CenterPoint Energy (CNP) SWOT Analysis / TOWS Matrix / MBA Resources
Natural Gas Utilities
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for CenterPoint Energy (United States)
Based on various researches at Oak Spring University , CenterPoint Energy is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, increasing commodity prices, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, technology disruption, there is increasing trade war between United States & China,
digital marketing is dominated by two big players Facebook and Google, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of CenterPoint Energy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that CenterPoint Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the CenterPoint Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which CenterPoint 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 CenterPoint Energy can be done for the following purposes –
1. Strategic planning of CenterPoint Energy
2. Improving business portfolio management of CenterPoint Energy
3. Assessing feasibility of the new initiative in United States
4. Making a Natural Gas Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of CenterPoint Energy
Strengths of CenterPoint Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of CenterPoint Energy are -
Low bargaining power of suppliers
– Suppliers of CenterPoint Energy in the Utilities sector have low bargaining power. CenterPoint Energy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps CenterPoint Energy to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Natural Gas Utilities industry
- digital transformation varies from industry to industry. For CenterPoint Energy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. CenterPoint Energy has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Ability to lead change in Natural Gas Utilities
– CenterPoint Energy is one of the leading players in the Natural Gas Utilities industry in United States. Over the years it has not only transformed the business landscape in the Natural Gas Utilities industry in United States but also across the existing markets. The ability to lead change has enabled CenterPoint 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
– CenterPoint Energy is present in almost all the verticals within the Natural Gas Utilities industry. This has provided CenterPoint 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
– CenterPoint Energy has one of the best training and development program in Utilities 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.
Operational resilience
– The operational resilience strategy of CenterPoint Energy comprises – understanding the underlying the factors in the Natural Gas 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.
Effective Research and Development (R&D)
– CenterPoint Energy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – CenterPoint Energy staying ahead in the Natural Gas Utilities industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Learning organization
- CenterPoint 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 CenterPoint Energy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at CenterPoint Energy emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– CenterPoint Energy is one of the most innovative firm in Natural Gas Utilities sector.
Strong track record of project management in the Natural Gas Utilities industry
– CenterPoint 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.
High brand equity
– CenterPoint Energy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled CenterPoint Energy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– CenterPoint Energy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. CenterPoint 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.
Weaknesses of CenterPoint Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of CenterPoint Energy are -
Employees’ less understanding of CenterPoint Energy strategy
– From the outside it seems that the employees of CenterPoint Energy 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.
Compensation and incentives
– The revenue per employee of CenterPoint Energy is just above the Natural Gas 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.
No frontier risks strategy
– From the 10K / annual statement of CenterPoint Energy, it seems that company is thinking out the frontier risks that can impact Natural Gas 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.
Products dominated business model
– Even though CenterPoint Energy has some of the most successful models in the Natural Gas Utilities industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. CenterPoint Energy should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– CenterPoint 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.
Slow decision making process
– As mentioned earlier in the report, CenterPoint 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 Natural Gas Utilities industry over the last five years. CenterPoint 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.
Interest costs
– Compare to the competition, CenterPoint Energy 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.
Low market penetration in new markets
– Outside its home market of United States, CenterPoint Energy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 CenterPoint Energy supply chain. Even after few cautionary changes, CenterPoint Energy is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left CenterPoint Energy vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that CenterPoint Energy needs to have more collaboration between its sales team and marketing team. Sales professionals in the Natural Gas Utilities industry have deep experience in developing customer relationships. Marketing department at CenterPoint Energy can leverage the sales team experience to cultivate customer relationships as CenterPoint Energy is planning to shift buying processes online.
High operating costs
– Compare to the competitors, CenterPoint Energy has high operating costs in the Natural Gas Utilities industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract CenterPoint Energy lucrative customers.
CenterPoint Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of CenterPoint Energy are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for CenterPoint 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 Natural Gas Utilities industry, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– CenterPoint Energy has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Natural Gas Utilities sector. This continuous investment in analytics has enabled CenterPoint Energy to build a competitive advantage using analytics. The analytics driven competitive advantage can help CenterPoint Energy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help CenterPoint Energy to increase its market reach. CenterPoint 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Natural Gas Utilities industry, but it has also influenced the consumer preferences. CenterPoint Energy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for CenterPoint Energy 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.
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 CenterPoint 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.
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. CenterPoint Energy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Building a culture of innovation
– managers at CenterPoint 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 Natural Gas Utilities industry.
Buying journey improvements
– CenterPoint Energy can improve the customer journey of consumers in the Natural Gas 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, CenterPoint Energy can use these opportunities to build new business models that can help the communities that CenterPoint Energy operates in. Secondly it can use opportunities from government spending in Natural Gas Utilities sector.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Natural Gas Utilities industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. CenterPoint 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. CenterPoint 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for CenterPoint Energy 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 CenterPoint Energy to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– CenterPoint Energy can develop new processes and procedures in Natural Gas 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.
Threats CenterPoint Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of CenterPoint Energy are -
High dependence on third party suppliers
– CenterPoint 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.
Shortening product life cycle
– it is one of the major threat that CenterPoint Energy is facing in Natural Gas Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Natural Gas Utilities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. CenterPoint Energy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of CenterPoint 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 CenterPoint Energy.
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 CenterPoint Energy business can come under increasing regulations regarding data privacy, data security, etc.
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.
Consumer confidence and its impact on CenterPoint 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 Natural Gas Utilities industry and other sectors.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, CenterPoint 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 CenterPoint Energy prominent markets.
Stagnating economy with rate increase
– CenterPoint Energy 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 Natural Gas Utilities industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, CenterPoint 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 Natural Gas Utilities 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. CenterPoint Energy needs to understand the core reasons impacting the Natural Gas Utilities industry. This will help it in building a better workplace.
Environmental challenges
– CenterPoint 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. CenterPoint Energy can take advantage of this fund but it will also bring new competitors in the Natural Gas Utilities industry.
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 CenterPoint Energy in the Natural Gas Utilities sector and impact the bottomline of the organization.
Weighted SWOT Analysis of CenterPoint Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at CenterPoint 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 CenterPoint 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 CenterPoint 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 CenterPoint 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 CenterPoint Energy needs to make to build a sustainable competitive advantage.
