Calpine SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by Calpine managers to do a situational analysis of the firm . It is an important technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Calpine is facing in its current business environment.

The Calpine is one of the leading companies in its industry. Calpine 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 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 Calpine to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
Calpine swot analysis / matrix

SWOT Matrix Strategies Objective

The core purpose of SWOT matrix is to identify the strategies that an organization can utilize to exploit external opportunities, counter threats, and build on & protect Calpine strengths, and eradicate its weaknesses.

Step by Step Guide to Calpine SWOT Analysis

Strengths of Calpine – Internal Strategic Factors

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

  • Highly skilled workforce through successful training and learning programs. Calpine 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.
  • Automation of activities brought consistency of quality to Calpine 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 – Calpine is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
  • Superb Performance in New Markets – Calpine 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.
  • 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 – Calpine has strong free cash flows that provide resources in the hand of the company to expand into new projects.
  • Strong Brand Portfolio – Over the years Calpine has invested in building a strong brand portfolio. The SWOT analysis of Calpine just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.

Weakness of Calpine – Internal Strategic Factors

Weakness are the areas where Calpine 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.

  • Not highly successful at integrating firms with different work culture. As mentioned earlier even though Calpine is successful at integrating small companies it has its share of failure to merge firms that have different work 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 Calpine
  • 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.
  • 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. Calpine has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
  • Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Calpine 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.
  • The profitability ratio and Net Contribution % of Calpine are below the industry average.
  • 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.

Opportunities for Calpine – External Strategic Factors

  • New trends in the consumer behavior can open up new market for the Calpine . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
  • Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Calpine an opportunity to enter a new emerging market.
  • Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Calpine.
  • 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 Calpine in other product categories.
  • The new technology provides an opportunity to Calpine 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.
  • The market development will lead to dilution of competitor’s advantage and enable Calpine to increase its competitiveness compare to the other competitors.
  • Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Calpine to capture new customers and increase its market share.
  • The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Calpine to increase its profitability.

Threats Calpine Facing - External Strategic Factors

  • 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.
  • 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.
  • Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
  • 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 Calpine
  • Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
  • Liability laws in different countries are different and Calpine may be exposed to various liability claims given change in policies 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.

Limitations of SWOT Analysis for Calpine

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 Calpine
  • 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 Calpine

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 Calpine 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 Calpine

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)