American Electric Power: Facing the Challenges of Distributed Generation SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of American Electric Power: Facing the Challenges of Distributed Generation
American Electric Power, like most utilities in the USA, is currently exposed to distributed generation and the problem of net-metering. Solar installations in particular have been heavily subsidized, by the state and by regulation, which does not allow grid operators to to recover their fixed costs. This results in stranded assets and cross-subsidies from poor to rich.
Swot Analysis of "American Electric Power: Facing the Challenges of Distributed Generation" written by Richard H.K. Vietor, Hilary White includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Distributed Electric facing as an external strategic factors. Some of the topics covered in American Electric Power: Facing the Challenges of Distributed Generation case study are - Strategic Management Strategies, Disruptive innovation, Managing organizations, Managing uncertainty, Policy, Risk management, Sustainability, Technology and Strategy & Execution.
Some of the macro environment factors that can be used to understand the American Electric Power: Facing the Challenges of Distributed Generation casestudy better are - – digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, there is increasing trade war between United States & China,
challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, etc
Introduction to SWOT Analysis of American Electric Power: Facing the Challenges of Distributed Generation
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in American Electric Power: Facing the Challenges of Distributed Generation case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Distributed Electric, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Distributed Electric 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 American Electric Power: Facing the Challenges of Distributed Generation can be done for the following purposes –
1. Strategic planning using facts provided in American Electric Power: Facing the Challenges of Distributed Generation case study
2. Improving business portfolio management of Distributed Electric
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 Distributed Electric
Strengths American Electric Power: Facing the Challenges of Distributed Generation | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Distributed Electric in American Electric Power: Facing the Challenges of Distributed Generation Harvard Business Review case study are -
Effective Research and Development (R&D)
– Distributed Electric 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 American Electric Power: Facing the Challenges of Distributed Generation - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Distributed Electric
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Distributed Electric does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Distributed Electric is present in almost all the verticals within the industry. This has provided firm in American Electric Power: Facing the Challenges of Distributed Generation case study 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.
Operational resilience
– The operational resilience strategy in the American Electric Power: Facing the Challenges of Distributed Generation 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.
Cross disciplinary teams
– Horizontal connected teams at the Distributed Electric are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Superior customer experience
– The customer experience strategy of Distributed Electric in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Distributed Electric has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in American Electric Power: Facing the Challenges of Distributed Generation HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Strategy & Execution field
– Distributed Electric 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 Distributed Electric in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Distributed Electric digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Distributed Electric 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.
Sustainable margins compare to other players in Strategy & Execution industry
– American Electric Power: Facing the Challenges of Distributed Generation firm has clearly differentiated products in the market place. This has enabled Distributed Electric to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Distributed Electric to invest into research and development (R&D) and innovation.
Ability to recruit top talent
– Distributed Electric is one of the leading recruiters in the industry. Managers in the American Electric Power: Facing the Challenges of Distributed Generation are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
High switching costs
– The high switching costs that Distributed Electric 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.
Weaknesses American Electric Power: Facing the Challenges of Distributed Generation | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of American Electric Power: Facing the Challenges of Distributed Generation are -
Slow decision making process
– As mentioned earlier in the report, Distributed Electric has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Distributed Electric 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 dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Distributed Electric supply chain. Even after few cautionary changes mentioned in the HBR case study - American Electric Power: Facing the Challenges of Distributed Generation, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Distributed Electric vulnerable to further global disruptions in South East Asia.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study American Electric Power: Facing the Challenges of Distributed Generation, in the dynamic environment Distributed Electric has struggled to respond to the nimble upstart competition. Distributed Electric has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Distributed Electric is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Distributed Electric needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Distributed Electric to focus more on services rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study American Electric Power: Facing the Challenges of Distributed Generation, is just above the industry average. Distributed Electric 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.
Need for greater diversity
– Distributed Electric has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Skills based hiring
– The stress on hiring functional specialists at Distributed Electric 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.
No frontier risks strategy
– After analyzing the HBR case study American Electric Power: Facing the Challenges of Distributed Generation, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Richard H.K. Vietor, Hilary White suggests that, Distributed Electric 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.
Low market penetration in new markets
– Outside its home market of Distributed Electric, firm in the HBR case study American Electric Power: Facing the Challenges of Distributed Generation needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study American Electric Power: Facing the Challenges of Distributed Generation has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Distributed Electric 's lucrative customers.
Opportunities American Electric Power: Facing the Challenges of Distributed Generation | 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 American Electric Power: Facing the Challenges of Distributed Generation are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Distributed Electric 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 Distributed Electric to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Distributed Electric to increase its market reach. Distributed Electric 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
– Distributed Electric 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, Distributed Electric can use these opportunities to build new business models that can help the communities that Distributed Electric operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Creating value in data economy
– The success of analytics program of Distributed Electric has opened avenues for new revenue streams for the organization in the industry. This can help Distributed Electric to build a more holistic ecosystem as suggested in the American Electric Power: Facing the Challenges of Distributed Generation case study. Distributed Electric can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Distributed Electric is facing challenges because of the dominance of functional experts in the organization. American Electric Power: Facing the Challenges of Distributed Generation case study suggests that firm can utilize new technology 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, Distributed Electric 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, as suggested in case study, American Electric Power: Facing the Challenges of Distributed Generation, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Distributed Electric 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 Strategy & Execution segment.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Distributed Electric 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.
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. Distributed Electric can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Distributed Electric can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. 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.
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 Distributed Electric in the consumer business. Now Distributed Electric can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Distributed Electric 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.
Threats American Electric Power: Facing the Challenges of Distributed Generation External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study American Electric Power: Facing the Challenges of Distributed Generation are -
Regulatory challenges
– Distributed Electric 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.
Stagnating economy with rate increase
– Distributed Electric can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Consumer confidence and its impact on Distributed Electric 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Distributed Electric 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.
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. Distributed Electric needs to understand the core reasons impacting the Strategy & Execution 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. Distributed Electric 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.
High dependence on third party suppliers
– Distributed Electric 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.
Environmental challenges
– Distributed Electric 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. Distributed Electric can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Distributed Electric can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Increasing wage structure of Distributed Electric
– 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 Distributed Electric.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Distributed Electric 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 American Electric Power: Facing the Challenges of Distributed Generation .
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.
Weighted SWOT Analysis of American Electric Power: Facing the Challenges of Distributed Generation 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 American Electric Power: Facing the Challenges of Distributed Generation 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 American Electric Power: Facing the Challenges of Distributed Generation 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 American Electric Power: Facing the Challenges of Distributed Generation 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 American Electric Power: Facing the Challenges of Distributed Generation 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 Distributed Electric needs to make to build a sustainable competitive advantage.