Innogy (IGY) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Innogy (Germany)

Based on various researches at Oak Spring University , Innogy is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, technology disruption, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, there is backlash against globalization, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, increasing household debt because of falling income levels, etc

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Introduction to SWOT Analysis of Innogy

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Innogy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Innogy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Innogy 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Innogy can be done for the following purposes –
1. Strategic planning of Innogy
2. Improving business portfolio management of Innogy
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 Innogy

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Strengths of Innogy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Innogy are -

Digital Transformation in Electric Utilities industry

- digital transformation varies from industry to industry. For Innogy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Innogy 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.

Diverse revenue streams

– Innogy is present in almost all the verticals within the Electric Utilities industry. This has provided Innogy 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

– Innogy 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.

Ability to lead change in Electric Utilities

– Innogy 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 Innogy 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

– Innogy has clearly differentiated products in the market place. This has enabled Innogy to fetch slight price premium compare to the competitors in the Electric Utilities industry. The sustainable margins have also helped Innogy to invest into research and development (R&D) and innovation.

Ability to recruit top talent

– Innogy 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.

Low bargaining power of suppliers

– Suppliers of Innogy in the Utilities sector have low bargaining power. Innogy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Innogy to manage not only supply disruptions but also source products at highly competitive prices.

High switching costs

– The high switching costs that Innogy 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.

Organizational Resilience of Innogy

– The covid-19 pandemic has put organizational resilience at the centre of everthing Innogy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.

High brand equity

– Innogy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Innogy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Effective Research and Development (R&D)

– Innogy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Innogy 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.

Operational resilience

– The operational resilience strategy of Innogy 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.

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Weaknesses of Innogy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Innogy are -

Low market penetration in new markets

– Outside its home market of Germany, Innogy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.

Interest costs

– Compare to the competition, Innogy 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.

Aligning sales with marketing

– From the outside it seems that Innogy 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 Innogy can leverage the sales team experience to cultivate customer relationships as Innogy is planning to shift buying processes online.

Lack of clear differentiation of Innogy products

– To increase the profitability and margins on the products, Innogy needs to provide more differentiated products than what it is currently offering in the marketplace.

Employees’ less understanding of Innogy strategy

– From the outside it seems that the employees of Innogy 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.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Innogy is slow explore the new channels of communication. These new channels of communication can help Innogy to provide better information regarding Electric Utilities products and services. It can also build an online community to further reach out to potential customers.

Products dominated business model

– Even though Innogy 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. Innogy should strive to include more intangible value offerings along with its core products and services.

Slow to strategic competitive environment developments

– As Innogy 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.

No frontier risks strategy

– From the 10K / annual statement of Innogy, 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.

Capital Spending Reduction

– Even during the low interest decade, Innogy 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.

High bargaining power of channel partners in Electric Utilities industry

– because of the regulatory requirements in Germany, Innogy 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.

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Innogy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Innogy are -

Building a culture of innovation

– managers at Innogy 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.

Buying journey improvements

– Innogy 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Innogy 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.

Remote work and new talent hiring opportunities

– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Innogy 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 Innogy to hire the very best people irrespective of their geographical location.

Better consumer reach

– The expansion of the 5G network will help Innogy to increase its market reach. Innogy 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.

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. Innogy can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Innogy 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.

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. Innogy 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. Innogy 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.

Developing new processes and practices

– Innogy 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Innogy can use these opportunities to build new business models that can help the communities that Innogy operates in. Secondly it can use opportunities from government spending in Electric Utilities sector.

Loyalty marketing

– Innogy 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.

Manufacturing automation

– Innogy 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.

Using analytics as competitive advantage

– Innogy 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 Innogy to build a competitive advantage using analytics. The analytics driven competitive advantage can help Innogy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.

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Threats Innogy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Innogy are -

Increasing wage structure of Innogy

– 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 Innogy.

Environmental challenges

– Innogy 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. Innogy can take advantage of this fund but it will also bring new competitors in the Electric Utilities industry.

Increasing international competition and downward pressure on margins

– Apart from technology driven competitive advantage dilution, Innogy 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 Innogy prominent markets.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Electric Utilities industry are lowering. It can presents Innogy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Electric Utilities sector.

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. Innogy needs to understand the core reasons impacting the Electric Utilities industry. This will help it in building a better workplace.

High dependence on third party suppliers

– Innogy 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.

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.

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.

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. Innogy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Shortening product life cycle

– it is one of the major threat that Innogy is facing in Electric Utilities sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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 Innogy.

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 Innogy in the Electric Utilities sector and impact the bottomline of the organization.

Regulatory challenges

– Innogy 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.

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Weighted SWOT Analysis of Innogy Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Innogy 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 Innogy 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 Innogy 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 Innogy 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 Innogy needs to make to build a sustainable competitive advantage.

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