American Energy (AEPT) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for American Energy (United States)

Based on various researches at Oak Spring University , American Energy is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, increasing household debt because of falling income levels, increasing energy prices, there is increasing trade war between United States & China, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , etc

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Introduction to SWOT Analysis of American Energy

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

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

The strengths of American Energy are -

Digital Transformation in Water Utilities industry

- digital transformation varies from industry to industry. For American Energy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. American Energy 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 American Energy in Water Utilities industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Effective Research and Development (R&D)

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

Successful track record of launching new products

– American Energy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. American Energy 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 brand equity

– American Energy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled American Energy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Highly skilled collaborators

– American Energy 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 American Energy have helped the firm to develop new products and bring them quickly to the marketplace.

Analytics focus

– American Energy 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 States 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.

Diverse revenue streams

– American Energy is present in almost all the verticals within the Water Utilities industry. This has provided American Energy 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

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

Ability to recruit top talent

– American Energy is one of the leading players in the Water Utilities industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.

Sustainable margins compare to other players in Water Utilities industry

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

Low bargaining power of suppliers

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

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

The weaknesses of American Energy are -

Interest costs

– Compare to the competition, American Energy 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.

High cash cycle compare to competitors

American Energy 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.

Lack of clear differentiation of American Energy products

– To increase the profitability and margins on the products, American Energy needs to provide more differentiated products than what it is currently offering in the marketplace.

Aligning sales with marketing

– From the outside it seems that American Energy needs to have more collaboration between its sales team and marketing team. Sales professionals in the Water Utilities industry have deep experience in developing customer relationships. Marketing department at American Energy can leverage the sales team experience to cultivate customer relationships as American Energy is planning to shift buying processes online.

Slow to strategic competitive environment developments

– As American Energy 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.

No frontier risks strategy

– From the 10K / annual statement of American Energy, 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.

Increasing silos among functional specialists

– The organizational structure of American Energy is dominated by functional specialists. It is not different from other players in the Water Utilities industry, but American Energy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help American Energy to focus more on services in the Water Utilities industry rather than just following the product oriented approach.

Need for greater diversity

– American Energy 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.

Slow decision making process

– As mentioned earlier in the report, American Energy 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. American Energy 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.

Employees’ less understanding of American Energy strategy

– From the outside it seems that the employees of American Energy 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.

Compensation and incentives

– The revenue per employee of American Energy 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.

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

The opportunities of American Energy are -

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, American Energy 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 American Energy 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, American Energy can use these opportunities to build new business models that can help the communities that American Energy operates in. Secondly it can use opportunities from government spending in Water Utilities sector.

Learning at scale

– Online learning technologies has now opened space for American Energy 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.

Creating value in data economy

– The success of analytics program of American Energy has opened avenues for new revenue streams for the organization in Water Utilities industry. This can help American Energy to build a more holistic ecosystem for American Energy products in the Water Utilities industry by providing – data insight services, data privacy related products, data based consulting services, 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. American Energy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Low interest rates

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

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. American Energy 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. American Energy 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.

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 American Energy in the Water Utilities industry. Now American Energy can target international markets with far fewer capital restrictions requirements than the existing system.

Better consumer reach

– The expansion of the 5G network will help American Energy to increase its market reach. American Energy will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.

Using analytics as competitive advantage

– American Energy has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Water Utilities sector. This continuous investment in analytics has enabled American Energy to build a competitive advantage using analytics. The analytics driven competitive advantage can help American Energy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Manufacturing automation

– American Energy 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

– American Energy 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.

Remote work and new talent hiring opportunities

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

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

The threats of American Energy are -

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 American Energy.

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 American Energy business can come under increasing regulations regarding data privacy, data security, etc.

Barriers of entry lowering

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

Increasing wage structure of American Energy

– 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 American Energy.

Learning curve for new practices

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

Shortening product life cycle

– it is one of the major threat that American Energy 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

– American Energy 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.

Consumer confidence and its impact on American Energy 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.

Stagnating economy with rate increase

– American Energy 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.

Environmental challenges

– American Energy 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. American Energy can take advantage of this fund but it will also bring new competitors in the Water Utilities industry.

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. American Energy 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.

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 American Energy in the Water Utilities sector and impact the bottomline of the organization.

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. American Energy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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Weighted SWOT Analysis of American Energy Template, Example

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

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