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 – technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, increasing energy prices, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing,
supply chains are disrupted by pandemic , increasing household debt because of falling income levels, 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 -
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.
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.
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.
Innovation driven organization
– Johnson Controls is one of the most innovative firm in Constr. - Supplies & Fixtures sector.
Cross disciplinary teams
– Horizontal connected teams at the Johnson Controls 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.
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.
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.
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.
Ability to lead change in Constr. - Supplies & Fixtures
– Johnson Controls is one of the leading players in the Constr. - Supplies & Fixtures industry in United States. Over the years it has not only transformed the business landscape in the Constr. - Supplies & Fixtures industry in United States 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.
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.
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.
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.
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 strategic competitive environment developments
– As Johnson Controls is one of the leading players in the Constr. - Supplies & Fixtures industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Constr. - Supplies & Fixtures industry in last five years.
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.
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.
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.
No frontier risks strategy
– From the 10K / annual statement of Johnson Controls, it seems that company is thinking out the frontier risks that can impact Constr. - Supplies & Fixtures industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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 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.
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.
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.
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.
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.
Johnson Controls Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Johnson Controls are -
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.
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.
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.
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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Johnson Controls 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Johnson Controls 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 Controls to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
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.
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.
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.
Threats Johnson Controls External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Johnson Controls are -
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.
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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Johnson Controls may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Constr. - Supplies & Fixtures sector.
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.
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.
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.
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.
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.
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.
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.