Aeon (8267) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Department & Discount)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Aeon (Japan)
Based on various researches at Oak Spring University , Aeon is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, there is increasing trade war between United States & China, geopolitical disruptions, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, talent flight as more people leaving formal jobs,
increasing transportation and logistics costs, wage bills are increasing, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Aeon can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aeon, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aeon 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 Aeon can be done for the following purposes –
1. Strategic planning of Aeon
2. Improving business portfolio management of Aeon
3. Assessing feasibility of the new initiative in Japan
4. Making a Retail (Department & Discount) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Aeon
Strengths of Aeon | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aeon are -
Operational resilience
– The operational resilience strategy of Aeon comprises – understanding the underlying the factors in the Retail (Department & Discount) 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.
Analytics focus
– Aeon 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 Retail (Department & Discount) industry. The technology infrastructure of Japan 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.
Innovation driven organization
– Aeon is one of the most innovative firm in Retail (Department & Discount) sector.
Strong track record of project management in the Retail (Department & Discount) industry
– Aeon is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Retail (Department & Discount) industry
– Aeon has clearly differentiated products in the market place. This has enabled Aeon to fetch slight price premium compare to the competitors in the Retail (Department & Discount) industry. The sustainable margins have also helped Aeon to invest into research and development (R&D) and innovation.
Digital Transformation in Retail (Department & Discount) industry
- digital transformation varies from industry to industry. For Aeon digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Aeon 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.
Successful track record of launching new products
– Aeon has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Aeon 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.
Ability to lead change in Retail (Department & Discount)
– Aeon is one of the leading players in the Retail (Department & Discount) industry in Japan. Over the years it has not only transformed the business landscape in the Retail (Department & Discount) industry in Japan but also across the existing markets. The ability to lead change has enabled Aeon in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Aeon in the Services sector have low bargaining power. Aeon has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Aeon to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Aeon has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Retail (Department & Discount) industry. Secondly the value chain collaborators of Aeon have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Aeon has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Aeon staying ahead in the Retail (Department & Discount) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Diverse revenue streams
– Aeon is present in almost all the verticals within the Retail (Department & Discount) industry. This has provided Aeon 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 Aeon | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Aeon are -
Aligning sales with marketing
– From the outside it seems that Aeon needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Department & Discount) industry have deep experience in developing customer relationships. Marketing department at Aeon can leverage the sales team experience to cultivate customer relationships as Aeon is planning to shift buying processes online.
High dependence on Aeon ‘s star products
– The top 2 products and services of Aeon still accounts for major business revenue. This dependence on star products in Retail (Department & Discount) industry has resulted into insufficient focus on developing new products, even though Aeon has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Aeon 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.
Increasing silos among functional specialists
– The organizational structure of Aeon is dominated by functional specialists. It is not different from other players in the Retail (Department & Discount) industry, but Aeon needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aeon to focus more on services in the Retail (Department & Discount) industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Aeon, it seems that company is thinking out the frontier risks that can impact Retail (Department & Discount) 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.
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 Aeon supply chain. Even after few cautionary changes, Aeon is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Aeon vulnerable to further global disruptions in South East Asia.
Employees’ less understanding of Aeon strategy
– From the outside it seems that the employees of Aeon 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.
Products dominated business model
– Even though Aeon has some of the most successful models in the Retail (Department & Discount) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Aeon should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative at Aeon, in the dynamic environment of Retail (Department & Discount) industry it has struggled to respond to the nimble upstart competition. Aeon has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Aeon is one of the leading players in the Retail (Department & Discount) industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Retail (Department & Discount) industry in last five years.
Compensation and incentives
– The revenue per employee of Aeon is just above the Retail (Department & Discount) 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.
Aeon Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Aeon are -
Loyalty marketing
– Aeon 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.
Learning at scale
– Online learning technologies has now opened space for Aeon 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.
Buying journey improvements
– Aeon can improve the customer journey of consumers in the Retail (Department & Discount) 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.
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. Aeon 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 Aeon can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Aeon can use these opportunities to build new business models that can help the communities that Aeon operates in. Secondly it can use opportunities from government spending in Retail (Department & Discount) sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Aeon in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Department & Discount) industry, and it will provide faster access to the consumers.
Use of Bitcoin and other crypto currencies for transactions in Retail (Department & Discount) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Aeon in the Retail (Department & Discount) industry. Now Aeon can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Retail (Department & Discount) industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Aeon 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. Aeon 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.
Better consumer reach
– The expansion of the 5G network will help Aeon to increase its market reach. Aeon 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aeon is facing challenges because of the dominance of functional experts in the organization. Aeon can utilize new technology in the field of Retail (Department & Discount) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Creating value in data economy
– The success of analytics program of Aeon has opened avenues for new revenue streams for the organization in Retail (Department & Discount) industry. This can help Aeon to build a more holistic ecosystem for Aeon products in the Retail (Department & Discount) industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Aeon 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 Aeon to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Aeon External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Aeon are -
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.
Shortening product life cycle
– it is one of the major threat that Aeon is facing in Retail (Department & Discount) sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Aeon 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. Aeon can take advantage of this fund but it will also bring new competitors in the Retail (Department & Discount) industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aeon 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 Aeon prominent markets.
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. Aeon 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.
Technology acceleration in Forth Industrial Revolution
– Aeon has witnessed rapid integration of technology during Covid-19 in the Retail (Department & Discount) industry. As one of the leading players in the industry, Aeon needs to keep up with the evolution of technology in the Retail (Department & Discount) 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Retail (Department & Discount) industry are lowering. It can presents Aeon with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Retail (Department & Discount) 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 Aeon.
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 Aeon in the Retail (Department & Discount) sector and impact the bottomline 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 Aeon in Retail (Department & Discount) industry. The Retail (Department & Discount) 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.
Regulatory challenges
– Aeon 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 (Department & Discount) industry regulations.
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. Aeon needs to understand the core reasons impacting the Retail (Department & Discount) industry. This will help it in building a better workplace.
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.
Weighted SWOT Analysis of Aeon Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Aeon 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 Aeon 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 Aeon 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 Aeon 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 Aeon needs to make to build a sustainable competitive advantage.