Algonquin Power (AQN) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Algonquin Power (Canada)

Based on various researches at Oak Spring University , Algonquin Power is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing energy prices, increasing household debt because of falling income levels, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, customer relationship management is fast transforming because of increasing concerns over data privacy, central banks are concerned over increasing inflation, geopolitical disruptions, technology disruption, etc

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Introduction to SWOT Analysis of Algonquin Power

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

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Strengths of Algonquin Power | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Algonquin Power are -

Diverse revenue streams

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

Ability to recruit top talent

– Algonquin Power is one of the leading players in the Electric Utilities industry in Canada. It is in a position to attract the best talent available in Canada. The firm has a robust talent identification program that helps in identifying the brightest.

Innovation driven organization

– Algonquin Power is one of the most innovative firm in Electric Utilities sector.

High switching costs

– The high switching costs that Algonquin Power 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.

Effective Research and Development (R&D)

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

Superior customer experience

– The customer experience strategy of Algonquin Power in Electric Utilities industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Successful track record of launching new products

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

High brand equity

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

Analytics focus

– Algonquin Power 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 Canada 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.

Sustainable margins compare to other players in Electric Utilities industry

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

Learning organization

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

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Weaknesses of Algonquin Power | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Algonquin Power are -

Ability to respond to the competition

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

High bargaining power of channel partners in Electric Utilities industry

– because of the regulatory requirements in Canada, Algonquin Power 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 Electric Utilities industry.

Compensation and incentives

– The revenue per employee of Algonquin Power 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.

Products dominated business model

– Even though Algonquin Power has some of the most successful models in the Electric Utilities industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Algonquin Power should strive to include more intangible value offerings along with its core products and services.

Increasing silos among functional specialists

– The organizational structure of Algonquin Power is dominated by functional specialists. It is not different from other players in the Electric Utilities industry, but Algonquin Power needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Algonquin Power 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 Algonquin Power supply chain. Even after few cautionary changes, Algonquin Power is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Algonquin Power vulnerable to further global disruptions in South East Asia.

No frontier risks strategy

– From the 10K / annual statement of Algonquin Power, 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 decision making process

– As mentioned earlier in the report, Algonquin Power 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. Algonquin Power 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.

Interest costs

– Compare to the competition, Algonquin Power 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 operating costs

– Compare to the competitors, Algonquin Power has high operating costs in the Electric Utilities industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Algonquin Power lucrative customers.

Aligning sales with marketing

– From the outside it seems that Algonquin Power 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 Algonquin Power can leverage the sales team experience to cultivate customer relationships as Algonquin Power is planning to shift buying processes online.

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Algonquin Power Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Algonquin Power are -

Buying journey improvements

– Algonquin Power can improve the customer journey of consumers in the Electric Utilities 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.

Learning at scale

– Online learning technologies has now opened space for Algonquin Power 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.

Better consumer reach

– The expansion of the 5G network will help Algonquin Power to increase its market reach. Algonquin Power 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.

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. Algonquin Power can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Harnessing reconfiguration of the global supply chains

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for Algonquin Power 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.

Leveraging digital technologies

– Algonquin Power 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.

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. Algonquin Power 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. Algonquin Power 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.

Using analytics as competitive advantage

– Algonquin Power 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 Algonquin Power to build a competitive advantage using analytics. The analytics driven competitive advantage can help Algonquin Power to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Developing new processes and practices

– Algonquin Power 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.

Loyalty marketing

– Algonquin Power 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.

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

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Threats Algonquin Power External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Algonquin Power are -

Regulatory challenges

– Algonquin Power 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 Electric Utilities industry regulations.

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

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Algonquin Power 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 Algonquin Power prominent markets.

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.

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 Algonquin Power in the Electric Utilities sector and impact the bottomline of the organization.

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. Algonquin Power 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.

Barriers of entry lowering

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

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 dependence on third party suppliers

– Algonquin Power 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 wage structure of Algonquin Power

– 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 Algonquin Power.

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

Learning curve for new practices

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

Stagnating economy with rate increase

– Algonquin Power 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.

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Weighted SWOT Analysis of Algonquin Power Template, Example

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

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