Makoto Construction (8995) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Makoto Construction (Japan)

Based on various researches at Oak Spring University , Makoto Construction is operating in a macro-environment that has been destablized by – geopolitical disruptions, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, increasing household debt because of falling income levels, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Makoto Construction

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Makoto Construction can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Makoto Construction, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Makoto Construction 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 Makoto Construction can be done for the following purposes –
1. Strategic planning of Makoto Construction
2. Improving business portfolio management of Makoto Construction
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 Makoto Construction

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

The strengths of Makoto Construction are -

Analytics focus

– Makoto Construction 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.

Sustainable margins compare to other players in Construction Services industry

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

Ability to lead change in Construction Services

– Makoto Construction is one of the leading players in the Construction Services industry in Japan. Over the years it has not only transformed the business landscape in the Construction Services industry in Japan but also across the existing markets. The ability to lead change has enabled Makoto Construction in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Effective Research and Development (R&D)

– Makoto Construction has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Makoto Construction 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.

Successful track record of launching new products

– Makoto Construction has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Makoto Construction has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.

Digital Transformation in Construction Services industry

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

Operational resilience

– The operational resilience strategy of Makoto Construction 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.

Training and development

– Makoto Construction 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.

Diverse revenue streams

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

High switching costs

– The high switching costs that Makoto Construction 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.

Ability to recruit top talent

– Makoto Construction 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.

Organizational Resilience of Makoto Construction

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

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

The weaknesses of Makoto Construction are -

Compensation and incentives

– The revenue per employee of Makoto Construction 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.

Employees’ less understanding of Makoto Construction strategy

– From the outside it seems that the employees of Makoto Construction 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.

Ability to respond to the competition

– As the decision making is very deliberative at Makoto Construction, in the dynamic environment of Construction Services industry it has struggled to respond to the nimble upstart competition. Makoto Construction has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Slow to strategic competitive environment developments

– As Makoto Construction 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.

Slow decision making process

– As mentioned earlier in the report, Makoto Construction 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. Makoto Construction 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.

High cash cycle compare to competitors

Makoto Construction 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.

Skills based hiring in Construction Services industry

– The stress on hiring functional specialists at Makoto Construction 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.

High operating costs

– Compare to the competitors, Makoto Construction 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 Makoto Construction lucrative customers.

High bargaining power of channel partners in Construction Services industry

– because of the regulatory requirements in Japan, Makoto Construction 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 dependence on Makoto Construction ‘s star products

– The top 2 products and services of Makoto Construction still accounts for major business revenue. This dependence on star products in Construction Services industry has resulted into insufficient focus on developing new products, even though Makoto Construction has relatively successful track record of launching new products.

No frontier risks strategy

– From the 10K / annual statement of Makoto Construction, 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.

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

The opportunities of Makoto Construction are -

Lowering marketing communication costs

– 5G expansion will open new opportunities for Makoto Construction 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.

Building a culture of innovation

– managers at Makoto Construction 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.

Learning at scale

– Online learning technologies has now opened space for Makoto Construction 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Makoto Construction can use these opportunities to build new business models that can help the communities that Makoto Construction operates in. Secondly it can use opportunities from government spending in Construction Services sector.

Developing new processes and practices

– Makoto Construction 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.

Buying journey improvements

– Makoto Construction 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.

Harnessing reconfiguration of the global supply chains

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

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Construction Services industry, but it has also influenced the consumer preferences. Makoto Construction can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Loyalty marketing

– Makoto Construction 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.

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

Using analytics as competitive advantage

– Makoto Construction 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 Makoto Construction to build a competitive advantage using analytics. The analytics driven competitive advantage can help Makoto Construction to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Creating value in data economy

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

Leveraging digital technologies

– Makoto Construction 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.

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

The threats of Makoto Construction are -

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

Increasing wage structure of Makoto Construction

– 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 Makoto Construction.

Regulatory challenges

– Makoto Construction 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 dependence on third party suppliers

– Makoto Construction 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.

Stagnating economy with rate increase

– Makoto Construction 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.

Consumer confidence and its impact on Makoto Construction 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.

Technology acceleration in Forth Industrial Revolution

– Makoto Construction has witnessed rapid integration of technology during Covid-19 in the Construction Services industry. As one of the leading players in the industry, Makoto Construction 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.

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

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. Makoto Construction 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.

Shortening product life cycle

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

Increasing international competition and downward pressure on margins

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

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Makoto Construction 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.

Barriers of entry lowering

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

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Weighted SWOT Analysis of Makoto Construction Template, Example

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

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