Nextware (4814) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Nextware (Japan)

Based on various researches at Oak Spring University , Nextware is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, geopolitical disruptions, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, wage bills are increasing, there is backlash against globalization, supply chains are disrupted by pandemic , etc

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Introduction to SWOT Analysis of Nextware

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

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

The strengths of Nextware are -

Sustainable margins compare to other players in Software & Programming industry

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

Superior customer experience

– The customer experience strategy of Nextware in Software & Programming industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Highly skilled collaborators

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

Diverse revenue streams

– Nextware is present in almost all the verticals within the Software & Programming industry. This has provided Nextware 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.

Operational resilience

– The operational resilience strategy of Nextware comprises – understanding the underlying the factors in the Software & Programming 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)

– Nextware has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nextware staying ahead in the Software & Programming 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 Nextware 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.

Innovation driven organization

– Nextware is one of the most innovative firm in Software & Programming sector.

Low bargaining power of suppliers

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

Cross disciplinary teams

– Horizontal connected teams at the Nextware 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.

Analytics focus

– Nextware 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 Software & Programming 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.

High brand equity

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

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

The weaknesses of Nextware are -

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

Compensation and incentives

– The revenue per employee of Nextware is just above the Software & Programming 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.

No frontier risks strategy

– From the 10K / annual statement of Nextware, it seems that company is thinking out the frontier risks that can impact Software & Programming 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.

Products dominated business model

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

Capital Spending Reduction

– Even during the low interest decade, Nextware 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 Software & Programming industry using digital technology.

High bargaining power of channel partners in Software & Programming industry

– because of the regulatory requirements in Japan, Nextware is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Software & Programming industry.

Ability to respond to the competition

– As the decision making is very deliberative at Nextware, in the dynamic environment of Software & Programming industry it has struggled to respond to the nimble upstart competition. Nextware has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Skills based hiring in Software & Programming industry

– The stress on hiring functional specialists at Nextware 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.

High cash cycle compare to competitors

Nextware has a high cash cycle compare to other players in the Software & Programming industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Slow to strategic competitive environment developments

– As Nextware is one of the leading players in the Software & Programming industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Software & Programming industry in last five years.

Employees’ less understanding of Nextware strategy

– From the outside it seems that the employees of Nextware 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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Nextware Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Nextware are -

Building a culture of innovation

– managers at Nextware 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 Software & Programming industry.

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 Nextware 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.

Remote work and new talent hiring opportunities

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

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Software & Programming industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Nextware 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. Nextware 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

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

Lowering marketing communication costs

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

Leveraging digital technologies

– Nextware 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, Nextware 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 Nextware to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nextware can use these opportunities to build new business models that can help the communities that Nextware operates in. Secondly it can use opportunities from government spending in Software & Programming sector.

Reforming the budgeting process

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

Learning at scale

– Online learning technologies has now opened space for Nextware 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

– Nextware can develop new processes and procedures in Software & Programming 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.

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

The threats of Nextware are -

Increasing wage structure of Nextware

– 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 Nextware.

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.

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 Nextware in the Software & Programming sector and impact the bottomline of the organization.

Increasing international competition and downward pressure on margins

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

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 Nextware.

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. Nextware 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.

Shortening product life cycle

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

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

Consumer confidence and its impact on Nextware 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 Software & Programming industry and other sectors.

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.

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. Nextware needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.

Regulatory challenges

– Nextware 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 Software & Programming industry regulations.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Nextware in Software & Programming industry. The Software & Programming 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.

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Weighted SWOT Analysis of Nextware Template, Example

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

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