Adaro Energy (ADRO) SWOT Analysis / TOWS Matrix / MBA Resources
Coal
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Adaro Energy (Indonesia)
Based on various researches at Oak Spring University , Adaro Energy is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, supply chains are disrupted by pandemic , increasing household debt because of falling income levels, cloud computing is disrupting traditional business models, increasing energy prices, increasing government debt because of Covid-19 spendings, increasing transportation and logistics costs,
there is increasing trade war between United States & China, central banks are concerned over increasing inflation, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Adaro Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Adaro Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Adaro Energy 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 Adaro Energy can be done for the following purposes –
1. Strategic planning of Adaro Energy
2. Improving business portfolio management of Adaro Energy
3. Assessing feasibility of the new initiative in Indonesia
4. Making a Coal sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Adaro Energy
Strengths of Adaro Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Adaro Energy are -
Ability to lead change in Coal
– Adaro Energy is one of the leading players in the Coal industry in Indonesia. Over the years it has not only transformed the business landscape in the Coal industry in Indonesia but also across the existing markets. The ability to lead change has enabled Adaro Energy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Adaro Energy
– The covid-19 pandemic has put organizational resilience at the centre of everthing Adaro Energy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Superior customer experience
– The customer experience strategy of Adaro Energy in Coal industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Adaro Energy is one of the most innovative firm in Coal sector.
Low bargaining power of suppliers
– Suppliers of Adaro Energy in the Energy sector have low bargaining power. Adaro Energy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Adaro Energy to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Adaro Energy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Adaro Energy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Adaro Energy has one of the best training and development program in Energy industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
High switching costs
– The high switching costs that Adaro Energy 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.
Strong track record of project management in the Coal industry
– Adaro Energy is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Adaro Energy is present in almost all the verticals within the Coal industry. This has provided Adaro Energy 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.
Cross disciplinary teams
– Horizontal connected teams at the Adaro Energy 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.
Digital Transformation in Coal industry
- digital transformation varies from industry to industry. For Adaro Energy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Adaro Energy 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.
Weaknesses of Adaro Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Adaro Energy are -
High cash cycle compare to competitors
Adaro Energy has a high cash cycle compare to other players in the Coal industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Workers concerns about automation
– As automation is fast increasing in the Coal industry, Adaro Energy 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Adaro Energy is slow explore the new channels of communication. These new channels of communication can help Adaro Energy to provide better information regarding Coal products and services. It can also build an online community to further reach out to potential customers.
High operating costs
– Compare to the competitors, Adaro Energy has high operating costs in the Coal industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Adaro Energy lucrative customers.
Ability to respond to the competition
– As the decision making is very deliberative at Adaro Energy, in the dynamic environment of Coal industry it has struggled to respond to the nimble upstart competition. Adaro Energy has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Employees’ less understanding of Adaro Energy strategy
– From the outside it seems that the employees of Adaro Energy 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.
Slow decision making process
– As mentioned earlier in the report, Adaro Energy has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Coal industry over the last five years. Adaro Energy 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.
Skills based hiring in Coal industry
– The stress on hiring functional specialists at Adaro Energy 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.
Aligning sales with marketing
– From the outside it seems that Adaro Energy needs to have more collaboration between its sales team and marketing team. Sales professionals in the Coal industry have deep experience in developing customer relationships. Marketing department at Adaro Energy can leverage the sales team experience to cultivate customer relationships as Adaro Energy is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Adaro Energy 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 Coal industry using digital technology.
Slow to strategic competitive environment developments
– As Adaro Energy is one of the leading players in the Coal industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Coal industry in last five years.
Adaro Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Adaro Energy are -
Better consumer reach
– The expansion of the 5G network will help Adaro Energy to increase its market reach. Adaro Energy 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.
Learning at scale
– Online learning technologies has now opened space for Adaro Energy 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.
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. Adaro Energy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Adaro Energy 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 Adaro Energy to hire the very best people irrespective of their geographical location.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Adaro Energy can use these opportunities to build new business models that can help the communities that Adaro Energy operates in. Secondly it can use opportunities from government spending in Coal sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Adaro Energy is facing challenges because of the dominance of functional experts in the organization. Adaro Energy can utilize new technology in the field of Coal industry 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, Adaro Energy 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 Adaro Energy to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Adaro Energy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Adaro Energy has opened avenues for new revenue streams for the organization in Coal industry. This can help Adaro Energy to build a more holistic ecosystem for Adaro Energy products in the Coal industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Adaro Energy 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Adaro Energy 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.
Building a culture of innovation
– managers at Adaro Energy 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 Coal industry.
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 Adaro Energy 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 Adaro Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Adaro Energy are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Adaro Energy in Coal industry. The Coal 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.
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 Adaro Energy in the Coal sector and impact the bottomline of the organization.
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.
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 Adaro Energy.
High dependence on third party suppliers
– Adaro Energy 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Coal industry are lowering. It can presents Adaro Energy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Coal sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Adaro Energy 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 Adaro Energy prominent markets.
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.
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 Adaro Energy business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Adaro Energy 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. Adaro Energy can take advantage of this fund but it will also bring new competitors in the Coal industry.
Technology acceleration in Forth Industrial Revolution
– Adaro Energy has witnessed rapid integration of technology during Covid-19 in the Coal industry. As one of the leading players in the industry, Adaro Energy needs to keep up with the evolution of technology in the Coal 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.
Easy access to finance
– Easy access to finance in Coal industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Adaro Energy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Adaro Energy may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Coal sector.
Weighted SWOT Analysis of Adaro Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Adaro Energy 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 Adaro Energy 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 Adaro Energy 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 Adaro Energy 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 Adaro Energy needs to make to build a sustainable competitive advantage.
