Dentsu Inc. (4324) SWOT Analysis / TOWS Matrix / MBA Resources
Advertising
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Dentsu Inc. (Japan)
Based on various researches at Oak Spring University , Dentsu Inc. is operating in a macro-environment that has been destablized by – wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, increasing energy prices,
competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Dentsu Inc. can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Dentsu Inc., and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Dentsu Inc. 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 Dentsu Inc. can be done for the following purposes –
1. Strategic planning of Dentsu Inc.
2. Improving business portfolio management of Dentsu Inc.
3. Assessing feasibility of the new initiative in Japan
4. Making a Advertising sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Dentsu Inc.
Strengths of Dentsu Inc. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Dentsu Inc. are -
Training and development
– Dentsu Inc. 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.
Cross disciplinary teams
– Horizontal connected teams at the Dentsu Inc. 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.
High switching costs
– The high switching costs that Dentsu Inc. 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.
Superior customer experience
– The customer experience strategy of Dentsu Inc. in Advertising industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Dentsu Inc. 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 Advertising 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.
Highly skilled collaborators
– Dentsu Inc. has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Advertising industry. Secondly the value chain collaborators of Dentsu Inc. have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Dentsu Inc. in the Services sector have low bargaining power. Dentsu Inc. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Dentsu Inc. to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Dentsu Inc. has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Dentsu Inc. to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Advertising industry
- digital transformation varies from industry to industry. For Dentsu Inc. digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Dentsu Inc. 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.
Operational resilience
– The operational resilience strategy of Dentsu Inc. comprises – understanding the underlying the factors in the Advertising 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.
Ability to lead change in Advertising
– Dentsu Inc. is one of the leading players in the Advertising industry in Japan. Over the years it has not only transformed the business landscape in the Advertising industry in Japan but also across the existing markets. The ability to lead change has enabled Dentsu Inc. in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Dentsu Inc.
– The covid-19 pandemic has put organizational resilience at the centre of everthing Dentsu Inc. does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of Dentsu Inc. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Dentsu Inc. are -
Interest costs
– Compare to the competition, Dentsu Inc. 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.
Capital Spending Reduction
– Even during the low interest decade, Dentsu Inc. 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 Advertising industry using digital technology.
Lack of clear differentiation of Dentsu Inc. products
– To increase the profitability and margins on the products, Dentsu Inc. needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Dentsu Inc. supply chain. Even after few cautionary changes, Dentsu Inc. is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Dentsu Inc. vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Japan, Dentsu Inc. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Dentsu Inc. is slow explore the new channels of communication. These new channels of communication can help Dentsu Inc. to provide better information regarding Advertising products and services. It can also build an online community to further reach out to potential customers.
No frontier risks strategy
– From the 10K / annual statement of Dentsu Inc., it seems that company is thinking out the frontier risks that can impact Advertising 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 cash cycle compare to competitors
Dentsu Inc. has a high cash cycle compare to other players in the Advertising industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
High operating costs
– Compare to the competitors, Dentsu Inc. has high operating costs in the Advertising industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Dentsu Inc. lucrative customers.
Products dominated business model
– Even though Dentsu Inc. has some of the most successful models in the Advertising industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Dentsu Inc. should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners in Advertising industry
– because of the regulatory requirements in Japan, Dentsu Inc. 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 Advertising industry.
Dentsu Inc. Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Dentsu Inc. are -
Using analytics as competitive advantage
– Dentsu Inc. has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Advertising sector. This continuous investment in analytics has enabled Dentsu Inc. to build a competitive advantage using analytics. The analytics driven competitive advantage can help Dentsu Inc. to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Dentsu Inc. can develop new processes and procedures in Advertising 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.
Manufacturing automation
– Dentsu Inc. can use the latest technology developments to improve its manufacturing and designing process in Advertising 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
– Dentsu Inc. can improve the customer journey of consumers in the Advertising 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Advertising industry, but it has also influenced the consumer preferences. Dentsu Inc. can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Dentsu Inc. 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.
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. Dentsu Inc. can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Dentsu Inc. in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Advertising industry, and it will provide faster access to the consumers.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Dentsu Inc. 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 Dentsu Inc. to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Dentsu Inc. to increase its market reach. Dentsu Inc. 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.
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 Dentsu Inc. 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.
Use of Bitcoin and other crypto currencies for transactions in Advertising industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Dentsu Inc. in the Advertising industry. Now Dentsu Inc. can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Dentsu Inc. 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.
Threats Dentsu Inc. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Dentsu Inc. are -
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 Dentsu Inc. in the Advertising sector and impact the bottomline of the organization.
Environmental challenges
– Dentsu Inc. 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. Dentsu Inc. can take advantage of this fund but it will also bring new competitors in the Advertising industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Dentsu Inc. may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Advertising sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Dentsu Inc. in Advertising industry. The Advertising 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Advertising industry are lowering. It can presents Dentsu Inc. with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Advertising sector.
Increasing wage structure of Dentsu Inc.
– 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 Dentsu Inc..
Shortening product life cycle
– it is one of the major threat that Dentsu Inc. is facing in Advertising sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Dentsu Inc. has witnessed rapid integration of technology during Covid-19 in the Advertising industry. As one of the leading players in the industry, Dentsu Inc. needs to keep up with the evolution of technology in the Advertising 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, Dentsu Inc. 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 Dentsu Inc. prominent markets.
Easy access to finance
– Easy access to finance in Advertising industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Dentsu Inc. 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 Dentsu Inc. business can come under increasing regulations regarding data privacy, data security, etc.
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. Dentsu Inc. needs to understand the core reasons impacting the Advertising industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Dentsu Inc. 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.
Weighted SWOT Analysis of Dentsu Inc. Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Dentsu Inc. 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 Dentsu Inc. 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 Dentsu Inc. 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 Dentsu Inc. 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 Dentsu Inc. needs to make to build a sustainable competitive advantage.