The U.S. energy company AES is in the process of entering the Nigerian market through acquisition of a controlling equity interest in a 270-megawatt power generator project. AES has a unique mode of organization and operation that emphasizes integrity, empowerment, and social responsibility. The Nigerian environment is very different in many dimensions (high levels of corruption, low infrastructure availability, different work ethic, and highly charged politics) from the origins of AES in North America. How does AES juggle its core values and company culture in entering this new environment? How can AES be successful in this environment and remain committed to its core values?
Swot Analysis of "AES in Nigeria" written by John McMillan, Ade Dosunmu includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Aes Nigerian facing as an external strategic factors. Some of the topics covered in AES in Nigeria case study are - Strategic Management Strategies, International business, Marketing, Strategic planning, Strategy execution and Global Business.
Some of the macro environment factors that can be used to understand the AES in Nigeria casestudy better are - – supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, technology disruption, challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing,
central banks are concerned over increasing inflation, geopolitical disruptions, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in AES in Nigeria case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Aes Nigerian, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Aes Nigerian 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 AES in Nigeria can be done for the following purposes –
1. Strategic planning using facts provided in AES in Nigeria case study
2. Improving business portfolio management of Aes Nigerian
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Aes Nigerian
Strengths AES in Nigeria | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Aes Nigerian in AES in Nigeria Harvard Business Review case study are -
Training and development
– Aes Nigerian has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in AES in Nigeria 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.
Operational resilience
– The operational resilience strategy in the AES in Nigeria 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.
Analytics focus
– Aes Nigerian 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 John McMillan, Ade Dosunmu 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.
High brand equity
– Aes Nigerian has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Aes Nigerian to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Aes Nigerian is present in almost all the verticals within the industry. This has provided firm in AES in Nigeria 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.
Learning organization
- Aes Nigerian 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 Aes Nigerian is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in AES in Nigeria Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to lead change in Global Business field
– Aes Nigerian 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 Aes Nigerian in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Highly skilled collaborators
– Aes Nigerian 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 AES in Nigeria HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Aes Nigerian is one of the leading recruiters in the industry. Managers in the AES in Nigeria are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Aes Nigerian 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.
Organizational Resilience of Aes Nigerian
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Aes Nigerian does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
High switching costs
– The high switching costs that Aes Nigerian 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 AES in Nigeria | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of AES in Nigeria are -
Aligning sales with marketing
– It come across in the case study AES in Nigeria 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 AES in Nigeria can leverage the sales team experience to cultivate customer relationships as Aes Nigerian is planning to shift buying processes online.
Skills based hiring
– The stress on hiring functional specialists at Aes Nigerian 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 AES in Nigeria, it seems that company is thinking about the frontier risks that can impact Global Business 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study AES in Nigeria, in the dynamic environment Aes Nigerian has struggled to respond to the nimble upstart competition. Aes Nigerian has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Capital Spending Reduction
– Even during the low interest decade, Aes Nigerian 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 star products
– The top 2 products and services of the firm as mentioned in the AES in Nigeria 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 Aes Nigerian has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study AES in Nigeria, is just above the industry average. Aes Nigerian 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
– Aes Nigerian 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.
Slow to strategic competitive environment developments
– As AES in Nigeria HBR case study mentions - Aes Nigerian 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.
Increasing silos among functional specialists
– The organizational structure of Aes Nigerian is dominated by functional specialists. It is not different from other players in the Global Business segment. Aes Nigerian needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Aes Nigerian to focus more on services rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Aes Nigerian 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.
Opportunities AES in Nigeria | 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 AES in Nigeria 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 Aes Nigerian 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Aes Nigerian is facing challenges because of the dominance of functional experts in the organization. AES in Nigeria 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, Aes Nigerian 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, AES in Nigeria, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Aes Nigerian can develop new processes and procedures in Global Business 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.
Creating value in data economy
– The success of analytics program of Aes Nigerian has opened avenues for new revenue streams for the organization in the industry. This can help Aes Nigerian to build a more holistic ecosystem as suggested in the AES in Nigeria case study. Aes Nigerian can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Aes Nigerian 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 Aes Nigerian to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Aes Nigerian can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Global Business industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Aes Nigerian can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Aes Nigerian can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Buying journey improvements
– Aes Nigerian can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. AES in Nigeria 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Aes Nigerian can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Aes Nigerian 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.
Leveraging digital technologies
– Aes Nigerian 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, Aes Nigerian can use these opportunities to build new business models that can help the communities that Aes Nigerian operates in. Secondly it can use opportunities from government spending in Global Business sector.
Threats AES in Nigeria External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study AES in Nigeria are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Aes Nigerian 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 AES in Nigeria .
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. Aes Nigerian 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.
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 Aes Nigerian.
Regulatory challenges
– Aes Nigerian 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 Global Business industry regulations.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Aes Nigerian with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Aes Nigerian needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Aes Nigerian 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.
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 Aes Nigerian business can come under increasing regulations regarding data privacy, data security, etc.
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 Aes Nigerian
– 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 Aes Nigerian.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Aes Nigerian in the Global Business industry. The Global Business 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.
Stagnating economy with rate increase
– Aes Nigerian 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study AES in Nigeria, Aes Nigerian may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Weighted SWOT Analysis of AES in Nigeria 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 AES in Nigeria 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 AES in Nigeria 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 AES in Nigeria 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 AES in Nigeria 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 Aes Nigerian needs to make to build a sustainable competitive advantage.