Hakuten (2173) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Hakuten (Japan)

Based on various researches at Oak Spring University , Hakuten is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, etc

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Introduction to SWOT Analysis of Hakuten

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

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

The strengths of Hakuten are -

Innovation driven organization

– Hakuten is one of the most innovative firm in Recreational Activities sector.

Organizational Resilience of Hakuten

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

Operational resilience

– The operational resilience strategy of Hakuten comprises – understanding the underlying the factors in the Recreational Activities 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.

Digital Transformation in Recreational Activities industry

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

Strong track record of project management in the Recreational Activities industry

– Hakuten 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

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

Cross disciplinary teams

– Horizontal connected teams at the Hakuten 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 Hakuten in Recreational Activities industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Sustainable margins compare to other players in Recreational Activities industry

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

Low bargaining power of suppliers

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

Training and development

– Hakuten has one of the best training and development program in Services 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.

Learning organization

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

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

The weaknesses of Hakuten are -

Products dominated business model

– Even though Hakuten has some of the most successful models in the Recreational Activities industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Hakuten should strive to include more intangible value offerings along with its core products and services.

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 Hakuten supply chain. Even after few cautionary changes, Hakuten is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hakuten vulnerable to further global disruptions in South East Asia.

Ability to respond to the competition

– As the decision making is very deliberative at Hakuten, in the dynamic environment of Recreational Activities industry it has struggled to respond to the nimble upstart competition. Hakuten 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, Hakuten 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 Recreational Activities industry using digital technology.

Low market penetration in new markets

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

Slow to harness new channels of communication

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

Employees’ less understanding of Hakuten strategy

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

Need for greater diversity

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

Lack of clear differentiation of Hakuten products

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

Skills based hiring in Recreational Activities industry

– The stress on hiring functional specialists at Hakuten 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.

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

The opportunities of Hakuten are -

Developing new processes and practices

– Hakuten can develop new processes and procedures in Recreational Activities 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.

Creating value in data economy

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

Loyalty marketing

– Hakuten 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.

Building a culture of innovation

– managers at Hakuten 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 Recreational Activities industry.

Learning at scale

– Online learning technologies has now opened space for Hakuten 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.

Use of Bitcoin and other crypto currencies for transactions in Recreational Activities industry

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

Redefining models of collaboration and team work

– As explained in the weaknesses section, Hakuten is facing challenges because of the dominance of functional experts in the organization. Hakuten can utilize new technology in the field of Recreational Activities industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

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

Leveraging digital technologies

– Hakuten 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.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Hakuten 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 Hakuten to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Remote work and new talent hiring opportunities

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

Buying journey improvements

– Hakuten can improve the customer journey of consumers in the Recreational Activities 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.

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

The threats of Hakuten are -

Environmental challenges

– Hakuten 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. Hakuten can take advantage of this fund but it will also bring new competitors in the Recreational Activities industry.

Barriers of entry lowering

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

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

Easy access to finance

– Easy access to finance in Recreational Activities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hakuten can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Hakuten in Recreational Activities industry. The Recreational Activities 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

– Hakuten 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.

Shortening product life cycle

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

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.

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. Hakuten 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.

Consumer confidence and its impact on Hakuten 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 Recreational Activities industry and other sectors.

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. Hakuten needs to understand the core reasons impacting the Recreational Activities industry. This will help it in building a better workplace.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Hakuten may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Recreational Activities sector.

Increasing international competition and downward pressure on margins

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

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Weighted SWOT Analysis of Hakuten Template, Example

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

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