Spectra Energy (SEP) SWOT Analysis / TOWS Matrix / MBA Resources
Natural Gas Utilities
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Spectra Energy (United States)
Based on various researches at Oak Spring University , Spectra Energy is operating in a macro-environment that has been destablized by – increasing commodity prices, 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, supply chains are disrupted by pandemic , digital marketing is dominated by two big players Facebook and Google, increasing energy prices, central banks are concerned over increasing inflation,
competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Spectra Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Spectra Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Spectra 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 Spectra Energy can be done for the following purposes –
1. Strategic planning of Spectra Energy
2. Improving business portfolio management of Spectra Energy
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 Spectra Energy
Strengths of Spectra Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Spectra Energy are -
Digital Transformation in Natural Gas Utilities industry
- digital transformation varies from industry to industry. For Spectra Energy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Spectra 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.
Sustainable margins compare to other players in Natural Gas Utilities industry
– Spectra Energy has clearly differentiated products in the market place. This has enabled Spectra Energy to fetch slight price premium compare to the competitors in the Natural Gas Utilities industry. The sustainable margins have also helped Spectra Energy to invest into research and development (R&D) and innovation.
Analytics focus
– Spectra 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 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.
Strong track record of project management in the Natural Gas Utilities industry
– Spectra 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.
Operational resilience
– The operational resilience strategy of Spectra Energy 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.
Low bargaining power of suppliers
– Suppliers of Spectra Energy in the Utilities sector have low bargaining power. Spectra Energy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Spectra Energy to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Spectra Energy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Spectra Energy 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.
Highly skilled collaborators
– Spectra Energy 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 Spectra Energy have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Spectra Energy is one of the most innovative firm in Natural Gas Utilities sector.
Ability to recruit top talent
– Spectra Energy is one of the leading players in the Natural Gas 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.
High switching costs
– The high switching costs that Spectra 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.
Cross disciplinary teams
– Horizontal connected teams at the Spectra 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 Spectra Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Spectra Energy are -
Need for greater diversity
– Spectra Energy 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.
No frontier risks strategy
– From the 10K / annual statement of Spectra Energy, it seems that company is thinking out the frontier risks that can impact Natural Gas Utilities industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Slow decision making process
– As mentioned earlier in the report, Spectra Energy 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. Spectra Energy 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.
Workers concerns about automation
– As automation is fast increasing in the Natural Gas Utilities industry, Spectra Energy 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.
Aligning sales with marketing
– From the outside it seems that Spectra Energy 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 Spectra Energy can leverage the sales team experience to cultivate customer relationships as Spectra Energy is planning to shift buying processes online.
High cash cycle compare to competitors
Spectra Energy 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.
High operating costs
– Compare to the competitors, Spectra Energy 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 Spectra Energy lucrative customers.
Interest costs
– Compare to the competition, Spectra Energy 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.
High bargaining power of channel partners in Natural Gas Utilities industry
– because of the regulatory requirements in United States, Spectra 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 Natural Gas Utilities industry.
Capital Spending Reduction
– Even during the low interest decade, Spectra Energy 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 Natural Gas Utilities industry using digital technology.
Compensation and incentives
– The revenue per employee of Spectra Energy is just above the Natural Gas 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.
Spectra Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Spectra Energy are -
Buying journey improvements
– Spectra Energy 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.
Developing new processes and practices
– Spectra Energy can develop new processes and procedures in Natural Gas 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.
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. Spectra 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. Spectra 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.
Using analytics as competitive advantage
– Spectra Energy 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 Spectra Energy to build a competitive advantage using analytics. The analytics driven competitive advantage can help Spectra Energy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Natural Gas Utilities industry, but it has also influenced the consumer preferences. Spectra Energy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Spectra Energy can use the latest technology developments to improve its manufacturing and designing process in Natural Gas 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.
Better consumer reach
– The expansion of the 5G network will help Spectra Energy to increase its market reach. Spectra 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Spectra 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Spectra Energy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Spectra Energy has opened avenues for new revenue streams for the organization in Natural Gas Utilities industry. This can help Spectra Energy to build a more holistic ecosystem for Spectra Energy products in the Natural Gas Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Spectra Energy is facing challenges because of the dominance of functional experts in the organization. Spectra Energy 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Spectra Energy 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.
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. Spectra Energy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Spectra Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Spectra Energy are -
Consumer confidence and its impact on Spectra Energy 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.
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.
Increasing wage structure of Spectra 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 Spectra Energy.
Easy access to finance
– Easy access to finance in Natural Gas Utilities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Spectra Energy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Spectra Energy 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.
Environmental challenges
– Spectra 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. Spectra Energy can take advantage of this fund but it will also bring new competitors in the Natural Gas Utilities industry.
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. Spectra Energy needs to understand the core reasons impacting the Natural Gas Utilities industry. This will help it in building a better workplace.
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. Spectra Energy 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.
Regulatory challenges
– Spectra 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 Natural Gas 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 Spectra Energy in the Natural Gas Utilities sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Spectra Energy has witnessed rapid integration of technology during Covid-19 in the Natural Gas Utilities industry. As one of the leading players in the industry, Spectra Energy needs to keep up with the evolution of technology in the Natural Gas 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.
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 Spectra Energy.
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 Spectra Energy business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Spectra Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Spectra 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 Spectra 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 Spectra 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 Spectra 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 Spectra Energy needs to make to build a sustainable competitive advantage.