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 – talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, geopolitical disruptions, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, technology disruption,
increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, 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 -
Superior customer experience
– The customer experience strategy of Johnson Controls in Constr. - Supplies & Fixtures industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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.
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.
Innovation driven organization
– Johnson Controls is one of the most innovative firm in Constr. - Supplies & Fixtures sector.
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.
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.
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.
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.
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.
Weaknesses of Johnson Controls | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Johnson Controls are -
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.
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.
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.
Capital Spending Reduction
– Even during the low interest decade, Johnson Controls 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 Constr. - Supplies & Fixtures industry using digital technology.
Products dominated business model
– Even though Johnson Controls has some of the most successful models in the Constr. - Supplies & Fixtures industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Johnson Controls should strive to include more intangible value offerings along with its core products and services.
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.
Aligning sales with marketing
– From the outside it seems that Johnson Controls needs to have more collaboration between its sales team and marketing team. Sales professionals in the Constr. - Supplies & Fixtures industry have deep experience in developing customer relationships. Marketing department at Johnson Controls can leverage the sales team experience to cultivate customer relationships as Johnson Controls is planning to shift buying processes online.
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.
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.
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 Controls supply chain. Even after few cautionary changes, Johnson Controls is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Johnson Controls vulnerable to further global disruptions in South East Asia.
Johnson Controls Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Johnson Controls are -
Better consumer reach
– The expansion of the 5G network will help Johnson Controls to increase its market reach. Johnson Controls will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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.
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.
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 Controls 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.
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.
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.
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.
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Johnson Controls in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Constr. - Supplies & Fixtures industry, and it will provide faster access to the consumers.
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.
Using analytics as competitive advantage
– Johnson Controls has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Constr. - Supplies & Fixtures sector. This continuous investment in analytics has enabled Johnson Controls to build a competitive advantage using analytics. The analytics driven competitive advantage can help Johnson Controls to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Threats Johnson Controls External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Johnson Controls are -
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.
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.
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 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.
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.
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.
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.
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.
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.
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.
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. Johnson Controls 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.
Easy access to finance
– Easy access to finance in Constr. - Supplies & Fixtures industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Johnson Controls can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
