SWOT Analysis / TOWS Matrix for Severn Trent (United Kingdom)
Based on various researches at Oak Spring University , Severn Trent is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, increasing transportation and logistics costs, there is increasing trade war between United States & China,
competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Severn Trent can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Severn Trent, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Severn Trent 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 Severn Trent can be done for the following purposes –
1. Strategic planning of Severn Trent
2. Improving business portfolio management of Severn Trent
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Water Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Severn Trent
Strengths of Severn Trent | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Severn Trent are -
Cross disciplinary teams
– Horizontal connected teams at the Severn Trent 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.
Digital Transformation in Water Utilities industry
- digital transformation varies from industry to industry. For Severn Trent digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Severn Trent 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.
High brand equity
– Severn Trent has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Severn Trent to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Water Utilities
– Severn Trent is one of the leading players in the Water Utilities industry in United Kingdom. Over the years it has not only transformed the business landscape in the Water Utilities industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Severn Trent in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Severn Trent 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.
Highly skilled collaborators
– Severn Trent has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Water Utilities industry. Secondly the value chain collaborators of Severn Trent have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to recruit top talent
– Severn Trent is one of the leading players in the Water 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.
Strong track record of project management in the Water Utilities industry
– Severn Trent is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Severn Trent
– The covid-19 pandemic has put organizational resilience at the centre of everthing Severn Trent does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Severn Trent in the Utilities sector have low bargaining power. Severn Trent has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Severn Trent to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Water Utilities industry
– Severn Trent has clearly differentiated products in the market place. This has enabled Severn Trent to fetch slight price premium compare to the competitors in the Water Utilities industry. The sustainable margins have also helped Severn Trent to invest into research and development (R&D) and innovation.
Analytics focus
– Severn Trent 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 Water 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 Severn Trent | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Severn Trent are -
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 Severn Trent supply chain. Even after few cautionary changes, Severn Trent is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Severn Trent vulnerable to further global disruptions in South East Asia.
Capital Spending Reduction
– Even during the low interest decade, Severn Trent 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 Water Utilities industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Severn Trent is dominated by functional specialists. It is not different from other players in the Water Utilities industry, but Severn Trent needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Severn Trent to focus more on services in the Water Utilities industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Severn Trent, it seems that company is thinking out the frontier risks that can impact Water 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 Severn Trent strategy
– From the outside it seems that the employees of Severn Trent 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.
Low market penetration in new markets
– Outside its home market of United Kingdom, Severn Trent needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Severn Trent is slow explore the new channels of communication. These new channels of communication can help Severn Trent to provide better information regarding Water Utilities products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Severn Trent has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Water Utilities industry over the last five years. Severn Trent 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.
Compensation and incentives
– The revenue per employee of Severn Trent is just above the Water 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 Severn Trent ‘s star products
– The top 2 products and services of Severn Trent still accounts for major business revenue. This dependence on star products in Water Utilities industry has resulted into insufficient focus on developing new products, even though Severn Trent has relatively successful track record of launching new products.
Need for greater diversity
– Severn Trent 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.
Severn Trent Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Severn Trent are -
Use of Bitcoin and other crypto currencies for transactions in Water Utilities industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Severn Trent in the Water Utilities industry. Now Severn Trent can target international markets with far fewer capital restrictions requirements than the existing system.
Buying journey improvements
– Severn Trent can improve the customer journey of consumers in the Water 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.
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 Severn Trent 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Water Utilities industry, but it has also influenced the consumer preferences. Severn Trent can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Severn Trent can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Severn Trent 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.
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. Severn Trent can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at Severn Trent 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 Water Utilities industry.
Manufacturing automation
– Severn Trent can use the latest technology developments to improve its manufacturing and designing process in Water 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.
Developing new processes and practices
– Severn Trent can develop new processes and procedures in Water 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Severn Trent can use these opportunities to build new business models that can help the communities that Severn Trent operates in. Secondly it can use opportunities from government spending in Water Utilities sector.
Creating value in data economy
– The success of analytics program of Severn Trent has opened avenues for new revenue streams for the organization in Water Utilities industry. This can help Severn Trent to build a more holistic ecosystem for Severn Trent products in the Water Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Water Utilities industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Severn Trent 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. Severn Trent 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.
Threats Severn Trent External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Severn Trent are -
Easy access to finance
– Easy access to finance in Water Utilities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Severn Trent can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Severn Trent needs to understand the core reasons impacting the Water 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.
Consumer confidence and its impact on Severn Trent 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 Water Utilities industry and other sectors.
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 Severn Trent.
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 Severn Trent business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Severn Trent
– 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 Severn Trent.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Water Utilities industry are lowering. It can presents Severn Trent with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Water Utilities sector.
Shortening product life cycle
– it is one of the major threat that Severn Trent is facing in Water Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Severn Trent 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Severn Trent may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Water Utilities sector.
Technology acceleration in Forth Industrial Revolution
– Severn Trent has witnessed rapid integration of technology during Covid-19 in the Water Utilities industry. As one of the leading players in the industry, Severn Trent needs to keep up with the evolution of technology in the Water 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.
Weighted SWOT Analysis of Severn Trent Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Severn Trent 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 Severn Trent 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 Severn Trent 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 Severn Trent 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 Severn Trent needs to make to build a sustainable competitive advantage.