AGL Energy (AGL) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for AGL Energy (Australia)

Based on various researches at Oak Spring University , AGL Energy is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, cloud computing is disrupting traditional business models, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing household debt because of falling income levels, increasing commodity prices, there is increasing trade war between United States & China, etc

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Introduction to SWOT Analysis of AGL Energy

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that AGL Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the AGL Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which AGL 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of AGL Energy can be done for the following purposes –
1. Strategic planning of AGL Energy
2. Improving business portfolio management of AGL Energy
3. Assessing feasibility of the new initiative in Australia
4. Making a Electric Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of AGL Energy

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Strengths of AGL Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of AGL Energy are -

Training and development

– AGL 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.

Successful track record of launching new products

– AGL Energy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. AGL 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.

Ability to lead change in Electric Utilities

– AGL Energy is one of the leading players in the Electric Utilities industry in Australia. Over the years it has not only transformed the business landscape in the Electric Utilities industry in Australia but also across the existing markets. The ability to lead change has enabled AGL Energy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Effective Research and Development (R&D)

– AGL Energy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – AGL Energy staying ahead in the Electric Utilities industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.

Superior customer experience

– The customer experience strategy of AGL Energy in Electric Utilities industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Organizational Resilience of AGL Energy

– The covid-19 pandemic has put organizational resilience at the centre of everthing AGL Energy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

Diverse revenue streams

– AGL Energy is present in almost all the verticals within the Electric Utilities industry. This has provided AGL 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.

Digital Transformation in Electric Utilities industry

- digital transformation varies from industry to industry. For AGL Energy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. AGL 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.

High brand equity

– AGL Energy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled AGL Energy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Analytics focus

– AGL Energy 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 Electric Utilities industry. The technology infrastructure of Australia 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.

Cross disciplinary teams

– Horizontal connected teams at the AGL 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.

Low bargaining power of suppliers

– Suppliers of AGL Energy in the Utilities sector have low bargaining power. AGL Energy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps AGL Energy to manage not only supply disruptions but also source products at highly competitive prices.

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Weaknesses of AGL Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of AGL Energy are -

Capital Spending Reduction

– Even during the low interest decade, AGL 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 Electric Utilities industry using digital technology.

Employees’ less understanding of AGL Energy strategy

– From the outside it seems that the employees of AGL 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.

Products dominated business model

– Even though AGL Energy has some of the most successful models in the Electric Utilities industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. AGL Energy should strive to include more intangible value offerings along with its core products and services.

Slow to strategic competitive environment developments

– As AGL Energy is one of the leading players in the Electric Utilities industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Electric Utilities industry in last five years.

High cash cycle compare to competitors

AGL Energy has a high cash cycle compare to other players in the Electric 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.

Skills based hiring in Electric Utilities industry

– The stress on hiring functional specialists at AGL 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.

No frontier risks strategy

– From the 10K / annual statement of AGL Energy, it seems that company is thinking out the frontier risks that can impact Electric 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.

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 AGL Energy supply chain. Even after few cautionary changes, AGL Energy is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left AGL Energy vulnerable to further global disruptions in South East Asia.

Ability to respond to the competition

– As the decision making is very deliberative at AGL Energy, in the dynamic environment of Electric Utilities industry it has struggled to respond to the nimble upstart competition. AGL Energy has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, AGL Energy is slow explore the new channels of communication. These new channels of communication can help AGL Energy to provide better information regarding Electric Utilities products and services. It can also build an online community to further reach out to potential customers.

Compensation and incentives

– The revenue per employee of AGL Energy is just above the Electric 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.

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AGL Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of AGL Energy are -

Reforming the budgeting process

- By establishing new metrics that will be used to evaluate both existing and potential projects AGL Energy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.

Finding new ways to collaborate

– Covid-19 has not only transformed business models of companies in Electric Utilities industry, but it has also influenced the consumer preferences. AGL Energy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Developing new processes and practices

– AGL Energy can develop new processes and procedures in Electric 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.

Better consumer reach

– The expansion of the 5G network will help AGL Energy to increase its market reach. AGL 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.

Changes in consumer behavior post Covid-19

– consumer behavior has changed in the Electric Utilities industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. AGL 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. AGL 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for AGL 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 AGL Energy to hire the very best people irrespective of their geographical location.

Creating value in data economy

– The success of analytics program of AGL Energy has opened avenues for new revenue streams for the organization in Electric Utilities industry. This can help AGL Energy to build a more holistic ecosystem for AGL Energy products in the Electric Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, AGL 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 AGL 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.

Loyalty marketing

– AGL 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, AGL Energy can use these opportunities to build new business models that can help the communities that AGL Energy operates in. Secondly it can use opportunities from government spending in Electric Utilities sector.

Buying journey improvements

– AGL Energy can improve the customer journey of consumers in the Electric 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.

Manufacturing automation

– AGL Energy can use the latest technology developments to improve its manufacturing and designing process in Electric 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.

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. AGL Energy can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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Threats AGL Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of AGL Energy are -

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Electric Utilities industry are lowering. It can presents AGL Energy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Electric Utilities sector.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, AGL Energy 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 AGL Energy prominent markets.

High dependence on third party suppliers

– AGL 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.

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. AGL 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.

Environmental challenges

– AGL Energy 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. AGL Energy can take advantage of this fund but it will also bring new competitors in the Electric Utilities industry.

Increasing wage structure of AGL 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 AGL Energy.

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 AGL 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. AGL Energy needs to understand the core reasons impacting the Electric Utilities industry. This will help it in building a better workplace.

Stagnating economy with rate increase

– AGL 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 Electric Utilities industry.

Easy access to finance

– Easy access to finance in Electric Utilities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. AGL 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 AGL Energy is facing in Electric Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 AGL Energy business can come under increasing regulations regarding data privacy, data security, etc.

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Weighted SWOT Analysis of AGL Energy Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at AGL 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 AGL 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 AGL 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 AGL 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 AGL Energy needs to make to build a sustainable competitive advantage.

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