Case Study Description of Sinopec: Refining its Strategy
China's oil industry, with majority ownership vested in the government, had engaged in an "equity oil" strategy for the past few years--acquiring equity interests in oil producing nations including Sudan, Angola, and Iran. Outside critics, however, suggested that the Chinese companies could buy oil in the highly fungible global marketplace. But Sinopec, the nations largest refiner, was one of the three companies (together with PetroChina and CNOOC) engaged in the equity oil play. With China's energy demands swelling--especially petroleum of which it had limited reserves--Sinopec was struggling to increase output rapidly enough to keep pace with the rapid growth of their automobile sector. And it had to make money soon.
Swot Analysis of "Sinopec: Refining its Strategy" written by Richard H.K. Vietor, Julia Galef includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sinopec Oil facing as an external strategic factors. Some of the topics covered in Sinopec: Refining its Strategy case study are - Strategic Management Strategies, Policy and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Sinopec: Refining its Strategy casestudy better are - – there is backlash against globalization, central banks are concerned over increasing inflation, wage bills are increasing, increasing inequality as vast percentage of new income is going to the top 1%, increasing transportation and logistics costs, increasing commodity prices, talent flight as more people leaving formal jobs,
there is increasing trade war between United States & China, geopolitical disruptions, etc
Introduction to SWOT Analysis of Sinopec: Refining its Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Sinopec: Refining its Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sinopec Oil, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sinopec Oil 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 Sinopec: Refining its Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Sinopec: Refining its Strategy case study
2. Improving business portfolio management of Sinopec Oil
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 Sinopec Oil
Strengths Sinopec: Refining its Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sinopec Oil in Sinopec: Refining its Strategy Harvard Business Review case study are -
Successful track record of launching new products
– Sinopec Oil has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sinopec Oil 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.
Organizational Resilience of Sinopec Oil
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Sinopec Oil does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Training and development
– Sinopec Oil has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Sinopec: Refining its Strategy 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.
Superior customer experience
– The customer experience strategy of Sinopec Oil in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Strategy & Execution field
– Sinopec Oil 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 Sinopec Oil in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Sinopec Oil 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 Sinopec Oil is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Sinopec: Refining its Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Strong track record of project management
– Sinopec Oil is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy in the Sinopec: Refining its Strategy 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.
Cross disciplinary teams
– Horizontal connected teams at the Sinopec Oil 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 brand equity
– Sinopec Oil has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sinopec Oil to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Innovation driven organization
– Sinopec Oil is one of the most innovative firm in sector. Manager in Sinopec: Refining its Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– Sinopec Oil is present in almost all the verticals within the industry. This has provided firm in Sinopec: Refining its Strategy 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 Sinopec: Refining its Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sinopec: Refining its Strategy are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Sinopec: Refining its Strategy, is just above the industry average. Sinopec Oil 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.
Low market penetration in new markets
– Outside its home market of Sinopec Oil, firm in the HBR case study Sinopec: Refining its Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Sinopec Oil 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 - Sinopec: Refining its Strategy should strive to include more intangible value offerings along with its core products and services.
Skills based hiring
– The stress on hiring functional specialists at Sinopec Oil 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Sinopec: Refining its Strategy HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Sinopec Oil has relatively successful track record of launching new products.
Lack of clear differentiation of Sinopec Oil products
– To increase the profitability and margins on the products, Sinopec Oil needs to provide more differentiated products than what it is currently offering in the marketplace.
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 Sinopec Oil supply chain. Even after few cautionary changes mentioned in the HBR case study - Sinopec: Refining its Strategy, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sinopec Oil vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Sinopec Oil 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.
Capital Spending Reduction
– Even during the low interest decade, Sinopec Oil has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Aligning sales with marketing
– It come across in the case study Sinopec: Refining its Strategy 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 Sinopec: Refining its Strategy can leverage the sales team experience to cultivate customer relationships as Sinopec Oil is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Sinopec Oil 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.
Opportunities Sinopec: Refining its Strategy | 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 Sinopec: Refining its Strategy are -
Developing new processes and practices
– Sinopec Oil 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sinopec Oil 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, Sinopec: Refining its Strategy, 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 Strategy & Execution industry, but it has also influenced the consumer preferences. Sinopec Oil can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Learning at scale
– Online learning technologies has now opened space for Sinopec Oil to conduct training and development for its employees across the world. This will result in not only reducing the cost of training but also help employees in different part of the world to integrate with the headquarter work culture, ethos, and standards.
Manufacturing automation
– Sinopec Oil 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sinopec Oil is facing challenges because of the dominance of functional experts in the organization. Sinopec: Refining its Strategy 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sinopec Oil 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 Sinopec Oil to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Sinopec Oil 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.
Loyalty marketing
– Sinopec Oil 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.
Better consumer reach
– The expansion of the 5G network will help Sinopec Oil to increase its market reach. Sinopec Oil 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.
Creating value in data economy
– The success of analytics program of Sinopec Oil has opened avenues for new revenue streams for the organization in the industry. This can help Sinopec Oil to build a more holistic ecosystem as suggested in the Sinopec: Refining its Strategy case study. Sinopec Oil can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Using analytics as competitive advantage
– Sinopec Oil 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 Sinopec: Refining its Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sinopec Oil to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sinopec Oil 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.
Threats Sinopec: Refining its Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Sinopec: Refining its Strategy are -
Technology acceleration in Forth Industrial Revolution
– Sinopec Oil has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Sinopec Oil 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.
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. Sinopec Oil needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Sinopec Oil is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sinopec Oil 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Sinopec: Refining its Strategy, Sinopec Oil 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 .
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. Sinopec Oil can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Increasing wage structure of Sinopec Oil
– 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 Sinopec Oil.
High dependence on third party suppliers
– Sinopec Oil 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.
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 Sinopec Oil business can come under increasing regulations regarding data privacy, data security, etc.
Environmental challenges
– Sinopec Oil 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. Sinopec Oil can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Regulatory challenges
– Sinopec Oil 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sinopec Oil 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 Sinopec: Refining its Strategy .
Weighted SWOT Analysis of Sinopec: Refining its Strategy 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 Sinopec: Refining its Strategy 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 Sinopec: Refining its Strategy 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 Sinopec: Refining its Strategy 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 Sinopec: Refining its Strategy 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 Sinopec Oil needs to make to build a sustainable competitive advantage.