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 transportation and logistics costs, there is increasing trade war between United States & China, geopolitical disruptions, increasing commodity prices, increasing government debt because of Covid-19 spendings, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, increasing household debt because of falling income levels, 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 -

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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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 -

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.

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.

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.

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.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, FRONTEO is slow explore the new channels of communication. These new channels of communication can help FRONTEO to provide better information regarding Computer Services products and services. It can also build an online community to further reach out to potential customers.

Low market penetration in new markets

– Outside its home market of Japan, FRONTEO needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

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.

No frontier risks strategy

– From the 10K / annual statement of FRONTEO, 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.

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.

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.

High dependence on FRONTEO ‘s star products

– The top 2 products and services of FRONTEO 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 FRONTEO has relatively successful track record of launching new products.

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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 -

Leveraging digital technologies

– FRONTEO 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.

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.

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.

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.

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.

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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, FRONTEO is facing challenges because of the dominance of functional experts in the organization. FRONTEO 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.

Manufacturing automation

– FRONTEO 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.

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.

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.

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.

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.

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.

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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 -

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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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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