Superior customer experience
– The customer experience strategy of Nippon Gear in Misc. Capital Goods industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Nippon Gear
– The covid-19 pandemic has put organizational resilience at the centre of everthing Nippon Gear does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management in the Misc. Capital Goods industry
– Nippon Gear 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
– Nippon Gear is present in almost all the verticals within the Misc. Capital Goods industry. This has provided Nippon Gear 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 lead change in Misc. Capital Goods
– Nippon Gear 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 Nippon Gear in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Nippon Gear has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nippon Gear to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Nippon Gear is one of the most innovative firm in Misc. Capital Goods sector.
Weaknesses of Nippon Gear | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nippon Gear are -
Slow decision making process
– As mentioned earlier in the report, Nippon Gear 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. Nippon Gear 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.
Lack of clear differentiation of Nippon Gear products
– To increase the profitability and margins on the products, Nippon Gear needs to provide more differentiated products than what it is currently offering in the marketplace.
Workers concerns about automation
– As automation is fast increasing in the Misc. Capital Goods industry, Nippon Gear 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.
Compensation and incentives
– The revenue per employee of Nippon Gear is just above the Misc. Capital Goods 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 Misc. Capital Goods industry
– because of the regulatory requirements in Japan, Nippon Gear 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 Misc. Capital Goods industry.
Products dominated business model
– Even though Nippon Gear 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. Nippon Gear should strive to include more intangible value offerings along with its core products and services.
Increasing silos among functional specialists
– The organizational structure of Nippon Gear is dominated by functional specialists. It is not different from other players in the Misc. Capital Goods industry, but Nippon Gear needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nippon Gear to focus more on services in the Misc. Capital Goods industry rather than just following the product oriented approach.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nippon Gear is slow explore the new channels of communication. These new channels of communication can help Nippon Gear to provide better information regarding Misc. Capital Goods products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, Nippon Gear has high operating costs in the Misc. Capital Goods industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Nippon Gear lucrative customers.
High cash cycle compare to competitors
Nippon Gear 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.
Skills based hiring in Misc. Capital Goods industry
– The stress on hiring functional specialists at Nippon Gear 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.
Nippon Gear Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nippon Gear are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nippon Gear in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Misc. Capital Goods industry, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nippon Gear can use these opportunities to build new business models that can help the communities that Nippon Gear operates in. Secondly it can use opportunities from government spending in Misc. Capital Goods sector.
Better consumer reach
– The expansion of the 5G network will help Nippon Gear to increase its market reach. Nippon Gear 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.
Leveraging digital technologies
– Nippon Gear 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Nippon Gear 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.
Using analytics as competitive advantage
– Nippon Gear has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Misc. Capital Goods sector. This continuous investment in analytics has enabled Nippon Gear to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nippon Gear to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nippon Gear can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Nippon Gear 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.
Loyalty marketing
– Nippon Gear 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.
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 Nippon Gear 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.
Building a culture of innovation
– managers at Nippon Gear 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nippon Gear 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 Nippon Gear to hire the very best people irrespective of their geographical location.
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. Nippon Gear can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Nippon Gear External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nippon Gear are -
Shortening product life cycle
– it is one of the major threat that Nippon Gear is facing in Misc. Capital Goods sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Nippon Gear.
Increasing wage structure of Nippon Gear
– 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 Nippon Gear.
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. Nippon Gear 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 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. Nippon Gear can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Nippon Gear 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.
Consumer confidence and its impact on Nippon Gear 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 Misc. Capital Goods industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Nippon Gear 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 Nippon Gear prominent markets.
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.
Environmental challenges
– Nippon Gear 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. Nippon Gear can take advantage of this fund but it will also bring new competitors in the Misc. Capital Goods industry.
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 Nippon Gear business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Nippon Gear has witnessed rapid integration of technology during Covid-19 in the Misc. Capital Goods industry. As one of the leading players in the industry, Nippon Gear needs to keep up with the evolution of technology in the Misc. Capital Goods 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.
Regulatory challenges
– Nippon Gear 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.
Weighted SWOT Analysis of Nippon Gear Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nippon Gear 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 Nippon Gear 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 Nippon Gear 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 Nippon Gear 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 Nippon Gear needs to make to build a sustainable competitive advantage.