FirstEnergy (FE) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for FirstEnergy (United States)

Based on various researches at Oak Spring University , FirstEnergy is operating in a macro-environment that has been destablized by – wage bills are increasing, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , geopolitical disruptions, technology disruption, increasing energy prices, there is increasing trade war between United States & China, etc

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Introduction to SWOT Analysis of FirstEnergy

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that FirstEnergy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the FirstEnergy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which FirstEnergy 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 FirstEnergy can be done for the following purposes –
1. Strategic planning of FirstEnergy
2. Improving business portfolio management of FirstEnergy
3. Assessing feasibility of the new initiative in United States
4. Making a Electric Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of FirstEnergy

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

The strengths of FirstEnergy are -

Cross disciplinary teams

– Horizontal connected teams at the FirstEnergy 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.

Effective Research and Development (R&D)

– FirstEnergy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – FirstEnergy 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.

High switching costs

– The high switching costs that FirstEnergy 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.

Analytics focus

– FirstEnergy 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 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 FirstEnergy in Electric Utilities industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.

Sustainable margins compare to other players in Electric Utilities industry

– FirstEnergy has clearly differentiated products in the market place. This has enabled FirstEnergy to fetch slight price premium compare to the competitors in the Electric Utilities industry. The sustainable margins have also helped FirstEnergy to invest into research and development (R&D) and innovation.

Digital Transformation in Electric Utilities industry

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

Strong track record of project management in the Electric Utilities industry

– FirstEnergy is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Diverse revenue streams

– FirstEnergy is present in almost all the verticals within the Electric Utilities industry. This has provided FirstEnergy 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 brand equity

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

Learning organization

- FirstEnergy 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 FirstEnergy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at FirstEnergy emphasize – knowledge, initiative, and innovation.

Training and development

– FirstEnergy 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.

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

The weaknesses of FirstEnergy are -

High operating costs

– Compare to the competitors, FirstEnergy has high operating costs in the Electric Utilities industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract FirstEnergy lucrative customers.

Compensation and incentives

– The revenue per employee of FirstEnergy 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.

Slow to harness new channels of communication

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

Slow decision making process

– As mentioned earlier in the report, FirstEnergy has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Electric Utilities industry over the last five years. FirstEnergy 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.

Ability to respond to the competition

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

Skills based hiring in Electric Utilities industry

– The stress on hiring functional specialists at FirstEnergy 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.

Products dominated business model

– Even though FirstEnergy 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. FirstEnergy should strive to include more intangible value offerings along with its core products and services.

High dependence on FirstEnergy ‘s star products

– The top 2 products and services of FirstEnergy still accounts for major business revenue. This dependence on star products in Electric Utilities industry has resulted into insufficient focus on developing new products, even though FirstEnergy has relatively successful track record of launching new products.

No frontier risks strategy

– From the 10K / annual statement of FirstEnergy, 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.

Employees’ less understanding of FirstEnergy strategy

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

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

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

The opportunities of FirstEnergy are -

Creating value in data economy

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

Learning at scale

– Online learning technologies has now opened space for FirstEnergy 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.

Use of Bitcoin and other crypto currencies for transactions in Electric Utilities industry

– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for FirstEnergy in the Electric Utilities industry. Now FirstEnergy can target international markets with far fewer capital restrictions requirements than the existing system.

Loyalty marketing

– FirstEnergy 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.

Redefining models of collaboration and team work

– As explained in the weaknesses section, FirstEnergy is facing challenges because of the dominance of functional experts in the organization. FirstEnergy can utilize new technology in the field of Electric Utilities industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, 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 FirstEnergy 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.

Developing new processes and practices

– FirstEnergy 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.

Remote work and new talent hiring opportunities

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

Increase in government spending

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for FirstEnergy in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Electric Utilities industry, and it will provide faster access to the consumers.

Buying journey improvements

– FirstEnergy 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.

Reforming the budgeting process

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

Using analytics as competitive advantage

– FirstEnergy has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Electric Utilities sector. This continuous investment in analytics has enabled FirstEnergy to build a competitive advantage using analytics. The analytics driven competitive advantage can help FirstEnergy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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

The threats of FirstEnergy are -

Barriers of entry lowering

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

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. FirstEnergy 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.

Technology acceleration in Forth Industrial Revolution

– FirstEnergy has witnessed rapid integration of technology during Covid-19 in the Electric Utilities industry. As one of the leading players in the industry, FirstEnergy needs to keep up with the evolution of technology in the Electric Utilities 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.

Increasing international competition and downward pressure on margins

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

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for FirstEnergy in Electric Utilities industry. The Electric Utilities 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.

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.

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 FirstEnergy.

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 FirstEnergy in the Electric Utilities sector and impact the bottomline of the organization.

Environmental challenges

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

High dependence on third party suppliers

– FirstEnergy 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, FirstEnergy may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Electric 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.

Consumer confidence and its impact on FirstEnergy 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 Electric Utilities industry and other sectors.

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Weighted SWOT Analysis of FirstEnergy Template, Example

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

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