Kinder Morgan (KMI) SWOT Analysis / TOWS Matrix / MBA Resources
Natural Gas Utilities
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Kinder Morgan (United States)
Based on various researches at Oak Spring University , Kinder Morgan is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, there is backlash against globalization,
increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Kinder Morgan can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kinder Morgan, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kinder Morgan 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 Kinder Morgan can be done for the following purposes –
1. Strategic planning of Kinder Morgan
2. Improving business portfolio management of Kinder Morgan
3. Assessing feasibility of the new initiative in United States
4. Making a Natural Gas Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Kinder Morgan
Strengths of Kinder Morgan | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kinder Morgan are -
Organizational Resilience of Kinder Morgan
– The covid-19 pandemic has put organizational resilience at the centre of everthing Kinder Morgan does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Kinder Morgan has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Natural Gas Utilities industry. Secondly the value chain collaborators of Kinder Morgan have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– Kinder Morgan has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kinder Morgan 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 Natural Gas Utilities
– Kinder Morgan is one of the leading players in the Natural Gas Utilities industry in United States. Over the years it has not only transformed the business landscape in the Natural Gas Utilities industry in United States but also across the existing markets. The ability to lead change has enabled Kinder Morgan in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Kinder Morgan 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.
Cross disciplinary teams
– Horizontal connected teams at the Kinder Morgan 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.
Sustainable margins compare to other players in Natural Gas Utilities industry
– Kinder Morgan has clearly differentiated products in the market place. This has enabled Kinder Morgan to fetch slight price premium compare to the competitors in the Natural Gas Utilities industry. The sustainable margins have also helped Kinder Morgan to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Kinder Morgan has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Kinder Morgan staying ahead in the Natural Gas Utilities 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 Kinder Morgan comprises – understanding the underlying the factors in the Natural Gas Utilities 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.
Strong track record of project management in the Natural Gas Utilities industry
– Kinder Morgan is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Kinder Morgan 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 Natural Gas 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.
High switching costs
– The high switching costs that Kinder Morgan 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.
Weaknesses of Kinder Morgan | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Kinder Morgan are -
High cash cycle compare to competitors
Kinder Morgan has a high cash cycle compare to other players in the Natural Gas 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.
Aligning sales with marketing
– From the outside it seems that Kinder Morgan needs to have more collaboration between its sales team and marketing team. Sales professionals in the Natural Gas Utilities industry have deep experience in developing customer relationships. Marketing department at Kinder Morgan can leverage the sales team experience to cultivate customer relationships as Kinder Morgan is planning to shift buying processes online.
Lack of clear differentiation of Kinder Morgan products
– To increase the profitability and margins on the products, Kinder Morgan needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners in Natural Gas Utilities industry
– because of the regulatory requirements in United States, Kinder Morgan is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Natural Gas Utilities industry.
High dependence on Kinder Morgan ‘s star products
– The top 2 products and services of Kinder Morgan still accounts for major business revenue. This dependence on star products in Natural Gas Utilities industry has resulted into insufficient focus on developing new products, even though Kinder Morgan has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of United States, Kinder Morgan needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Kinder Morgan is one of the leading players in the Natural Gas Utilities industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Natural Gas Utilities industry in last five years.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Kinder Morgan is slow explore the new channels of communication. These new channels of communication can help Kinder Morgan to provide better information regarding Natural Gas Utilities products and services. It can also build an online community to further reach out to potential customers.
Employees’ less understanding of Kinder Morgan strategy
– From the outside it seems that the employees of Kinder Morgan 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 operating costs
– Compare to the competitors, Kinder Morgan has high operating costs in the Natural Gas Utilities industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Kinder Morgan lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Kinder Morgan has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Natural Gas Utilities industry over the last five years. Kinder Morgan 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.
Kinder Morgan Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Kinder Morgan are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Kinder Morgan can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kinder Morgan in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Natural Gas Utilities industry, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kinder Morgan can use these opportunities to build new business models that can help the communities that Kinder Morgan operates in. Secondly it can use opportunities from government spending in Natural Gas Utilities sector.
Buying journey improvements
– Kinder Morgan can improve the customer journey of consumers in the Natural Gas 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.
Using analytics as competitive advantage
– Kinder Morgan has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Natural Gas Utilities sector. This continuous investment in analytics has enabled Kinder Morgan to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kinder Morgan to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Kinder Morgan 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.
Building a culture of innovation
– managers at Kinder Morgan 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 Natural Gas Utilities industry.
Creating value in data economy
– The success of analytics program of Kinder Morgan has opened avenues for new revenue streams for the organization in Natural Gas Utilities industry. This can help Kinder Morgan to build a more holistic ecosystem for Kinder Morgan products in the Natural Gas Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Kinder Morgan 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 Kinder Morgan to hire the very best people irrespective of their geographical location.
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. Kinder Morgan can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Kinder Morgan 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 Kinder Morgan to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Kinder Morgan is facing challenges because of the dominance of functional experts in the organization. Kinder Morgan can utilize new technology in the field of Natural Gas Utilities industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Natural Gas Utilities industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Kinder Morgan 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. Kinder Morgan 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.
Threats Kinder Morgan External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Kinder Morgan are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Kinder Morgan 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 Kinder Morgan prominent markets.
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. Kinder Morgan needs to understand the core reasons impacting the Natural Gas Utilities industry. This will help it in building a better workplace.
Regulatory challenges
– Kinder Morgan 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 Natural Gas Utilities industry regulations.
Consumer confidence and its impact on Kinder Morgan 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 Natural Gas Utilities industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Kinder Morgan is facing in Natural Gas Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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 Kinder Morgan in the Natural Gas Utilities sector and impact the bottomline of the organization.
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. Kinder Morgan 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.
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 Kinder Morgan.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Kinder Morgan in Natural Gas Utilities industry. The Natural Gas 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.
High dependence on third party suppliers
– Kinder Morgan 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 Kinder Morgan
– 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 Kinder Morgan.
Stagnating economy with rate increase
– Kinder Morgan 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 Natural Gas Utilities industry.
Weighted SWOT Analysis of Kinder Morgan Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Kinder Morgan 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 Kinder Morgan 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 Kinder Morgan 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 Kinder Morgan 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 Kinder Morgan needs to make to build a sustainable competitive advantage.