Iberdrola (IBE) SWOT Analysis / TOWS Matrix / MBA Resources
Electric Utilities
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Iberdrola (Germany)
Based on various researches at Oak Spring University , Iberdrola is operating in a macro-environment that has been destablized by – there is backlash against globalization, wage bills are increasing, there is increasing trade war between United States & China, increasing energy prices, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, talent flight as more people leaving formal jobs,
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%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Iberdrola can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Iberdrola, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Iberdrola 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 Iberdrola can be done for the following purposes –
1. Strategic planning of Iberdrola
2. Improving business portfolio management of Iberdrola
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 Iberdrola
Strengths of Iberdrola | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Iberdrola are -
Ability to recruit top talent
– Iberdrola is one of the leading players in the Electric Utilities industry in Germany. It is in a position to attract the best talent available in Germany. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Iberdrola 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 Iberdrola have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Electric Utilities
– Iberdrola is one of the leading players in the Electric Utilities industry in Germany. Over the years it has not only transformed the business landscape in the Electric Utilities industry in Germany but also across the existing markets. The ability to lead change has enabled Iberdrola in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Electric Utilities industry
– Iberdrola has clearly differentiated products in the market place. This has enabled Iberdrola to fetch slight price premium compare to the competitors in the Electric Utilities industry. The sustainable margins have also helped Iberdrola to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Iberdrola has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Iberdrola 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.
Analytics focus
– Iberdrola 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 Electric Utilities industry. The technology infrastructure of Germany 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.
Cross disciplinary teams
– Horizontal connected teams at the Iberdrola 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.
High brand equity
– Iberdrola has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Iberdrola to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Iberdrola 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 Iberdrola is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Iberdrola emphasize – knowledge, initiative, and innovation.
Diverse revenue streams
– Iberdrola is present in almost all the verticals within the Electric Utilities industry. This has provided Iberdrola 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.
Training and development
– Iberdrola 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.
Operational resilience
– The operational resilience strategy of Iberdrola 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.
Weaknesses of Iberdrola | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Iberdrola are -
Slow decision making process
– As mentioned earlier in the report, Iberdrola 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. Iberdrola 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.
Products dominated business model
– Even though Iberdrola 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. Iberdrola should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– From the outside it seems that Iberdrola 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 Iberdrola can leverage the sales team experience to cultivate customer relationships as Iberdrola is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the Electric Utilities industry, Iberdrola 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.
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 Iberdrola supply chain. Even after few cautionary changes, Iberdrola is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Iberdrola vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As Iberdrola 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.
Need for greater diversity
– Iberdrola 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.
Compensation and incentives
– The revenue per employee of Iberdrola 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.
Employees’ less understanding of Iberdrola strategy
– From the outside it seems that the employees of Iberdrola 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.
Skills based hiring in Electric Utilities industry
– The stress on hiring functional specialists at Iberdrola 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.
Lack of clear differentiation of Iberdrola products
– To increase the profitability and margins on the products, Iberdrola needs to provide more differentiated products than what it is currently offering in the marketplace.
Iberdrola Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Iberdrola are -
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 Iberdrola 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.
Building a culture of innovation
– managers at Iberdrola 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
– Iberdrola 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.
Leveraging digital technologies
– Iberdrola 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 Iberdrola to increase its market reach. Iberdrola 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, Iberdrola 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
– Iberdrola 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.
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. Iberdrola can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Iberdrola has opened avenues for new revenue streams for the organization in Electric Utilities industry. This can help Iberdrola to build a more holistic ecosystem for Iberdrola products in the Electric Utilities industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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. Iberdrola 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. Iberdrola 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Iberdrola can use these opportunities to build new business models that can help the communities that Iberdrola operates in. Secondly it can use opportunities from government spending in Electric Utilities sector.
Using analytics as competitive advantage
– Iberdrola has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Electric Utilities sector. This continuous investment in analytics has enabled Iberdrola to build a competitive advantage using analytics. The analytics driven competitive advantage can help Iberdrola to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Iberdrola 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.
Threats Iberdrola External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Iberdrola are -
Stagnating economy with rate increase
– Iberdrola 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.
Technology acceleration in Forth Industrial Revolution
– Iberdrola has witnessed rapid integration of technology during Covid-19 in the Electric Utilities industry. As one of the leading players in the industry, Iberdrola 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Iberdrola 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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Iberdrola 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. Iberdrola can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Iberdrola 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 Iberdrola prominent markets.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Electric Utilities industry are lowering. It can presents Iberdrola with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Electric Utilities sector.
Environmental challenges
– Iberdrola 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. Iberdrola can take advantage of this fund but it will also bring new competitors in the Electric Utilities industry.
Regulatory challenges
– Iberdrola 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.
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 Iberdrola business can come under increasing regulations regarding data privacy, data security, etc.
Consumer confidence and its impact on Iberdrola 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.
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 Iberdrola.
Weighted SWOT Analysis of Iberdrola Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Iberdrola 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 Iberdrola 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 Iberdrola 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 Iberdrola 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 Iberdrola needs to make to build a sustainable competitive advantage.