Drecom (3793) SWOT Analysis / TOWS Matrix / MBA Resources
Computer Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Drecom (Japan)
Based on various researches at Oak Spring University , Drecom is operating in a macro-environment that has been destablized by – increasing commodity prices, wage bills are increasing, central banks are concerned over increasing inflation, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, supply chains are disrupted by pandemic ,
challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Drecom can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Drecom, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Drecom 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 Drecom can be done for the following purposes –
1. Strategic planning of Drecom
2. Improving business portfolio management of Drecom
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 Drecom
Strengths of Drecom | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Drecom are -
Diverse revenue streams
– Drecom is present in almost all the verticals within the Computer Services industry. This has provided Drecom 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.
Digital Transformation in Computer Services industry
- digital transformation varies from industry to industry. For Drecom digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Drecom 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.
Effective Research and Development (R&D)
– Drecom has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Drecom 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.
Training and development
– Drecom 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
– Drecom has clearly differentiated products in the market place. This has enabled Drecom to fetch slight price premium compare to the competitors in the Computer Services industry. The sustainable margins have also helped Drecom to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Drecom is one of the leading players in the Computer Services industry in Japan. It is in a position to attract the best talent available in Japan. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Drecom 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 Drecom is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Drecom emphasize – knowledge, initiative, and innovation.
Strong track record of project management in the Computer Services industry
– Drecom is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Drecom 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
– Drecom has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Drecom 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 Drecom
– The covid-19 pandemic has put organizational resilience at the centre of everthing Drecom does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High brand equity
– Drecom has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Drecom to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Drecom | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Drecom are -
Lack of clear differentiation of Drecom products
– To increase the profitability and margins on the products, Drecom needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Drecom supply chain. Even after few cautionary changes, Drecom is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Drecom vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the Computer Services industry, Drecom 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 cash cycle compare to competitors
Drecom 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.
Increasing silos among functional specialists
– The organizational structure of Drecom is dominated by functional specialists. It is not different from other players in the Computer Services industry, but Drecom needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Drecom to focus more on services in the Computer Services industry rather than just following the product oriented approach.
Aligning sales with marketing
– From the outside it seems that Drecom 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 Drecom can leverage the sales team experience to cultivate customer relationships as Drecom is planning to shift buying processes online.
Slow to strategic competitive environment developments
– As Drecom 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.
Interest costs
– Compare to the competition, Drecom 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 Drecom, in the dynamic environment of Computer Services industry it has struggled to respond to the nimble upstart competition. Drecom has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Drecom 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.
Low market penetration in new markets
– Outside its home market of Japan, Drecom needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Drecom Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Drecom are -
Loyalty marketing
– Drecom 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Drecom can use these opportunities to build new business models that can help the communities that Drecom operates in. Secondly it can use opportunities from government spending in Computer Services sector.
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 Drecom 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.
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. Drecom 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. Drecom 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.
Buying journey improvements
– Drecom 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Drecom 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 Drecom 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.
Using analytics as competitive advantage
– Drecom 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 Drecom to build a competitive advantage using analytics. The analytics driven competitive advantage can help Drecom to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Drecom 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 Drecom to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Drecom 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. Drecom can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Drecom 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 Drecom to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Drecom 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 Drecom External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Drecom are -
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Drecom 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 Drecom prominent markets.
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. Drecom can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Drecom
– 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 Drecom.
Consumer confidence and its impact on Drecom 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.
Shortening product life cycle
– it is one of the major threat that Drecom is facing in Computer Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Technology acceleration in Forth Industrial Revolution
– Drecom has witnessed rapid integration of technology during Covid-19 in the Computer Services industry. As one of the leading players in the industry, Drecom 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.
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. Drecom 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 Drecom 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.
High dependence on third party suppliers
– Drecom 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.
Environmental challenges
– Drecom 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. Drecom can take advantage of this fund but it will also bring new competitors in the Computer Services industry.
Regulatory challenges
– Drecom 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Computer Services industry are lowering. It can presents Drecom 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 Drecom Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Drecom 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 Drecom 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 Drecom 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 Drecom 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 Drecom needs to make to build a sustainable competitive advantage.