Examines the corporate strategy of German energy giant E.ON. The firm is vertically integrated, horizontally diversified across electricity and natural gas, and active in numerous countries in Europe as well as in the United States. Explores the costs and benefits of the company's choices about its vertical, horizontal, and geographical scope. Considers the risks of economic regulation, increasing concerns about environmental externalities from carbon emissions and nuclear power, and political and price risks in upstream markets for fossil fuels.
Authors :: Forest Reinhardt, Sebastian Frankenberger
Swot Analysis of "E.ON Corporate Strategy" written by Forest Reinhardt, Sebastian Frankenberger includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that E.on Externalities facing as an external strategic factors. Some of the topics covered in E.ON Corporate Strategy case study are - Strategic Management Strategies, Globalization, Mergers & acquisitions, Organizational structure, Risk management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the E.ON Corporate Strategy casestudy better are - – increasing commodity prices, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , technology disruption, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization,
digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, etc
Introduction to SWOT Analysis of E.ON Corporate Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in E.ON Corporate Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the E.on Externalities, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which E.on Externalities 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 E.ON Corporate Strategy can be done for the following purposes –
1. Strategic planning using facts provided in E.ON Corporate Strategy case study
2. Improving business portfolio management of E.on Externalities
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of E.on Externalities
Strengths E.ON Corporate Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of E.on Externalities in E.ON Corporate Strategy Harvard Business Review case study are -
Operational resilience
– The operational resilience strategy in the E.ON Corporate Strategy Harvard Business Review case study 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.
High switching costs
– The high switching costs that E.on Externalities 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.
Analytics focus
– E.on Externalities 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 industry. The technology infrastructure suggested by Forest Reinhardt, Sebastian Frankenberger can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Learning organization
- E.on Externalities 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 E.on Externalities is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in E.ON Corporate Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Organizational Resilience of E.on Externalities
– The covid-19 pandemic has put organizational resilience at the centre of everthing that E.on Externalities does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For E.on Externalities digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. E.on Externalities 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.
Ability to lead change in Strategy & Execution field
– E.on Externalities is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled E.on Externalities in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Strategy & Execution industry
– E.ON Corporate Strategy firm has clearly differentiated products in the market place. This has enabled E.on Externalities to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped E.on Externalities to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– E.on Externalities has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study E.ON Corporate Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of E.on Externalities in the sector have low bargaining power. E.ON Corporate Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps E.on Externalities to manage not only supply disruptions but also source products at highly competitive prices.
Ability to recruit top talent
– E.on Externalities is one of the leading recruiters in the industry. Managers in the E.ON Corporate Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Successful track record of launching new products
– E.on Externalities has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. E.on Externalities 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.
Weaknesses E.ON Corporate Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of E.ON Corporate Strategy are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study E.ON Corporate Strategy, in the dynamic environment E.on Externalities has struggled to respond to the nimble upstart competition. E.on Externalities has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study E.ON Corporate Strategy, it seems that the employees of E.on Externalities 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the E.ON Corporate Strategy HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though E.on Externalities has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of E.on Externalities, firm in the HBR case study E.ON Corporate Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Skills based hiring
– The stress on hiring functional specialists at E.on Externalities 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.
Lack of clear differentiation of E.on Externalities products
– To increase the profitability and margins on the products, E.on Externalities needs to provide more differentiated products than what it is currently offering in the marketplace.
High cash cycle compare to competitors
E.on Externalities 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.
Products dominated business model
– Even though E.on Externalities has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - E.ON Corporate Strategy should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As E.ON Corporate Strategy HBR case study mentions - E.on Externalities takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Interest costs
– Compare to the competition, E.on Externalities 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Forest Reinhardt, Sebastian Frankenberger suggests that, E.on Externalities 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.
Opportunities E.ON Corporate Strategy | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study E.ON Corporate Strategy are -
Loyalty marketing
– E.on Externalities 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.
Buying journey improvements
– E.on Externalities can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. E.ON Corporate Strategy suggest that firm 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.
Learning at scale
– Online learning technologies has now opened space for E.on Externalities 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for E.on Externalities 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 E.on Externalities to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, E.on Externalities 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
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for E.on Externalities in the consumer business. Now E.on Externalities can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. E.on Externalities can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for E.on Externalities in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– E.on Externalities has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study E.ON Corporate Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help E.on Externalities to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help E.on Externalities to increase its market reach. E.on Externalities 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.
Developing new processes and practices
– E.on Externalities can develop new processes and procedures in Strategy & Execution 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects E.on Externalities can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 E.on Externalities 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.
Threats E.ON Corporate Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study E.ON Corporate Strategy are -
Environmental challenges
– E.on Externalities 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. E.on Externalities can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study E.ON Corporate Strategy, E.on Externalities may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Consumer confidence and its impact on E.on Externalities 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 the industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, E.on Externalities 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 prominent markets illustrated in HBR case study E.ON Corporate Strategy .
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 E.on Externalities.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for E.on Externalities in the Strategy & Execution industry. The Strategy & Execution 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.
Regulatory challenges
– E.on Externalities 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 Strategy & Execution industry regulations.
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. E.on Externalities needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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.
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 E.on Externalities in the Strategy & Execution sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– E.on Externalities has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, E.on Externalities needs to keep up with the evolution of technology in the Strategy & Execution 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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents E.on Externalities with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Weighted SWOT Analysis of E.ON Corporate Strategy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study E.ON Corporate Strategy 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 the case study E.ON Corporate Strategy 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 the Harvard case study E.ON Corporate Strategy 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 E.ON Corporate Strategy is 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 E.on Externalities needs to make to build a sustainable competitive advantage.
