Endesa (0N9G) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Endesa (United Kingdom)

Based on various researches at Oak Spring University , Endesa is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, increasing energy prices, competitive advantages are harder to sustain because of technology dispersion, etc

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Introduction to SWOT Analysis of Endesa

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

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

The strengths of Endesa are -

Analytics focus

– Endesa 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.

Operational resilience

– The operational resilience strategy of Endesa 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 Endesa 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.

Ability to recruit top talent

– Endesa is one of the leading players in the Electric 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.

Sustainable margins compare to other players in Electric Utilities industry

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

Low bargaining power of suppliers

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

Training and development

– Endesa 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.

Diverse revenue streams

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

High switching costs

– The high switching costs that Endesa 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.

Strong track record of project management in the Electric Utilities industry

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

Effective Research and Development (R&D)

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

Learning organization

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

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

The weaknesses of Endesa are -

Ability to respond to the competition

– As the decision making is very deliberative at Endesa, in the dynamic environment of Electric Utilities industry it has struggled to respond to the nimble upstart competition. Endesa has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Compensation and incentives

– The revenue per employee of Endesa 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.

Low market penetration in new markets

– Outside its home market of United Kingdom, Endesa needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Need for greater diversity

– Endesa 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, Endesa 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 Endesa 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 Endesa can leverage the sales team experience to cultivate customer relationships as Endesa is planning to shift buying processes online.

Interest costs

– Compare to the competition, Endesa 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 Endesa 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. Endesa should strive to include more intangible value offerings along with its core products and services.

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

High cash cycle compare to competitors

Endesa 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.

Employees’ less understanding of Endesa strategy

– From the outside it seems that the employees of Endesa 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.

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

The opportunities of Endesa are -

Low interest rates

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

Developing new processes and practices

– Endesa 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.

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. Endesa 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. Endesa 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.

Increase in government spending

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

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 Endesa 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.

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 Endesa in the Electric Utilities industry. Now Endesa 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 Endesa can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Building a culture of innovation

– managers at Endesa 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.

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

Creating value in data economy

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

Buying journey improvements

– Endesa 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.

Using analytics as competitive advantage

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

Harnessing reconfiguration of the global supply chains

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

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

The threats of Endesa are -

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Endesa 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.

Increasing international competition and downward pressure on margins

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

Regulatory challenges

– Endesa 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.

Technology acceleration in Forth Industrial Revolution

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

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

High dependence on third party suppliers

– Endesa 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.

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.

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. Endesa 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 wage structure of Endesa

– 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 Endesa.

Stagnating economy with rate increase

– Endesa 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 Electric Utilities industry.

Environmental challenges

– Endesa 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. Endesa can take advantage of this fund but it will also bring new competitors in the Electric Utilities industry.

Barriers of entry lowering

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

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

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Weighted SWOT Analysis of Endesa Template, Example

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

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