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NextEra Energy SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by NextEra Energy managers to do a situational analysis of the firm . It is a handy technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) NextEra Energy is facing in its current business environment.
The NextEra Energy is one of the leading organizatations in its industry. NextEra Energy maintains its prominent position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the organization such as – marketing, finance, operations, management information systems and strategic planning.
The SWOT Analysis framework helps an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the NextEra Energy to develop four types of strategies:
- SO (strengths-opportunities) Strategies
- WO (weaknesses-opportunities) Strategies
- ST (strengths-threats) Strategies
- WT (weaknesses-threats) Strategies
SWOT Matrix Strategies Objective
The main purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect NextEra Energy strengths, and eradicate its weaknesses.
Step by Step Guide to NextEra Energy SWOT Analysis
Strengths of NextEra Energy – Internal Strategic Factors
As one of the leading organizations in its industry, NextEra Energy has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of NextEra Energy are –
- High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
- Highly successful at Go To Market strategies for its products.
- Good Returns on Capital Expenditure – NextEra Energy is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Strong distribution network – Over the years NextEra Energy has built a reliable distribution network that can reach majority of its potential market.
- Highly skilled workforce through successful training and learning programs. NextEra Energy is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
- Strong Free Cash Flow – NextEra Energy has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
- Superb Performance in New Markets – NextEra Energy has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
Weakness of NextEra Energy – Internal Strategic Factors
Weakness are the areas where NextEra Energy can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of NextEra Energy
- High attrition rate in work force – compare to other organizations in the industry NextEra Energy has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though NextEra Energy is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that NextEra Energy is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- The profitability ratio and Net Contribution % of NextEra Energy are below the industry average.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Opportunities for NextEra Energy – External Strategic Factors
- The new technology provides an opportunity to NextEra Energy to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
- Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for NextEra Energy in other product categories.
- Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for NextEra Energy to capture new customers and increase its market share.
- New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for NextEra Energy. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- New trends in the consumer behavior can open up new market for the NextEra Energy . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- The market development will lead to dilution of competitor’s advantage and enable NextEra Energy to increase its competitiveness compare to the other competitors.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided NextEra Energy an opportunity to enter a new emerging market.
Threats NextEra Energy Facing - External Strategic Factors
- Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
- Liability laws in different countries are different and NextEra Energy may be exposed to various liability claims given change in policies in those markets.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for NextEra Energy in those markets.
- Imitation of the counterfeit and low quality product is also a threat to NextEra Energy’s product especially in the emerging markets and low income markets.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
Limitations of SWOT Analysis for NextEra Energy
Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.
- Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
- SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
- The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of NextEra Energy
- SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
- SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.
Weighted SWOT Analysis of NextEra Energy
In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.
This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis NextEra Energy managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.
Limitation of Weighted SWOT analysis of NextEra Energy
This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.
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SWOT Worksheet & Template
If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.
References / Citations & Bibliography
- M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
- A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
- O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
- L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
- R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)
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