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Shiseido SWOT Analysis / Matrix
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SWOT analysis is a strategic planning tool that can be used by Shiseido managers to do a situational analysis of the company . It is a handy technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Shiseido is facing in its current business environment.
The Shiseido is one of the leading firms in its industry. Shiseido maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework helps an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Shiseido to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The primary purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Shiseido strengths, and eradicate its weaknesses.
Step by Step Guide to Shiseido SWOT Analysis
Strengths of Shiseido – Internal Strategic Factors
As one of the leading firms in its industry, Shiseido has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Shiseido are –
- Strong Free Cash Flow – Shiseido has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Superb Performance in New Markets – Shiseido has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
- Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
- Successful track record of developing new products – product innovation.
- Strong Brand Portfolio – Over the years Shiseido has invested in building a strong brand portfolio. The SWOT analysis of Shiseido just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Highly successful at Go To Market strategies for its products.
Weakness of Shiseido – Internal Strategic Factors
Weakness are the areas where Shiseido can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- High attrition rate in work force – compare to other organizations in the industry Shiseido has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Shiseido needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Shiseido is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Shiseido is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- Limited success outside core business – Even though Shiseido is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Opportunities for Shiseido – External Strategic Factors
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Shiseido. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Shiseido in other product categories.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Shiseido to increase its profitability.
- The market development will lead to dilution of competitor’s advantage and enable Shiseido to increase its competitiveness compare to the other competitors.
- New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Shiseido to drive home its advantage in new technology and gain market share in the new product category.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Shiseido.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Shiseido an opportunity to enter a new emerging market.
- Government green drive also opens an opportunity for procurement of Shiseido products by the state as well as federal government contractors.
Threats Shiseido Facing - External Strategic Factors
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Rising raw material can pose a threat to the Shiseido profitability.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
Limitations of SWOT Analysis for Shiseido
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Shiseido
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of Shiseido
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Shiseido managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of Shiseido
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
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References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)