Case Study Description of PDVSA & CITGO (B): Fully Integrated?
Concerned that Citgo investments are not yielding sufficient returns, PDVSA constrains Citgo management's autonomy, leading to Citgo senior management turnover. The case closes with Citgo's new CEO reflecting on what he needs to do to align Citgo's strategy and operations with PDVSA's strategy and organizational needs.
Authors :: Ashish Nanda, Leopoldo E. Lopez Mendoza
Swot Analysis of "PDVSA & CITGO (B): Fully Integrated?" written by Ashish Nanda, Leopoldo E. Lopez Mendoza includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Citgo Citgo's facing as an external strategic factors. Some of the topics covered in PDVSA & CITGO (B): Fully Integrated? case study are - Strategic Management Strategies, International business, Joint ventures, Mergers & acquisitions and Organizational Development.
Some of the macro environment factors that can be used to understand the PDVSA & CITGO (B): Fully Integrated? casestudy better are - – increasing transportation and logistics costs, geopolitical disruptions, there is backlash against globalization, technology disruption, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings,
banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of PDVSA & CITGO (B): Fully Integrated?
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in PDVSA & CITGO (B): Fully Integrated? case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Citgo Citgo's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Citgo Citgo's operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of PDVSA & CITGO (B): Fully Integrated? can be done for the following purposes –
1. Strategic planning using facts provided in PDVSA & CITGO (B): Fully Integrated? case study
2. Improving business portfolio management of Citgo Citgo's
3. Assessing feasibility of the new initiative in Organizational Development field.
4. Making a Organizational Development topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Citgo Citgo's
Strengths PDVSA & CITGO (B): Fully Integrated? | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Citgo Citgo's in PDVSA & CITGO (B): Fully Integrated? Harvard Business Review case study are -
Diverse revenue streams
– Citgo Citgo's is present in almost all the verticals within the industry. This has provided firm in PDVSA & CITGO (B): Fully Integrated? case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Successful track record of launching new products
– Citgo Citgo's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Citgo Citgo's has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Ability to lead change in Organizational Development field
– Citgo Citgo's is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Citgo Citgo's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Operational resilience
– The operational resilience strategy in the PDVSA & CITGO (B): Fully Integrated? Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Learning organization
- Citgo Citgo's is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Citgo Citgo's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in PDVSA & CITGO (B): Fully Integrated? Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Analytics focus
– Citgo Citgo's is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Ashish Nanda, Leopoldo E. Lopez Mendoza can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Cross disciplinary teams
– Horizontal connected teams at the Citgo Citgo's are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
High switching costs
– The high switching costs that Citgo Citgo's has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
High brand equity
– Citgo Citgo's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Citgo Citgo's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Citgo Citgo's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in PDVSA & CITGO (B): Fully Integrated? Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Digital Transformation in Organizational Development segment
- digital transformation varies from industry to industry. For Citgo Citgo's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Citgo Citgo's has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Organizational Resilience of Citgo Citgo's
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Citgo Citgo's does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses PDVSA & CITGO (B): Fully Integrated? | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PDVSA & CITGO (B): Fully Integrated? are -
High operating costs
– Compare to the competitors, firm in the HBR case study PDVSA & CITGO (B): Fully Integrated? has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Citgo Citgo's 's lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Citgo Citgo's has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Citgo Citgo's even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Interest costs
– Compare to the competition, Citgo Citgo's has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study PDVSA & CITGO (B): Fully Integrated?, is just above the industry average. Citgo Citgo's needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
No frontier risks strategy
– After analyzing the HBR case study PDVSA & CITGO (B): Fully Integrated?, it seems that company is thinking about the frontier risks that can impact Organizational Development strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High bargaining power of channel partners
– Because of the regulatory requirements, Ashish Nanda, Leopoldo E. Lopez Mendoza suggests that, Citgo Citgo's is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High cash cycle compare to competitors
Citgo Citgo's has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study PDVSA & CITGO (B): Fully Integrated?, it seems that the employees of Citgo Citgo's don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Low market penetration in new markets
– Outside its home market of Citgo Citgo's, firm in the HBR case study PDVSA & CITGO (B): Fully Integrated? needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Citgo Citgo's products
– To increase the profitability and margins on the products, Citgo Citgo's needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As PDVSA & CITGO (B): Fully Integrated? HBR case study mentions - Citgo Citgo's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities PDVSA & CITGO (B): Fully Integrated? | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study PDVSA & CITGO (B): Fully Integrated? are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Citgo Citgo's to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Citgo Citgo's to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Citgo Citgo's can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Creating value in data economy
– The success of analytics program of Citgo Citgo's has opened avenues for new revenue streams for the organization in the industry. This can help Citgo Citgo's to build a more holistic ecosystem as suggested in the PDVSA & CITGO (B): Fully Integrated? case study. Citgo Citgo's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Citgo Citgo's to increase its market reach. Citgo Citgo's will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Citgo Citgo's can use these opportunities to build new business models that can help the communities that Citgo Citgo's operates in. Secondly it can use opportunities from government spending in Organizational Development sector.
Buying journey improvements
– Citgo Citgo's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. PDVSA & CITGO (B): Fully Integrated? suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Citgo Citgo's is facing challenges because of the dominance of functional experts in the organization. PDVSA & CITGO (B): Fully Integrated? case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Citgo Citgo's has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Citgo Citgo's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Developing new processes and practices
– Citgo Citgo's can develop new processes and procedures in Organizational Development industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Citgo Citgo's can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, PDVSA & CITGO (B): Fully Integrated?, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Organizational Development industry, but it has also influenced the consumer preferences. Citgo Citgo's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Citgo Citgo's can use the latest technology developments to improve its manufacturing and designing process in Organizational Development segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats PDVSA & CITGO (B): Fully Integrated? External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study PDVSA & CITGO (B): Fully Integrated? are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Citgo Citgo's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Citgo Citgo's needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Organizational Development industry regulations.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Citgo Citgo's business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Citgo Citgo's has witnessed rapid integration of technology during Covid-19 in the Organizational Development industry. As one of the leading players in the industry, Citgo Citgo's needs to keep up with the evolution of technology in the Organizational Development sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Citgo Citgo's in the Organizational Development sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Citgo Citgo's is facing in Organizational Development sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Citgo Citgo's demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
Increasing wage structure of Citgo Citgo's
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Citgo Citgo's.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study PDVSA & CITGO (B): Fully Integrated?, Citgo Citgo's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Organizational Development .
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Citgo Citgo's needs to understand the core reasons impacting the Organizational Development industry. This will help it in building a better workplace.
High dependence on third party suppliers
– Citgo Citgo's high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Environmental challenges
– Citgo Citgo's needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Citgo Citgo's can take advantage of this fund but it will also bring new competitors in the Organizational Development industry.
Weighted SWOT Analysis of PDVSA & CITGO (B): Fully Integrated? Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study PDVSA & CITGO (B): Fully Integrated? needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study PDVSA & CITGO (B): Fully Integrated? is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study PDVSA & CITGO (B): Fully Integrated? is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of PDVSA & CITGO (B): Fully Integrated? is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Citgo Citgo's needs to make to build a sustainable competitive advantage.