Enel (ENEI) SWOT Analysis / TOWS Matrix / MBA Resources
Electric Utilities
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Enel (Germany)
Based on various researches at Oak Spring University , Enel is operating in a macro-environment that has been destablized by – increasing commodity prices, cloud computing is disrupting traditional business models, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, geopolitical disruptions,
supply chains are disrupted by pandemic , increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Enel can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Enel, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Enel 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 Enel can be done for the following purposes –
1. Strategic planning of Enel
2. Improving business portfolio management of Enel
3. Assessing feasibility of the new initiative in Germany
4. Making a Electric Utilities sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Enel
Strengths of Enel | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Enel are -
Innovation driven organization
– Enel is one of the most innovative firm in Electric Utilities sector.
Highly skilled collaborators
– Enel 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 Enel have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Enel is present in almost all the verticals within the Electric Utilities industry. This has provided Enel 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.
Successful track record of launching new products
– Enel has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Enel 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.
Training and development
– Enel 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.
Low bargaining power of suppliers
– Suppliers of Enel in the Utilities sector have low bargaining power. Enel has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Enel to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Enel 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.
Sustainable margins compare to other players in Electric Utilities industry
– Enel has clearly differentiated products in the market place. This has enabled Enel to fetch slight price premium compare to the competitors in the Electric Utilities industry. The sustainable margins have also helped Enel to invest into research and development (R&D) and innovation.
Digital Transformation in Electric Utilities industry
- digital transformation varies from industry to industry. For Enel digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Enel 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.
Cross disciplinary teams
– Horizontal connected teams at the Enel 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.
Effective Research and Development (R&D)
– Enel has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Enel 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.
Organizational Resilience of Enel
– The covid-19 pandemic has put organizational resilience at the centre of everthing Enel does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of Enel | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Enel are -
Interest costs
– Compare to the competition, Enel 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.
Compensation and incentives
– The revenue per employee of Enel 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.
Aligning sales with marketing
– From the outside it seems that Enel 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 Enel can leverage the sales team experience to cultivate customer relationships as Enel is planning to shift buying processes online.
Employees’ less understanding of Enel strategy
– From the outside it seems that the employees of Enel 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.
High operating costs
– Compare to the competitors, Enel 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 Enel lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Enel 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 Electric Utilities industry using digital technology.
Skills based hiring in Electric Utilities industry
– The stress on hiring functional specialists at Enel 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.
Slow decision making process
– As mentioned earlier in the report, Enel 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. Enel 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.
Increasing silos among functional specialists
– The organizational structure of Enel is dominated by functional specialists. It is not different from other players in the Electric Utilities industry, but Enel needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Enel to focus more on services in the Electric Utilities industry rather than just following the product oriented approach.
No frontier risks strategy
– From the 10K / annual statement of Enel, 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.
High dependence on Enel ‘s star products
– The top 2 products and services of Enel 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 Enel has relatively successful track record of launching new products.
Enel Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Enel are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Enel 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 Enel to hire the very best people irrespective of their geographical location.
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. Enel 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. Enel 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.
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 Enel 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Enel 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 Enel to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Enel in the Electric Utilities industry. Now Enel can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Enel 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.
Creating value in data economy
– The success of analytics program of Enel has opened avenues for new revenue streams for the organization in Electric Utilities industry. This can help Enel to build a more holistic ecosystem for Enel products in the Electric 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, Enel is facing challenges because of the dominance of functional experts in the organization. Enel 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.
Learning at scale
– Online learning technologies has now opened space for Enel 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.
Developing new processes and practices
– Enel 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.
Buying journey improvements
– Enel 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.
Building a culture of innovation
– managers at Enel 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Enel 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.
Threats Enel External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Enel are -
Consumer confidence and its impact on Enel 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 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. Enel needs to understand the core reasons impacting the Electric Utilities industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Enel 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.
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. Enel can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Enel.
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. Enel 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.
Technology acceleration in Forth Industrial Revolution
– Enel has witnessed rapid integration of technology during Covid-19 in the Electric Utilities industry. As one of the leading players in the industry, Enel 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.
Shortening product life cycle
– it is one of the major threat that Enel is facing in Electric Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Environmental challenges
– Enel 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. Enel can take advantage of this fund but it will also bring new competitors in the Electric Utilities industry.
High dependence on third party suppliers
– Enel 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 Enel business can come under increasing regulations regarding data privacy, data security, etc.
Increasing wage structure of Enel
– 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 Enel.
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.
Weighted SWOT Analysis of Enel Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Enel 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 Enel 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 Enel 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 Enel 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 Enel needs to make to build a sustainable competitive advantage.
