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 – increasing government debt because of Covid-19 spendings, there is backlash against globalization, wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, increasing energy prices,
competitive advantages are harder to sustain because of technology dispersion, 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 -
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.
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.
Ability to recruit top talent
– Dentsu Inc. is one of the leading players in the Advertising industry in Japan. It is in a position to attract the best talent available in Japan. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
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.
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.
Effective Research and Development (R&D)
– Dentsu Inc. has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Dentsu Inc. staying ahead in the Advertising industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Successful track record of launching new products
– Dentsu Inc. has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Dentsu Inc. 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.
Sustainable margins compare to other players in Advertising industry
– Dentsu Inc. has clearly differentiated products in the market place. This has enabled Dentsu Inc. to fetch slight price premium compare to the competitors in the Advertising industry. The sustainable margins have also helped Dentsu Inc. to invest into research and development (R&D) and innovation.
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.
Weaknesses of Dentsu Inc. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Dentsu Inc. are -
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.
Slow decision making process
– As mentioned earlier in the report, Dentsu Inc. has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Advertising industry over the last five years. Dentsu Inc. 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.
Need for greater diversity
– Dentsu Inc. has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Increasing silos among functional specialists
– The organizational structure of Dentsu Inc. is dominated by functional specialists. It is not different from other players in the Advertising industry, but Dentsu Inc. needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Dentsu Inc. to focus more on services in the Advertising industry rather than just following the product oriented approach.
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.
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.
Aligning sales with marketing
– From the outside it seems that Dentsu Inc. needs to have more collaboration between its sales team and marketing team. Sales professionals in the Advertising industry have deep experience in developing customer relationships. Marketing department at Dentsu Inc. can leverage the sales team experience to cultivate customer relationships as Dentsu Inc. is planning to shift buying processes online.
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.
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.
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.
High dependence on Dentsu Inc. ‘s star products
– The top 2 products and services of Dentsu Inc. still accounts for major business revenue. This dependence on star products in Advertising industry has resulted into insufficient focus on developing new products, even though Dentsu Inc. has relatively successful track record of launching new products.
Dentsu Inc. Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Dentsu Inc. are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Dentsu Inc. is facing challenges because of the dominance of functional experts in the organization. Dentsu Inc. can utilize new technology in the field of Advertising industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for Dentsu Inc. 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
– 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Threats Dentsu Inc. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Dentsu Inc. are -
Regulatory challenges
– Dentsu Inc. 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 Advertising industry regulations.
Stagnating economy with rate increase
– Dentsu Inc. 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 Advertising industry.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
