Italgas (IG) SWOT Analysis / TOWS Matrix / MBA Resources
Natural Gas Utilities
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Italgas (Italy)
Based on various researches at Oak Spring University , Italgas is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing household debt because of falling income levels, technology disruption, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic ,
increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Italgas can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Italgas, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Italgas 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 Italgas can be done for the following purposes –
1. Strategic planning of Italgas
2. Improving business portfolio management of Italgas
3. Assessing feasibility of the new initiative in Italy
4. Making a Natural Gas Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Italgas
Strengths of Italgas | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Italgas are -
Low bargaining power of suppliers
– Suppliers of Italgas in the Utilities sector have low bargaining power. Italgas has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Italgas to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Italgas in Natural Gas Utilities industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Italgas 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 Italgas is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Italgas emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Italgas has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Italgas 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.
Innovation driven organization
– Italgas is one of the most innovative firm in Natural Gas Utilities sector.
Ability to lead change in Natural Gas Utilities
– Italgas is one of the leading players in the Natural Gas Utilities industry in Italy. Over the years it has not only transformed the business landscape in the Natural Gas Utilities industry in Italy but also across the existing markets. The ability to lead change has enabled Italgas in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Natural Gas Utilities industry
- digital transformation varies from industry to industry. For Italgas digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Italgas 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.
Diverse revenue streams
– Italgas is present in almost all the verticals within the Natural Gas Utilities industry. This has provided Italgas 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.
Effective Research and Development (R&D)
– Italgas has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Italgas staying ahead in the Natural Gas Utilities industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy of Italgas comprises – understanding the underlying the factors in the Natural Gas 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.
High switching costs
– The high switching costs that Italgas 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.
Analytics focus
– Italgas is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Natural Gas Utilities industry. The technology infrastructure of Italy is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses of Italgas | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Italgas are -
Interest costs
– Compare to the competition, Italgas 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, Italgas 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 Natural Gas Utilities industry using digital technology.
High operating costs
– Compare to the competitors, Italgas has high operating costs in the Natural Gas Utilities industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Italgas lucrative customers.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Italgas is slow explore the new channels of communication. These new channels of communication can help Italgas to provide better information regarding Natural Gas Utilities products and services. It can also build an online community to further reach out to potential customers.
Aligning sales with marketing
– From the outside it seems that Italgas needs to have more collaboration between its sales team and marketing team. Sales professionals in the Natural Gas Utilities industry have deep experience in developing customer relationships. Marketing department at Italgas can leverage the sales team experience to cultivate customer relationships as Italgas is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative at Italgas, in the dynamic environment of Natural Gas Utilities industry it has struggled to respond to the nimble upstart competition. Italgas has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Italgas supply chain. Even after few cautionary changes, Italgas is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Italgas vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Italgas 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.
Employees’ less understanding of Italgas strategy
– From the outside it seems that the employees of Italgas 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.
Increasing silos among functional specialists
– The organizational structure of Italgas is dominated by functional specialists. It is not different from other players in the Natural Gas Utilities industry, but Italgas needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Italgas to focus more on services in the Natural Gas Utilities industry rather than just following the product oriented approach.
Skills based hiring in Natural Gas Utilities industry
– The stress on hiring functional specialists at Italgas 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.
Italgas Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Italgas are -
Manufacturing automation
– Italgas can use the latest technology developments to improve its manufacturing and designing process in Natural Gas 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.
Creating value in data economy
– The success of analytics program of Italgas has opened avenues for new revenue streams for the organization in Natural Gas Utilities industry. This can help Italgas to build a more holistic ecosystem for Italgas products in the Natural Gas Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Italgas 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 Italgas to hire the very best people irrespective of their geographical location.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Natural Gas Utilities industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Italgas 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. Italgas 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.
Building a culture of innovation
– managers at Italgas 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 Natural Gas Utilities industry.
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. Italgas can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Italgas can use these opportunities to build new business models that can help the communities that Italgas operates in. Secondly it can use opportunities from government spending in Natural Gas Utilities sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Natural Gas Utilities industry, but it has also influenced the consumer preferences. Italgas can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 Italgas 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.
Loyalty marketing
– Italgas 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.
Developing new processes and practices
– Italgas can develop new processes and procedures in Natural Gas 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.
Learning at scale
– Online learning technologies has now opened space for Italgas 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Italgas 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 Italgas to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Italgas External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Italgas are -
Shortening product life cycle
– it is one of the major threat that Italgas is facing in Natural Gas Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Italgas may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Natural Gas Utilities sector.
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. Italgas 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 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.
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 Italgas business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Italgas 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 Natural Gas Utilities industry and other sectors.
Stagnating economy with rate increase
– Italgas 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 Natural Gas Utilities industry.
Easy access to finance
– Easy access to finance in Natural Gas Utilities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Italgas can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Italgas in the Natural Gas Utilities sector and impact the bottomline of the organization.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Italgas in Natural Gas Utilities industry. The Natural Gas 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, Italgas 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 Italgas prominent markets.
Environmental challenges
– Italgas 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. Italgas can take advantage of this fund but it will also bring new competitors in the Natural Gas Utilities industry.
Weighted SWOT Analysis of Italgas Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Italgas 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 Italgas 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 Italgas 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 Italgas 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 Italgas needs to make to build a sustainable competitive advantage.
