Question: INTERNAL ENVIRONMENTAL ANALYSIS/STRATEGY ANALYSIS  Edit

Answer: Introduction:
The following report helps the users in understanding the process of conducting an internal environmental analysis in an organisation while utilizing various techniques and tools. For the same purpose, Konami Holdings Corporation has been chosen, and the report will be prepared for this company only. The report will develop the knowledge of users regarding the development and management of different strategies implemented in an organisation for controlling the internal functions. A review will be conducted for identifying and assessing the goals and objectives of the organisation, and different matrixes will be developed for accomplishing this purpose. The company background and general information will be presented in the first section of the report. The report will further include the discussion regarding the strategic role of corporate strengths or weaknesses and role of internal resources in an organisation. This will require developing the matrixes relating to SWOT analysis, IFE matrix, grand strategy matric, BCG matrix and a deep evaluation of the company’s strategy will be made according to these matrixes prepared. The other section of the report will include strategic financial analysis where different ratios will be calculated for the company, and the analysis will be drawn accordingly. The conclusion relating to the report will be drawn after considering the results recognized above.
 
Company Background Analysis:
Konami Holdings Corporation is a Japanese company funded in the year 1969, and it can be referred to as one of the largest entertainment and gaming conglomerate. The founder of the company, Kagemasa Kozuki is the current Chairman of the company, and he previously ran a small business of repairing after which he started transforming his business into the manufacturer of amusement machines. The company has been operating as a product distributor engaged in the production of slot machines, trading cards, anime, arcade cabinets and the business is extended for distributing these products too. The company has its operations in video game developing too and can be recognized as a publisher company. The success of the company can be reflected in its gaming operations (Konami Holdings Corporation, 2018). The corporate history of the company states that the Konami Industry Co. Ltd. was founded in the year 1969 on March 19 and it began its manufacturing operations for amusement machines for arcades. In January 1979, the company started exporting its products to the United States, and the capital of the company increased significantly due to expansion plans of the company in this field. In 1980 the corporate headquarters of the company moved in Osaka. The success of the company started accruing in the late 1980s with the hit in arcade games like Super Cobra and Frogger. In the year 1991, the corporate name of the company changed to Konami Co. Ltd. The corporate business of the company has diversified categories including digital entertainment business, amusement business, sports business and gaming and system business. The vision and mission statement of the company indicates that it wants to fully utilize the entertainment experience obtained over the years and is dedicated to serve its customer with the appealing products which can please and fulfil their requires and needs. The products and services offered by the company will be concentrated towards providing best amusement facilities (Konami Holdings Corporation, 2018).  
Strategic Role of Corporate Strengths/Weaknesses in Internal Strategy Analysis:
Partial SWOT table:
Strength Weakness
1. Continuous automation of activities is leading to high-quality products and services offered to customers.
2. Tremendous performance achieved in new and emerging markets by achieving expertise in this. Development of a new stream of revenue from these expansion plans.
3. Enhanced customer satisfaction achieved by the company due to dedicated customer relationship management department efforts (Sakdiah & Arpenas, 2018).
4. A strong community of dealers where the dealers promote the products and services offered by the company. 1. Inefficient financial planning leading towards optimised current ratio and the liquid ratio of the company.
2. Missing integration among the segments and inefficiency in integrating the objectives of people are working in the company belonging to different cultures (Konami Holdings Corporation, 2018).
3. Inefficient marketing activities of the company and missing adequate promotional activities of the company leading prospects empty for prospective customers.
4. The increased attrition rate of staff and workforce
Discussion – To capitalise the strengths mentioned above, the management of the company have launched certain gaming application which has been developed after utilizing the new technologies in trend. The introduction of the same will help the company in entering new customer segments, and the target strategy of the company can be achieved and implemented successfully (Astuty, et. al., 2016). The weaknesses associated with the marketing operation of the company have been resolved by introducing new marketing campaigns in which target customers are focused for higher revenues. The management has been utilizing various management accounting tools for planning their financial position in future and measures have been taken to resolve the issues of culture differentiation among employees.
IFE Matrix:
Internal Strengths Weight Rating Weighted Score
1. Continuous Automation 0.21 4 0.35
2. Enhanced customer satisfaction 0.19 4 0.32
3. Strong dealers community 0.11 3 0.18
4. Strong performance in new markets 0.09 3 0.15

