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 – there is backlash against globalization, wage bills are increasing, increasing energy prices, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs,
geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, 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 -
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.
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.
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.
Innovation driven organization
– CenterPoint Energy is one of the most innovative firm in Natural Gas Utilities sector.
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.
Cross disciplinary teams
– Horizontal connected teams at the CenterPoint Energy are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
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.
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.
Sustainable margins compare to other players in Natural Gas Utilities industry
– CenterPoint Energy has clearly differentiated products in the market place. This has enabled CenterPoint Energy to fetch slight price premium compare to the competitors in the Natural Gas Utilities industry. The sustainable margins have also helped CenterPoint Energy to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of CenterPoint Energy in Natural Gas Utilities industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– CenterPoint Energy is one of the leading players in the Natural Gas 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.
Weaknesses of CenterPoint Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of CenterPoint Energy are -
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, CenterPoint Energy is slow explore the new channels of communication. These new channels of communication can help CenterPoint Energy to provide better information regarding Natural Gas Utilities products and services. It can also build an online community to further reach out to potential customers.
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 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.
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.
Increasing silos among functional specialists
– The organizational structure of CenterPoint Energy is dominated by functional specialists. It is not different from other players in the Natural Gas Utilities industry, but CenterPoint Energy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help CenterPoint Energy to focus more on services in the Natural Gas Utilities industry rather than just following the product oriented approach.
Ability to respond to the competition
– As the decision making is very deliberative at CenterPoint Energy, in the dynamic environment of Natural Gas Utilities industry it has struggled to respond to the nimble upstart competition. CenterPoint Energy has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Lack of clear differentiation of CenterPoint Energy products
– To increase the profitability and margins on the products, CenterPoint Energy needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
CenterPoint Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of CenterPoint Energy are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, CenterPoint Energy is facing challenges because of the dominance of functional experts in the organization. CenterPoint Energy can utilize new technology in the field of Natural Gas Utilities industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Use of Bitcoin and other crypto currencies for transactions in Natural Gas Utilities industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for CenterPoint Energy in the Natural Gas Utilities industry. Now CenterPoint Energy can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– CenterPoint Energy 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.
Manufacturing automation
– CenterPoint Energy can use the latest technology developments to improve its manufacturing and designing process in Natural Gas Utilities 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, CenterPoint 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.
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.
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.
Leveraging digital technologies
– CenterPoint 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.
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.
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.
Creating value in data economy
– The success of analytics program of CenterPoint Energy has opened avenues for new revenue streams for the organization in Natural Gas Utilities industry. This can help CenterPoint Energy to build a more holistic ecosystem for CenterPoint Energy products in the Natural Gas 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 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.
Threats CenterPoint Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of CenterPoint Energy are -
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.
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.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– CenterPoint Energy has witnessed rapid integration of technology during Covid-19 in the Natural Gas Utilities industry. As one of the leading players in the industry, CenterPoint Energy needs to keep up with the evolution of technology in the Natural Gas 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.
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.
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for CenterPoint Energy in Natural Gas Utilities industry. The Natural Gas Utilities industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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 CenterPoint Energy.
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. CenterPoint 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.
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.