FRONTEO (2158) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for FRONTEO (Japan)

Based on various researches at Oak Spring University , FRONTEO is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, technology disruption, increasing energy prices, cloud computing is disrupting traditional business models, etc

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Introduction to SWOT Analysis of FRONTEO

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that FRONTEO can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the FRONTEO, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which FRONTEO 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 FRONTEO can be done for the following purposes –
1. Strategic planning of FRONTEO
2. Improving business portfolio management of FRONTEO
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 FRONTEO

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

The strengths of FRONTEO are -

High brand equity

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

Ability to lead change in Computer Services

– FRONTEO 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 FRONTEO in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Operational resilience

– The operational resilience strategy of FRONTEO comprises – understanding the underlying the factors in the Computer Services 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.

Low bargaining power of suppliers

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

Analytics focus

– FRONTEO 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 Computer Services 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.

Successful track record of launching new products

– FRONTEO has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. FRONTEO 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.

Strong track record of project management in the Computer Services industry

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

Cross disciplinary teams

– Horizontal connected teams at the FRONTEO 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.

Effective Research and Development (R&D)

– FRONTEO has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – FRONTEO 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.

Learning organization

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

Training and development

– FRONTEO 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.

High switching costs

– The high switching costs that FRONTEO 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.

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

The weaknesses of FRONTEO are -

High operating costs

– Compare to the competitors, FRONTEO 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 FRONTEO lucrative customers.

High bargaining power of channel partners in Computer Services industry

– because of the regulatory requirements in Japan, FRONTEO 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 Computer Services industry.

Compensation and incentives

– The revenue per employee of FRONTEO is just above the Computer Services 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.

Increasing silos among functional specialists

– The organizational structure of FRONTEO is dominated by functional specialists. It is not different from other players in the Computer Services industry, but FRONTEO needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help FRONTEO to focus more on services in the Computer Services industry rather than just following the product oriented approach.

Slow decision making process

– As mentioned earlier in the report, FRONTEO 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. FRONTEO 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.

Skills based hiring in Computer Services industry

– The stress on hiring functional specialists at FRONTEO 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.

Aligning sales with marketing

– From the outside it seems that FRONTEO needs to have more collaboration between its sales team and marketing team. Sales professionals in the Computer Services industry have deep experience in developing customer relationships. Marketing department at FRONTEO can leverage the sales team experience to cultivate customer relationships as FRONTEO is planning to shift buying processes online.

Products dominated business model

– Even though FRONTEO 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. FRONTEO should strive to include more intangible value offerings along with its core products and services.

Ability to respond to the competition

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

Workers concerns about automation

– As automation is fast increasing in the Computer Services industry, FRONTEO 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.

Slow to strategic competitive environment developments

– As FRONTEO 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.

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

The opportunities of FRONTEO are -

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. FRONTEO can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Better consumer reach

– The expansion of the 5G network will help FRONTEO to increase its market reach. FRONTEO 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.

Developing new processes and practices

– FRONTEO 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.

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 FRONTEO 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.

Using analytics as competitive advantage

– FRONTEO 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 FRONTEO to build a competitive advantage using analytics. The analytics driven competitive advantage can help FRONTEO to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Learning at scale

– Online learning technologies has now opened space for FRONTEO 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, FRONTEO 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.

Building a culture of innovation

– managers at FRONTEO 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.

Reforming the budgeting process

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

Loyalty marketing

– FRONTEO 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for FRONTEO 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.

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. FRONTEO 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 Computer Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. FRONTEO 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. FRONTEO 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.

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

The threats of FRONTEO are -

Shortening product life cycle

– it is one of the major threat that FRONTEO is facing in Computer Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

Barriers of entry lowering

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

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 FRONTEO.

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. FRONTEO 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. FRONTEO 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.

Increasing international competition and downward pressure on margins

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

Increasing wage structure of FRONTEO

– 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 FRONTEO.

Regulatory challenges

– FRONTEO 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.

Environmental challenges

– FRONTEO 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. FRONTEO can take advantage of this fund but it will also bring new competitors in the Computer Services industry.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, FRONTEO 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.

Stagnating economy with rate increase

– FRONTEO 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.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for FRONTEO 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.

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 FRONTEO business can come under increasing regulations regarding data privacy, data security, etc.

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Weighted SWOT Analysis of FRONTEO Template, Example

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

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