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 – there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings,
banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, 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 -
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.
Operational resilience
– The operational resilience strategy of Peabody Energy comprises – understanding the underlying the factors in the Coal 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.
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.
Low bargaining power of suppliers
– Suppliers of Peabody Energy in the Energy sector have low bargaining power. Peabody Energy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Peabody Energy to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Peabody Energy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Peabody Energy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
Innovation driven organization
– Peabody Energy is one of the most innovative firm in Coal sector.
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.
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.
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.
Diverse revenue streams
– Peabody Energy is present in almost all the verticals within the Coal industry. This has provided Peabody 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.
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.
Weaknesses of Peabody Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Peabody Energy are -
Products dominated business model
– Even though Peabody Energy has some of the most successful models in the Coal industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Peabody Energy should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of United States, Peabody Energy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Peabody 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.
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.
No frontier risks strategy
– From the 10K / annual statement of Peabody Energy, it seems that company is thinking out the frontier risks that can impact Coal 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.
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.
High bargaining power of channel partners in Coal industry
– because of the regulatory requirements in United States, Peabody Energy 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 Coal industry.
Aligning sales with marketing
– From the outside it seems that Peabody Energy needs to have more collaboration between its sales team and marketing team. Sales professionals in the Coal industry have deep experience in developing customer relationships. Marketing department at Peabody Energy can leverage the sales team experience to cultivate customer relationships as Peabody Energy is planning to shift buying processes online.
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.
Increasing silos among functional specialists
– The organizational structure of Peabody Energy is dominated by functional specialists. It is not different from other players in the Coal industry, but Peabody Energy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Peabody Energy to focus more on services in the Coal industry rather than just following the product oriented approach.
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 -
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Coal industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Peabody 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. Peabody 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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Coal industry, but it has also influenced the consumer preferences. Peabody Energy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Peabody 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 Peabody 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.
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.
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.
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.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Peabody Energy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Threats Peabody Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Peabody Energy are -
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.
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.
Easy access to finance
– Easy access to finance in Coal industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Peabody Energy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Peabody Energy in the Coal sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Peabody Energy has witnessed rapid integration of technology during Covid-19 in the Coal industry. As one of the leading players in the industry, Peabody Energy needs to keep up with the evolution of technology in the Coal 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 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.
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.
Shortening product life cycle
– it is one of the major threat that Peabody Energy is facing in Coal sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Coal industry are lowering. It can presents Peabody Energy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the 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.
