Next Co Ltd (2120) SWOT Analysis / TOWS Matrix / MBA Resources
Computer Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Next Co Ltd (Japan)
Based on various researches at Oak Spring University , Next Co Ltd is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings,
wage bills are increasing, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Next Co Ltd can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Next Co Ltd, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Next 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.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Next Co Ltd can be done for the following purposes –
1. Strategic planning of Next Co Ltd
2. Improving business portfolio management of Next Co Ltd
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 Next Co Ltd
Strengths of Next Co Ltd | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Next Co Ltd are -
Sustainable margins compare to other players in Computer Services industry
– Next Co Ltd has clearly differentiated products in the market place. This has enabled Next Co Ltd to fetch slight price premium compare to the competitors in the Computer Services industry. The sustainable margins have also helped Next Co Ltd to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Next 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.
Highly skilled collaborators
– Next Co Ltd has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Computer Services industry. Secondly the value chain collaborators of Next Co Ltd have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Next Co Ltd has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Next 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.
High switching costs
– The high switching costs that Next 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.
Learning organization
- Next 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 Next Co Ltd is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Next Co Ltd emphasize – knowledge, initiative, and innovation.
High brand equity
– Next Co Ltd has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Next Co Ltd to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Computer Services
– Next Co Ltd 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 Next Co Ltd in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Next Co Ltd has one of the best training and development program in Technology 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
– Next Co Ltd is one of the most innovative firm in Computer Services sector.
Low bargaining power of suppliers
– Suppliers of Next Co Ltd in the Technology sector have low bargaining power. Next Co Ltd has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Next Co Ltd to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Next Co Ltd
– The covid-19 pandemic has put organizational resilience at the centre of everthing Next Co Ltd does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of Next Co Ltd | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Next Co Ltd are -
Slow decision making process
– As mentioned earlier in the report, Next 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 Computer Services industry over the last five years. Next 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.
Increasing silos among functional specialists
– The organizational structure of Next Co Ltd is dominated by functional specialists. It is not different from other players in the Computer Services industry, but Next Co Ltd needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Next Co Ltd to focus more on services in the Computer Services industry rather than just following the product oriented approach.
High cash cycle compare to competitors
Next Co Ltd has a high cash cycle compare to other players in the Computer Services 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, Next Co Ltd needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on Next Co Ltd ‘s star products
– The top 2 products and services of Next Co Ltd 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 Next Co Ltd has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of Next Co Ltd, it seems that company is thinking out the frontier risks that can impact Computer Services 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.
Products dominated business model
– Even though Next Co Ltd 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. Next Co Ltd should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Next 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 Computer Services industry using digital technology.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Next Co Ltd is slow explore the new channels of communication. These new channels of communication can help Next Co Ltd to provide better information regarding Computer Services products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Next Co Ltd is one of the leading players in the Computer Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Computer Services industry in last five years.
Skills based hiring in Computer Services industry
– The stress on hiring functional specialists at Next 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.
Next Co Ltd Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Next Co Ltd are -
Loyalty marketing
– Next Co Ltd 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.
Better consumer reach
– The expansion of the 5G network will help Next Co Ltd to increase its market reach. Next Co Ltd 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 Next 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 Next 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 Next Co Ltd to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Next Co Ltd 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.
Buying journey improvements
– Next Co Ltd 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.
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. Next Co Ltd can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Next Co Ltd 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.
Using analytics as competitive advantage
– Next Co Ltd has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Computer Services sector. This continuous investment in analytics has enabled Next Co Ltd to build a competitive advantage using analytics. The analytics driven competitive advantage can help Next Co Ltd to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Computer Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Next 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. Next 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Next Co Ltd can use these opportunities to build new business models that can help the communities that Next Co Ltd operates in. Secondly it can use opportunities from government spending in Computer Services sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Next Co Ltd is facing challenges because of the dominance of functional experts in the organization. Next Co Ltd 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.
Developing new processes and practices
– Next Co Ltd can develop new processes and procedures in Computer Services 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.
Threats Next Co Ltd External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Next Co Ltd are -
Consumer confidence and its impact on Next Co Ltd 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 Computer Services industry and other sectors.
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. Next 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Next Co Ltd in Computer Services industry. The Computer Services 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.
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.
Technology acceleration in Forth Industrial Revolution
– Next Co Ltd has witnessed rapid integration of technology during Covid-19 in the Computer Services industry. As one of the leading players in the industry, Next Co Ltd 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.
Stagnating economy with rate increase
– Next 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 Computer Services industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Next 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 Next Co Ltd prominent markets.
High dependence on third party suppliers
– Next 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, Next 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 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 Next Co Ltd business can come under increasing regulations regarding data privacy, data security, etc.
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 Next Co Ltd in the Computer Services sector and impact the bottomline of the organization.
Environmental challenges
– Next 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. Next Co Ltd can take advantage of this fund but it will also bring new competitors in the Computer Services industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Computer Services industry are lowering. It can presents Next Co Ltd with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Computer Services sector.
Weighted SWOT Analysis of Next Co Ltd Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Next 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 Next 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 Next 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 Next 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 Next Co Ltd needs to make to build a sustainable competitive advantage.
