Fast Retailing DRC (6288) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Fast Retailing DRC (Hong Kong)
Based on various researches at Oak Spring University , Fast Retailing DRC is operating in a macro-environment that has been destablized by – increasing commodity prices, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, there is increasing trade war between United States & China,
technology disruption, geopolitical disruptions, etc
Introduction to SWOT Analysis of Fast Retailing DRC
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Fast Retailing DRC can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Fast Retailing DRC, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Fast Retailing DRC 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 Fast Retailing DRC can be done for the following purposes –
1. Strategic planning of Fast Retailing DRC
2. Improving business portfolio management of Fast Retailing DRC
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Fast Retailing DRC
Strengths of Fast Retailing DRC | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Fast Retailing DRC are -
Effective Research and Development (R&D)
– Fast Retailing DRC has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Fast Retailing DRC staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Fast Retailing DRC in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Fast Retailing DRC is present in almost all the verticals within the industry. This has provided Fast Retailing DRC 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.
Sustainable margins compare to other players in industry
– Fast Retailing DRC has clearly differentiated products in the market place. This has enabled Fast Retailing DRC to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped Fast Retailing DRC to invest into research and development (R&D) and innovation.
Innovation driven organization
– Fast Retailing DRC is one of the most innovative firm in sector.
Highly skilled collaborators
– Fast Retailing DRC has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive industry. Secondly the value chain collaborators of Fast Retailing DRC have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in
– Fast Retailing DRC is one of the leading players in the industry in Hong Kong. Over the years it has not only transformed the business landscape in the industry in Hong Kong but also across the existing markets. The ability to lead change has enabled Fast Retailing DRC in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management in the industry
– Fast Retailing DRC is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– Fast Retailing DRC has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Fast Retailing DRC to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Fast Retailing DRC in the sector have low bargaining power. Fast Retailing DRC has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Fast Retailing DRC to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Fast Retailing DRC comprises – understanding the underlying the factors in the 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.
Training and development
– Fast Retailing DRC has one of the best training and development program in 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.
Weaknesses of Fast Retailing DRC | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Fast Retailing DRC are -
Interest costs
– Compare to the competition, Fast Retailing DRC 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.
Increasing silos among functional specialists
– The organizational structure of Fast Retailing DRC is dominated by functional specialists. It is not different from other players in the industry, but Fast Retailing DRC needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Fast Retailing DRC to focus more on services in the industry rather than just following the product oriented approach.
Employees’ less understanding of Fast Retailing DRC strategy
– From the outside it seems that the employees of Fast Retailing DRC 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.
Low market penetration in new markets
– Outside its home market of Hong Kong, Fast Retailing DRC needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Fast Retailing DRC 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 industry using digital technology.
High operating costs
– Compare to the competitors, Fast Retailing DRC has high operating costs in the industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Fast Retailing DRC lucrative customers.
High bargaining power of channel partners in industry
– because of the regulatory requirements in Hong Kong, Fast Retailing DRC 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 industry.
High cash cycle compare to competitors
Fast Retailing DRC has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– From the 10K / annual statement of Fast Retailing DRC, it seems that company is thinking out the frontier risks that can impact 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.
Lack of clear differentiation of Fast Retailing DRC products
– To increase the profitability and margins on the products, Fast Retailing DRC needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on Fast Retailing DRC ‘s star products
– The top 2 products and services of Fast Retailing DRC still accounts for major business revenue. This dependence on star products in industry has resulted into insufficient focus on developing new products, even though Fast Retailing DRC has relatively successful track record of launching new products.
Fast Retailing DRC Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Fast Retailing DRC are -
Building a culture of innovation
– managers at Fast Retailing DRC 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 industry.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Fast Retailing DRC 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 Fast Retailing DRC to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– Fast Retailing DRC can use the latest technology developments to improve its manufacturing and designing process in 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.
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. Fast Retailing DRC can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Fast Retailing DRC 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.
Better consumer reach
– The expansion of the 5G network will help Fast Retailing DRC to increase its market reach. Fast Retailing DRC 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.
Loyalty marketing
– Fast Retailing DRC 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.
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 Fast Retailing DRC 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.
Buying journey improvements
– Fast Retailing DRC can improve the customer journey of consumers in the 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, Fast Retailing DRC is facing challenges because of the dominance of functional experts in the organization. Fast Retailing DRC can utilize new technology in the field of industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Fast Retailing DRC can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Fast Retailing DRC has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in sector. This continuous investment in analytics has enabled Fast Retailing DRC to build a competitive advantage using analytics. The analytics driven competitive advantage can help Fast Retailing DRC 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 Fast Retailing DRC in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the industry, and it will provide faster access to the consumers.
Threats Fast Retailing DRC External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Fast Retailing DRC are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Fast Retailing DRC 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 Fast Retailing DRC 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 Fast Retailing DRC.
Environmental challenges
– Fast Retailing DRC 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. Fast Retailing DRC can take advantage of this fund but it will also bring new competitors in the industry.
High dependence on third party suppliers
– Fast Retailing DRC 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.
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.
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.
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. Fast Retailing DRC needs to understand the core reasons impacting the industry. This will help it in building a better workplace.
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. Fast Retailing DRC 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Fast Retailing DRC may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of sector.
Regulatory challenges
– Fast Retailing DRC 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 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 Fast Retailing DRC in the sector and impact the bottomline of the organization.
Increasing wage structure of Fast Retailing DRC
– 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 Fast Retailing DRC.
Shortening product life cycle
– it is one of the major threat that Fast Retailing DRC is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Fast Retailing DRC Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Fast Retailing DRC 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 Fast Retailing DRC 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 Fast Retailing DRC 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 Fast Retailing DRC 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 Fast Retailing DRC needs to make to build a sustainable competitive advantage.