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Energy Future Holdings SWOT Analysis / Matrix
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SWOT analysis is a vital strategic planning tool that can be used by Energy Future Holdings managers to do a situational analysis of the organization . It is a handy technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Energy Future Holdings is facing in its current business environment.
The Energy Future Holdings is one of the leading organizatations in its industry. Energy Future Holdings maintains its dominant position in market by carefully 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 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 Energy Future Holdings 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 core purpose of SWOT matrix is to identify the strategies that a company can utilize to exploit external opportunities, counter threats, and build on & protect Energy Future Holdings strengths, and eradicate its weaknesses.
Step by Step Guide to Energy Future Holdings SWOT Analysis
Strengths of Energy Future Holdings – Internal Strategic Factors
As one of the leading firms in its industry, Energy Future Holdings 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 Energy Future Holdings are –
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- 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.
- Good Returns on Capital Expenditure – Energy Future Holdings is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Automation of activities brought consistency of quality to Energy Future Holdings products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Strong Brand Portfolio – Over the years Energy Future Holdings has invested in building a strong brand portfolio. The SWOT analysis of Energy Future Holdings just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- 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.
- Strong distribution network – Over the years Energy Future Holdings has built a reliable distribution network that can reach majority of its potential market.
- 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.
Weakness of Energy Future Holdings – Internal Strategic Factors
Weakness are the areas where Energy Future Holdings 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.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though Energy Future Holdings is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- The profitability ratio and Net Contribution % of Energy Future Holdings are below the industry average.
- 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.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Energy Future Holdings 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.
- High attrition rate in work force – compare to other organizations in the industry Energy Future Holdings 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.
Opportunities for Energy Future Holdings – 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 Energy Future Holdings 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 Energy Future Holdings to increase its competitiveness compare to the other competitors.
- 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 Energy Future Holdings. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Energy Future Holdings to capture new customers and increase its market share.
- 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.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Energy Future Holdings to increase its profitability.
- Government green drive also opens an opportunity for procurement of Energy Future Holdings 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 Energy Future Holdings an opportunity to enter a new emerging market.
Threats Energy Future Holdings Facing - External Strategic Factors
- Rising raw material can pose a threat to the Energy Future Holdings profitability.
- 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.
- No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
- Liability laws in different countries are different and Energy Future Holdings may be exposed to various liability claims given change in policies in those markets.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Energy Future Holdings in those markets.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- 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 Energy Future Holdings
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 Energy Future Holdings
- 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 Energy Future Holdings
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 Energy Future Holdings 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 Energy Future Holdings
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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