SWOT Analysis / TOWS Matrix for NKK Switches (Japan)
Based on various researches at Oak Spring University , NKK Switches is operating in a macro-environment that has been destablized by – geopolitical disruptions, wage bills are increasing, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings,
there is backlash against globalization, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that NKK Switches can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the NKK Switches, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which NKK Switches 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 NKK Switches can be done for the following purposes –
1. Strategic planning of NKK Switches
2. Improving business portfolio management of NKK Switches
3. Assessing feasibility of the new initiative in Japan
4. Making a Electronic Instr. & Controls sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of NKK Switches
Strengths of NKK Switches | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of NKK Switches are -
Digital Transformation in Electronic Instr. & Controls industry
- digital transformation varies from industry to industry. For NKK Switches digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. NKK Switches 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.
Sustainable margins compare to other players in Electronic Instr. & Controls industry
– NKK Switches has clearly differentiated products in the market place. This has enabled NKK Switches to fetch slight price premium compare to the competitors in the Electronic Instr. & Controls industry. The sustainable margins have also helped NKK Switches to invest into research and development (R&D) and innovation.
Learning organization
- NKK Switches 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 NKK Switches is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at NKK Switches emphasize – knowledge, initiative, and innovation.
Organizational Resilience of NKK Switches
– The covid-19 pandemic has put organizational resilience at the centre of everthing NKK Switches does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of NKK Switches comprises – understanding the underlying the factors in the Electronic Instr. & Controls 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.
Highly skilled collaborators
– NKK Switches has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Electronic Instr. & Controls industry. Secondly the value chain collaborators of NKK Switches have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that NKK Switches 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
– NKK Switches has one of the best training and development program in Technology 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.
Innovation driven organization
– NKK Switches is one of the most innovative firm in Electronic Instr. & Controls sector.
Effective Research and Development (R&D)
– NKK Switches has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – NKK Switches staying ahead in the Electronic Instr. & Controls industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– NKK Switches has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled NKK Switches to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to recruit top talent
– NKK Switches is one of the leading players in the Electronic Instr. & Controls 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.
Weaknesses of NKK Switches | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of NKK Switches are -
Employees’ less understanding of NKK Switches strategy
– From the outside it seems that the employees of NKK Switches 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.
Compensation and incentives
– The revenue per employee of NKK Switches is just above the Electronic Instr. & Controls 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.
Products dominated business model
– Even though NKK Switches has some of the most successful models in the Electronic Instr. & Controls industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. NKK Switches should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
NKK Switches has a high cash cycle compare to other players in the Electronic Instr. & Controls industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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 NKK Switches supply chain. Even after few cautionary changes, NKK Switches is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left NKK Switches vulnerable to further global disruptions in South East Asia.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, NKK Switches is slow explore the new channels of communication. These new channels of communication can help NKK Switches to provide better information regarding Electronic Instr. & Controls products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– From the 10K / annual statement of NKK Switches, it seems that company is thinking out the frontier risks that can impact Electronic Instr. & Controls 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 dependence on NKK Switches ‘s star products
– The top 2 products and services of NKK Switches still accounts for major business revenue. This dependence on star products in Electronic Instr. & Controls industry has resulted into insufficient focus on developing new products, even though NKK Switches has relatively successful track record of launching new products.
Ability to respond to the competition
– As the decision making is very deliberative at NKK Switches, in the dynamic environment of Electronic Instr. & Controls industry it has struggled to respond to the nimble upstart competition. NKK Switches has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners in Electronic Instr. & Controls industry
– because of the regulatory requirements in Japan, NKK Switches 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 Electronic Instr. & Controls industry.
Interest costs
– Compare to the competition, NKK Switches 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.
NKK Switches Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of NKK Switches are -
Low interest rates
– Even though inflation is raising its head in most developed economies, NKK Switches 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for NKK Switches 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 NKK Switches to hire the very best people irrespective of their geographical location.
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 NKK Switches 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.
Learning at scale
– Online learning technologies has now opened space for NKK Switches 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.
Use of Bitcoin and other crypto currencies for transactions in Electronic Instr. & Controls industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for NKK Switches in the Electronic Instr. & Controls industry. Now NKK Switches can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Electronic Instr. & Controls industry, but it has also influenced the consumer preferences. NKK Switches can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– NKK Switches can use the latest technology developments to improve its manufacturing and designing process in Electronic Instr. & Controls 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.
Developing new processes and practices
– NKK Switches can develop new processes and procedures in Electronic Instr. & Controls 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Electronic Instr. & Controls industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. NKK Switches 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. NKK Switches 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.
Loyalty marketing
– NKK Switches 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.
Using analytics as competitive advantage
– NKK Switches has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Electronic Instr. & Controls sector. This continuous investment in analytics has enabled NKK Switches to build a competitive advantage using analytics. The analytics driven competitive advantage can help NKK Switches to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– NKK Switches 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, NKK Switches 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 NKK Switches to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats NKK Switches External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of NKK Switches are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for NKK Switches in Electronic Instr. & Controls industry. The Electronic Instr. & Controls 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Electronic Instr. & Controls industry are lowering. It can presents NKK Switches with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Electronic Instr. & Controls sector.
Environmental challenges
– NKK Switches 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. NKK Switches can take advantage of this fund but it will also bring new competitors in the Electronic Instr. & Controls industry.
Increasing wage structure of NKK Switches
– 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 NKK Switches.
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.
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. NKK Switches 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.
Stagnating economy with rate increase
– NKK Switches 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 Electronic Instr. & Controls 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 NKK Switches.
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. NKK Switches needs to understand the core reasons impacting the Electronic Instr. & Controls industry. This will help it in building a better workplace.
High dependence on third party suppliers
– NKK Switches 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.
Consumer confidence and its impact on NKK Switches 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 Electronic Instr. & Controls industry and other sectors.
Regulatory challenges
– NKK Switches 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 Electronic Instr. & Controls industry regulations.
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 NKK Switches in the Electronic Instr. & Controls sector and impact the bottomline of the organization.
Weighted SWOT Analysis of NKK Switches Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at NKK Switches 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 NKK Switches 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 NKK Switches 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 NKK Switches 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 NKK Switches needs to make to build a sustainable competitive advantage.