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Denso SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a strategic planning tool that can be used by Denso managers to do a situational analysis of the company . It is an important technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Denso is facing in its current business environment.
The Denso is one of the leading companies in its industry. Denso maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework enables an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Denso to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The central purpose of SWOT matrix is to identify the strategies that a firm can use to exploit external opportunities, counter threats, and build on & protect Denso strengths, and eradicate its weaknesses.
Step by Step Guide to Denso SWOT Analysis
Strengths of Denso – Internal Strategic Factors
As one of the leading firms in its industry, Denso has numerous strengths that help it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Denso are –
- Strong Free Cash Flow – Denso has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Strong distribution network – Over the years Denso has built a reliable distribution network that can reach majority of its potential market.
- Automation of activities brought consistency of quality to Denso products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
- Good Returns on Capital Expenditure – Denso is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Superb Performance in New Markets – Denso has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
- Strong Brand Portfolio – Over the years Denso has invested in building a strong brand portfolio. The SWOT analysis of Denso just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Weakness of Denso – Internal Strategic Factors
Weakness are the areas where Denso can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Denso has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Denso is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
- High attrition rate in work force – compare to other organizations in the industry Denso has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Limited success outside core business – Even though Denso is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Denso is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Opportunities for Denso – External Strategic Factors
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Denso to capture new customers and increase its market share.
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- Government green drive also opens an opportunity for procurement of Denso products by the state as well as federal government contractors.
- New trends in the consumer behavior can open up new market for the Denso . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- The new technology provides an opportunity to Denso to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- The market development will lead to dilution of competitor’s advantage and enable Denso to increase its competitiveness compare to the other competitors.
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Denso in other product categories.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Denso’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
Threats Denso Facing - External Strategic Factors
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Denso
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Denso in those markets.
- Liability laws in different countries are different and Denso may be exposed to various liability claims given change in policies in those markets.
Limitations of SWOT Analysis for Denso
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Denso
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Denso
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Denso managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Denso
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
SWOT Worksheet & Template
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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