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CPFL Energia S.A. SWOT Analysis / Matrix
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SWOT analysis is a vital strategic planning tool that can be used by CPFL Energia S.A. managers to do a situational analysis of the organization . It is a handy technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) CPFL Energia S.A. is facing in its current business environment.
The CPFL Energia S.A. is one of the leading organizatations in its industry. CPFL Energia S.A. 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.
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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 helps the managers of the CPFL Energia S.A. 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 central purpose of SWOT matrix is to identify the strategies that a firm can use to exploit external opportunities, counter threats, and build on & protect CPFL Energia S.A. strengths, and eradicate its weaknesses.
Step by Step Guide to CPFL Energia S.A. SWOT Analysis
Strengths of CPFL Energia S.A. – Internal Strategic Factors
As one of the leading firms in its industry, CPFL Energia S.A. 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 CPFL Energia S.A. are –
Read - CPFL Energia S.A. Porter 5 Forces Analysis & Industry Analysis
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- Good Returns on Capital Expenditure – CPFL Energia S.A. is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- 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.
- 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.
- Automation of activities brought consistency of quality to CPFL Energia S.A. products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Highly successful at Go To Market strategies for its products.
- Superb Performance in New Markets – CPFL Energia S.A. 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.
- Strong distribution network – Over the years CPFL Energia S.A. has built a reliable distribution network that can reach majority of its potential market.
Weakness of CPFL Energia S.A. – Internal Strategic Factors
Weakness are the areas where CPFL Energia S.A. 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.
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- 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 CPFL Energia S.A. is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- 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.
- The profitability ratio and Net Contribution % of CPFL Energia S.A. are below the industry average.
- High attrition rate in work force – compare to other organizations in the industry CPFL Energia S.A. has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- 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.
- 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 CPFL Energia S.A.
Opportunities for CPFL Energia S.A. – External Strategic Factors
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- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as CPFL Energia S.A. to increase its profitability.
- New trends in the consumer behavior can open up new market for the CPFL Energia S.A. . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for CPFL Energia S.A. to capture new customers and increase its market share.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of CPFL Energia S.A..
- 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 CPFL Energia S.A. to drive home its advantage in new technology and gain market share in the new product category.
- 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 CPFL Energia S.A.. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- 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.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided CPFL Energia S.A. an opportunity to enter a new emerging market.
Threats CPFL Energia S.A. Facing - External Strategic Factors
- 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.
- Liability laws in different countries are different and CPFL Energia S.A. may be exposed to various liability claims given change in policies in those markets.
- 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 company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Rising raw material can pose a threat to the CPFL Energia S.A. profitability.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of CPFL Energia S.A.
- 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 CPFL Energia S.A.
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 CPFL Energia S.A.
- 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.
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Weighted SWOT Analysis of CPFL Energia S.A.
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 CPFL Energia S.A. 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 CPFL Energia S.A.
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)
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