Square Enix Holdings Co Ltd (9684) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Square Enix Holdings Co Ltd (Japan)

Based on various researches at Oak Spring University , Square Enix Holdings Co Ltd is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing transportation and logistics costs, technology disruption, increasing energy prices, etc

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Introduction to SWOT Analysis of Square Enix Holdings Co Ltd

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Square Enix Holdings Co Ltd can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Square Enix Holdings Co Ltd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Square Enix Holdings Co Ltd 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Square Enix Holdings Co Ltd can be done for the following purposes –
1. Strategic planning of Square Enix Holdings Co Ltd
2. Improving business portfolio management of Square Enix Holdings Co Ltd
3. Assessing feasibility of the new initiative in Japan
4. Making a Casinos & Gaming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Square Enix Holdings Co Ltd

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Strengths of Square Enix Holdings Co Ltd | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Square Enix Holdings Co Ltd are -

Successful track record of launching new products

– Square Enix Holdings Co Ltd has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Square Enix Holdings Co Ltd 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.

Low bargaining power of suppliers

– Suppliers of Square Enix Holdings Co Ltd in the Services sector have low bargaining power. Square Enix Holdings Co Ltd has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Square Enix Holdings Co Ltd to manage not only supply disruptions but also source products at highly competitive prices.

Analytics focus

– Square Enix Holdings Co Ltd 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 Casinos & Gaming 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.

Learning organization

- Square Enix Holdings Co Ltd 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 Square Enix Holdings Co Ltd is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Square Enix Holdings Co Ltd emphasize – knowledge, initiative, and innovation.

Cross disciplinary teams

– Horizontal connected teams at the Square Enix Holdings Co Ltd 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 Square Enix Holdings Co Ltd 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.

Effective Research and Development (R&D)

– Square Enix Holdings Co Ltd has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Square Enix Holdings Co Ltd staying ahead in the Casinos & Gaming 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 Square Enix Holdings Co Ltd in Casinos & Gaming industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Digital Transformation in Casinos & Gaming industry

- digital transformation varies from industry to industry. For Square Enix Holdings Co Ltd digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Square Enix Holdings Co Ltd 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.

High brand equity

– Square Enix Holdings Co Ltd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Square Enix Holdings Co Ltd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Training and development

– Square Enix Holdings Co Ltd 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.

Innovation driven organization

– Square Enix Holdings Co Ltd is one of the most innovative firm in Casinos & Gaming sector.

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Weaknesses of Square Enix Holdings Co Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Square Enix Holdings Co Ltd are -

High bargaining power of channel partners in Casinos & Gaming industry

– because of the regulatory requirements in Japan, Square Enix Holdings Co Ltd 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 Casinos & Gaming industry.

Capital Spending Reduction

– Even during the low interest decade, Square Enix Holdings Co Ltd 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 Casinos & Gaming industry using digital technology.

Interest costs

– Compare to the competition, Square Enix Holdings Co Ltd 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.

High operating costs

– Compare to the competitors, Square Enix Holdings Co Ltd has high operating costs in the Casinos & Gaming industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Square Enix Holdings Co Ltd lucrative customers.

High cash cycle compare to competitors

Square Enix Holdings Co Ltd has a high cash cycle compare to other players in the Casinos & Gaming 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, Square Enix Holdings Co Ltd needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Aligning sales with marketing

– From the outside it seems that Square Enix Holdings Co Ltd needs to have more collaboration between its sales team and marketing team. Sales professionals in the Casinos & Gaming industry have deep experience in developing customer relationships. Marketing department at Square Enix Holdings Co Ltd can leverage the sales team experience to cultivate customer relationships as Square Enix Holdings Co Ltd is planning to shift buying processes online.

Skills based hiring in Casinos & Gaming industry

– The stress on hiring functional specialists at Square Enix Holdings Co Ltd 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 Square Enix Holdings Co Ltd is just above the Casinos & Gaming 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.