Internal Weaknesses
1. Inefficient financial planning 0.16 1 0.4
2. Integration missing among departments and people 0.15 1 0.38
3. High attrition rate of workforce 0.05 2 0.13
4. Inefficient marketing activities 0.04 1 0.1
Major Weaknesses (1), Minor Weaknesses (2), Minor Strength (3), Major Strength (4)
Total weighted 1 2
The strategic inferences and implications from the above matrix show that the major strengths that can contribute towards the growth strategy of the company are concerned with continuous automation in the operations conducted by the company and the customer satisfaction achieved by these operations. There is a need to develop a strategy related with marketing efforts of the company and budgeting, and financial tools should be utilized to identify the financial weaknesses so that strong position can be achieved by the company (Kukuh, et. al., 2019).


 
Grand Strategy Matrix:

The company Konami Holdings Corporation as a corporate business entity can be placed in the first quadrant while taking into consideration the strategic aims of the company. It can be established that the strategic position of the company is really strong and the firm is focusing towards acquiring the competitive advantage in the industry and market concerned. The management at a business unit level must concentrate on the existing market by adopting strategies associated with product development, market penetration and market development. The company should focus on digital entertainment segment as the growth prospects in this segment are very high, and it can bring enhanced revenues for the company (Thamrin, et. al., 2017).
Strategic Role of Internal Resources/Departments/Processes
Business level strategies – The business level strategies of the company are concerned with identifying the target market of the company and competition to acquire a competitive advantage in the industry. The business level strategy of the company Konami Holdings Corporations states that the products delivered by the company have been diversified and the options include mobile games, computer and video games, production and distribution of amusements machines, deals in gaming machines and casino management systems, operating various fitness clubs and sports classes. The target market of the company includes customers belonging to the age of 12 years to 28 years (Kukuh, et. al., 2019). These are the consumers who are interested in amusement and gaming services, and they are very much conscious about their fitness and health regime when compared to other classes. The competitive advantage of the company will be achieved by targeting these customers.
BCG Matrix:

