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 – cloud computing is disrupting traditional business models, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies, technology disruption,
customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, 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 -
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.
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.
Ability to lead change in Waste Management Services
– Covanta is one of the leading players in the Waste Management Services industry in United States. Over the years it has not only transformed the business landscape in the Waste Management Services industry in United States but also across the existing markets. The ability to lead change has enabled Covanta in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
Innovation driven organization
– Covanta is one of the most innovative firm in Waste Management Services sector.
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.
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.
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.
High brand equity
– Covanta has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Covanta to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
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.
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.
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.
Weaknesses of Covanta | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Covanta are -
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.
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.
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.
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.
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.
Slow to strategic competitive environment developments
– As Covanta is one of the leading players in the Waste Management Services industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Waste Management Services industry in last five years.
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.
Capital Spending Reduction
– Even during the low interest decade, Covanta 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 Waste Management Services industry using digital technology.
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.
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.
Covanta Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Covanta are -
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Covanta is facing challenges because of the dominance of functional experts in the organization. Covanta can utilize new technology in the field of Waste Management Services industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
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.
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.
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.
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.
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.
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.
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.
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.
Manufacturing automation
– Covanta can use the latest technology developments to improve its manufacturing and designing process in Waste Management Services 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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Covanta 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 Covanta to hire the very best people irrespective of their geographical location.
Threats Covanta External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Covanta are -
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.
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.
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.
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. Covanta needs to understand the core reasons impacting the Waste Management Services industry. This will help it in building a better workplace.
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.
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.
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.
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.
Regulatory challenges
– Covanta 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 Waste Management Services industry regulations.
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.
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.
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 Covanta business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.