Johnson Matthey (JMAT) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Johnson Matthey (United Kingdom)

Based on various researches at Oak Spring University , Johnson Matthey is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , increasing household debt because of falling income levels, there is backlash against globalization, increasing energy prices, increasing commodity prices, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of Johnson Matthey

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Johnson Matthey can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Johnson Matthey, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Johnson Matthey 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 Johnson Matthey can be done for the following purposes –
1. Strategic planning of Johnson Matthey
2. Improving business portfolio management of Johnson Matthey
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Chemical Manufacturing sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Johnson Matthey

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Strengths of Johnson Matthey | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Johnson Matthey are -

Highly skilled collaborators

– Johnson Matthey has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Chemical Manufacturing industry. Secondly the value chain collaborators of Johnson Matthey have helped the firm to develop new products and bring them quickly to the marketplace.

Sustainable margins compare to other players in Chemical Manufacturing industry

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

Training and development

– Johnson Matthey has one of the best training and development program in Basic Materials 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.

Cross disciplinary teams

– Horizontal connected teams at the Johnson Matthey 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.

Strong track record of project management in the Chemical Manufacturing industry

– Johnson Matthey 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 recruit top talent

– Johnson Matthey is one of the leading players in the Chemical Manufacturing industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.

Low bargaining power of suppliers

– Suppliers of Johnson Matthey in the Basic Materials sector have low bargaining power. Johnson Matthey has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Johnson Matthey to manage not only supply disruptions but also source products at highly competitive prices.

Organizational Resilience of Johnson Matthey

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

Learning organization

- Johnson Matthey 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 Johnson Matthey is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Johnson Matthey emphasize – knowledge, initiative, and innovation.

Diverse revenue streams

– Johnson Matthey is present in almost all the verticals within the Chemical Manufacturing industry. This has provided Johnson Matthey 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.

Analytics focus

– Johnson Matthey 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 Chemical Manufacturing 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.

Superior customer experience

– The customer experience strategy of Johnson Matthey in Chemical Manufacturing industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

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Weaknesses of Johnson Matthey | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Johnson Matthey are -

High cash cycle compare to competitors

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

Capital Spending Reduction

– Even during the low interest decade, Johnson Matthey has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Chemical Manufacturing industry using digital technology.

Aligning sales with marketing

– From the outside it seems that Johnson Matthey needs to have more collaboration between its sales team and marketing team. Sales professionals in the Chemical Manufacturing industry have deep experience in developing customer relationships. Marketing department at Johnson Matthey can leverage the sales team experience to cultivate customer relationships as Johnson Matthey is planning to shift buying processes online.

Slow decision making process

– As mentioned earlier in the report, Johnson Matthey has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Chemical Manufacturing industry over the last five years. Johnson Matthey 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 operating costs

– Compare to the competitors, Johnson Matthey has high operating costs in the Chemical Manufacturing industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Johnson Matthey lucrative customers.

Interest costs

– Compare to the competition, Johnson Matthey 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.

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

High dependence on Johnson Matthey ‘s star products

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

Employees’ less understanding of Johnson Matthey strategy

– From the outside it seems that the employees of Johnson Matthey 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.

Skills based hiring in Chemical Manufacturing industry

– The stress on hiring functional specialists at Johnson Matthey 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.

Ability to respond to the competition

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

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Johnson Matthey Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Johnson Matthey are -

Loyalty marketing

– Johnson Matthey 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.

Use of Bitcoin and other crypto currencies for transactions in Chemical Manufacturing industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Johnson Matthey in the Chemical Manufacturing industry. Now Johnson Matthey can target international markets with far fewer capital restrictions requirements than the existing system.

Manufacturing automation

– Johnson Matthey can use the latest technology developments to improve its manufacturing and designing process in Chemical Manufacturing 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Johnson Matthey can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Using analytics as competitive advantage

– Johnson Matthey has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Chemical Manufacturing sector. This continuous investment in analytics has enabled Johnson Matthey to build a competitive advantage using analytics. The analytics driven competitive advantage can help Johnson Matthey to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Learning at scale

– Online learning technologies has now opened space for Johnson Matthey 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Johnson Matthey 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 Johnson Matthey 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 Chemical Manufacturing industry, but it has also influenced the consumer preferences. Johnson Matthey can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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 Johnson Matthey 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.

Creating value in data economy

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

Buying journey improvements

– Johnson Matthey can improve the customer journey of consumers in the Chemical Manufacturing 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.

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

Low interest rates

– Even though inflation is raising its head in most developed economies, Johnson Matthey 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.

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Threats Johnson Matthey External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Johnson Matthey are -

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 Matthey needs to understand the core reasons impacting the Chemical Manufacturing industry. This will help it in building a better workplace.

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.

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 Johnson Matthey in the Chemical Manufacturing sector and impact the bottomline of the organization.

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 Matthey.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Johnson Matthey may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Chemical Manufacturing sector.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Johnson Matthey in Chemical Manufacturing industry. The Chemical Manufacturing 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.

Stagnating economy with rate increase

– Johnson Matthey 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 Chemical Manufacturing industry.

Shortening product life cycle

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

Environmental challenges

– Johnson Matthey 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 Matthey can take advantage of this fund but it will also bring new competitors in the Chemical Manufacturing industry.

Increasing wage structure of Johnson Matthey

– 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 Matthey.

Easy access to finance

– Easy access to finance in Chemical Manufacturing industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Johnson Matthey can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Johnson Matthey 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 Matthey prominent markets.

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Weighted SWOT Analysis of Johnson Matthey Template, Example

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

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