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 – there is backlash against globalization, there is increasing trade war between United States & China, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic , wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, 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 -

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.

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.

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.

Organizational Resilience of Red Electrica

– The covid-19 pandemic has put organizational resilience at the centre of everthing Red Electrica does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

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.

Cross disciplinary teams

– Horizontal connected teams at the Red Electrica 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.

Innovation driven organization

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

High switching costs

– The high switching costs that Red Electrica 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.

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.

Diverse revenue streams

– Red Electrica is present in almost all the verticals within the Electric Utilities industry. This has provided Red Electrica 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.

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.

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.

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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 -

Workers concerns about automation

– As automation is fast increasing in the Electric Utilities industry, Red Electrica 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.

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.

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.

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.

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.

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.

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.

High cash cycle compare to competitors

Red Electrica 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.

Aligning sales with marketing

– From the outside it seems that Red Electrica 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 Red Electrica can leverage the sales team experience to cultivate customer relationships as Red Electrica is planning to shift buying processes online.

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.

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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 -

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.

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.

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.

Developing new processes and practices

– Red Electrica 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.

Leveraging digital technologies

– Red Electrica can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.

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.

Learning at scale

– Online learning technologies has now opened space for Red Electrica 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.

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.

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

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.

Redefining models of collaboration and team work

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

Harnessing reconfiguration of the global supply chains

– As the trade war between US and China heats up in the coming years, Red Electrica 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 Red Electrica to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.

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.

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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 -

Stagnating economy with rate increase

– Red Electrica 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.

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Red Electrica 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 dependence on third party suppliers

– Red Electrica 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.

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 Red Electrica.

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.

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.

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.

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.

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.

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.

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.

Increasing wage structure of Red Electrica

– 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 Red Electrica.

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.

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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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