Black Hills (BKH) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Black Hills (United States)

Based on various researches at Oak Spring University , Black Hills is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, central banks are concerned over increasing inflation, there is backlash against globalization, technology disruption, wage bills are increasing, geopolitical disruptions, challanges to central banks by blockchain based private currencies, etc

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Introduction to SWOT Analysis of Black Hills

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Black Hills can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Black Hills, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Black Hills 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 Black Hills can be done for the following purposes –
1. Strategic planning of Black Hills
2. Improving business portfolio management of Black Hills
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 Black Hills

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Strengths of Black Hills | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Black Hills are -

Learning organization

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

Analytics focus

– Black Hills 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.

Highly skilled collaborators

– Black Hills 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 Black Hills have helped the firm to develop new products and bring them quickly to the marketplace.

Low bargaining power of suppliers

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

High switching costs

– The high switching costs that Black Hills 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.

Diverse revenue streams

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

High brand equity

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

Sustainable margins compare to other players in Electric Utilities industry

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

Organizational Resilience of Black Hills

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

Ability to recruit top talent

– Black Hills is one of the leading players in the Electric 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.

Ability to lead change in Electric Utilities

– Black Hills 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 Black Hills in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Operational resilience

– The operational resilience strategy of Black Hills comprises – understanding the underlying the factors in the Electric 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.

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Weaknesses of Black Hills | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Black Hills are -

Interest costs

– Compare to the competition, Black Hills 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.

Increasing silos among functional specialists

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

Lack of clear differentiation of Black Hills products

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

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

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Black Hills is slow explore the new channels of communication. These new channels of communication can help Black Hills to provide better information regarding Electric Utilities products and services. It can also build an online community to further reach out to potential customers.

Skills based hiring in Electric Utilities industry

– The stress on hiring functional specialists at Black Hills 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.

Compensation and incentives

– The revenue per employee of Black Hills is just above the Electric 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.

Slow decision making process

– As mentioned earlier in the report, Black Hills 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. Black Hills 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.

Need for greater diversity

– Black Hills 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.

Employees’ less understanding of Black Hills strategy

– From the outside it seems that the employees of Black Hills 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 cash cycle compare to competitors

Black Hills 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.

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Black Hills Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Black Hills are -

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. Black Hills 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. Black Hills 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.

Creating value in data economy

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

Learning at scale

– Online learning technologies has now opened space for Black Hills 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.

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 Black Hills in the Electric Utilities industry. Now Black Hills can target international markets with far fewer capital restrictions requirements than the existing system.

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. Black Hills 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, Black Hills 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.

Developing new processes and practices

– Black Hills 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.

Using analytics as competitive advantage

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

Leveraging digital technologies

– Black Hills 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.

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 Black Hills 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 Black Hills 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.

Loyalty marketing

– Black Hills 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.

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects Black Hills 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 Black Hills External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Black Hills are -

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.

Shortening product life cycle

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

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 Black Hills in the Electric Utilities sector and impact the bottomline of the organization.

Environmental challenges

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

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 Black Hills.

Technology acceleration in Forth Industrial Revolution

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

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Black Hills 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 Black Hills prominent markets.

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 Black Hills business can come under increasing regulations regarding data privacy, data security, etc.

Consumer confidence and its impact on Black Hills 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 Electric Utilities industry and other sectors.

Stagnating economy with rate increase

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

High dependence on third party suppliers

– Black Hills 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.

Learning curve for new practices

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

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Weighted SWOT Analysis of Black Hills Template, Example

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

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