Nextgen (3842) SWOT Analysis / TOWS Matrix / MBA Resources
Software & Programming
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nextgen (Japan)
Based on various researches at Oak Spring University , Nextgen is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices,
geopolitical disruptions, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nextgen can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nextgen, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nextgen 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 Nextgen can be done for the following purposes –
1. Strategic planning of Nextgen
2. Improving business portfolio management of Nextgen
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 Nextgen
Strengths of Nextgen | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nextgen are -
High switching costs
– The high switching costs that Nextgen 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.
High brand equity
– Nextgen has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nextgen to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Software & Programming industry
– Nextgen has clearly differentiated products in the market place. This has enabled Nextgen to fetch slight price premium compare to the competitors in the Software & Programming industry. The sustainable margins have also helped Nextgen to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Nextgen is present in almost all the verticals within the Software & Programming industry. This has provided Nextgen 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.
Innovation driven organization
– Nextgen is one of the most innovative firm in Software & Programming sector.
Learning organization
- Nextgen 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 Nextgen is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nextgen emphasize – knowledge, initiative, and innovation.
Organizational Resilience of Nextgen
– The covid-19 pandemic has put organizational resilience at the centre of everthing Nextgen does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Nextgen has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nextgen 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.
Digital Transformation in Software & Programming industry
- digital transformation varies from industry to industry. For Nextgen digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nextgen 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.
Analytics focus
– Nextgen 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.
Low bargaining power of suppliers
– Suppliers of Nextgen in the Technology sector have low bargaining power. Nextgen has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nextgen to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Nextgen in Software & Programming industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Nextgen | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nextgen are -
Compensation and incentives
– The revenue per employee of Nextgen 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.
Increasing silos among functional specialists
– The organizational structure of Nextgen is dominated by functional specialists. It is not different from other players in the Software & Programming industry, but Nextgen needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nextgen to focus more on services in the Software & Programming industry rather than just following the product oriented approach.
Skills based hiring in Software & Programming industry
– The stress on hiring functional specialists at Nextgen 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.
Slow decision making process
– As mentioned earlier in the report, Nextgen has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Software & Programming industry over the last five years. Nextgen even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
High bargaining power of channel partners in Software & Programming industry
– because of the regulatory requirements in Japan, Nextgen 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.
Low market penetration in new markets
– Outside its home market of Japan, Nextgen 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 Nextgen supply chain. Even after few cautionary changes, Nextgen is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nextgen vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Nextgen 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.
Aligning sales with marketing
– From the outside it seems that Nextgen needs to have more collaboration between its sales team and marketing team. Sales professionals in the Software & Programming industry have deep experience in developing customer relationships. Marketing department at Nextgen can leverage the sales team experience to cultivate customer relationships as Nextgen is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative at Nextgen, in the dynamic environment of Software & Programming industry it has struggled to respond to the nimble upstart competition. Nextgen has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– From the 10K / annual statement of Nextgen, 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.
Nextgen Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nextgen are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nextgen 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 Nextgen to increase its market reach. Nextgen 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Software & Programming industry, but it has also influenced the consumer preferences. Nextgen 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 Nextgen 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.
Creating value in data economy
– The success of analytics program of Nextgen has opened avenues for new revenue streams for the organization in Software & Programming industry. This can help Nextgen to build a more holistic ecosystem for Nextgen products in the Software & Programming industry by providing – data insight services, data privacy related products, data based consulting services, 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. Nextgen can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Nextgen 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. Nextgen 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nextgen 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Nextgen 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.
Loyalty marketing
– Nextgen 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nextgen 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 Nextgen to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nextgen 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 Nextgen to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nextgen is facing challenges because of the dominance of functional experts in the organization. Nextgen can utilize new technology in the field of Software & Programming industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Threats Nextgen External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nextgen are -
Stagnating economy with rate increase
– Nextgen 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 Software & Programming industry.
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. Nextgen needs to understand the core reasons impacting the Software & Programming industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Software & Programming industry are lowering. It can presents Nextgen with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Software & Programming sector.
High dependence on third party suppliers
– Nextgen 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, Nextgen 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 Nextgen prominent markets.
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 Nextgen in the Software & Programming sector and impact the bottomline of the organization.
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 Nextgen.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Nextgen may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Software & Programming sector.
Regulatory challenges
– Nextgen 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.
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. Nextgen 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.
Increasing wage structure of Nextgen
– 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 Nextgen.
Easy access to finance
– Easy access to finance in Software & Programming industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Nextgen can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Nextgen business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Nextgen Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nextgen 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 Nextgen 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 Nextgen 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 Nextgen 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 Nextgen needs to make to build a sustainable competitive advantage.