HEROZ (4382) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for HEROZ (Japan)

Based on various researches at Oak Spring University , HEROZ is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, etc

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Introduction to SWOT Analysis of HEROZ

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that HEROZ can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the HEROZ, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which HEROZ 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 HEROZ can be done for the following purposes –
1. Strategic planning of HEROZ
2. Improving business portfolio management of HEROZ
3. Assessing feasibility of the new initiative in Japan
4. Making a Software & Programming sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of HEROZ

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Strengths of HEROZ | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of HEROZ are -

Sustainable margins compare to other players in Software & Programming industry

– HEROZ has clearly differentiated products in the market place. This has enabled HEROZ to fetch slight price premium compare to the competitors in the Software & Programming industry. The sustainable margins have also helped HEROZ to invest into research and development (R&D) and innovation.

Highly skilled collaborators

– HEROZ has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Software & Programming industry. Secondly the value chain collaborators of HEROZ have helped the firm to develop new products and bring them quickly to the marketplace.

Training and development

– HEROZ 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.

Diverse revenue streams

– HEROZ is present in almost all the verticals within the Software & Programming industry. This has provided HEROZ 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.

Cross disciplinary teams

– Horizontal connected teams at the HEROZ 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.

Superior customer experience

– The customer experience strategy of HEROZ in Software & Programming industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Innovation driven organization

– HEROZ is one of the most innovative firm in Software & Programming sector.

Strong track record of project management in the Software & Programming industry

– HEROZ is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Learning organization

- HEROZ 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 HEROZ is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at HEROZ emphasize – knowledge, initiative, and innovation.

High brand equity

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

High switching costs

– The high switching costs that HEROZ 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.

Ability to lead change in Software & Programming

– HEROZ is one of the leading players in the Software & Programming industry in Japan. Over the years it has not only transformed the business landscape in the Software & Programming industry in Japan but also across the existing markets. The ability to lead change has enabled HEROZ in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

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Weaknesses of HEROZ | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of HEROZ are -

High bargaining power of channel partners in Software & Programming industry

– because of the regulatory requirements in Japan, HEROZ 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 Software & Programming industry.

Need for greater diversity

– HEROZ 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.

High cash cycle compare to competitors

HEROZ has a high cash cycle compare to other players in the Software & Programming industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

No frontier risks strategy

– From the 10K / annual statement of HEROZ, it seems that company is thinking out the frontier risks that can impact Software & Programming 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.

Interest costs

– Compare to the competition, HEROZ 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.

Ability to respond to the competition

– As the decision making is very deliberative at HEROZ, in the dynamic environment of Software & Programming industry it has struggled to respond to the nimble upstart competition. HEROZ has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Lack of clear differentiation of HEROZ products

– To increase the profitability and margins on the products, HEROZ needs to provide more differentiated products than what it is currently offering in the marketplace.

Slow decision making process

– As mentioned earlier in the report, HEROZ has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Software & Programming industry over the last five years. HEROZ 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.

Workers concerns about automation

– As automation is fast increasing in the Software & Programming industry, HEROZ needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.

High operating costs

– Compare to the competitors, HEROZ has high operating costs in the Software & Programming industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract HEROZ lucrative customers.

High dependence on existing supply chain

– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of HEROZ supply chain. Even after few cautionary changes, HEROZ is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left HEROZ vulnerable to further global disruptions in South East Asia.

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HEROZ Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of HEROZ are -

Leveraging digital technologies

– HEROZ 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

– HEROZ can use the latest technology developments to improve its manufacturing and designing process in Software & Programming 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, HEROZ can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help HEROZ to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Creating value in data economy

– The success of analytics program of HEROZ has opened avenues for new revenue streams for the organization in Software & Programming industry. This can help HEROZ to build a more holistic ecosystem for HEROZ products in the Software & Programming 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, HEROZ can use these opportunities to build new business models that can help the communities that HEROZ operates in. Secondly it can use opportunities from government spending in Software & Programming sector.

Loyalty marketing

– HEROZ 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.

Learning at scale

– Online learning technologies has now opened space for HEROZ 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.

Reforming the budgeting process

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

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. HEROZ can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Buying journey improvements

– HEROZ can improve the customer journey of consumers in the Software & Programming 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Software & Programming industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. HEROZ 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. HEROZ 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, HEROZ 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for HEROZ in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Software & Programming industry, and it will provide faster access to the consumers.

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Threats HEROZ External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of HEROZ are -

High dependence on third party suppliers

– HEROZ 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.

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.

Consumer confidence and its impact on HEROZ 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 Software & Programming 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. HEROZ 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.

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 HEROZ 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 HEROZ in the Software & Programming sector and impact the bottomline of the organization.

Stagnating economy with rate increase

– HEROZ 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 Software & Programming industry.

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.

Environmental challenges

– HEROZ 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. HEROZ can take advantage of this fund but it will also bring new competitors in the Software & Programming industry.

Technology acceleration in Forth Industrial Revolution

– HEROZ has witnessed rapid integration of technology during Covid-19 in the Software & Programming industry. As one of the leading players in the industry, HEROZ needs to keep up with the evolution of technology in the Software & Programming 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 wage structure of HEROZ

– 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 HEROZ.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, HEROZ 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 HEROZ prominent markets.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Software & Programming industry are lowering. It can presents HEROZ with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Software & Programming sector.

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Weighted SWOT Analysis of HEROZ Template, Example

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

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