National Grid (NG) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for National Grid (United Kingdom)

Based on various researches at Oak Spring University , National Grid is operating in a macro-environment that has been destablized by – increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic , customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, there is increasing trade war between United States & China, central banks are concerned over increasing inflation, etc

---

---

---

---

Introduction to SWOT Analysis of National Grid

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that National Grid can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the National Grid, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which National Grid 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 National Grid can be done for the following purposes –
1. Strategic planning of National Grid
2. Improving business portfolio management of National Grid
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Electric Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of National Grid

---

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

The strengths of National Grid are -

Strong track record of project management in the Electric Utilities industry

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

Learning organization

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

Digital Transformation in Electric Utilities industry

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

Operational resilience

– The operational resilience strategy of National Grid 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.

Cross disciplinary teams

– Horizontal connected teams at the National Grid 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.

Organizational Resilience of National Grid

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

Ability to lead change in Electric Utilities

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

Successful track record of launching new products

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

Analytics focus

– National Grid 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 Electric Utilities industry. The technology infrastructure of United Kingdom 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.

Highly skilled collaborators

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

Low bargaining power of suppliers

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

Diverse revenue streams

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

---

---

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

The weaknesses of National Grid are -

High bargaining power of channel partners in Electric Utilities industry

– because of the regulatory requirements in United Kingdom, National Grid 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.

Compensation and incentives

– The revenue per employee of National Grid is just above the Electric Utilities 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.

Capital Spending Reduction

– Even during the low interest decade, National Grid 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.

Products dominated business model

– Even though National Grid 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. National Grid 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, National Grid 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. National Grid 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 dependence on National Grid ‘s star products

– The top 2 products and services of National Grid 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 National Grid has relatively successful track record of launching new products.

Need for greater diversity

– National Grid 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.

No frontier risks strategy

– From the 10K / annual statement of National Grid, 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.

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

Interest costs

– Compare to the competition, National Grid 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.

Employees’ less understanding of National Grid strategy

– From the outside it seems that the employees of National Grid 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.

---

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

The opportunities of National Grid are -

Better consumer reach

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

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 National Grid 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, National Grid 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.

Leveraging digital technologies

– National Grid 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.

Using analytics as competitive advantage

– National Grid 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 National Grid to build a competitive advantage using analytics. The analytics driven competitive advantage can help National Grid to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Lowering marketing communication costs

– 5G expansion will open new opportunities for National Grid 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.

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. National Grid 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. National Grid 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 National Grid 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.

Reforming the budgeting process

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

Buying journey improvements

– National Grid 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.

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

Learning at scale

– Online learning technologies has now opened space for National Grid 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.

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

---

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

The threats of National Grid are -

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.

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 National Grid.

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. National Grid 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.

Increasing international competition and downward pressure on margins

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

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 National Grid in the Electric Utilities sector and impact the bottomline of the organization.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for National Grid 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 wage structure of National Grid

– 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 National Grid.

Technology acceleration in Forth Industrial Revolution

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

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, National Grid may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Electric Utilities sector.

Regulatory challenges

– National Grid 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.

Consumer confidence and its impact on National Grid 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.

Barriers of entry lowering

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

High dependence on third party suppliers

– National Grid 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.

---

Weighted SWOT Analysis of National Grid Template, Example

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

--- ---