Royal Holdings (8179) SWOT Analysis / TOWS Matrix / MBA Resources
Restaurants
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Royal Holdings (Japan)
Based on various researches at Oak Spring University , Royal Holdings is operating in a macro-environment that has been destablized by – wage bills are increasing, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, geopolitical disruptions, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies,
supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Royal Holdings can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Royal Holdings, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Royal Holdings 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 Royal Holdings can be done for the following purposes –
1. Strategic planning of Royal Holdings
2. Improving business portfolio management of Royal Holdings
3. Assessing feasibility of the new initiative in Japan
4. Making a Restaurants sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Royal Holdings
Strengths of Royal Holdings | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Royal Holdings are -
Ability to recruit top talent
– Royal Holdings is one of the leading players in the Restaurants 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.
Diverse revenue streams
– Royal Holdings is present in almost all the verticals within the Restaurants industry. This has provided Royal Holdings a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Operational resilience
– The operational resilience strategy of Royal Holdings comprises – understanding the underlying the factors in the Restaurants 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
– Royal Holdings 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 Restaurants 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.
Training and development
– Royal Holdings 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.
Highly skilled collaborators
– Royal Holdings has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Restaurants industry. Secondly the value chain collaborators of Royal Holdings have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management in the Restaurants industry
– Royal Holdings is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Sustainable margins compare to other players in Restaurants industry
– Royal Holdings has clearly differentiated products in the market place. This has enabled Royal Holdings to fetch slight price premium compare to the competitors in the Restaurants industry. The sustainable margins have also helped Royal Holdings to invest into research and development (R&D) and innovation.
High brand equity
– Royal Holdings has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Royal Holdings to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Royal Holdings is one of the most innovative firm in Restaurants sector.
Ability to lead change in Restaurants
– Royal Holdings is one of the leading players in the Restaurants industry in Japan. Over the years it has not only transformed the business landscape in the Restaurants industry in Japan but also across the existing markets. The ability to lead change has enabled Royal Holdings 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 Royal Holdings in the Services sector have low bargaining power. Royal Holdings has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Royal Holdings to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of Royal Holdings | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Royal Holdings are -
Employees’ less understanding of Royal Holdings strategy
– From the outside it seems that the employees of Royal Holdings 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.
Lack of clear differentiation of Royal Holdings products
– To increase the profitability and margins on the products, Royal Holdings needs to provide more differentiated products than what it is currently offering in the marketplace.
Interest costs
– Compare to the competition, Royal Holdings 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, Royal Holdings 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 Restaurants industry using digital technology.
Compensation and incentives
– The revenue per employee of Royal Holdings is just above the Restaurants 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.
Ability to respond to the competition
– As the decision making is very deliberative at Royal Holdings, in the dynamic environment of Restaurants industry it has struggled to respond to the nimble upstart competition. Royal Holdings 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 Royal Holdings has some of the most successful models in the Restaurants industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Royal Holdings should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Royal Holdings has a high cash cycle compare to other players in the Restaurants industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Increasing silos among functional specialists
– The organizational structure of Royal Holdings is dominated by functional specialists. It is not different from other players in the Restaurants industry, but Royal Holdings needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Royal Holdings to focus more on services in the Restaurants industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Japan, Royal Holdings needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring in Restaurants industry
– The stress on hiring functional specialists at Royal Holdings 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.
Royal Holdings Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Royal Holdings are -
Learning at scale
– Online learning technologies has now opened space for Royal Holdings 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Royal Holdings 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Restaurants industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Royal Holdings 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. Royal Holdings 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.
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 Royal Holdings 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Royal Holdings is facing challenges because of the dominance of functional experts in the organization. Royal Holdings can utilize new technology in the field of Restaurants industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Manufacturing automation
– Royal Holdings can use the latest technology developments to improve its manufacturing and designing process in Restaurants 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Royal Holdings can use these opportunities to build new business models that can help the communities that Royal Holdings operates in. Secondly it can use opportunities from government spending in Restaurants sector.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Royal Holdings in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Restaurants industry, and it will provide faster access to the consumers.
Creating value in data economy
– The success of analytics program of Royal Holdings has opened avenues for new revenue streams for the organization in Restaurants industry. This can help Royal Holdings to build a more holistic ecosystem for Royal Holdings products in the Restaurants industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Royal Holdings can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Royal Holdings has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Restaurants sector. This continuous investment in analytics has enabled Royal Holdings to build a competitive advantage using analytics. The analytics driven competitive advantage can help Royal Holdings to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Restaurants industry, but it has also influenced the consumer preferences. Royal Holdings can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Use of Bitcoin and other crypto currencies for transactions in Restaurants industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Royal Holdings in the Restaurants industry. Now Royal Holdings can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Royal Holdings External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Royal Holdings 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.
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 Royal Holdings in the Restaurants sector and impact the bottomline of the organization.
Environmental challenges
– Royal Holdings 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. Royal Holdings can take advantage of this fund but it will also bring new competitors in the Restaurants industry.
Stagnating economy with rate increase
– Royal Holdings 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 Restaurants industry.
Easy access to finance
– Easy access to finance in Restaurants industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Royal Holdings can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Royal Holdings 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.
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 Royal Holdings.
Regulatory challenges
– Royal Holdings 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 Restaurants industry regulations.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Royal Holdings may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Restaurants sector.
High dependence on third party suppliers
– Royal Holdings 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.
Increasing wage structure of Royal Holdings
– 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 Royal Holdings.
Technology acceleration in Forth Industrial Revolution
– Royal Holdings has witnessed rapid integration of technology during Covid-19 in the Restaurants industry. As one of the leading players in the industry, Royal Holdings needs to keep up with the evolution of technology in the Restaurants 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 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. Royal Holdings needs to understand the core reasons impacting the Restaurants industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Royal Holdings Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Royal Holdings 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 Royal Holdings 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 Royal Holdings 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 Royal Holdings 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 Royal Holdings needs to make to build a sustainable competitive advantage.