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 – cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, increasing household debt because of falling income levels,
there is backlash against globalization, increasing commodity prices, 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 -
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.
High switching costs
– The high switching costs that CenterPoint Energy has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
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.
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.
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.
Organizational Resilience of CenterPoint Energy
– The covid-19 pandemic has put organizational resilience at the centre of everthing CenterPoint Energy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
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.
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.
Highly skilled collaborators
– CenterPoint Energy has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Natural Gas Utilities industry. Secondly the value chain collaborators of CenterPoint Energy have helped the firm to develop new products and bring them quickly to the marketplace.
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.
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.
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 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.
Capital Spending Reduction
– Even during the low interest decade, CenterPoint Energy has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Natural Gas Utilities industry using digital technology.
High bargaining power of channel partners in Natural Gas Utilities industry
– because of the regulatory requirements in United States, CenterPoint 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 Natural Gas Utilities industry.
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.
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.
Workers concerns about automation
– As automation is fast increasing in the Natural Gas Utilities industry, CenterPoint Energy needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
High cash cycle compare to competitors
CenterPoint Energy has a high cash cycle compare to other players in the Natural Gas Utilities industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
High dependence on CenterPoint Energy ‘s star products
– The top 2 products and services of CenterPoint Energy still accounts for major business revenue. This dependence on star products in Natural Gas Utilities industry has resulted into insufficient focus on developing new products, even though CenterPoint Energy has relatively successful track record of launching new products.
Skills based hiring in Natural Gas Utilities industry
– The stress on hiring functional specialists at CenterPoint 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.
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.
CenterPoint Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of CenterPoint Energy are -
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.
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.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, CenterPoint 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 CenterPoint 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.
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.
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.
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.
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.
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.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects CenterPoint Energy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
Threats CenterPoint Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of CenterPoint Energy are -
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Natural Gas Utilities industry are lowering. It can presents CenterPoint Energy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Natural Gas 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.
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.
Regulatory challenges
– CenterPoint Energy needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Natural Gas Utilities industry regulations.
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 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.
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.
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.
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 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.
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.
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.