Fast Retailing (9983) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Fast Retailing (Japan)

Based on various researches at Oak Spring University , Fast Retailing is operating in a macro-environment that has been destablized by – increasing energy prices, there is backlash against globalization, wage bills are increasing, challanges to central banks by blockchain based private currencies, increasing commodity prices, increasing transportation and logistics costs, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of Fast Retailing

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

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Strengths of Fast Retailing | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Fast Retailing are -

Superior customer experience

– The customer experience strategy of Fast Retailing in Retail (Apparel) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Training and development

– Fast Retailing has one of the best training and development program in Services 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.

Organizational Resilience of Fast Retailing

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

Operational resilience

– The operational resilience strategy of Fast Retailing comprises – understanding the underlying the factors in the Retail (Apparel) 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.

High brand equity

– Fast Retailing has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Fast Retailing to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Cross disciplinary teams

– Horizontal connected teams at the Fast Retailing 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.

Diverse revenue streams

– Fast Retailing is present in almost all the verticals within the Retail (Apparel) industry. This has provided Fast Retailing 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.

Innovation driven organization

– Fast Retailing is one of the most innovative firm in Retail (Apparel) sector.

High switching costs

– The high switching costs that Fast Retailing 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.

Digital Transformation in Retail (Apparel) industry

- digital transformation varies from industry to industry. For Fast Retailing digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Fast Retailing has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.

Highly skilled collaborators

– Fast Retailing has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Apparel) industry. Secondly the value chain collaborators of Fast Retailing have helped the firm to develop new products and bring them quickly to the marketplace.

Sustainable margins compare to other players in Retail (Apparel) industry

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

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Weaknesses of Fast Retailing | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Fast Retailing are -

Low market penetration in new markets

– Outside its home market of Japan, Fast Retailing needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Increasing silos among functional specialists

– The organizational structure of Fast Retailing is dominated by functional specialists. It is not different from other players in the Retail (Apparel) industry, but Fast Retailing needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fast Retailing to focus more on services in the Retail (Apparel) industry rather than just following the product oriented approach.

Employees’ less understanding of Fast Retailing strategy

– From the outside it seems that the employees of Fast Retailing 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 Retail (Apparel) industry

– The stress on hiring functional specialists at Fast Retailing 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.

Compensation and incentives

– The revenue per employee of Fast Retailing is just above the Retail (Apparel) 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 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 Fast Retailing supply chain. Even after few cautionary changes, Fast Retailing is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Fast Retailing vulnerable to further global disruptions in South East Asia.

Slow decision making process

– As mentioned earlier in the report, Fast Retailing has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Apparel) industry over the last five years. Fast Retailing 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.

Workers concerns about automation

– As automation is fast increasing in the Retail (Apparel) industry, Fast Retailing 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.

Lack of clear differentiation of Fast Retailing products

– To increase the profitability and margins on the products, Fast Retailing needs to provide more differentiated products than what it is currently offering in the marketplace.

Slow to strategic competitive environment developments

– As Fast Retailing is one of the leading players in the Retail (Apparel) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Apparel) industry in last five years.

Products dominated business model

– Even though Fast Retailing has some of the most successful models in the Retail (Apparel) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Fast Retailing should strive to include more intangible value offerings along with its core products and services.

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Fast Retailing Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Fast Retailing are -

Developing new processes and practices

– Fast Retailing can develop new processes and procedures in Retail (Apparel) 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.

Better consumer reach

– The expansion of the 5G network will help Fast Retailing to increase its market reach. Fast Retailing 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.

Building a culture of innovation

– managers at Fast Retailing 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 Retail (Apparel) industry.

Buying journey improvements

– Fast Retailing can improve the customer journey of consumers in the Retail (Apparel) 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.

Using analytics as competitive advantage

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

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Retail (Apparel) industry, but it has also influenced the consumer preferences. Fast Retailing can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Manufacturing automation

– Fast Retailing can use the latest technology developments to improve its manufacturing and designing process in Retail (Apparel) 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.

Loyalty marketing

– Fast Retailing 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.

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

Reforming the budgeting process

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

Low interest rates

– Even though inflation is raising its head in most developed economies, Fast Retailing 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.

Leveraging digital technologies

– Fast Retailing 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.

Creating value in data economy

– The success of analytics program of Fast Retailing has opened avenues for new revenue streams for the organization in Retail (Apparel) industry. This can help Fast Retailing to build a more holistic ecosystem for Fast Retailing products in the Retail (Apparel) industry by providing – data insight services, data privacy related products, data based consulting services, etc.

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Threats Fast Retailing External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Fast Retailing are -

Environmental challenges

– Fast Retailing 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. Fast Retailing can take advantage of this fund but it will also bring new competitors in the Retail (Apparel) industry.

Technology acceleration in Forth Industrial Revolution

– Fast Retailing has witnessed rapid integration of technology during Covid-19 in the Retail (Apparel) industry. As one of the leading players in the industry, Fast Retailing needs to keep up with the evolution of technology in the Retail (Apparel) 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 Fast Retailing in the Retail (Apparel) sector and impact the bottomline of the organization.

Regulatory challenges

– Fast Retailing 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 Retail (Apparel) industry regulations.

High dependence on third party suppliers

– Fast Retailing 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.

Consumer confidence and its impact on Fast Retailing 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 Retail (Apparel) industry and other sectors.

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. Fast Retailing needs to understand the core reasons impacting the Retail (Apparel) industry. This will help it in building a better workplace.

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

Stagnating economy with rate increase

– Fast Retailing 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 Retail (Apparel) industry.

Easy access to finance

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

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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Fast Retailing in Retail (Apparel) industry. The Retail (Apparel) 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Fast Retailing may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Apparel) sector.

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Weighted SWOT Analysis of Fast Retailing Template, Example

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

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