Covanta (CVA) SWOT Analysis / TOWS Matrix / MBA Resources
Waste Management Services
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Covanta (United States)
Based on various researches at Oak Spring University , Covanta is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, supply chains are disrupted by pandemic , technology disruption, wage bills are increasing,
there is backlash against globalization, challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Covanta can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Covanta, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Covanta 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 Covanta can be done for the following purposes –
1. Strategic planning of Covanta
2. Improving business portfolio management of Covanta
3. Assessing feasibility of the new initiative in United States
4. Making a Waste Management Services sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Covanta
Strengths of Covanta | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Covanta are -
Training and development
– Covanta has one of the best training and development program in Services 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.
Ability to recruit top talent
– Covanta is one of the leading players in the Waste Management Services 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.
Cross disciplinary teams
– Horizontal connected teams at the Covanta 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.
Organizational Resilience of Covanta
– The covid-19 pandemic has put organizational resilience at the centre of everthing Covanta does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Covanta 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 Waste Management Services industry. The technology infrastructure of United States is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Superior customer experience
– The customer experience strategy of Covanta in Waste Management Services industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Strong track record of project management in the Waste Management Services industry
– Covanta is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Covanta has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Waste Management Services industry. Secondly the value chain collaborators of Covanta have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Covanta 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 Covanta is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Covanta emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Covanta in the Services sector have low bargaining power. Covanta has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Covanta to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Waste Management Services industry
- digital transformation varies from industry to industry. For Covanta digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Covanta 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
– Covanta is present in almost all the verticals within the Waste Management Services industry. This has provided Covanta 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.
Weaknesses of Covanta | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Covanta are -
No frontier risks strategy
– From the 10K / annual statement of Covanta, it seems that company is thinking out the frontier risks that can impact Waste Management Services 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.
Employees’ less understanding of Covanta strategy
– From the outside it seems that the employees of Covanta 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.
Ability to respond to the competition
– As the decision making is very deliberative at Covanta, in the dynamic environment of Waste Management Services industry it has struggled to respond to the nimble upstart competition. Covanta has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Covanta has a high cash cycle compare to other players in the Waste Management Services industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Skills based hiring in Waste Management Services industry
– The stress on hiring functional specialists at Covanta 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.
Need for greater diversity
– Covanta 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.
Products dominated business model
– Even though Covanta has some of the most successful models in the Waste Management Services industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Covanta should strive to include more intangible value offerings along with its core products and services.
Compensation and incentives
– The revenue per employee of Covanta is just above the Waste Management Services 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.
Aligning sales with marketing
– From the outside it seems that Covanta needs to have more collaboration between its sales team and marketing team. Sales professionals in the Waste Management Services industry have deep experience in developing customer relationships. Marketing department at Covanta can leverage the sales team experience to cultivate customer relationships as Covanta is planning to shift buying processes online.
Interest costs
– Compare to the competition, Covanta 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Covanta is slow explore the new channels of communication. These new channels of communication can help Covanta to provide better information regarding Waste Management Services products and services. It can also build an online community to further reach out to potential customers.
Covanta Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Covanta are -
Creating value in data economy
– The success of analytics program of Covanta has opened avenues for new revenue streams for the organization in Waste Management Services industry. This can help Covanta to build a more holistic ecosystem for Covanta products in the Waste Management Services industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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 Covanta 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.
Using analytics as competitive advantage
– Covanta has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Waste Management Services sector. This continuous investment in analytics has enabled Covanta to build a competitive advantage using analytics. The analytics driven competitive advantage can help Covanta to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Covanta can use these opportunities to build new business models that can help the communities that Covanta operates in. Secondly it can use opportunities from government spending in Waste Management Services sector.
Buying journey improvements
– Covanta can improve the customer journey of consumers in the Waste Management Services 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.
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. Covanta can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Developing new processes and practices
– Covanta can develop new processes and procedures in Waste Management Services 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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Waste Management Services industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Covanta 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. Covanta 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Covanta 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.
Loyalty marketing
– Covanta 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, Covanta 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 Covanta to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Covanta 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 Waste Management Services industry.
Leveraging digital technologies
– Covanta 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.
Threats Covanta External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Covanta 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. Covanta 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
– Covanta 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 Waste Management Services industry.
Consumer confidence and its impact on Covanta 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 Waste Management Services industry and other sectors.
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.
Increasing wage structure of Covanta
– 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 Covanta.
Easy access to finance
– Easy access to finance in Waste Management Services industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Covanta can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Covanta 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. Covanta can take advantage of this fund but it will also bring new competitors in the Waste Management Services 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 Covanta in the Waste Management Services sector and impact the bottomline 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 Covanta in Waste Management Services industry. The Waste Management Services 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.
High dependence on third party suppliers
– Covanta 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 Covanta is facing in Waste Management Services sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Covanta.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Covanta 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 Covanta prominent markets.
Weighted SWOT Analysis of Covanta Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Covanta 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 Covanta 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 Covanta 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 Covanta 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 Covanta needs to make to build a sustainable competitive advantage.