E.ON SE (EOA) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for E.ON SE (Italy)

Based on various researches at Oak Spring University , E.ON SE is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, wage bills are increasing, increasing transportation and logistics costs, supply chains are disrupted by pandemic , technology disruption, etc

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Introduction to SWOT Analysis of E.ON SE

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that E.ON SE can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the E.ON SE, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which E.ON SE 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 E.ON SE can be done for the following purposes –
1. Strategic planning of E.ON SE
2. Improving business portfolio management of E.ON SE
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 E.ON SE

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Strengths of E.ON SE | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of E.ON SE are -

Digital Transformation in Electric Utilities industry

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

Innovation driven organization

– E.ON SE is one of the most innovative firm in Electric Utilities sector.

Strong track record of project management in the Electric Utilities industry

– E.ON SE is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Ability to lead change in Electric Utilities

– E.ON SE 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 E.ON SE in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Training and development

– E.ON SE 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.

Effective Research and Development (R&D)

– E.ON SE has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – E.ON SE 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.

Sustainable margins compare to other players in Electric Utilities industry

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

High switching costs

– The high switching costs that E.ON SE 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.

Low bargaining power of suppliers

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

Ability to recruit top talent

– E.ON SE is one of the leading players in the Electric Utilities industry in Italy. It is in a position to attract the best talent available in Italy. The firm has a robust talent identification program that helps in identifying the brightest.

Learning organization

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

Diverse revenue streams

– E.ON SE is present in almost all the verticals within the Electric Utilities industry. This has provided E.ON SE 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.

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Weaknesses of E.ON SE | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of E.ON SE are -

Workers concerns about automation

– As automation is fast increasing in the Electric Utilities industry, E.ON SE 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.

Interest costs

– Compare to the competition, E.ON SE 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.

Slow decision making process

– As mentioned earlier in the report, E.ON SE has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Electric Utilities industry over the last five years. E.ON SE 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.

High cash cycle compare to competitors

E.ON SE has a high cash cycle compare to other players in the Electric Utilities industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.

Aligning sales with marketing

– From the outside it seems that E.ON SE needs to have more collaboration between its sales team and marketing team. Sales professionals in the Electric Utilities industry have deep experience in developing customer relationships. Marketing department at E.ON SE can leverage the sales team experience to cultivate customer relationships as E.ON SE is planning to shift buying processes online.

High operating costs

– Compare to the competitors, E.ON SE has high operating costs in the Electric Utilities industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract E.ON SE lucrative customers.

Employees’ less understanding of E.ON SE strategy

– From the outside it seems that the employees of E.ON SE 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.

High bargaining power of channel partners in Electric Utilities industry

– because of the regulatory requirements in Italy, E.ON SE 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.

Increasing silos among functional specialists

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

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 E.ON SE supply chain. Even after few cautionary changes, E.ON SE is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left E.ON SE vulnerable to further global disruptions in South East Asia.

High dependence on E.ON SE ‘s star products

– The top 2 products and services of E.ON SE 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 E.ON SE has relatively successful track record of launching new products.

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E.ON SE Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of E.ON SE are -

Learning at scale

– Online learning technologies has now opened space for E.ON SE 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, E.ON SE is facing challenges because of the dominance of functional experts in the organization. E.ON SE 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, E.ON SE can use these opportunities to build new business models that can help the communities that E.ON SE operates in. Secondly it can use opportunities from government spending in Electric Utilities sector.

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. E.ON SE can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Manufacturing automation

– E.ON SE can use the latest technology developments to improve its manufacturing and designing process in Electric Utilities 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.

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 E.ON SE in the Electric Utilities industry. Now E.ON SE can target international markets with far fewer capital restrictions requirements than the existing system.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects E.ON SE can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Low interest rates

– Even though inflation is raising its head in most developed economies, E.ON SE 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.

Buying journey improvements

– E.ON SE 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for E.ON SE 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.

Remote work and new talent hiring opportunities

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

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. E.ON SE can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Leveraging digital technologies

– E.ON SE 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.

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Threats E.ON SE External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of E.ON SE are -

Consumer confidence and its impact on E.ON SE 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.

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 E.ON SE.

Regulatory challenges

– E.ON SE 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 Electric Utilities industry regulations.

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 E.ON SE business can come under increasing regulations regarding data privacy, data security, etc.

Barriers of entry lowering

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

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.

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

Easy access to finance

– Easy access to finance in Electric Utilities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. E.ON SE can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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. E.ON SE 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

– E.ON SE 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.

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 E.ON SE in the Electric Utilities sector and impact the bottomline of the organization.

Shortening product life cycle

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

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Weighted SWOT Analysis of E.ON SE Template, Example

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

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