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 - – wage bills are increasing, there is increasing trade war between United States & China, increasing transportation and logistics costs, geopolitical disruptions, challanges to central banks by blockchain based private currencies, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels,
banking and financial system is disrupted by Bitcoin and other crypto currencies, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 -
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.
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.
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.
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.
Operational resilience
– The operational resilience strategy in the OAO YUKOS Oil Co. 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.
Highly skilled collaborators
– Yukos Discount has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in OAO YUKOS Oil Co. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Organizational Resilience of Yukos Discount
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Yukos Discount does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Analytics focus
– Yukos Discount 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 Malcolm S. Salter, Joshua N. Rosenbaum 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.
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.
Ability to lead change in Strategy & Execution field
– Yukos Discount 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 Yukos Discount in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Yukos Discount is present in almost all the verticals within the industry. This has provided firm in OAO YUKOS Oil Co. 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.
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 -
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.
Low market penetration in new markets
– Outside its home market of Yukos Discount, firm in the HBR case study OAO YUKOS Oil Co. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Yukos Discount products
– To increase the profitability and margins on the products, Yukos Discount needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study OAO YUKOS Oil Co., is just above the industry average. Yukos Discount 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.
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.
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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Yukos Discount is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study OAO YUKOS Oil Co. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Skills based hiring
– The stress on hiring functional specialists at Yukos Discount has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers 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.
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 -
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Yukos Discount can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Manufacturing automation
– Yukos Discount can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution 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.
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.
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.
Using analytics as competitive advantage
– Yukos Discount has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study OAO YUKOS Oil Co. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Yukos Discount to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Yukos Discount can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Yukos Discount 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, OAO YUKOS Oil Co., to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Yukos Discount can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 -
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Yukos Discount will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Yukos Discount in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
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.
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.
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.
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. .
Regulatory challenges
– Yukos Discount 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 Strategy & Execution industry regulations.
Technology acceleration in Forth Industrial Revolution
– Yukos Discount has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Yukos Discount needs to keep up with the evolution of technology in the Strategy & Execution 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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Yukos Discount.
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.
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.
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.