MGE Energy (MGEE) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for MGE Energy (United States)

Based on various researches at Oak Spring University , MGE Energy is operating in a macro-environment that has been destablized by – geopolitical disruptions, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, increasing transportation and logistics costs, central banks are concerned over increasing inflation, etc

---

---

---

---

Introduction to SWOT Analysis of MGE Energy

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

---

SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of MGE Energy can be done for the following purposes –
1. Strategic planning of MGE Energy
2. Improving business portfolio management of MGE Energy
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 MGE Energy

---

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

The strengths of MGE Energy are -

Low bargaining power of suppliers

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

Digital Transformation in Electric Utilities industry

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

Ability to recruit top talent

– MGE Energy is one of the leading players in the Electric Utilities 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.

Training and development

– MGE 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.

High switching costs

– The high switching costs that MGE Energy 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

– MGE 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 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.

Effective Research and Development (R&D)

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

Successful track record of launching new products

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

High brand equity

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

Ability to lead change in Electric Utilities

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

Strong track record of project management in the Electric Utilities industry

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

Cross disciplinary teams

– Horizontal connected teams at the MGE 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.

---

---

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

The weaknesses of MGE Energy are -

Ability to respond to the competition

– As the decision making is very deliberative at MGE Energy, in the dynamic environment of Electric Utilities industry it has struggled to respond to the nimble upstart competition. MGE 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, MGE Energy is slow explore the new channels of communication. These new channels of communication can help MGE 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.

High operating costs

– Compare to the competitors, MGE Energy 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 MGE Energy lucrative customers.

High cash cycle compare to competitors

MGE 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.

Products dominated business model

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

Aligning sales with marketing

– From the outside it seems that MGE Energy needs to have more collaboration between its sales team and marketing team. Sales professionals in the Electric Utilities industry have deep experience in developing customer relationships. Marketing department at MGE Energy can leverage the sales team experience to cultivate customer relationships as MGE Energy is planning to shift buying processes online.

Compensation and incentives

– The revenue per employee of MGE 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.

High bargaining power of channel partners in Electric Utilities industry

– because of the regulatory requirements in United States, MGE Energy 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 Electric Utilities industry.

Low market penetration in new markets

– Outside its home market of United States, MGE Energy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

High dependence on MGE Energy ‘s star products

– The top 2 products and services of MGE Energy 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 MGE Energy has relatively successful track record of launching new products.

Increasing silos among functional specialists

– The organizational structure of MGE Energy is dominated by functional specialists. It is not different from other players in the Electric Utilities industry, but MGE Energy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help MGE Energy to focus more on services in the Electric Utilities industry rather than just following the product oriented approach.

---

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

The opportunities of MGE Energy are -

Reforming the budgeting process

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

Manufacturing automation

– MGE 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.

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. MGE Energy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

Better consumer reach

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

Loyalty marketing

– MGE 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.

Using analytics as competitive advantage

– MGE Energy 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 MGE Energy to build a competitive advantage using analytics. The analytics driven competitive advantage can help MGE Energy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

Remote work and new talent hiring opportunities

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

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 MGE Energy in the Electric Utilities industry. Now MGE Energy can target international markets with far fewer capital restrictions requirements than the existing system.

Redefining models of collaboration and team work

– As explained in the weaknesses section, MGE Energy is facing challenges because of the dominance of functional experts in the organization. MGE Energy 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 MGE Energy 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.

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. MGE 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. MGE 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.

Building a culture of innovation

– managers at MGE Energy 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 Electric Utilities industry.

Low interest rates

– Even though inflation is raising its head in most developed economies, MGE Energy 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.

---

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

The threats of MGE Energy are -

Stagnating economy with rate increase

– MGE 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.

Increasing wage structure of MGE 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 MGE Energy.

Environmental challenges

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

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 MGE Energy.

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. MGE Energy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Regulatory challenges

– MGE Energy 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 Electric Utilities industry regulations.

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 MGE Energy in the Electric Utilities sector and impact the bottomline of the organization.

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.

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

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, MGE Energy 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.

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

Shortening product life cycle

– it is one of the major threat that MGE Energy is facing in Electric Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

---

Weighted SWOT Analysis of MGE Energy Template, Example

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

--- ---