SWOT Analysis / TOWS Matrix for Severn Trent (United States)
Based on various researches at Oak Spring University , Severn Trent is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, there is backlash against globalization, increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, challanges to central banks by blockchain based private currencies,
digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Severn Trent can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Severn Trent, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Severn Trent 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 Severn Trent can be done for the following purposes –
1. Strategic planning of Severn Trent
2. Improving business portfolio management of Severn Trent
3. Assessing feasibility of the new initiative in United States
4. Making a Water Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Severn Trent
Strengths of Severn Trent | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Severn Trent are -
Effective Research and Development (R&D)
– Severn Trent has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Severn Trent staying ahead in the Water Utilities industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Severn Trent 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 Water 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.
Sustainable margins compare to other players in Water Utilities industry
– Severn Trent has clearly differentiated products in the market place. This has enabled Severn Trent to fetch slight price premium compare to the competitors in the Water Utilities industry. The sustainable margins have also helped Severn Trent to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Severn Trent in the Utilities sector have low bargaining power. Severn Trent has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Severn Trent to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Severn Trent has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Water Utilities industry. Secondly the value chain collaborators of Severn Trent have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of Severn Trent in Water Utilities industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Severn Trent
– The covid-19 pandemic has put organizational resilience at the centre of everthing Severn Trent does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Severn Trent 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 brand equity
– Severn Trent has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Severn Trent to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Strong track record of project management in the Water Utilities industry
– Severn Trent is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Successful track record of launching new products
– Severn Trent has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Severn Trent 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.
Learning organization
- Severn Trent 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 Severn Trent is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Severn Trent emphasize – knowledge, initiative, and innovation.
Weaknesses of Severn Trent | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Severn Trent are -
Products dominated business model
– Even though Severn Trent has some of the most successful models in the Water Utilities industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Severn Trent 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 Water Utilities industry, Severn Trent 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 Severn Trent needs to have more collaboration between its sales team and marketing team. Sales professionals in the Water Utilities industry have deep experience in developing customer relationships. Marketing department at Severn Trent can leverage the sales team experience to cultivate customer relationships as Severn Trent is planning to shift buying processes online.
Ability to respond to the competition
– As the decision making is very deliberative at Severn Trent, in the dynamic environment of Water Utilities industry it has struggled to respond to the nimble upstart competition. Severn Trent has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on Severn Trent ‘s star products
– The top 2 products and services of Severn Trent still accounts for major business revenue. This dependence on star products in Water Utilities industry has resulted into insufficient focus on developing new products, even though Severn Trent has relatively successful track record of launching new products.
High cash cycle compare to competitors
Severn Trent has a high cash cycle compare to other players in the Water 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.
Slow to strategic competitive environment developments
– As Severn Trent is one of the leading players in the Water Utilities industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Water Utilities industry in last five years.
Capital Spending Reduction
– Even during the low interest decade, Severn Trent 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 Water Utilities industry using digital technology.
Increasing silos among functional specialists
– The organizational structure of Severn Trent is dominated by functional specialists. It is not different from other players in the Water Utilities industry, but Severn Trent needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Severn Trent to focus more on services in the Water Utilities industry rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee of Severn Trent is just above the Water 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 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 Severn Trent supply chain. Even after few cautionary changes, Severn Trent is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Severn Trent vulnerable to further global disruptions in South East Asia.
Severn Trent Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Severn Trent are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Severn Trent can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Severn Trent 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 Severn Trent to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Severn Trent 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Water Utilities industry, but it has also influenced the consumer preferences. Severn Trent can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Severn Trent 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.
Developing new processes and practices
– Severn Trent can develop new processes and procedures in Water 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Severn Trent can use these opportunities to build new business models that can help the communities that Severn Trent operates in. Secondly it can use opportunities from government spending in Water Utilities sector.
Leveraging digital technologies
– Severn Trent 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.
Better consumer reach
– The expansion of the 5G network will help Severn Trent to increase its market reach. Severn Trent 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 Water Utilities industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Severn Trent 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. Severn Trent 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.
Creating value in data economy
– The success of analytics program of Severn Trent has opened avenues for new revenue streams for the organization in Water Utilities industry. This can help Severn Trent to build a more holistic ecosystem for Severn Trent products in the Water Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Loyalty marketing
– Severn Trent 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.
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. Severn Trent can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Severn Trent External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Severn Trent are -
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 Severn Trent in the Water Utilities sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Water Utilities industry are lowering. It can presents Severn Trent with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Water Utilities sector.
High dependence on third party suppliers
– Severn Trent 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.
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 Severn Trent business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Severn Trent 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 Water 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 Severn Trent.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Severn Trent in Water Utilities industry. The Water 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Severn Trent may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Water Utilities sector.
Shortening product life cycle
– it is one of the major threat that Severn Trent is facing in Water Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Water Utilities industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Severn Trent can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Severn Trent 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Severn Trent 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 Severn Trent prominent markets.
Technology acceleration in Forth Industrial Revolution
– Severn Trent has witnessed rapid integration of technology during Covid-19 in the Water Utilities industry. As one of the leading players in the industry, Severn Trent needs to keep up with the evolution of technology in the Water 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.
Weighted SWOT Analysis of Severn Trent Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Severn Trent 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 Severn Trent 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 Severn Trent 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 Severn Trent 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 Severn Trent needs to make to build a sustainable competitive advantage.