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 – there is backlash against globalization, increasing transportation and logistics costs, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings,
increasing energy prices, increasing commodity prices, 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 -
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.
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.
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.
Learning organization
- Adaro Energy 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 Adaro Energy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Adaro Energy emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Adaro Energy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Adaro Energy 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.
Highly skilled collaborators
– Adaro Energy has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Coal industry. Secondly the value chain collaborators of Adaro Energy have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
Ability to recruit top talent
– Adaro Energy is one of the leading players in the Coal industry in Indonesia. It is in a position to attract the best talent available in Indonesia. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Coal industry
– Adaro Energy has clearly differentiated products in the market place. This has enabled Adaro Energy to fetch slight price premium compare to the competitors in the Coal industry. The sustainable margins have also helped Adaro Energy to invest into research and development (R&D) and innovation.
Innovation driven organization
– Adaro Energy is one of the most innovative firm in Coal sector.
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.
Weaknesses of Adaro Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Adaro Energy are -
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.
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.
Compensation and incentives
– The revenue per employee of Adaro Energy is just above the Coal industry average. It 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.
High bargaining power of channel partners in Coal industry
– because of the regulatory requirements in Indonesia, Adaro Energy 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 Coal industry.
No frontier risks strategy
– From the 10K / annual statement of Adaro Energy, it seems that company is thinking out the frontier risks that can impact Coal industry. 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.
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.
Interest costs
– Compare to the competition, Adaro Energy 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.
Lack of clear differentiation of Adaro Energy products
– To increase the profitability and margins on the products, Adaro Energy needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
High dependence on Adaro Energy ‘s star products
– The top 2 products and services of Adaro Energy still accounts for major business revenue. This dependence on star products in Coal industry has resulted into insufficient focus on developing new products, even though Adaro Energy has relatively successful track record of launching new products.
Adaro Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Adaro Energy are -
Leveraging digital technologies
– Adaro Energy 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.
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.
Using analytics as competitive advantage
– Adaro Energy has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Coal sector. This continuous investment in analytics has enabled Adaro Energy to build a competitive advantage using analytics. The analytics driven competitive advantage can help Adaro Energy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Adaro Energy in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Coal industry, and it will provide faster access to the consumers.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Coal industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Adaro Energy 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. Adaro Energy 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.
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.
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.
Developing new processes and practices
– Adaro Energy can develop new processes and procedures in Coal 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.
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.
Manufacturing automation
– Adaro Energy can use the latest technology developments to improve its manufacturing and designing process in Coal sector. 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.
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.
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.
Regulatory challenges
– Adaro Energy 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 Coal industry regulations.
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.
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. Adaro Energy needs to understand the core reasons impacting the Coal industry. This will help it in building a better workplace.
Increasing wage structure of Adaro Energy
– 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 Adaro Energy.
Stagnating economy with rate increase
– Adaro Energy 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 Coal industry.
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.
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.
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. Adaro Energy 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
– 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.
Shortening product life cycle
– it is one of the major threat that Adaro Energy is facing in Coal 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.
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.