(Source: França, et. al., 2017)
Stars – Digital entertainment
Cash Cows – Amusement segment
Dogs – gaming and systems
Question Marks – Health and Fitness
The above matrix for Konami Holdings Corporations states that the segment associated with digital entertainment can be placed in the first quadrant of Stars, as the same is the leader in the category (Astuty, et. al., 2016). The products offered by the company in this segment are attractive, and they are highly competitive in the market. The quadrant associated with cash cows will include amusement segment. The segment has generated surprising and interesting revenues for the company, but they need to be replaced now because the growth in this segment of the market is really low. However, when these products become profitable, they can finance other activities in the company. The segment associated with gaming and system can be placed in the category of dogs as they are holding low market share in comparison to the competitors in the industry. The investment shall not be made n this segment as the returns are not satisfactory for the company (Thamrin, et. al., 2017). The last quadrant associated with question marks will include health and fitness segment of the company. The future potential of this segment is questionable but with the right strategy adopted in this section, will bring this segment into stars and the company can acquire enhanced revenues.
Functional level strategies – The functional level strategies of the company have been concentrated towards interacting with the stakeholders of the company which includes customers, suppliers, shareholders etc. A hierarchical structure has been followed in the company, and the board is composed of executive and non-executive members who are well qualified and skilled (Konami Holdings Corporation, 2018).
Strategic Financial Analysis:
The ratio analysis has been conducted for the company Konami Holdings Corporation, and the results are as under:
Profitability Ratios:
Gross Profit Ratio:
Gross Profit
Particulars 2017 (¥m) 2018 (¥m) Industry Average
Gross Profit 88,731 97,272
Total revenues 229,922 239,497
Gross Profit ratio 39% 41% 45%
Net Profit Ratio:
Net Profit Ratio
Particulars 2017 (¥m) 2018 (¥m) Industry Average
Net Profit 25,977 30,506
Total turnover 229,922 239,497
Net Profit Ratio (Net Profit/Total turnover) 11% 13% 15%
Return on assets ratio:
Return on assets
Particulars 2017 (¥m) 2018 (¥m) Industry Average
Net Profit 25,977 30,506
Total assets 337,144 363,108
Return on assets 8% 8% 10%
Return on equity ratio:
Return on equity Ratio
Particulars 2017 (¥m) 2018 (¥m) Industry Average
Net Profit 25,977 30,506
Total equity 235,192 254,539
Return on equity Ratio (Net Profit/Total Equity) 11% 12% 15%
Discussion on financial standing:
The above ratios reflect the satisfactory performance of the company over the last few years. The net profit ratio of the company indicates financial strength as the company has been able to achieve enhanced profitability in comparison to the previous year. The return on equity ratio has also increased from the level of 11% to 12% in the year 2018, and the industry average for this ratio is 15% which is very much achievable for the company now (Konami Holdings Corporation, 2018). The return on assets ratio has remained constant for the company at the level of 8%, and the industry average for this ratio is 10%. It can be established that the corporate strategies of the company are focused towards utilizing the assets to their maximum usage and therefore the concerned strategies will result in a higher return on assets in the future. Therefore overall Konami Holdings Corporation profitability aspect shows strength achieved by the company.
Liquidity Ratios:
Current ratio:
Current Ratio
Particulars 2017 (¥m) 2018 (¥m) Industry Average
Current assets 174,948 195,672
Current liabilities 56,846 69,290
Current Ratio (Current assets/ Current liabilities) 3.08 2.82 2
Cash Ratio:
Cash Ratio
Particulars 2017 (¥m) 2018 (¥m) Industry Average
Cash 134,743 154,485
Current liabilities 56,846 69,290
Cash Ratio 2.37 2.23 2
Discussion on financial standing:
The above calculations show that the current ratio of the company Konami Holding Corporation has decreased from 3.08 to 2.82 in the year 2018. The industry average concerned with a current ratio of the company is two which have been achieved by the company easily. This shows that the company has a strong liquidity position that can help in acquiring a competitive advantage. The cash ratio of the company, on the other hand, is 2.23 in the year 2017. However, this has been maintained above the industry averages which show that the company has adequate cash to meet out its short term liabilities. The creditors will feel confident from this fact, and the strong position will be achieved in the market (Marimin, et. al, 2017).
Leverage Ratios:
Debt to equity ratio:
Debt to Equity Ratio
Particulars 2017 (¥m) 2018 (¥m) Industry Average
Total Debt 101,952 108,569
Total equity 235,192 254,539
Debt to Equity (Total debt/ Total Equity) 0.43 0.43 2
Long term debt ratio:
Long term debt ratio
Particulars 2017 (¥m) 2018 (¥m) Industry Average
Long term debt 45,106 39,279
Equity 235,192 254,539
Long term debt ratio 0.19 0.15 1
Discussion on financial standing:
The leverage ratio of the company reflects a weak position of the firm as the capital structure of the company has not been optimised. It can be observed that industry ratio for debt equity has been 2, but the company has maintained a proportion of .43 in the current year. This shows that the leverage position of the company is weak and more debt should be employed in the company to acquire a competitive advantage (Messeghem, et. al., 2018). The other ratio concerned with long term debt ratio shows the weak position of the company as very minimum debt has been employed in the company when compared to equity proportion. This will affect the profitability of the company as the expectations of shareholders are high. Therefore efforts must be made for employing more debt in the company.
Efficiency Ratios:
Asset turnover ratio:
Asset Turnover Ratio
Particulars 2017 (¥m) 2018 (¥m) Industry Average
Total assets 337,144 363,108
Total Revenues 229,922 239,497
Asset Turnover Ratio 1.47 1.52 1.5
Inventory turnover ratio:
Inventory Turnover Ratio
Particulars 2017 (¥m) 2018 (¥m) Industry Average
Cost of sales 141,191 142,225
Average Inventory 7,430 6,840
Inventory Turnover Ratio (Cost of sales/Average Inventory) 19 21 20
Discussion on financial standing:
The efficiency ratio shows a satisfactory position in comparison to the industry averages. The inventory turnover ratio has achieved the industry averages, and same is the case in asset turnover ratio. The company should focus towards achieving greater efficiency however current efficiency ratios reflects the strong position of the company, leading towards enhanced revenues and profitability for the company in the current year (Marimin, et. al, 2017).
Composite Analysis:
Quantitative Strategic Planning Matrix:
QSPM for Konami Holding Corporation
Key Factors Alternative 1 - Acquire competitor Alternative 2 - Internal expansion
Internal Strengths Weight Attractiveness Score Total Attractiveness Score Weight Attractiveness Score Total Attractiveness Score
1. Continuous Automation 0.12 4 0.48 0.15 1 0.15
2. Enhanced customer satisfaction 0.06 4 0.24 0.15 2 0.3
3. Strong dealers community 0.22 0 0 0.1 4 0.4
4. Strong performance in new markets 0.1 0 0 0.1 4 0.4

