Johnson Controls (JCI) SWOT Analysis / TOWS Matrix / MBA Resources
Constr. - Supplies & Fixtures
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Johnson Controls (United States)
Based on various researches at Oak Spring University , Johnson Controls is operating in a macro-environment that has been destablized by – wage bills are increasing, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China,
technology disruption, geopolitical disruptions, 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 States
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 -
Ability to recruit top talent
– Johnson Controls is one of the leading players in the Constr. - Supplies & Fixtures industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– Johnson Controls has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Johnson Controls 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.
Innovation driven organization
– Johnson Controls is one of the most innovative firm in Constr. - Supplies & Fixtures sector.
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.
Low bargaining power of suppliers
– Suppliers of Johnson Controls in the Capital Goods sector have low bargaining power. Johnson Controls has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Johnson Controls to manage not only supply disruptions but also source products at highly competitive prices.
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 States 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 Constr. - Supplies & Fixtures industry
– Johnson Controls has clearly differentiated products in the market place. This has enabled Johnson Controls to fetch slight price premium compare to the competitors in the Constr. - Supplies & Fixtures industry. The sustainable margins have also helped Johnson Controls to invest into research and development (R&D) and innovation.
Learning organization
- Johnson Controls 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 Controls is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Johnson Controls emphasize – knowledge, initiative, and innovation.
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.
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.
Diverse revenue streams
– Johnson Controls is present in almost all the verticals within the Constr. - Supplies & Fixtures industry. This has provided Johnson Controls 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.
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.
Weaknesses of Johnson Controls | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Johnson Controls are -
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.
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.
High bargaining power of channel partners in Constr. - Supplies & Fixtures industry
– because of the regulatory requirements in United States, 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.
Slow decision making process
– As mentioned earlier in the report, Johnson Controls has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Constr. - Supplies & Fixtures industry over the last five years. Johnson Controls 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.
Low market penetration in new markets
– Outside its home market of United States, Johnson Controls needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ less understanding of Johnson Controls strategy
– From the outside it seems that the employees of Johnson Controls 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.
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Johnson Controls, in the dynamic environment of Constr. - Supplies & Fixtures industry it has struggled to respond to the nimble upstart competition. Johnson Controls has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Need for greater diversity
– Johnson Controls has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Johnson Controls Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Johnson Controls are -
Building a culture of innovation
– managers at Johnson Controls 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 Constr. - Supplies & Fixtures industry.
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.
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.
Leveraging digital technologies
– Johnson Controls 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.
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.
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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Constr. - Supplies & Fixtures industry, but it has also influenced the consumer preferences. Johnson Controls can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
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.
Threats Johnson Controls External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Johnson Controls are -
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.
Shortening product life cycle
– it is one of the major threat that Johnson Controls is facing in Constr. - Supplies & Fixtures sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
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.
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.
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.
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.
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 Controls in the Constr. - Supplies & Fixtures sector and impact the bottomline of the organization.
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.
Regulatory challenges
– Johnson Controls 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 Constr. - Supplies & Fixtures industry regulations.
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.