Enel (ENEI) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Enel (Italy)

Based on various researches at Oak Spring University , Enel is operating in a macro-environment that has been destablized by – technology disruption, wage bills are increasing, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings, geopolitical disruptions, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc

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Introduction to SWOT Analysis of Enel

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Enel can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Enel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Enel 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Enel can be done for the following purposes –
1. Strategic planning of Enel
2. Improving business portfolio management of Enel
3. Assessing feasibility of the new initiative in Italy
4. Making a Electric Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Enel

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Strengths of Enel | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Enel are -

Effective Research and Development (R&D)

– Enel has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Enel staying ahead in the Electric Utilities industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

High brand equity

– Enel has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Enel to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Learning organization

- Enel 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 Enel is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Enel emphasize – knowledge, initiative, and innovation.

Highly skilled collaborators

– Enel has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Electric Utilities industry. Secondly the value chain collaborators of Enel have helped the firm to develop new products and bring them quickly to the marketplace.

Ability to lead change in Electric Utilities

– Enel is one of the leading players in the Electric Utilities industry in Italy. Over the years it has not only transformed the business landscape in the Electric Utilities industry in Italy but also across the existing markets. The ability to lead change has enabled Enel in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Digital Transformation in Electric Utilities industry

- digital transformation varies from industry to industry. For Enel digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Enel 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.

Low bargaining power of suppliers

– Suppliers of Enel in the Utilities sector have low bargaining power. Enel has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Enel to manage not only supply disruptions but also source products at highly competitive prices.

Sustainable margins compare to other players in Electric Utilities industry

– Enel has clearly differentiated products in the market place. This has enabled Enel to fetch slight price premium compare to the competitors in the Electric Utilities industry. The sustainable margins have also helped Enel to invest into research and development (R&D) and innovation.

Training and development

– Enel has one of the best training and development program in Utilities 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.

Diverse revenue streams

– Enel is present in almost all the verticals within the Electric Utilities industry. This has provided Enel 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 of Enel comprises – understanding the underlying the factors in the Electric Utilities 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.

Organizational Resilience of Enel

– The covid-19 pandemic has put organizational resilience at the centre of everthing Enel does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

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Weaknesses of Enel | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Enel are -

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Enel is slow explore the new channels of communication. These new channels of communication can help Enel to provide better information regarding Electric Utilities products and services. It can also build an online community to further reach out to potential customers.

Increasing silos among functional specialists

– The organizational structure of Enel is dominated by functional specialists. It is not different from other players in the Electric Utilities industry, but Enel needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Enel to focus more on services in the Electric Utilities industry rather than just following the product oriented approach.

High dependence on Enel ‘s star products

– The top 2 products and services of Enel still accounts for major business revenue. This dependence on star products in Electric Utilities industry has resulted into insufficient focus on developing new products, even though Enel has relatively successful track record of launching new products.

Slow to strategic competitive environment developments

– As Enel is one of the leading players in the Electric Utilities industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Electric Utilities industry in last five years.

No frontier risks strategy

– From the 10K / annual statement of Enel, it seems that company is thinking out the frontier risks that can impact Electric Utilities 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.

Capital Spending Reduction

– Even during the low interest decade, Enel 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 Electric Utilities industry using digital technology.

Workers concerns about automation

– As automation is fast increasing in the Electric Utilities industry, Enel 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.

Need for greater diversity

– Enel 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.

Lack of clear differentiation of Enel products

– To increase the profitability and margins on the products, Enel needs to provide more differentiated products than what it is currently offering in the marketplace.

High bargaining power of channel partners in Electric Utilities industry

– because of the regulatory requirements in Italy, Enel 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 Electric Utilities industry.

Employees’ less understanding of Enel strategy

– From the outside it seems that the employees of Enel 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.

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Enel Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Enel are -

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Enel 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 Enel to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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 Enel 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Enel in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Electric Utilities industry, and it will provide faster access to the consumers.

Leveraging digital technologies

– Enel 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.

Building a culture of innovation

– managers at Enel 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 Electric Utilities industry.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Electric Utilities industry, but it has also influenced the consumer preferences. Enel can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Enel 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 Enel to hire the very best people irrespective of their geographical location.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Enel is facing challenges because of the dominance of functional experts in the organization. Enel can utilize new technology in the field of Electric Utilities industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

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. Enel can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Buying journey improvements

– Enel can improve the customer journey of consumers in the Electric Utilities industry by using analytics and artificial intelligence. It 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.

Use of Bitcoin and other crypto currencies for transactions in Electric Utilities industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Enel in the Electric Utilities industry. Now Enel can target international markets with far fewer capital restrictions requirements than the existing system.

Loyalty marketing

– Enel 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, Enel 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.

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Threats Enel External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Enel are -

Stagnating economy with rate increase

– Enel 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 Electric Utilities industry.

Technology acceleration in Forth Industrial Revolution

– Enel has witnessed rapid integration of technology during Covid-19 in the Electric Utilities industry. As one of the leading players in the industry, Enel needs to keep up with the evolution of technology in the Electric Utilities 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.

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.

Shortening product life cycle

– it is one of the major threat that Enel is facing in Electric Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 Enel business can come under increasing regulations regarding data privacy, data security, etc.

Consumer confidence and its impact on Enel 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 Electric Utilities 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 Enel in Electric Utilities industry. The Electric Utilities 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.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Enel 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 Enel prominent markets.

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. Enel needs to understand the core reasons impacting the Electric Utilities industry. This will help it in building a better workplace.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Electric Utilities industry are lowering. It can presents Enel with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Electric Utilities sector.

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 Enel in the Electric Utilities sector and impact the bottomline of the organization.

Increasing wage structure of Enel

– 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 Enel.

Environmental challenges

– Enel 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. Enel can take advantage of this fund but it will also bring new competitors in the Electric Utilities industry.

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Weighted SWOT Analysis of Enel Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Enel 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 Enel 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 Enel 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 Enel 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 Enel needs to make to build a sustainable competitive advantage.

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