Severn Trent Plc SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

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

The Severn Trent Plc is one of the leading companies in its industry. Severn Trent Plc maintains its prominent 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 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 known as SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Severn Trent 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 firm can utilize to exploit external opportunities, counter threats, and build on & protect Severn Trent Plc strengths, and eradicate its weaknesses.

Step by Step Guide to Severn Trent Plc SWOT Analysis

Strengths of Severn Trent Plc – Internal Strategic Factors

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

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

Weakness of Severn Trent Plc – Internal Strategic Factors

Weakness are the areas where Severn Trent Plc 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.

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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 Severn Trent Plc is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
Limited success outside core business – Even though Severn Trent Plc is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present 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 Severn Trent Plc
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Severn Trent 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.
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 Severn Trent Plc are below the industry average.
Investment in Research and Development is below the fastest growing players in the industry. Even though Severn Trent Plc 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.

Opportunities for Severn Trent Plc – 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 Severn Trent Plc to increase its profitability.
Government green drive also opens an opportunity for procurement of Severn Trent Plc products by the state as well as federal government contractors.
Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Severn Trent Plc.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Severn Trent Plc an opportunity to enter a new emerging market.
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.
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 Severn Trent Plc. 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 Severn Trent Plc to capture new customers and increase its market share.
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 Severn Trent Plc in other product categories.

Threats Severn Trent Plc Facing - External Strategic Factors

Imitation of the counterfeit and low quality product is also a threat to Severn Trent Plc’s product especially in the emerging markets and low income markets.
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 Severn Trent Plc profitability.
Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
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.
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.

Limitations of SWOT Analysis for Severn Trent 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 Severn Trent 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 Severn Trent 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 Severn Trent 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 Severn Trent 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

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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)