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 – customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, technology disruption, increasing energy prices, central banks are concerned over increasing inflation, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, increasing commodity prices, supply chains are disrupted by pandemic , 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 -

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.

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.

Ability to lead change in Recreational Activities

– Hakuten is one of the leading players in the Recreational Activities industry in Japan. Over the years it has not only transformed the business landscape in the Recreational Activities industry in Japan but also across the existing markets. The ability to lead change has enabled Hakuten in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Analytics focus

– Hakuten 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 Recreational Activities 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.

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.

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.

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.

Innovation driven organization

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

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.

Highly skilled collaborators

– Hakuten has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Recreational Activities industry. Secondly the value chain collaborators of Hakuten have helped the firm to develop new products and bring them quickly to the marketplace.

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.

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.

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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 -

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.

Interest costs

– Compare to the competition, Hakuten 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.

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.

High operating costs

– Compare to the competitors, Hakuten has high operating costs in the Recreational Activities industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Hakuten lucrative customers.

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.

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.

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.

Workers concerns about automation

– As automation is fast increasing in the Recreational Activities industry, Hakuten 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.

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.

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.

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.

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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 -

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.

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.

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.

Manufacturing automation

– Hakuten can use the latest technology developments to improve its manufacturing and designing process in Recreational Activities 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.

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.

Better consumer reach

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

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.

Reforming the budgeting process

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

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Recreational Activities industry, but it has also influenced the consumer preferences. Hakuten can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Recreational Activities industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Hakuten 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. Hakuten 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.

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.

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.

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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 -

Stagnating economy with rate increase

– Hakuten 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 Recreational Activities industry.

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.

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.

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.

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.

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.

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.

Increasing wage structure of Hakuten

– 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 Hakuten.

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.

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 Hakuten.

Regulatory challenges

– Hakuten 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 Recreational Activities industry regulations.

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.

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.

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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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