AES SWOT Analysis / Matrix

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SWOT analysis is a strategic planning tool that can be used by AES managers to do a situational analysis of the organization . It is a handy technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) AES is facing in its current business environment.

The AES is one of the leading companies in its industry. AES maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the company 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 known as SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the AES 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 use to exploit external opportunities, counter threats, and build on & protect AES strengths, and eradicate its weaknesses.

Step by Step Guide to AES SWOT Analysis

Strengths of AES – Internal Strategic Factors

As one of the leading firms in its industry, AES has numerous strengths that help 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 AES are –

Strong Brand Portfolio – Over the years AES has invested in building a strong brand portfolio. The SWOT analysis of AES just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Superb Performance in New Markets – AES 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.
Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Highly successful at Go To Market strategies for its products.
Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
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.
Strong distribution network – Over the years AES has built a reliable distribution network that can reach majority of its potential market.
Highly skilled workforce through successful training and learning programs. AES 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.

Weakness of AES – Internal Strategic Factors

Weakness are the areas where AES can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, AES needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
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 AES
The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. AES has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
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.
High attrition rate in work force – compare to other organizations in the industry AES has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
Limited success outside core business – Even though AES is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.

Opportunities for AES – External Strategic Factors

New trends in the consumer behavior can open up new market for the AES . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
Decreasing cost of transportation because of lower shipping prices can also bring down the cost of AES’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
The market development will lead to dilution of competitor’s advantage and enable AES to increase its competitiveness compare to the other competitors.
New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for AES to drive home its advantage in new technology and gain market share in the new product category.
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.
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 AES in other product categories.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided AES an opportunity to enter a new emerging market.
Government green drive also opens an opportunity for procurement of AES products by the state as well as federal government contractors.

Threats AES Facing - External Strategic Factors

New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
Liability laws in different countries are different and AES 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.
As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
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.
Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for AES in those markets.

Limitations of SWOT Analysis for AES

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 AES
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 AES

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 AES 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 AES

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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Example of Weighted SWOT Analysis

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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)