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Consolidated Edison SWOT Analysis / Matrix
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SWOT analysis is a strategic planning tool that can be used by Consolidated Edison managers to do a situational analysis of the firm . It is an important technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Consolidated Edison is facing in its current business environment.
The Consolidated Edison is one of the leading firms in its industry. Consolidated Edison maintains its dominant 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 firm 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 Consolidated Edison 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 company can utilize to exploit external opportunities, counter threats, and build on & protect Consolidated Edison strengths, and eradicate its weaknesses.
Step by Step Guide to Consolidated Edison SWOT Analysis
Strengths of Consolidated Edison – Internal Strategic Factors
As one of the leading organizations in its industry, Consolidated Edison 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 Consolidated Edison are –
- 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 – Consolidated Edison 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.
- Good Returns on Capital Expenditure – Consolidated Edison is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Successful track record of developing new products – product innovation.
- 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.
- Strong Free Cash Flow – Consolidated Edison has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Highly skilled workforce through successful training and learning programs. Consolidated Edison 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 Consolidated Edison – Internal Strategic Factors
Weakness are the areas where Consolidated Edison can improve upon. Strategy is about making choices and weakness are the areas where a firm 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, Consolidated Edison 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.
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Consolidated Edison is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- Limited success outside core business – Even though Consolidated Edison is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- 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 Consolidated Edison
- High attrition rate in work force – compare to other organizations in the industry Consolidated Edison has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
Opportunities for Consolidated Edison – External Strategic Factors
- Government green drive also opens an opportunity for procurement of Consolidated Edison products by the state as well as federal government contractors.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Consolidated Edison an opportunity to enter a new emerging market.
- The new technology provides an opportunity to Consolidated Edison 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.
- 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.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Consolidated Edison’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.
- 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 Consolidated Edison to drive home its advantage in new technology and gain market share in the new product category.
- The market development will lead to dilution of competitor’s advantage and enable Consolidated Edison to increase its competitiveness compare to the other competitors.
- 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 Consolidated Edison in other product categories.
Threats Consolidated Edison Facing - External Strategic Factors
- Rising raw material can pose a threat to the Consolidated Edison profitability.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- 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 .
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Consolidated Edison in those markets.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Consolidated Edison
Limitations of SWOT Analysis for Consolidated Edison
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 Consolidated Edison
- 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 Consolidated Edison
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 Consolidated Edison 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 Consolidated Edison
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
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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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