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 – technology disruption, increasing commodity prices, increasing household debt because of falling income levels, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, there is increasing trade war between United States & China, 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 -

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.

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 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.

Highly skilled collaborators

– FRONTEO 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 FRONTEO have helped the firm to develop new products and bring them quickly to the marketplace.

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.

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.

Organizational Resilience of FRONTEO

– The covid-19 pandemic has put organizational resilience at the centre of everthing FRONTEO does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Digital Transformation in Computer Services industry

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

Sustainable margins compare to other players in Computer Services industry

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

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.

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.

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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 -

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.

Capital Spending Reduction

– Even during the low interest decade, FRONTEO 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.

Lack of clear differentiation of FRONTEO products

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

Employees’ less understanding of FRONTEO strategy

– From the outside it seems that the employees of FRONTEO 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.

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.

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.

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.

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.

Need for greater diversity

– FRONTEO 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.

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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 -

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.

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.

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.

Buying journey improvements

– FRONTEO 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.

Use of Bitcoin and other crypto currencies for transactions in Computer Services industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for FRONTEO in the Computer Services industry. Now FRONTEO can target international markets with far fewer capital restrictions requirements than the existing system.

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.

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.

Creating value in data economy

– The success of analytics program of FRONTEO has opened avenues for new revenue streams for the organization in Computer Services industry. This can help FRONTEO to build a more holistic ecosystem for FRONTEO products in the Computer Services industry by providing – data insight services, data privacy related products, data based consulting services, 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.

Remote work and new talent hiring opportunities

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

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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, FRONTEO can use these opportunities to build new business models that can help the communities that FRONTEO operates in. Secondly it can use opportunities from government spending in Computer Services sector.

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.

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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 -

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.

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. FRONTEO needs to understand the core reasons impacting the Computer Services industry. This will help it in building a better workplace.

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.

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.

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.

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.

Technology acceleration in Forth Industrial Revolution

– FRONTEO has witnessed rapid integration of technology during Covid-19 in the Computer Services industry. As one of the leading players in the industry, FRONTEO 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.

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.

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 FRONTEO in the Computer Services sector and impact the bottomline of the organization.

High dependence on third party suppliers

– FRONTEO 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.

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.

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.

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.

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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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