TerraForm Power (TERP) SWOT Analysis / TOWS Matrix / MBA Resources
Electric Utilities
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for TerraForm Power (United States)
Based on various researches at Oak Spring University , TerraForm Power is operating in a macro-environment that has been destablized by – wage bills are increasing, geopolitical disruptions, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption,
talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that TerraForm Power can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the TerraForm Power, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which TerraForm Power 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 TerraForm Power can be done for the following purposes –
1. Strategic planning of TerraForm Power
2. Improving business portfolio management of TerraForm Power
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 TerraForm Power
Strengths of TerraForm Power | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of TerraForm Power are -
Learning organization
- TerraForm Power 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 TerraForm Power is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at TerraForm Power emphasize – knowledge, initiative, and innovation.
Ability to lead change in Electric Utilities
– TerraForm Power 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 TerraForm Power in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– TerraForm Power has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled TerraForm Power to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– TerraForm Power is one of the most innovative firm in Electric Utilities sector.
Ability to recruit top talent
– TerraForm Power 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.
Successful track record of launching new products
– TerraForm Power has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. TerraForm Power 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.
Effective Research and Development (R&D)
– TerraForm Power has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – TerraForm Power 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.
Low bargaining power of suppliers
– Suppliers of TerraForm Power in the Utilities sector have low bargaining power. TerraForm Power has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps TerraForm Power to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Electric Utilities industry
– TerraForm Power has clearly differentiated products in the market place. This has enabled TerraForm Power to fetch slight price premium compare to the competitors in the Electric Utilities industry. The sustainable margins have also helped TerraForm Power to invest into research and development (R&D) and innovation.
High switching costs
– The high switching costs that TerraForm Power 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.
Operational resilience
– The operational resilience strategy of TerraForm Power 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.
Organizational Resilience of TerraForm Power
– The covid-19 pandemic has put organizational resilience at the centre of everthing TerraForm Power does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of TerraForm Power | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of TerraForm Power are -
Skills based hiring in Electric Utilities industry
– The stress on hiring functional specialists at TerraForm Power 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 bargaining power of channel partners in Electric Utilities industry
– because of the regulatory requirements in United States, TerraForm Power 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 TerraForm Power 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.
High dependence on TerraForm Power ‘s star products
– The top 2 products and services of TerraForm Power still accounts for major business revenue. This dependence on star products in Electric Utilities industry has resulted into insufficient focus on developing new products, even though TerraForm Power has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the Electric Utilities industry, TerraForm Power 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.
No frontier risks strategy
– From the 10K / annual statement of TerraForm Power, it seems that company is thinking out the frontier risks that can impact Electric 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.
Products dominated business model
– Even though TerraForm Power 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. TerraForm Power should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of TerraForm Power products
– To increase the profitability and margins on the products, TerraForm Power needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of TerraForm Power is dominated by functional specialists. It is not different from other players in the Electric Utilities industry, but TerraForm Power needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help TerraForm Power to focus more on services in the Electric Utilities industry rather than just following the product oriented approach.
Aligning sales with marketing
– From the outside it seems that TerraForm Power 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 TerraForm Power can leverage the sales team experience to cultivate customer relationships as TerraForm Power is planning to shift buying processes online.
Employees’ less understanding of TerraForm Power strategy
– From the outside it seems that the employees of TerraForm Power don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
TerraForm Power Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of TerraForm Power are -
Low interest rates
– Even though inflation is raising its head in most developed economies, TerraForm Power 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.
Creating value in data economy
– The success of analytics program of TerraForm Power has opened avenues for new revenue streams for the organization in Electric Utilities industry. This can help TerraForm Power to build a more holistic ecosystem for TerraForm Power products in the Electric Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at TerraForm Power can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Electric Utilities industry.
Manufacturing automation
– TerraForm Power 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.
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. TerraForm Power 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. TerraForm Power 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 TerraForm Power can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for TerraForm Power 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.
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 TerraForm Power in the Electric Utilities industry. Now TerraForm Power can target international markets with far fewer capital restrictions requirements than the existing system.
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. TerraForm Power can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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 TerraForm Power 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for TerraForm Power 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 TerraForm Power to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– TerraForm Power 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, TerraForm Power 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 TerraForm Power to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats TerraForm Power External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of TerraForm Power are -
Technology acceleration in Forth Industrial Revolution
– TerraForm Power has witnessed rapid integration of technology during Covid-19 in the Electric Utilities industry. As one of the leading players in the industry, TerraForm Power 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 TerraForm Power 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.
High dependence on third party suppliers
– TerraForm Power 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.
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.
Regulatory challenges
– TerraForm Power 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 wage structure of TerraForm Power
– 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 TerraForm Power.
Stagnating economy with rate increase
– TerraForm Power 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.
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. TerraForm Power needs to understand the core reasons impacting the Electric Utilities industry. This will help it in building a better workplace.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Electric Utilities industry are lowering. It can presents TerraForm Power with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Electric Utilities sector.
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 TerraForm Power business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, TerraForm Power 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.
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 TerraForm Power.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for TerraForm Power 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.
Weighted SWOT Analysis of TerraForm Power Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at TerraForm Power 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 TerraForm Power 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 TerraForm Power 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 TerraForm Power 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 TerraForm Power needs to make to build a sustainable competitive advantage.