This case presents the history and current position of Russia's second-largest oil company, YUKOS, as it seeks listing on the NYSE as an ADR and attempts to rid itself from a punishing "governance discount" by the capital markets. This is a company with a history of significant corporate governance abuses that is, more recently, attempting to reform its ways. Although the market value of the company has risen dramatically over the past year (2000), it is still selling at a whopping discount from the imputed market value of its gigantic oil and gas reserves. What more should YUKOS be doing to eliminate its governance discount? How can any program be implemented successfully given the current ownership structure of the company?
Swot Analysis of "OAO YUKOS Oil Co." written by Malcolm S. Salter, Joshua N. Rosenbaum includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Yukos Discount facing as an external strategic factors. Some of the topics covered in OAO YUKOS Oil Co. case study are - Strategic Management Strategies, Financial markets and Strategy & Execution.
Some of the macro environment factors that can be used to understand the OAO YUKOS Oil Co. casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, there is increasing trade war between United States & China, geopolitical disruptions, increasing household debt because of falling income levels,
increasing commodity prices, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of OAO YUKOS Oil Co.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in OAO YUKOS Oil Co. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Yukos Discount, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Yukos Discount 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 OAO YUKOS Oil Co. can be done for the following purposes –
1. Strategic planning using facts provided in OAO YUKOS Oil Co. case study
2. Improving business portfolio management of Yukos Discount
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Yukos Discount
Strengths OAO YUKOS Oil Co. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Yukos Discount in OAO YUKOS Oil Co. Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Yukos Discount in the sector have low bargaining power. OAO YUKOS Oil Co. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Yukos Discount to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Yukos Discount in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Yukos Discount has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Yukos Discount 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.
Innovation driven organization
– Yukos Discount is one of the most innovative firm in sector. Manager in OAO YUKOS Oil Co. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Yukos Discount has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Yukos Discount to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Strategy & Execution industry
– OAO YUKOS Oil Co. firm has clearly differentiated products in the market place. This has enabled Yukos Discount to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Yukos Discount to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Yukos Discount has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study OAO YUKOS Oil Co. - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Strong track record of project management
– Yukos Discount is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High switching costs
– The high switching costs that Yukos Discount 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.
Learning organization
- Yukos Discount 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 Yukos Discount is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in OAO YUKOS Oil Co. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Yukos Discount 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.
Training and development
– Yukos Discount has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in OAO YUKOS Oil Co. 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.
Weaknesses OAO YUKOS Oil Co. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of OAO YUKOS Oil Co. are -
Interest costs
– Compare to the competition, Yukos Discount 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.
Products dominated business model
– Even though Yukos Discount has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - OAO YUKOS Oil Co. should strive to include more intangible value offerings along with its core products and services.
Slow decision making process
– As mentioned earlier in the report, Yukos Discount 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. Yukos Discount 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Malcolm S. Salter, Joshua N. Rosenbaum suggests that, Yukos Discount 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.
Increasing silos among functional specialists
– The organizational structure of Yukos Discount is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Yukos Discount needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Yukos Discount to focus more on services rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As OAO YUKOS Oil Co. HBR case study mentions - Yukos Discount 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.
Aligning sales with marketing
– It come across in the case study OAO YUKOS Oil Co. that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case OAO YUKOS Oil Co. can leverage the sales team experience to cultivate customer relationships as Yukos Discount is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Yukos Discount needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
No frontier risks strategy
– After analyzing the HBR case study OAO YUKOS Oil Co., it seems that company is thinking about the frontier risks that can impact Strategy & Execution 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 dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Yukos Discount supply chain. Even after few cautionary changes mentioned in the HBR case study - OAO YUKOS Oil Co., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Yukos Discount vulnerable to further global disruptions in South East Asia.
Need for greater diversity
– Yukos Discount has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Opportunities OAO YUKOS Oil Co. | 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 OAO YUKOS Oil Co. are -
Loyalty marketing
– Yukos Discount 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Yukos Discount can use these opportunities to build new business models that can help the communities that Yukos Discount operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Yukos Discount to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Yukos Discount in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Strategy & Execution segment, and it will provide faster access to the consumers.
Low interest rates
– Even though inflation is raising its head in most developed economies, Yukos Discount 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.
Developing new processes and practices
– Yukos Discount can develop new processes and procedures in Strategy & Execution 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.
Buying journey improvements
– Yukos Discount can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. OAO YUKOS Oil Co. 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.
Building a culture of innovation
– managers at Yukos Discount can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Leveraging digital technologies
– Yukos Discount can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Yukos Discount in the consumer business. Now Yukos Discount can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Yukos Discount to increase its market reach. Yukos Discount 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Yukos Discount can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Yukos Discount can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Yukos Discount 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 Yukos Discount to hire the very best people irrespective of their geographical location.
Threats OAO YUKOS Oil Co. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study OAO YUKOS Oil Co. are -
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Yukos Discount can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Yukos Discount 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. Yukos Discount can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Consumer confidence and its impact on Yukos Discount 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.
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 Yukos Discount business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study OAO YUKOS Oil Co., Yukos Discount may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Yukos Discount can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study OAO YUKOS Oil Co. .
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.
Shortening product life cycle
– it is one of the major threat that Yukos Discount is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Yukos Discount
– 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 Yukos Discount.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Yukos Discount with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
High dependence on third party suppliers
– Yukos Discount 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.
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 Yukos Discount in the Strategy & Execution sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Yukos Discount can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Weighted SWOT Analysis of OAO YUKOS Oil Co. 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 OAO YUKOS Oil Co. 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 OAO YUKOS Oil Co. 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 OAO YUKOS Oil Co. 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 OAO YUKOS Oil Co. 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 Yukos Discount needs to make to build a sustainable competitive advantage.
