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 – technology disruption, increasing commodity prices, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , wage bills are increasing,
central banks are concerned over increasing inflation, increasing household debt because of falling income levels, 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 -
Successful track record of launching new products
– Covanta has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Covanta 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.
Innovation driven organization
– Covanta is one of the most innovative firm in Waste Management Services sector.
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.
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.
Sustainable margins compare to other players in Waste Management Services industry
– Covanta has clearly differentiated products in the market place. This has enabled Covanta to fetch slight price premium compare to the competitors in the Waste Management Services industry. The sustainable margins have also helped Covanta to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that Covanta 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.
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.
Effective Research and Development (R&D)
– Covanta has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Covanta staying ahead in the Waste Management Services industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
Operational resilience
– The operational resilience strategy of Covanta comprises – understanding the underlying the factors in the Waste Management Services 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.
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.
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.
Weaknesses of Covanta | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Covanta are -
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.
High dependence on Covanta ‘s star products
– The top 2 products and services of Covanta still accounts for major business revenue. This dependence on star products in Waste Management Services industry has resulted into insufficient focus on developing new products, even though Covanta has relatively successful track record of launching new products.
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.
Increasing silos among functional specialists
– The organizational structure of Covanta is dominated by functional specialists. It is not different from other players in the Waste Management Services industry, but Covanta needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Covanta to focus more on services in the Waste Management Services industry rather than just following the product oriented approach.
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.
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.
High operating costs
– Compare to the competitors, Covanta has high operating costs in the Waste Management Services industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Covanta lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Covanta has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Waste Management Services industry over the last five years. Covanta 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, 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.
Low market penetration in new markets
– Outside its home market of United States, Covanta needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Covanta Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Covanta are -
Use of Bitcoin and other crypto currencies for transactions in Waste Management Services industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Covanta in the Waste Management Services industry. Now Covanta can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Covanta in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Waste Management Services industry, and it will provide faster access to the consumers.
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.
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.
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.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Covanta can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Covanta to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Better consumer reach
– The expansion of the 5G network will help Covanta to increase its market reach. Covanta 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.
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.
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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Waste Management Services industry, but it has also influenced the consumer preferences. Covanta can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Covanta External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Covanta are -
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Waste Management Services industry are lowering. It can presents Covanta with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Waste Management Services sector.
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.
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.
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.
Technology acceleration in Forth Industrial Revolution
– Covanta has witnessed rapid integration of technology during Covid-19 in the Waste Management Services industry. As one of the leading players in the industry, Covanta needs to keep up with the evolution of technology in the Waste Management Services 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.
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.
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.
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 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.
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.
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.