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 – increasing household debt because of falling income levels, supply chains are disrupted by pandemic , wage bills are increasing, increasing energy prices, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, technology disruption,
customer relationship management is fast transforming because of increasing concerns over data privacy, increasing government debt because of Covid-19 spendings, 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 -
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.
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.
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.
Effective Research and Development (R&D)
– Severn Trent has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Severn Trent staying ahead in the Water Utilities industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Diverse revenue streams
– Severn Trent is present in almost all the verticals within the Water Utilities industry. This has provided Severn Trent 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.
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.
Successful track record of launching new products
– Severn Trent has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Severn Trent 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.
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.
Operational resilience
– The operational resilience strategy of Severn Trent comprises – understanding the underlying the factors in the Water 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.
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.
Learning organization
- Severn Trent 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 Severn Trent is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Severn Trent emphasize – knowledge, initiative, and innovation.
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 cash cycle compare to competitors
Severn Trent has a high cash cycle compare to other players in the Water 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.
Skills based hiring in Water Utilities industry
– The stress on hiring functional specialists at Severn Trent 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.
Interest costs
– Compare to the competition, Severn Trent 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.
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.
Products dominated business model
– Even though Severn Trent has some of the most successful models in the Water Utilities industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Severn Trent 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, 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.
Ability to respond to the competition
– As the decision making is very deliberative at Severn Trent, in the dynamic environment of Water Utilities industry it has struggled to respond to the nimble upstart competition. Severn Trent has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Slow to strategic competitive environment developments
– As Severn Trent is one of the leading players in the Water Utilities industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Water Utilities industry in last five years.
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.
Severn Trent Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Severn Trent are -
Learning at scale
– Online learning technologies has now opened space for Severn Trent 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.
Leveraging digital technologies
– Severn Trent 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.
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.
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.
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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Severn Trent 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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Severn Trent 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 Severn Trent to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
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.
Threats Severn Trent External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Severn Trent are -
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 Severn Trent in the Water Utilities sector and impact the bottomline of the organization.
Environmental challenges
– Severn Trent 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. Severn Trent can take advantage of this fund but it will also bring new competitors in the Water Utilities industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Severn Trent 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 Severn Trent prominent markets.
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.
Stagnating economy with rate increase
– Severn Trent 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 Water Utilities industry.
Regulatory challenges
– Severn Trent 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 Water Utilities industry regulations.
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Severn Trent in Water Utilities industry. The Water 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.
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.
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.
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.