Red Electrica (RDEIF) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Red Electrica (United States)

Based on various researches at Oak Spring University , Red Electrica is operating in a macro-environment that has been destablized by – digital marketing is dominated by two big players Facebook and Google, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , technology disruption, there is backlash against globalization, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, etc

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Introduction to SWOT Analysis of Red Electrica

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Red Electrica can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Red Electrica, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Red Electrica 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 Red Electrica can be done for the following purposes –
1. Strategic planning of Red Electrica
2. Improving business portfolio management of Red Electrica
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 Red Electrica

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

The strengths of Red Electrica are -

Superior customer experience

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

Successful track record of launching new products

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

Highly skilled collaborators

– Red Electrica has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Electric Utilities industry. Secondly the value chain collaborators of Red Electrica have helped the firm to develop new products and bring them quickly to the marketplace.

Low bargaining power of suppliers

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

Training and development

– Red Electrica 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.

Innovation driven organization

– Red Electrica is one of the most innovative firm in Electric Utilities sector.

Ability to recruit top talent

– Red Electrica 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.

Learning organization

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

High brand equity

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

Digital Transformation in Electric Utilities industry

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

Sustainable margins compare to other players in Electric Utilities industry

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

Operational resilience

– The operational resilience strategy of Red Electrica 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.

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

The weaknesses of Red Electrica are -

Ability to respond to the competition

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

Compensation and incentives

– The revenue per employee of Red Electrica 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.

Products dominated business model

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

Need for greater diversity

– Red Electrica 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.

Slow decision making process

– As mentioned earlier in the report, Red Electrica 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. Red Electrica 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.

High operating costs

– Compare to the competitors, Red Electrica 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 Red Electrica lucrative customers.

Lack of clear differentiation of Red Electrica products

– To increase the profitability and margins on the products, Red Electrica 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, Red Electrica needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Slow to harness new channels of communication

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

Interest costs

– Compare to the competition, Red Electrica has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.

Skills based hiring in Electric Utilities industry

– The stress on hiring functional specialists at Red Electrica 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.

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

The opportunities of Red Electrica are -

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. Red Electrica 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. Red Electrica 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.

Reforming the budgeting process

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

Increase in government spending

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

Buying journey improvements

– Red Electrica 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.

Remote work and new talent hiring opportunities

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

Loyalty marketing

– Red Electrica 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.

Better consumer reach

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

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

Using analytics as competitive advantage

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

Creating value in data economy

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

Lowering marketing communication costs

– 5G expansion will open new opportunities for Red Electrica 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.

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 Red Electrica 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.

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. Red Electrica can explore opportunities that can attract volunteers and are consistent with its mission and vision.

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

The threats of Red Electrica are -

Environmental challenges

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

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Red Electrica 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 Red Electrica 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. Red Electrica needs to understand the core reasons impacting the Electric Utilities industry. This will help it in building a better workplace.

Technology acceleration in Forth Industrial Revolution

– Red Electrica has witnessed rapid integration of technology during Covid-19 in the Electric Utilities industry. As one of the leading players in the industry, Red Electrica 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.

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.

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

Barriers of entry lowering

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

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Red Electrica 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.

Consumer confidence and its impact on Red Electrica 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.

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.

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. Red Electrica 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.

Shortening product life cycle

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

Regulatory challenges

– Red Electrica 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.

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Weighted SWOT Analysis of Red Electrica Template, Example

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

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