The CEO of Enron Gas Services (EGS), a subsidiary of the largest U.S. integrated natural gas firm, considers the risks and opportunities of selling a variety of natural gas derivatives, both embedded in gas delivery contracts and as free-standing financial contracts. In its three years of existence, EGS had been successful by offering buyers and sellers of natural gas a variety of innovative pricing contracts. In order to mitigate the risks of having mismatch between its commitments to buy and sell gas, EGS established a system to decompose all of its commitments into a handful of different risks of exposures. Its centralized risk-management group not only measures the firm's exposures but also enters into financial contracts to offset the exposure brought about by the firm's business activities.
Swot Analysis of "Enron Gas Services" written by Peter Tufano, Sanjay Bhatnagar includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Gas Egs facing as an external strategic factors. Some of the topics covered in Enron Gas Services case study are - Strategic Management Strategies, Negotiations, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Enron Gas Services casestudy better are - – increasing commodity prices, central banks are concerned over increasing inflation, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, geopolitical disruptions, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google,
there is backlash against globalization, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of Enron Gas Services
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Enron Gas Services case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Gas Egs, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Gas Egs 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 Enron Gas Services can be done for the following purposes –
1. Strategic planning using facts provided in Enron Gas Services case study
2. Improving business portfolio management of Gas Egs
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Gas Egs
Strengths Enron Gas Services | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Gas Egs in Enron Gas Services Harvard Business Review case study are -
Ability to recruit top talent
– Gas Egs is one of the leading recruiters in the industry. Managers in the Enron Gas Services are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Gas Egs 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 Enron Gas Services HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Gas Egs in the sector have low bargaining power. Enron Gas Services has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Gas Egs to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Gas Egs has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Gas Egs 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.
Ability to lead change in Finance & Accounting field
– Gas Egs 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 Gas Egs in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Gas Egs 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 Gas Egs is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Enron Gas Services Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Finance & Accounting industry
– Enron Gas Services firm has clearly differentiated products in the market place. This has enabled Gas Egs to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Gas Egs to invest into research and development (R&D) and innovation.
High brand equity
– Gas Egs has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Gas Egs to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Gas Egs 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.
Superior customer experience
– The customer experience strategy of Gas Egs in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the Gas Egs 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.
Training and development
– Gas Egs has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Enron Gas Services Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Weaknesses Enron Gas Services | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Enron Gas Services are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Enron Gas Services, in the dynamic environment Gas Egs has struggled to respond to the nimble upstart competition. Gas Egs has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow decision making process
– As mentioned earlier in the report, Gas Egs 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. Gas Egs 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.
Increasing silos among functional specialists
– The organizational structure of Gas Egs is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Gas Egs needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Gas Egs to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Gas Egs 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Gas Egs is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Enron Gas Services can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– It come across in the case study Enron Gas Services that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case Enron Gas Services can leverage the sales team experience to cultivate customer relationships as Gas Egs is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Gas Egs needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High bargaining power of channel partners
– Because of the regulatory requirements, Peter Tufano, Sanjay Bhatnagar suggests that, Gas Egs 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Enron Gas Services, it seems that the employees of Gas Egs 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.
Capital Spending Reduction
– Even during the low interest decade, Gas Egs 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 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 Gas Egs supply chain. Even after few cautionary changes mentioned in the HBR case study - Enron Gas Services, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Gas Egs vulnerable to further global disruptions in South East Asia.
Opportunities Enron Gas Services | 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 Enron Gas Services are -
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 Gas Egs 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.
Manufacturing automation
– Gas Egs can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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 Gas Egs in the consumer business. Now Gas Egs can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Gas Egs to increase its market reach. Gas Egs 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.
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. Gas Egs can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Gas Egs has opened avenues for new revenue streams for the organization in the industry. This can help Gas Egs to build a more holistic ecosystem as suggested in the Enron Gas Services case study. Gas Egs can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Gas Egs 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
– Gas Egs 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 Enron Gas Services - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Gas Egs to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Gas Egs can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Gas Egs 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Gas Egs can use these opportunities to build new business models that can help the communities that Gas Egs operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Gas Egs 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 Gas Egs to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Gas Egs can develop new processes and procedures in Finance & Accounting 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.
Threats Enron Gas Services External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Enron Gas Services are -
High dependence on third party suppliers
– Gas Egs 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.
Shortening product life cycle
– it is one of the major threat that Gas Egs is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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 Gas Egs in the Finance & Accounting sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Gas Egs has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Gas Egs needs to keep up with the evolution of technology in the Finance & Accounting 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Enron Gas Services, Gas Egs may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
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. Gas Egs needs to understand the core reasons impacting the Finance & Accounting 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. Gas Egs 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.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Gas Egs business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Gas Egs
– 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 Gas Egs.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Gas Egs can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Regulatory challenges
– Gas Egs 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 Finance & Accounting industry regulations.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Gas Egs 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 Enron Gas Services .
Weighted SWOT Analysis of Enron Gas Services 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 Enron Gas Services 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 Enron Gas Services 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 Enron Gas Services 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 Enron Gas Services 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 Gas Egs needs to make to build a sustainable competitive advantage.
