Centrica (CNA) SWOT Analysis / TOWS Matrix / MBA Resources
Natural Gas Utilities
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Centrica (United Kingdom)
Based on various researches at Oak Spring University , Centrica is operating in a macro-environment that has been destablized by – there is backlash against globalization, wage bills are increasing, cloud computing is disrupting traditional business models, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption,
talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Centrica can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Centrica, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Centrica 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 Centrica can be done for the following purposes –
1. Strategic planning of Centrica
2. Improving business portfolio management of Centrica
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 Centrica
Strengths of Centrica | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Centrica are -
High brand equity
– Centrica has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Centrica to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Natural Gas Utilities industry
– Centrica is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Centrica 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.
High switching costs
– The high switching costs that Centrica 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.
Innovation driven organization
– Centrica is one of the most innovative firm in Natural Gas Utilities sector.
Ability to recruit top talent
– Centrica 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.
Sustainable margins compare to other players in Natural Gas Utilities industry
– Centrica has clearly differentiated products in the market place. This has enabled Centrica to fetch slight price premium compare to the competitors in the Natural Gas Utilities industry. The sustainable margins have also helped Centrica to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Centrica has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Natural Gas Utilities industry. Secondly the value chain collaborators of Centrica have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Centrica is present in almost all the verticals within the Natural Gas Utilities industry. This has provided Centrica 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 Natural Gas Utilities industry
- digital transformation varies from industry to industry. For Centrica digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Centrica 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.
Superior customer experience
– The customer experience strategy of Centrica in Natural Gas Utilities industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Centrica 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 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.
Weaknesses of Centrica | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Centrica are -
Workers concerns about automation
– As automation is fast increasing in the Natural Gas Utilities industry, Centrica 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.
Slow decision making process
– As mentioned earlier in the report, Centrica 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. Centrica 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, Centrica is slow explore the new channels of communication. These new channels of communication can help Centrica 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.
Skills based hiring in Natural Gas Utilities industry
– The stress on hiring functional specialists at Centrica 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.
Need for greater diversity
– Centrica 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 Centrica strategy
– From the outside it seems that the employees of Centrica 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.
Ability to respond to the competition
– As the decision making is very deliberative at Centrica, in the dynamic environment of Natural Gas Utilities industry it has struggled to respond to the nimble upstart competition. Centrica has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on Centrica ‘s star products
– The top 2 products and services of Centrica 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 Centrica has relatively successful track record of launching new products.
Aligning sales with marketing
– From the outside it seems that Centrica 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 Centrica can leverage the sales team experience to cultivate customer relationships as Centrica is planning to shift buying processes online.
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 Centrica supply chain. Even after few cautionary changes, Centrica is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Centrica vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, Centrica 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 Centrica lucrative customers.
Centrica Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Centrica are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Centrica 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 Centrica to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Centrica can use these opportunities to build new business models that can help the communities that Centrica operates in. Secondly it can use opportunities from government spending in Natural Gas 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 Centrica 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.
Learning at scale
– Online learning technologies has now opened space for Centrica 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Centrica can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Centrica can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Centrica has opened avenues for new revenue streams for the organization in Natural Gas Utilities industry. This can help Centrica to build a more holistic ecosystem for Centrica products in the Natural Gas Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Low interest rates
– Even though inflation is raising its head in most developed economies, Centrica 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
– Centrica 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.
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. Centrica 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. Centrica 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.
Manufacturing automation
– Centrica 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Centrica 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.
Building a culture of innovation
– managers at Centrica 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.
Threats Centrica External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Centrica are -
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. Centrica can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Centrica business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Centrica 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Centrica 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 Centrica prominent markets.
Technology acceleration in Forth Industrial Revolution
– Centrica has witnessed rapid integration of technology during Covid-19 in the Natural Gas Utilities industry. As one of the leading players in the industry, Centrica needs to keep up with the evolution of technology in the Natural Gas 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.
Consumer confidence and its impact on Centrica 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Centrica 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.
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 Centrica.
High dependence on third party suppliers
– Centrica 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 Centrica 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.
Shortening product life cycle
– it is one of the major threat that Centrica is facing in Natural Gas 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 Centrica in the Natural Gas Utilities sector and impact the bottomline of the organization.
Environmental challenges
– Centrica 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. Centrica can take advantage of this fund but it will also bring new competitors in the Natural Gas Utilities industry.
Weighted SWOT Analysis of Centrica Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Centrica 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 Centrica 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 Centrica 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 Centrica 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 Centrica needs to make to build a sustainable competitive advantage.