CenterPoint Energy SWOT Analysis / Matrix

Essays, Term Papers & Research Papers

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

The CenterPoint Energy is one of the leading organizatations in its industry. CenterPoint Energy maintains its dominant position in market by critically analyzing and reviewing the SWOT analysis.  SWOT analysis an immensenly 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 facilitates 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 CenterPoint 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 use to exploit external opportunities, counter threats, and build on & protect CenterPoint Energy strengths, and eradicate its weaknesses.

Step by Step Guide to CenterPoint Energy SWOT Analysis

Strengths of CenterPoint Energy – Internal Strategic Factors

As one of the leading companies in its industry, CenterPoint Energy 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 CenterPoint Energy are –

• Highly skilled workforce through successful training and learning programs. CenterPoint 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.
• Successful track record of developing new products – product innovation.
• Strong Free Cash Flow – CenterPoint Energy has strong free cash flows that provide resources in the hand of the company to expand into new projects.
• Superb Performance in New Markets – CenterPoint 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.
• Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
• Automation of activities brought consistency of quality to CenterPoint Energy products and has enabled the company to scale up and scale down based on the demand conditions in the market.
• Good Returns on Capital Expenditure – CenterPoint Energy is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
• 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.

Weakness of CenterPoint Energy – Internal Strategic Factors

Weakness are the areas where CenterPoint Energy 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.

• The profitability ratio and Net Contribution % of CenterPoint Energy are below the industry average.
• High attrition rate in work force – compare to other organizations in the industry CenterPoint Energy has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
• Investment in Research and Development is below the fastest growing players in the industry. Even though CenterPoint Energy is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
• Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
• 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.
• 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 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 CenterPoint Energy is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.

Opportunities for CenterPoint Energy – External Strategic Factors

• 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 CenterPoint Energy to drive home its advantage in new technology and gain market share in the new product category.
• The new technology provides an opportunity to CenterPoint 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 CenterPoint Energy in other product categories.
• Decreasing cost of transportation because of lower shipping prices can also bring down the cost of CenterPoint Energy’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 new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as CenterPoint Energy to increase its profitability.
• New trends in the consumer behavior can open up new market for the CenterPoint Energy . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
• Government green drive also opens an opportunity for procurement of CenterPoint Energy products by the state as well as federal government contractors.
• The market development will lead to dilution of competitor’s advantage and enable CenterPoint Energy to increase its competitiveness compare to the other competitors.

Threats CenterPoint Energy Facing - External Strategic Factors

• Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
• The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
• New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
• Rising raw material can pose a threat to the CenterPoint Energy profitability.
• The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
• Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of CenterPoint Energy
• Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for CenterPoint Energy   in those markets.
• Liability laws in different countries are different and CenterPoint Energy may be exposed to various liability claims given change in policies in those markets.

Limitations of SWOT Analysis for CenterPoint 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 CenterPoint 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 CenterPoint 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 CenterPoint 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 CenterPoint 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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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)