Arte Salon (2406) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Arte Salon (Japan)

Based on various researches at Oak Spring University , Arte Salon is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, etc

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Introduction to SWOT Analysis of Arte Salon

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

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

The strengths of Arte Salon are -

Learning organization

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

Ability to recruit top talent

– Arte Salon is one of the leading players in the Personal 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.

High switching costs

– The high switching costs that Arte Salon 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.

Low bargaining power of suppliers

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

Digital Transformation in Personal Services industry

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

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

Operational resilience

– The operational resilience strategy of Arte Salon comprises – understanding the underlying the factors in the Personal 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.

Effective Research and Development (R&D)

– Arte Salon has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Arte Salon staying ahead in the Personal Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Highly skilled collaborators

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

Innovation driven organization

– Arte Salon is one of the most innovative firm in Personal Services sector.

High brand equity

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

Strong track record of project management in the Personal Services industry

– Arte Salon is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

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

The weaknesses of Arte Salon are -

Need for greater diversity

– Arte Salon 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.

High dependence on Arte Salon ‘s star products

– The top 2 products and services of Arte Salon still accounts for major business revenue. This dependence on star products in Personal Services industry has resulted into insufficient focus on developing new products, even though Arte Salon has relatively successful track record of launching new products.

Ability to respond to the competition

– As the decision making is very deliberative at Arte Salon, in the dynamic environment of Personal Services industry it has struggled to respond to the nimble upstart competition. Arte Salon 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, Arte Salon is slow explore the new channels of communication. These new channels of communication can help Arte Salon to provide better information regarding Personal Services products and services. It can also build an online community to further reach out to potential customers.

High cash cycle compare to competitors

Arte Salon has a high cash cycle compare to other players in the Personal 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.

High operating costs

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

Increasing silos among functional specialists

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

Low market penetration in new markets

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

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

Workers concerns about automation

– As automation is fast increasing in the Personal Services industry, Arte Salon 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 Arte Salon strategy

– From the outside it seems that the employees of Arte Salon 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.

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

The opportunities of Arte Salon are -

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 Arte Salon 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.

Reforming the budgeting process

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

Better consumer reach

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

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Personal Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Arte Salon 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. Arte Salon 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.

Using analytics as competitive advantage

– Arte Salon has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Personal Services sector. This continuous investment in analytics has enabled Arte Salon to build a competitive advantage using analytics. The analytics driven competitive advantage can help Arte Salon to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Loyalty marketing

– Arte Salon 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.

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

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for Arte Salon in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Personal Services industry, and it will provide faster access to the consumers.

Redefining models of collaboration and team work

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

Creating value in data economy

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

Finding new ways to collaborate

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

Building a culture of innovation

– managers at Arte Salon 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 Personal Services industry.

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

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

The threats of Arte Salon are -

High dependence on third party suppliers

– Arte Salon 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, Arte Salon 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 Arte Salon prominent markets.

Regulatory challenges

– Arte Salon 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 Personal Services industry regulations.

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 Arte Salon in the Personal Services sector and impact the bottomline of the organization.

Stagnating economy with rate increase

– Arte Salon 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 Personal Services industry.

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.

Environmental challenges

– Arte Salon 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. Arte Salon can take advantage of this fund but it will also bring new competitors in the Personal 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.

Consumer confidence and its impact on Arte Salon 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 Personal Services industry and other sectors.

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 Arte Salon business can come under increasing regulations regarding data privacy, data security, 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. Arte Salon 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.

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 Arte Salon.

Shortening product life cycle

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

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Weighted SWOT Analysis of Arte Salon Template, Example

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

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