Lilycolor (9827) SWOT Analysis / TOWS Matrix / MBA Resources
Retail (Home Improvement)
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Lilycolor (Japan)
Based on various researches at Oak Spring University , Lilycolor is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, technology disruption, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, increasing energy prices, increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%,
wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lilycolor can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lilycolor, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lilycolor 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 Lilycolor can be done for the following purposes –
1. Strategic planning of Lilycolor
2. Improving business portfolio management of Lilycolor
3. Assessing feasibility of the new initiative in Japan
4. Making a Retail (Home Improvement) sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lilycolor
Strengths of Lilycolor | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lilycolor are -
High brand equity
– Lilycolor has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Lilycolor to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Retail (Home Improvement) industry
– Lilycolor has clearly differentiated products in the market place. This has enabled Lilycolor to fetch slight price premium compare to the competitors in the Retail (Home Improvement) industry. The sustainable margins have also helped Lilycolor to invest into research and development (R&D) and innovation.
Strong track record of project management in the Retail (Home Improvement) industry
– Lilycolor is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Lilycolor has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Lilycolor staying ahead in the Retail (Home Improvement) industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- Lilycolor 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 Lilycolor is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Lilycolor emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Lilycolor is one of the most innovative firm in Retail (Home Improvement) sector.
Successful track record of launching new products
– Lilycolor has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lilycolor 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.
Ability to lead change in Retail (Home Improvement)
– Lilycolor is one of the leading players in the Retail (Home Improvement) industry in Japan. Over the years it has not only transformed the business landscape in the Retail (Home Improvement) industry in Japan but also across the existing markets. The ability to lead change has enabled Lilycolor in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Superior customer experience
– The customer experience strategy of Lilycolor in Retail (Home Improvement) industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Low bargaining power of suppliers
– Suppliers of Lilycolor in the Services sector have low bargaining power. Lilycolor has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lilycolor to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Lilycolor 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.
Digital Transformation in Retail (Home Improvement) industry
- digital transformation varies from industry to industry. For Lilycolor digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lilycolor 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.
Weaknesses of Lilycolor | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lilycolor are -
Lack of clear differentiation of Lilycolor products
– To increase the profitability and margins on the products, Lilycolor needs to provide more differentiated products than what it is currently offering in the marketplace.
Products dominated business model
– Even though Lilycolor has some of the most successful models in the Retail (Home Improvement) industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Lilycolor should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee of Lilycolor is just above the Retail (Home Improvement) 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.
Ability to respond to the competition
– As the decision making is very deliberative at Lilycolor, in the dynamic environment of Retail (Home Improvement) industry it has struggled to respond to the nimble upstart competition. Lilycolor 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 Lilycolor, it seems that company is thinking out the frontier risks that can impact Retail (Home Improvement) 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.
Aligning sales with marketing
– From the outside it seems that Lilycolor needs to have more collaboration between its sales team and marketing team. Sales professionals in the Retail (Home Improvement) industry have deep experience in developing customer relationships. Marketing department at Lilycolor can leverage the sales team experience to cultivate customer relationships as Lilycolor is planning to shift buying processes online.
High dependence on Lilycolor ‘s star products
– The top 2 products and services of Lilycolor still accounts for major business revenue. This dependence on star products in Retail (Home Improvement) industry has resulted into insufficient focus on developing new products, even though Lilycolor has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of Japan, Lilycolor needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow decision making process
– As mentioned earlier in the report, Lilycolor has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Retail (Home Improvement) industry over the last five years. Lilycolor 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 Retail (Home Improvement) industry
– because of the regulatory requirements in Japan, Lilycolor 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 Retail (Home Improvement) industry.
Increasing silos among functional specialists
– The organizational structure of Lilycolor is dominated by functional specialists. It is not different from other players in the Retail (Home Improvement) industry, but Lilycolor needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lilycolor to focus more on services in the Retail (Home Improvement) industry rather than just following the product oriented approach.
Lilycolor Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lilycolor are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lilycolor 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 Lilycolor to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Lilycolor can develop new processes and procedures in Retail (Home Improvement) 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.
Learning at scale
– Online learning technologies has now opened space for Lilycolor 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.
Buying journey improvements
– Lilycolor can improve the customer journey of consumers in the Retail (Home Improvement) 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.
Better consumer reach
– The expansion of the 5G network will help Lilycolor to increase its market reach. Lilycolor 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lilycolor in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Retail (Home Improvement) industry, and it will provide faster access to the consumers.
Loyalty marketing
– Lilycolor 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lilycolor can use these opportunities to build new business models that can help the communities that Lilycolor operates in. Secondly it can use opportunities from government spending in Retail (Home Improvement) sector.
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 Lilycolor 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lilycolor is facing challenges because of the dominance of functional experts in the organization. Lilycolor can utilize new technology in the field of Retail (Home Improvement) industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Lilycolor 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 Lilycolor to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lilycolor 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.
Use of Bitcoin and other crypto currencies for transactions in Retail (Home Improvement) industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lilycolor in the Retail (Home Improvement) industry. Now Lilycolor can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Lilycolor External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lilycolor are -
Environmental challenges
– Lilycolor 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. Lilycolor can take advantage of this fund but it will also bring new competitors in the Retail (Home Improvement) 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.
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 Lilycolor in the Retail (Home Improvement) sector and impact the bottomline 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 Lilycolor in Retail (Home Improvement) industry. The Retail (Home Improvement) 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.
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. Lilycolor 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.
Regulatory challenges
– Lilycolor 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 Retail (Home Improvement) industry regulations.
Consumer confidence and its impact on Lilycolor 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 Retail (Home Improvement) industry and other sectors.
Technology acceleration in Forth Industrial Revolution
– Lilycolor has witnessed rapid integration of technology during Covid-19 in the Retail (Home Improvement) industry. As one of the leading players in the industry, Lilycolor needs to keep up with the evolution of technology in the Retail (Home Improvement) sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lilycolor 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 Lilycolor prominent markets.
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.
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 Lilycolor.
Easy access to finance
– Easy access to finance in Retail (Home Improvement) industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Lilycolor can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Lilycolor may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Retail (Home Improvement) sector.
Weighted SWOT Analysis of Lilycolor Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lilycolor 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 Lilycolor 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 Lilycolor 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 Lilycolor 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 Lilycolor needs to make to build a sustainable competitive advantage.