Peabody Energy (BTU) SWOT Analysis / TOWS Matrix / MBA Resources
Coal
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Peabody Energy (United States)
Based on various researches at Oak Spring University , Peabody Energy is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, there is increasing trade war between United States & China, increasing energy prices, central banks are concerned over increasing inflation, increasing transportation and logistics costs,
there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Peabody Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Peabody Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Peabody 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.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Peabody Energy can be done for the following purposes –
1. Strategic planning of Peabody Energy
2. Improving business portfolio management of Peabody Energy
3. Assessing feasibility of the new initiative in United States
4. Making a Coal sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Peabody Energy
Strengths of Peabody Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Peabody Energy are -
Sustainable margins compare to other players in Coal industry
– Peabody Energy has clearly differentiated products in the market place. This has enabled Peabody Energy to fetch slight price premium compare to the competitors in the Coal industry. The sustainable margins have also helped Peabody Energy to invest into research and development (R&D) and innovation.
Analytics focus
– Peabody 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 Coal 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
– Peabody Energy has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Coal industry. Secondly the value chain collaborators of Peabody Energy have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Peabody Energy 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.
Organizational Resilience of Peabody Energy
– The covid-19 pandemic has put organizational resilience at the centre of everthing Peabody Energy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Learning organization
- Peabody 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 Peabody Energy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Peabody Energy emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Peabody Energy is one of the leading players in the Coal 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.
Training and development
– Peabody Energy has one of the best training and development program in Energy 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.
Strong track record of project management in the Coal industry
– Peabody Energy is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Ability to lead change in Coal
– Peabody Energy is one of the leading players in the Coal industry in United States. Over the years it has not only transformed the business landscape in the Coal industry in United States but also across the existing markets. The ability to lead change has enabled Peabody Energy 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
– Peabody Energy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Peabody 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.
Superior customer experience
– The customer experience strategy of Peabody Energy in Coal industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Peabody Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Peabody Energy are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Peabody Energy is slow explore the new channels of communication. These new channels of communication can help Peabody Energy to provide better information regarding Coal products and services. It can also build an online community to further reach out to potential customers.
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 Peabody Energy supply chain. Even after few cautionary changes, Peabody Energy is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Peabody Energy vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, Peabody Energy has high operating costs in the Coal industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Peabody Energy lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Peabody 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 Coal industry over the last five years. Peabody 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.
Slow to strategic competitive environment developments
– As Peabody Energy is one of the leading players in the Coal industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Coal industry in last five years.
Skills based hiring in Coal industry
– The stress on hiring functional specialists at Peabody Energy 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.
Ability to respond to the competition
– As the decision making is very deliberative at Peabody Energy, in the dynamic environment of Coal industry it has struggled to respond to the nimble upstart competition. Peabody Energy has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on Peabody Energy ‘s star products
– The top 2 products and services of Peabody Energy still accounts for major business revenue. This dependence on star products in Coal industry has resulted into insufficient focus on developing new products, even though Peabody Energy has relatively successful track record of launching new products.
High cash cycle compare to competitors
Peabody Energy has a high cash cycle compare to other players in the Coal 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 Peabody Energy products
– To increase the profitability and margins on the products, Peabody Energy needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee of Peabody Energy is just above the Coal 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.
Peabody Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Peabody Energy are -
Using analytics as competitive advantage
– Peabody Energy has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Coal sector. This continuous investment in analytics has enabled Peabody Energy to build a competitive advantage using analytics. The analytics driven competitive advantage can help Peabody Energy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Peabody Energy 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 Peabody Energy 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 Peabody Energy in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Coal industry, and it will provide faster access to the consumers.
Manufacturing automation
– Peabody Energy can use the latest technology developments to improve its manufacturing and designing process in Coal 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.
Use of Bitcoin and other crypto currencies for transactions in Coal industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Peabody Energy in the Coal industry. Now Peabody Energy can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Peabody Energy has opened avenues for new revenue streams for the organization in Coal industry. This can help Peabody Energy to build a more holistic ecosystem for Peabody Energy products in the Coal industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Peabody Energy can use these opportunities to build new business models that can help the communities that Peabody Energy operates in. Secondly it can use opportunities from government spending in Coal sector.
Buying journey improvements
– Peabody Energy can improve the customer journey of consumers in the Coal 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Peabody 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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Peabody Energy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Peabody Energy to increase its market reach. Peabody 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.
Building a culture of innovation
– managers at Peabody Energy 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 Coal industry.
Threats Peabody Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Peabody Energy are -
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 Peabody Energy business can come under increasing regulations regarding data privacy, data security, etc.
Regulatory challenges
– Peabody Energy 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 Coal industry regulations.
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. Peabody 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.
High dependence on third party suppliers
– Peabody 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Peabody Energy 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 Peabody Energy prominent markets.
Consumer confidence and its impact on Peabody 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 Coal industry and other sectors.
Increasing wage structure of Peabody 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 Peabody Energy.
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. Peabody Energy needs to understand the core reasons impacting the Coal industry. This will help it in building a better workplace.
Environmental challenges
– Peabody 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. Peabody Energy can take advantage of this fund but it will also bring new competitors in the Coal 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 Peabody Energy.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Peabody 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 Coal sector.
Weighted SWOT Analysis of Peabody Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Peabody 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 Peabody 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 Peabody 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 Peabody 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 Peabody Energy needs to make to build a sustainable competitive advantage.