Johnson Controls (0Y7S) SWOT Analysis / TOWS Matrix / MBA Resources
Constr. - Supplies & Fixtures
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Johnson Controls (United Kingdom)
Based on various researches at Oak Spring University , Johnson Controls is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, there is backlash against globalization, increasing transportation and logistics costs, increasing energy prices, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%,
central banks are concerned over increasing inflation, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Johnson Controls can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Johnson Controls, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Johnson Controls 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 Johnson Controls can be done for the following purposes –
1. Strategic planning of Johnson Controls
2. Improving business portfolio management of Johnson Controls
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Constr. - Supplies & Fixtures sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Johnson Controls
Strengths of Johnson Controls | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Johnson Controls are -
Analytics focus
– Johnson Controls 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 Constr. - Supplies & Fixtures industry. The technology infrastructure of United Kingdom 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.
High switching costs
– The high switching costs that Johnson Controls 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
– Johnson Controls 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.
Operational resilience
– The operational resilience strategy of Johnson Controls comprises – understanding the underlying the factors in the Constr. - Supplies & Fixtures 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.
High brand equity
– Johnson Controls has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Johnson Controls to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Constr. - Supplies & Fixtures industry
– Johnson Controls is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Constr. - Supplies & Fixtures
– Johnson Controls is one of the leading players in the Constr. - Supplies & Fixtures industry in United Kingdom. Over the years it has not only transformed the business landscape in the Constr. - Supplies & Fixtures industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Johnson Controls in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Johnson Controls has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Constr. - Supplies & Fixtures industry. Secondly the value chain collaborators of Johnson Controls have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Johnson Controls has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Johnson Controls staying ahead in the Constr. - Supplies & Fixtures industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Johnson Controls
– The covid-19 pandemic has put organizational resilience at the centre of everthing Johnson Controls does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Johnson Controls is one of the most innovative firm in Constr. - Supplies & Fixtures sector.
Digital Transformation in Constr. - Supplies & Fixtures industry
- digital transformation varies from industry to industry. For Johnson Controls digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Johnson Controls 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.
Weaknesses of Johnson Controls | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Johnson Controls are -
Increasing silos among functional specialists
– The organizational structure of Johnson Controls is dominated by functional specialists. It is not different from other players in the Constr. - Supplies & Fixtures industry, but Johnson Controls needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Johnson Controls to focus more on services in the Constr. - Supplies & Fixtures 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, Johnson Controls is slow explore the new channels of communication. These new channels of communication can help Johnson Controls to provide better information regarding Constr. - Supplies & Fixtures products and services. It can also build an online community to further reach out to potential customers.
High dependence on Johnson Controls ‘s star products
– The top 2 products and services of Johnson Controls still accounts for major business revenue. This dependence on star products in Constr. - Supplies & Fixtures industry has resulted into insufficient focus on developing new products, even though Johnson Controls has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Johnson Controls 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.
Skills based hiring in Constr. - Supplies & Fixtures industry
– The stress on hiring functional specialists at Johnson Controls 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.
Lack of clear differentiation of Johnson Controls products
– To increase the profitability and margins on the products, Johnson Controls needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee of Johnson Controls is just above the Constr. - Supplies & Fixtures 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 cash cycle compare to competitors
Johnson Controls has a high cash cycle compare to other players in the Constr. - Supplies & Fixtures 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 operating costs
– Compare to the competitors, Johnson Controls has high operating costs in the Constr. - Supplies & Fixtures industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Johnson Controls lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the Constr. - Supplies & Fixtures industry, Johnson Controls 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 bargaining power of channel partners in Constr. - Supplies & Fixtures industry
– because of the regulatory requirements in United Kingdom, Johnson Controls 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 Constr. - Supplies & Fixtures industry.
Johnson Controls Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Johnson Controls are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Johnson Controls 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 Johnson Controls to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Johnson Controls 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Johnson Controls can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Constr. - Supplies & Fixtures industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Johnson Controls 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. Johnson Controls 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.
Learning at scale
– Online learning technologies has now opened space for Johnson Controls 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.
Developing new processes and practices
– Johnson Controls can develop new processes and procedures in Constr. - Supplies & Fixtures 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.
Manufacturing automation
– Johnson Controls can use the latest technology developments to improve its manufacturing and designing process in Constr. - Supplies & Fixtures 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Johnson Controls is facing challenges because of the dominance of functional experts in the organization. Johnson Controls can utilize new technology in the field of Constr. - Supplies & Fixtures 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, Johnson Controls can use these opportunities to build new business models that can help the communities that Johnson Controls operates in. Secondly it can use opportunities from government spending in Constr. - Supplies & Fixtures sector.
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. Johnson Controls can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Johnson Controls has opened avenues for new revenue streams for the organization in Constr. - Supplies & Fixtures industry. This can help Johnson Controls to build a more holistic ecosystem for Johnson Controls products in the Constr. - Supplies & Fixtures industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Use of Bitcoin and other crypto currencies for transactions in Constr. - Supplies & Fixtures industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Johnson Controls in the Constr. - Supplies & Fixtures industry. Now Johnson Controls can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Johnson Controls can improve the customer journey of consumers in the Constr. - Supplies & Fixtures 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.
Threats Johnson Controls External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Johnson Controls are -
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 Johnson Controls.
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.
Consumer confidence and its impact on Johnson Controls 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 Constr. - Supplies & Fixtures industry and other sectors.
High dependence on third party suppliers
– Johnson Controls 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.
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. Johnson Controls needs to understand the core reasons impacting the Constr. - Supplies & Fixtures industry. This will help it in building a better workplace.
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 Johnson Controls business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Johnson Controls has witnessed rapid integration of technology during Covid-19 in the Constr. - Supplies & Fixtures industry. As one of the leading players in the industry, Johnson Controls needs to keep up with the evolution of technology in the Constr. - Supplies & Fixtures 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.
Environmental challenges
– Johnson Controls 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. Johnson Controls can take advantage of this fund but it will also bring new competitors in the Constr. - Supplies & Fixtures industry.
Stagnating economy with rate increase
– Johnson Controls 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 Constr. - Supplies & Fixtures industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Constr. - Supplies & Fixtures industry are lowering. It can presents Johnson Controls with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Constr. - Supplies & Fixtures sector.
Increasing wage structure of Johnson Controls
– 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 Johnson Controls.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Johnson Controls 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 Johnson Controls prominent markets.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Johnson Controls in Constr. - Supplies & Fixtures industry. The Constr. - Supplies & Fixtures 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.
Weighted SWOT Analysis of Johnson Controls Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Johnson Controls 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 Johnson Controls 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 Johnson Controls 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 Johnson Controls 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 Johnson Controls needs to make to build a sustainable competitive advantage.