Products dominated business model

– Even though Square Enix Holdings Co Ltd has some of the most successful models in the Casinos & Gaming industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Square Enix Holdings Co Ltd should strive to include more intangible value offerings along with its core products and services.

Slow decision making process

– As mentioned earlier in the report, Square Enix Holdings Co Ltd has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Casinos & Gaming industry over the last five years. Square Enix Holdings Co Ltd 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.

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Square Enix Holdings Co Ltd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Square Enix Holdings Co Ltd are -

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. Square Enix Holdings Co Ltd can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Casinos & Gaming industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Square Enix Holdings Co Ltd 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. Square Enix Holdings Co Ltd 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.

Use of Bitcoin and other crypto currencies for transactions in Casinos & Gaming industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Square Enix Holdings Co Ltd in the Casinos & Gaming industry. Now Square Enix Holdings Co Ltd can target international markets with far fewer capital restrictions requirements than the existing system.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Casinos & Gaming industry, but it has also influenced the consumer preferences. Square Enix Holdings Co Ltd can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Creating value in data economy

– The success of analytics program of Square Enix Holdings Co Ltd has opened avenues for new revenue streams for the organization in Casinos & Gaming industry. This can help Square Enix Holdings Co Ltd to build a more holistic ecosystem for Square Enix Holdings Co Ltd products in the Casinos & Gaming industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Square Enix Holdings Co Ltd can use these opportunities to build new business models that can help the communities that Square Enix Holdings Co Ltd operates in. Secondly it can use opportunities from government spending in Casinos & Gaming sector.

Using analytics as competitive advantage

– Square Enix Holdings Co Ltd has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Casinos & Gaming sector. This continuous investment in analytics has enabled Square Enix Holdings Co Ltd to build a competitive advantage using analytics. The analytics driven competitive advantage can help Square Enix Holdings Co Ltd to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Square Enix Holdings Co Ltd can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Square Enix Holdings Co Ltd 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 Square Enix Holdings Co Ltd to hire the very best people irrespective of their geographical location.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Square Enix Holdings Co Ltd is facing challenges because of the dominance of functional experts in the organization. Square Enix Holdings Co Ltd can utilize new technology in the field of Casinos & Gaming industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Manufacturing automation

– Square Enix Holdings Co Ltd can use the latest technology developments to improve its manufacturing and designing process in Casinos & Gaming 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.

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 Square Enix Holdings Co Ltd 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.

Developing new processes and practices

– Square Enix Holdings Co Ltd can develop new processes and procedures in Casinos & Gaming 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.

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Threats Square Enix Holdings Co Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Square Enix Holdings Co Ltd are -

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.

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. Square Enix Holdings Co Ltd needs to understand the core reasons impacting the Casinos & Gaming industry. This will help it in building a better workplace.

Increasing wage structure of Square Enix Holdings Co Ltd

– 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 Square Enix Holdings Co Ltd.

High dependence on third party suppliers

– Square Enix Holdings Co Ltd 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Square Enix Holdings Co Ltd may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Casinos & Gaming sector.

Stagnating economy with rate increase

– Square Enix Holdings Co Ltd 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 Casinos & Gaming 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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Square Enix Holdings Co Ltd 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 Square Enix Holdings Co Ltd prominent markets.

Environmental challenges

– Square Enix Holdings Co Ltd 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. Square Enix Holdings Co Ltd can take advantage of this fund but it will also bring new competitors in the Casinos & Gaming industry.

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 Square Enix Holdings Co Ltd in the Casinos & Gaming sector and impact the bottomline of the organization.

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 Square Enix Holdings Co Ltd.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Square Enix Holdings Co Ltd in Casinos & Gaming industry. The Casinos & Gaming 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.

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. Square Enix Holdings Co Ltd 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.

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Weighted SWOT Analysis of Square Enix Holdings Co Ltd Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Square Enix Holdings Co Ltd 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 Square Enix Holdings Co Ltd 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 Square Enix Holdings Co Ltd 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 Square Enix Holdings Co Ltd 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 Square Enix Holdings Co Ltd needs to make to build a sustainable competitive advantage.

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