A2A (A2) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for A2A (Italy)

Based on various researches at Oak Spring University , A2A is operating in a macro-environment that has been destablized by – talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google, challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, etc

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Introduction to SWOT Analysis of A2A

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that A2A can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the A2A, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which A2A 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 A2A can be done for the following purposes –
1. Strategic planning of A2A
2. Improving business portfolio management of A2A
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 A2A

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Strengths of A2A | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of A2A are -

Effective Research and Development (R&D)

– A2A has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – A2A 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.

Ability to lead change in Electric Utilities

– A2A 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 A2A in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

High switching costs

– The high switching costs that A2A 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.

Successful track record of launching new products

– A2A has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. A2A 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.

Learning organization

- A2A 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 A2A is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at A2A emphasize – knowledge, initiative, and innovation.

Diverse revenue streams

– A2A is present in almost all the verticals within the Electric Utilities industry. This has provided A2A 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.

Digital Transformation in Electric Utilities industry

- digital transformation varies from industry to industry. For A2A digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. A2A 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.

Cross disciplinary teams

– Horizontal connected teams at the A2A 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.

Sustainable margins compare to other players in Electric Utilities industry

– A2A has clearly differentiated products in the market place. This has enabled A2A to fetch slight price premium compare to the competitors in the Electric Utilities industry. The sustainable margins have also helped A2A to invest into research and development (R&D) and innovation.

Highly skilled collaborators

– A2A 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 A2A have helped the firm to develop new products and bring them quickly to the marketplace.

Organizational Resilience of A2A

– The covid-19 pandemic has put organizational resilience at the centre of everthing A2A does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Ability to recruit top talent

– A2A 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.

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Weaknesses of A2A | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of A2A are -

Interest costs

– Compare to the competition, A2A 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.

Capital Spending Reduction

– Even during the low interest decade, A2A 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.

High cash cycle compare to competitors

A2A 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.

Need for greater diversity

– A2A 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.

Workers concerns about automation

– As automation is fast increasing in the Electric Utilities industry, A2A 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.

Aligning sales with marketing

– From the outside it seems that A2A 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 A2A can leverage the sales team experience to cultivate customer relationships as A2A is planning to shift buying processes online.

No frontier risks strategy

– From the 10K / annual statement of A2A, 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.

Products dominated business model

– Even though A2A has some of the most successful models in the Electric Utilities industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. A2A should strive to include more intangible value offerings along with its core products and services.

Slow decision making process

– As mentioned earlier in the report, A2A 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. A2A 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 Electric Utilities industry

– The stress on hiring functional specialists at A2A 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.

Lack of clear differentiation of A2A products

– To increase the profitability and margins on the products, A2A needs to provide more differentiated products than what it is currently offering in the marketplace.

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A2A Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of A2A are -

Better consumer reach

– The expansion of the 5G network will help A2A to increase its market reach. A2A 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.

Leveraging digital technologies

– A2A 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, A2A can use these opportunities to build new business models that can help the communities that A2A operates in. Secondly it can use opportunities from government spending in Electric Utilities sector.

Creating value in data economy

– The success of analytics program of A2A has opened avenues for new revenue streams for the organization in Electric Utilities industry. This can help A2A to build a more holistic ecosystem for A2A products in the Electric Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Using analytics as competitive advantage

– A2A has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Electric Utilities sector. This continuous investment in analytics has enabled A2A to build a competitive advantage using analytics. The analytics driven competitive advantage can help A2A to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Loyalty marketing

– A2A 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects A2A can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Electric Utilities industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. A2A 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. A2A 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.

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 A2A in the Electric Utilities industry. Now A2A can target international markets with far fewer capital restrictions requirements than the existing system.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, A2A 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 A2A to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

Buying journey improvements

– A2A 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.

Developing new processes and practices

– A2A can develop new processes and procedures in Electric Utilities 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, A2A 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 A2A External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of A2A are -

High dependence on third party suppliers

– A2A 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.

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. A2A can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Electric Utilities industry are lowering. It can presents A2A with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Electric Utilities sector.

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 A2A.

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 A2A business can come under increasing regulations regarding data privacy, data security, etc.

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. A2A 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.

Technology acceleration in Forth Industrial Revolution

– A2A has witnessed rapid integration of technology during Covid-19 in the Electric Utilities industry. As one of the leading players in the industry, A2A 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.

Regulatory challenges

– A2A 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.

Shortening product life cycle

– it is one of the major threat that A2A is facing in Electric Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 A2A in the Electric Utilities sector and impact the bottomline of the organization.

Increasing wage structure of A2A

– 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 A2A.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for A2A 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.

Environmental challenges

– A2A 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. A2A 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 A2A Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at A2A 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 A2A 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 A2A 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 A2A 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 A2A needs to make to build a sustainable competitive advantage.

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