The AES (AES) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for The AES (United States)

Based on various researches at Oak Spring University , The AES is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of The AES

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

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Strengths of The AES | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of The AES are -

Cross disciplinary teams

– Horizontal connected teams at the The AES 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 brand equity

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

Successful track record of launching new products

– The AES has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. The AES 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.

Analytics focus

– The AES 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 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.

Ability to lead change in Electric Utilities

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

Diverse revenue streams

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

Organizational Resilience of The AES

– The covid-19 pandemic has put organizational resilience at the centre of everthing The AES 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 The AES in the Utilities sector have low bargaining power. The AES has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps The AES to manage not only supply disruptions but also source products at highly competitive prices.

Strong track record of project management in the Electric Utilities industry

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

Highly skilled collaborators

– The AES has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Electric Utilities industry. Secondly the value chain collaborators of The AES have helped the firm to develop new products and bring them quickly to the marketplace.

Effective Research and Development (R&D)

– The AES has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – The AES staying ahead in the Electric Utilities industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Innovation driven organization

– The AES is one of the most innovative firm in Electric Utilities sector.

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Weaknesses of The AES | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of The AES are -

Skills based hiring in Electric Utilities industry

– The stress on hiring functional specialists at The AES 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

– The AES 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.

Lack of clear differentiation of The AES products

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

Ability to respond to the competition

– As the decision making is very deliberative at The AES, in the dynamic environment of Electric Utilities industry it has struggled to respond to the nimble upstart competition. The AES has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Increasing silos among functional specialists

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

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 The AES supply chain. Even after few cautionary changes, The AES is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left The AES vulnerable to further global disruptions in South East Asia.

No frontier risks strategy

– From the 10K / annual statement of The AES, it seems that company is thinking out the frontier risks that can impact Electric 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.

Slow to strategic competitive environment developments

– As The AES 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.

Low market penetration in new markets

– Outside its home market of United States, The AES needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Slow decision making process

– As mentioned earlier in the report, The AES has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Electric Utilities industry over the last five years. The AES 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.

Aligning sales with marketing

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

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The AES Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of The AES are -

Learning at scale

– Online learning technologies has now opened space for The AES 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.

Building a culture of innovation

– managers at The AES 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.

Creating value in data economy

– The success of analytics program of The AES has opened avenues for new revenue streams for the organization in Electric Utilities industry. This can help The AES to build a more holistic ecosystem for The AES products in the Electric Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Use of Bitcoin and other crypto currencies for transactions in Electric Utilities industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for The AES in the Electric Utilities industry. Now The AES can target international markets with far fewer capital restrictions requirements than the existing system.

Redefining models of collaboration and team work

– As explained in the weaknesses section, The AES is facing challenges because of the dominance of functional experts in the organization. The AES can utilize new technology in the field of Electric Utilities industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Loyalty marketing

– The AES 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.

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 The AES 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.

Harnessing reconfiguration of the global supply chains

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

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Electric Utilities industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. The AES 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. The AES 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.

Remote work and new talent hiring opportunities

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

Manufacturing automation

– The AES 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for The AES 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects The AES can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

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Threats The AES External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of The AES are -

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, The AES 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 The AES prominent markets.

Barriers of entry lowering

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

Environmental challenges

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

High dependence on third party suppliers

– The AES 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.

Shortening product life cycle

– it is one of the major threat that The AES is facing in Electric Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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. The AES 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.

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.

Easy access to finance

– Easy access to finance in Electric Utilities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. The AES can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

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 The AES.

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.

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. The AES needs to understand the core reasons impacting the Electric Utilities industry. This will help it in building a better workplace.

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 The AES business can come under increasing regulations regarding data privacy, data security, etc.

Increasing wage structure of The AES

– 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 The AES.

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Weighted SWOT Analysis of The AES Template, Example

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

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