Internal Weaknesses
1. Inefficient financial planning 0.15 3 0.45 0.13 3 0.39
2. Integration missing among departments and people 0.15 2 0.3 0.07 1 0.07
3. High attrition rate of workforce 0.1 1 0.1 0.21 0 0
4. Inefficient marketing activities 0.1 0 0 0.09 1 0.09
Total weighted 1 1

Opportunities
1. Lower inflation rates 0.21 4 0.84 0.17 0 0
2. New environment policies 0.11 0 0 0.13 2 0.26
3. New trends in consumer behaviour 0.18 3 0.54 0.2 1 0.2

Threats
1. Exposure to currency fluctuations 0.17 0 0 0.21 1 0.21
2. Growing strengths of local suppliers 0.13 4 0.52 0.11 0 0
3. Frequent changes in behaviour of consumers 0.2 4 0.8 0.18 1 0.18
Total weighted 1 1

Sum Total Attractiveness Score 4.27 2.65


Attractiveness Score: 1 = not acceptable; 2 = possibly acceptable; 3 = probably acceptable; 4 = most acceptable; 0 = not relevant
The total attractiveness score for acquiring a competitor strategy is higher, and therefore it can be stated that the company Konami Holding Corporation should focus towards mergers and acquisitions in order acquire a large share in the market. The opportunities will be well recognized in this strategy and the company will be able to capitalise on its strengths. The weaknesses associated with the company can be controlled by following this strategy (Gupta, 2015).
Conclusion:
The above report leads to the conclusion that strategic management in an organisation is necessary for controlling the internal weaknesses present in the company. The utilization of various matrixes can help the management in assessing the internal strengths and weaknesses of the company, and immediate actions can be taken by the company for acquiring a competitive edge in the market. In the case of Konami Holding Corporation, it can be observed that the company has major strengths in making innovative products and it has been capitalizing on its strengths by adopting automatic technologies in its production operations. The strategies associated with mergers and acquisition will be suitable for the company as the company can target the customers required for acquiring large profitability. The ratio analysis of the company states that the liquidity and profitability position of the company is a point of strength, but leverage position has been weak for the company in the recent few years. To optimise the capital structure of the company, management should employ more debt in the capital instead of equity so that leverage position can become stronger and adequate profitability can be achieved by the company in the long run.
 
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