Ormat (ORA) SWOT Analysis / TOWS Matrix / MBA Resources
Electric Utilities
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Ormat (United States)
Based on various researches at Oak Spring University , Ormat is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, central banks are concerned over increasing inflation, there is increasing trade war between United States & China,
geopolitical disruptions, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Ormat can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Ormat, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Ormat 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 Ormat can be done for the following purposes –
1. Strategic planning of Ormat
2. Improving business portfolio management of Ormat
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 Ormat
Strengths of Ormat | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Ormat are -
Analytics focus
– Ormat 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.
Learning organization
- Ormat 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 Ormat is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Ormat emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Ormat has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Ormat 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 brand equity
– Ormat has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Ormat to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Ormat in the Utilities sector have low bargaining power. Ormat has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Ormat to manage not only supply disruptions but also source products at highly competitive prices.
Operational resilience
– The operational resilience strategy of Ormat comprises – understanding the underlying the factors in the Electric 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.
High switching costs
– The high switching costs that Ormat 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.
Strong track record of project management in the Electric Utilities industry
– Ormat is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Digital Transformation in Electric Utilities industry
- digital transformation varies from industry to industry. For Ormat digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Ormat 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.
Training and development
– Ormat 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.
Ability to lead change in Electric Utilities
– Ormat 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 Ormat in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Ormat 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 Ormat | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Ormat are -
Lack of clear differentiation of Ormat products
– To increase the profitability and margins on the products, Ormat needs to provide more differentiated products than what it is currently offering in the marketplace.
Low market penetration in new markets
– Outside its home market of United States, Ormat needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High bargaining power of channel partners in Electric Utilities industry
– because of the regulatory requirements in United States, Ormat 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.
Slow to strategic competitive environment developments
– As Ormat 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.
Need for greater diversity
– Ormat has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Products dominated business model
– Even though Ormat 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. Ormat should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the Electric Utilities industry, Ormat needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
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 Ormat supply chain. Even after few cautionary changes, Ormat is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Ormat vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Ormat 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.
High operating costs
– Compare to the competitors, Ormat 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 Ormat lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Ormat 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.
Ormat Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Ormat are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Ormat can use these opportunities to build new business models that can help the communities that Ormat operates in. Secondly it can use opportunities from government spending in Electric Utilities sector.
Manufacturing automation
– Ormat 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Ormat 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 Ormat to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Ormat 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.
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. Ormat 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 Ormat to increase its market reach. Ormat 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. Ormat 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. Ormat 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.
Buying journey improvements
– Ormat 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.
Creating value in data economy
– The success of analytics program of Ormat has opened avenues for new revenue streams for the organization in Electric Utilities industry. This can help Ormat to build a more holistic ecosystem for Ormat products in the Electric Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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. Ormat can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Ormat in the Electric Utilities industry. Now Ormat can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Ormat 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.
Learning at scale
– Online learning technologies has now opened space for Ormat 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.
Threats Ormat External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Ormat are -
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 Ormat.
Stagnating economy with rate increase
– Ormat 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.
Environmental challenges
– Ormat 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. Ormat can take advantage of this fund but it will also bring new competitors in the Electric Utilities industry.
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 Ormat in the Electric Utilities sector and impact the bottomline of the organization.
Regulatory challenges
– Ormat 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Ormat 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 Ormat prominent markets.
Increasing wage structure of Ormat
– 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 Ormat.
Technology acceleration in Forth Industrial Revolution
– Ormat has witnessed rapid integration of technology during Covid-19 in the Electric Utilities industry. As one of the leading players in the industry, Ormat 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.
Consumer confidence and its impact on Ormat 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.
Shortening product life cycle
– it is one of the major threat that Ormat is facing in Electric Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Ormat business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Ormat 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Electric Utilities industry are lowering. It can presents Ormat with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Electric Utilities sector.
Weighted SWOT Analysis of Ormat Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Ormat 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 Ormat 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 Ormat 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 Ormat 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 Ormat needs to make to build a sustainable competitive advantage.
