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 – cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, wage bills are increasing,
talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, 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 -
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.
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.
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.
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.
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.
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.
Learning organization
- Dentsu Inc. is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Dentsu Inc. is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Dentsu Inc. emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Dentsu Inc. is one of the most innovative firm in Advertising sector.
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.
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.
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 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.
Weaknesses of Dentsu Inc. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Dentsu Inc. are -
Ability to respond to the competition
– As the decision making is very deliberative at Dentsu Inc., in the dynamic environment of Advertising industry it has struggled to respond to the nimble upstart competition. Dentsu Inc. has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
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.
Employees’ less understanding of Dentsu Inc. strategy
– From the outside it seems that the employees of Dentsu Inc. 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.
Slow to strategic competitive environment developments
– As Dentsu Inc. is one of the leading players in the Advertising industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Advertising industry in last five years.
Workers concerns about automation
– As automation is fast increasing in the Advertising industry, Dentsu Inc. 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.
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.
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.
Skills based hiring in Advertising industry
– The stress on hiring functional specialists at Dentsu Inc. 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 Dentsu Inc. is just above the Advertising 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.
Dentsu Inc. Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Dentsu Inc. are -
Building a culture of innovation
– managers at Dentsu Inc. 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 Advertising industry.
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.
Creating value in data economy
– The success of analytics program of Dentsu Inc. has opened avenues for new revenue streams for the organization in Advertising industry. This can help Dentsu Inc. to build a more holistic ecosystem for Dentsu Inc. products in the Advertising industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Dentsu Inc. can use these opportunities to build new business models that can help the communities that Dentsu Inc. operates in. Secondly it can use opportunities from government spending in Advertising sector.
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.
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.
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.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Dentsu Inc. can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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.
Threats Dentsu Inc. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Dentsu Inc. are -
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. Dentsu Inc. 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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..
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.
Consumer confidence and its impact on Dentsu Inc. 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 Advertising industry and other sectors.
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.