Naturgy Energy (0NPV) SWOT Analysis / TOWS Matrix / MBA Resources
Natural Gas Utilities
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Naturgy Energy (United Kingdom)
Based on various researches at Oak Spring University , Naturgy Energy is operating in a macro-environment that has been destablized by – cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, geopolitical disruptions, challanges to central banks by blockchain based private currencies, there is increasing trade war between United States & China, increasing energy prices, supply chains are disrupted by pandemic ,
increasing inequality as vast percentage of new income is going to the top 1%, digital marketing is dominated by two big players Facebook and Google, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Naturgy Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Naturgy Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Naturgy Energy 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 Naturgy Energy can be done for the following purposes –
1. Strategic planning of Naturgy Energy
2. Improving business portfolio management of Naturgy Energy
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Natural Gas Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Naturgy Energy
Strengths of Naturgy Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Naturgy Energy are -
Sustainable margins compare to other players in Natural Gas Utilities industry
– Naturgy Energy has clearly differentiated products in the market place. This has enabled Naturgy Energy to fetch slight price premium compare to the competitors in the Natural Gas Utilities industry. The sustainable margins have also helped Naturgy Energy to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Naturgy Energy 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.
Ability to lead change in Natural Gas Utilities
– Naturgy Energy is one of the leading players in the Natural Gas Utilities industry in United Kingdom. Over the years it has not only transformed the business landscape in the Natural Gas Utilities industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Naturgy Energy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy of Naturgy Energy 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.
Learning organization
- Naturgy Energy 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 Naturgy Energy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Naturgy Energy emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Naturgy Energy is one of the leading players in the Natural Gas Utilities industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Naturgy Energy in Natural Gas Utilities industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Naturgy Energy is present in almost all the verticals within the Natural Gas Utilities industry. This has provided Naturgy Energy 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.
Strong track record of project management in the Natural Gas Utilities industry
– Naturgy Energy is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Naturgy Energy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Naturgy Energy 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.
Low bargaining power of suppliers
– Suppliers of Naturgy Energy in the Utilities sector have low bargaining power. Naturgy Energy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Naturgy Energy to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Naturgy Energy 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.
Weaknesses of Naturgy Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Naturgy Energy are -
Compensation and incentives
– The revenue per employee of Naturgy Energy is just above the Natural Gas 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.
High dependence on Naturgy Energy ‘s star products
– The top 2 products and services of Naturgy Energy still accounts for major business revenue. This dependence on star products in Natural Gas Utilities industry has resulted into insufficient focus on developing new products, even though Naturgy Energy has relatively successful track record of launching new products.
Skills based hiring in Natural Gas Utilities industry
– The stress on hiring functional specialists at Naturgy Energy 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.
Slow decision making process
– As mentioned earlier in the report, Naturgy Energy has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Natural Gas Utilities industry over the last five years. Naturgy Energy 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Naturgy Energy is slow explore the new channels of communication. These new channels of communication can help Naturgy Energy 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 Naturgy Energy 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 Naturgy Energy can leverage the sales team experience to cultivate customer relationships as Naturgy Energy is planning to shift buying processes online.
Need for greater diversity
– Naturgy Energy 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 Naturgy Energy, it seems that company is thinking out the frontier risks that can impact Natural Gas 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.
Employees’ less understanding of Naturgy Energy strategy
– From the outside it seems that the employees of Naturgy Energy 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.
Interest costs
– Compare to the competition, Naturgy Energy 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.
Products dominated business model
– Even though Naturgy Energy has some of the most successful models in the Natural Gas Utilities industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Naturgy Energy should strive to include more intangible value offerings along with its core products and services.
Naturgy Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Naturgy Energy are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Naturgy Energy in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Natural Gas Utilities industry, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Naturgy Energy can use these opportunities to build new business models that can help the communities that Naturgy Energy operates in. Secondly it can use opportunities from government spending in Natural Gas Utilities sector.
Use of Bitcoin and other crypto currencies for transactions in Natural Gas Utilities industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Naturgy Energy in the Natural Gas Utilities industry. Now Naturgy Energy can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Naturgy Energy 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Naturgy Energy 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 Naturgy Energy to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Naturgy Energy 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Naturgy Energy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Using analytics as competitive advantage
– Naturgy Energy has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Natural Gas Utilities sector. This continuous investment in analytics has enabled Naturgy Energy to build a competitive advantage using analytics. The analytics driven competitive advantage can help Naturgy Energy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Naturgy Energy 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.
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. Naturgy Energy 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. Naturgy Energy 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.
Better consumer reach
– The expansion of the 5G network will help Naturgy Energy to increase its market reach. Naturgy Energy 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.
Developing new processes and practices
– Naturgy Energy 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Naturgy Energy 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 Naturgy Energy 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 Naturgy Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Naturgy Energy are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Natural Gas Utilities industry are lowering. It can presents Naturgy Energy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Natural Gas Utilities sector.
Regulatory challenges
– Naturgy Energy 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 Natural Gas Utilities industry regulations.
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.
Stagnating economy with rate increase
– Naturgy Energy 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.
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 Naturgy Energy in the Natural Gas Utilities sector and impact the bottomline of the organization.
Increasing wage structure of Naturgy Energy
– 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 Naturgy Energy.
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. Naturgy Energy needs to understand the core reasons impacting the Natural Gas Utilities industry. This will help it in building a better workplace.
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.
Environmental challenges
– Naturgy Energy 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. Naturgy Energy can take advantage of this fund but it will also bring new competitors 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. Naturgy Energy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Naturgy Energy.
High dependence on third party suppliers
– Naturgy Energy 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Naturgy Energy 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.
Weighted SWOT Analysis of Naturgy Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Naturgy Energy 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 Naturgy Energy 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 Naturgy Energy 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 Naturgy Energy 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 Naturgy Energy needs to make to build a sustainable competitive advantage.