Renova Energia (RNEW3) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Renova Energia (Brazil)

Based on various researches at Oak Spring University , Renova Energia is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, technology disruption, there is backlash against globalization, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of Renova Energia

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Renova Energia can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Renova Energia, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Renova Energia 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 Renova Energia can be done for the following purposes –
1. Strategic planning of Renova Energia
2. Improving business portfolio management of Renova Energia
3. Assessing feasibility of the new initiative in Brazil
4. Making a Electric Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Renova Energia

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

The strengths of Renova Energia are -

Diverse revenue streams

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

Learning organization

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

Sustainable margins compare to other players in Electric Utilities industry

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

Cross disciplinary teams

– Horizontal connected teams at the Renova Energia 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.

Organizational Resilience of Renova Energia

– The covid-19 pandemic has put organizational resilience at the centre of everthing Renova Energia does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

High switching costs

– The high switching costs that Renova Energia 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.

Analytics focus

– Renova Energia 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 Brazil 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.

Superior customer experience

– The customer experience strategy of Renova Energia in Electric Utilities industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Ability to lead change in Electric Utilities

– Renova Energia is one of the leading players in the Electric Utilities industry in Brazil. Over the years it has not only transformed the business landscape in the Electric Utilities industry in Brazil but also across the existing markets. The ability to lead change has enabled Renova Energia in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Training and development

– Renova Energia 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.

Ability to recruit top talent

– Renova Energia is one of the leading players in the Electric Utilities industry in Brazil. It is in a position to attract the best talent available in Brazil. The firm has a robust talent identification program that helps in identifying the brightest.

Strong track record of project management in the Electric Utilities industry

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

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

The weaknesses of Renova Energia are -

High dependence on Renova Energia ‘s star products

– The top 2 products and services of Renova Energia still accounts for major business revenue. This dependence on star products in Electric Utilities industry has resulted into insufficient focus on developing new products, even though Renova Energia has relatively successful track record of launching new products.

Capital Spending Reduction

– Even during the low interest decade, Renova Energia 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 Electric Utilities industry using digital technology.

High cash cycle compare to competitors

Renova Energia 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.

Interest costs

– Compare to the competition, Renova Energia 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.

Need for greater diversity

– Renova Energia 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.

Products dominated business model

– Even though Renova Energia 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. Renova Energia should strive to include more intangible value offerings along with its core products and services.

Employees’ less understanding of Renova Energia strategy

– From the outside it seems that the employees of Renova Energia 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.

High bargaining power of channel partners in Electric Utilities industry

– because of the regulatory requirements in Brazil, Renova Energia is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Electric Utilities industry.

Low market penetration in new markets

– Outside its home market of Brazil, Renova Energia needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Slow to strategic competitive environment developments

– As Renova Energia is one of the leading players in the Electric Utilities industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Electric Utilities industry in last five years.

Skills based hiring in Electric Utilities industry

– The stress on hiring functional specialists at Renova Energia 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.

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

The opportunities of Renova Energia are -

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Renova Energia 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 Renova Energia 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Renova Energia in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Electric Utilities industry, and it will provide faster access to the consumers.

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

Harnessing reconfiguration of the global supply chains

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

Manufacturing automation

– Renova Energia can use the latest technology developments to improve its manufacturing and designing process in Electric 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.

Leveraging digital technologies

– Renova Energia 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.

Low interest rates

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

Learning at scale

– Online learning technologies has now opened space for Renova Energia 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Renova Energia 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 Renova Energia to hire the very best people irrespective of their geographical location.

Building a culture of innovation

– managers at Renova Energia 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.

Buying journey improvements

– Renova Energia 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.

Developing new processes and practices

– Renova Energia 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.

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

The threats of Renova Energia are -

Increasing international competition and downward pressure on margins

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

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 Renova Energia in the Electric Utilities sector and impact the bottomline of the organization.

Increasing wage structure of Renova Energia

– 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 Renova Energia.

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 Renova Energia.

Learning curve for new practices

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

Environmental challenges

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

Technology acceleration in Forth Industrial Revolution

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

Stagnating economy with rate increase

– Renova Energia 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.

High dependence on third party suppliers

– Renova Energia 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. Renova Energia 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.

Barriers of entry lowering

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

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.

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Weighted SWOT Analysis of Renova Energia Template, Example

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

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