SWOT Analysis / TOWS Matrix for Rakuten Inc (Japan)
Based on various researches at Oak Spring University , Rakuten Inc is operating in a macro-environment that has been destablized by – wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, geopolitical disruptions, increasing commodity prices,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Rakuten Inc can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Rakuten Inc, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Rakuten 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 Rakuten Inc can be done for the following purposes –
1. Strategic planning of Rakuten Inc
2. Improving business portfolio management of Rakuten Inc
3. Assessing feasibility of the new initiative in Japan
4. Making a Computer Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Rakuten Inc
Strengths of Rakuten Inc | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Rakuten Inc are -
Ability to recruit top talent
– Rakuten Inc is one of the leading players in the Computer Services 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.
Successful track record of launching new products
– Rakuten Inc has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Rakuten 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.
Ability to lead change in Computer Services
– Rakuten Inc is one of the leading players in the Computer Services industry in Japan. Over the years it has not only transformed the business landscape in the Computer Services industry in Japan but also across the existing markets. The ability to lead change has enabled Rakuten Inc in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management in the Computer Services industry
– Rakuten Inc is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Rakuten Inc has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Rakuten Inc to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Rakuten Inc in the Technology sector have low bargaining power. Rakuten Inc has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Rakuten Inc to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Rakuten 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.
Sustainable margins compare to other players in Computer Services industry
– Rakuten Inc has clearly differentiated products in the market place. This has enabled Rakuten Inc to fetch slight price premium compare to the competitors in the Computer Services industry. The sustainable margins have also helped Rakuten Inc to invest into research and development (R&D) and innovation.
Learning organization
- Rakuten 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 Rakuten Inc is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Rakuten Inc emphasize – knowledge, initiative, and innovation.
Digital Transformation in Computer Services industry
- digital transformation varies from industry to industry. For Rakuten Inc digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Rakuten 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.
Effective Research and Development (R&D)
– Rakuten Inc has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Rakuten Inc staying ahead in the Computer Services 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 Rakuten Inc in Computer Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Rakuten Inc | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Rakuten Inc are -
High dependence on Rakuten Inc ‘s star products
– The top 2 products and services of Rakuten Inc still accounts for major business revenue. This dependence on star products in Computer Services industry has resulted into insufficient focus on developing new products, even though Rakuten Inc has relatively successful track record of launching new products.
Lack of clear differentiation of Rakuten Inc products
– To increase the profitability and margins on the products, Rakuten Inc needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Rakuten 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.
Low market penetration in new markets
– Outside its home market of Japan, Rakuten Inc needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, Rakuten Inc has high operating costs in the Computer Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Rakuten Inc lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Rakuten Inc is dominated by functional specialists. It is not different from other players in the Computer Services industry, but Rakuten Inc needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Rakuten Inc to focus more on services in the Computer Services industry rather than just following the product oriented approach.
Employees’ less understanding of Rakuten Inc strategy
– From the outside it seems that the employees of Rakuten 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.
Skills based hiring in Computer Services industry
– The stress on hiring functional specialists at Rakuten 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.
Need for greater diversity
– Rakuten 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.
Ability to respond to the competition
– As the decision making is very deliberative at Rakuten Inc, in the dynamic environment of Computer Services industry it has struggled to respond to the nimble upstart competition. Rakuten Inc has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Rakuten Inc has some of the most successful models in the Computer Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Rakuten Inc should strive to include more intangible value offerings along with its core products and services.
Rakuten Inc Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Rakuten Inc are -
Building a culture of innovation
– managers at Rakuten 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 Computer Services industry.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Computer Services industry, but it has also influenced the consumer preferences. Rakuten Inc 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
– Rakuten Inc can use the latest technology developments to improve its manufacturing and designing process in Computer Services 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
– Rakuten 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Rakuten Inc 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.
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 Rakuten 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 Rakuten Inc has opened avenues for new revenue streams for the organization in Computer Services industry. This can help Rakuten Inc to build a more holistic ecosystem for Rakuten Inc products in the Computer Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Rakuten Inc can improve the customer journey of consumers in the Computer Services 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Rakuten Inc to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Rakuten Inc to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Rakuten 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 Computer Services industry, and it will provide faster access to the consumers.
Better consumer reach
– The expansion of the 5G network will help Rakuten Inc to increase its market reach. Rakuten 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Rakuten Inc can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Rakuten Inc is facing challenges because of the dominance of functional experts in the organization. Rakuten Inc can utilize new technology in the field of Computer Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Rakuten Inc External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Rakuten Inc are -
Environmental challenges
– Rakuten 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. Rakuten Inc can take advantage of this fund but it will also bring new competitors in the Computer Services industry.
Technology acceleration in Forth Industrial Revolution
– Rakuten Inc has witnessed rapid integration of technology during Covid-19 in the Computer Services industry. As one of the leading players in the industry, Rakuten Inc needs to keep up with the evolution of technology in the Computer Services 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.
High dependence on third party suppliers
– Rakuten 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.
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 Rakuten Inc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Rakuten 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 Rakuten Inc 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. Rakuten 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.
Easy access to finance
– Easy access to finance in Computer Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Rakuten Inc can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Rakuten Inc in the Computer Services sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Rakuten 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 Computer Services sector.
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.
Regulatory challenges
– Rakuten 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 Computer Services industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Computer Services industry are lowering. It can presents Rakuten Inc with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Computer Services sector.
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 Rakuten Inc business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Rakuten Inc Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Rakuten 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 Rakuten 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 Rakuten 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 Rakuten 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 Rakuten Inc needs to make to build a sustainable competitive advantage.