Centrica Plc SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

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

The Centrica Plc is one of the leading organizatations in its industry. Centrica Plc maintains its dominant position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis a highly 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 enables 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 Centrica Plc 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 Centrica Plc strengths, and eradicate its weaknesses.

Step by Step Guide to Centrica Plc SWOT Analysis

Strengths of Centrica Plc – Internal Strategic Factors

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

Read - Centrica Plc Porter 5 Forces Analysis & Industry Analysis
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Highly skilled workforce through successful training and learning programs. Centrica Plc 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.
Strong Free Cash Flow – Centrica Plc has strong free cash flows that provide resources in the hand of the company to expand into new projects.
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.
Strong Brand Portfolio – Over the years Centrica Plc has invested in building a strong brand portfolio. The SWOT analysis of Centrica Plc just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Strong distribution network – Over the years Centrica Plc has built a reliable distribution network that can reach majority of its potential market.
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.
Good Returns on Capital Expenditure – Centrica Plc is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.

Weakness of Centrica Plc – Internal Strategic Factors

Weakness are the areas where Centrica Plc 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 highly successful at integrating firms with different work culture. As mentioned earlier even though Centrica Plc is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Centrica Plc 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 Centrica Plc are below the industry average.
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 Centrica Plc
Limited success outside core business – Even though Centrica Plc is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
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.

Opportunities for Centrica Plc – External Strategic Factors

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New trends in the consumer behavior can open up new market for the Centrica Plc . 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 Centrica Plc to capture new customers and increase its market share.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Centrica Plc an opportunity to enter a new emerging market.
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 Centrica Plc to drive home its advantage in new technology and gain market share in the new product category.
Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Centrica Plc.
Government green drive also opens an opportunity for procurement of Centrica Plc products by the state as well as federal government contractors.
The market development will lead to dilution of competitor’s advantage and enable Centrica Plc 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 Centrica Plc in other product categories.

Threats Centrica Plc Facing - External Strategic Factors

Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
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.
Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
Rising raw material can pose a threat to the Centrica Plc profitability.
Liability laws in different countries are different and Centrica Plc 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.
Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Centrica Plc

Limitations of SWOT Analysis for Centrica Plc

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 Centrica Plc
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 Centrica Plc

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 Centrica Plc 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 Centrica Plc

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

You can email us to get an example document of Weighted SWOT analysis.

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)