Equity Capital Raising: The SEO of Petrobras 2010 (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Equity Capital Raising: The SEO of Petrobras 2010 (A)
This two-part case series is about the largest equity-raising deal in history - the Petrobras seasoned equity offering (SEO) of 2010. In June 2010, Petrobras, Brazil's national oil company was preparing a share issue to develop its "pre-salt" oil fields - so called because they are trapped under several kilometers of seawater, rock and a hard-to-penetrate layer of salt. The hydrocarbons resting in the pre-salt fields could make Brazil one of the world's largest oil-exporting nations. Brazil's offshore pre-salt area - widely tipped to rival the North Sea in terms of size and importance - had been generating excitement in the energy world since its discovery in 2005. Six new pre-salt fields had been discovered more recently and were now ready for exploration. The investments outlined in the plan were huge and would transform Petrobras into one of the world's largest producers. However, this also posed significant financing challenges for Petrobras, given its capacity to generate cash from its current operations. So, how could it raise the money? A bond issue so soon after the previous one was a possibility. It would then be among the world's biggest bond issues. But there was a risk of not meeting the need for capital. How would such an issue affect its debt-to-value ratio and its rating? Would Petrobras be able to maintain its investment grade status? A share issue was another possibility, but it would also be very big. Would the market be ready for such a big issue so soon after the financial crisis? Many unresolved issues lay ahead. Both Gabrielli (CEO) and Barbassa (CFO) understood that regardless of the method used, they were facing one of the world's biggest funding challenges to date. A lot was at stake and wrong choices would have disastrous consequences for both Petrobras and Brazil.
Swot Analysis of "Equity Capital Raising: The SEO of Petrobras 2010 (A)" written by Nuno Fernandes, Lars-Fredrik Forberg includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Petrobras Salt facing as an external strategic factors. Some of the topics covered in Equity Capital Raising: The SEO of Petrobras 2010 (A) case study are - Strategic Management Strategies, Emerging markets, Financial management, Risk management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Equity Capital Raising: The SEO of Petrobras 2010 (A) casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, technology disruption, increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%,
digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Equity Capital Raising: The SEO of Petrobras 2010 (A)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Equity Capital Raising: The SEO of Petrobras 2010 (A) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Petrobras Salt, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Petrobras Salt 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 Equity Capital Raising: The SEO of Petrobras 2010 (A) can be done for the following purposes –
1. Strategic planning using facts provided in Equity Capital Raising: The SEO of Petrobras 2010 (A) case study
2. Improving business portfolio management of Petrobras Salt
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 Petrobras Salt
Strengths Equity Capital Raising: The SEO of Petrobras 2010 (A) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Petrobras Salt in Equity Capital Raising: The SEO of Petrobras 2010 (A) Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Petrobras Salt in the sector have low bargaining power. Equity Capital Raising: The SEO of Petrobras 2010 (A) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Petrobras Salt to manage not only supply disruptions but also source products at highly competitive prices.
Learning organization
- Petrobras Salt 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 Petrobras Salt is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Equity Capital Raising: The SEO of Petrobras 2010 (A) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Petrobras Salt is one of the leading recruiters in the industry. Managers in the Equity Capital Raising: The SEO of Petrobras 2010 (A) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Highly skilled collaborators
– Petrobras Salt 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 Equity Capital Raising: The SEO of Petrobras 2010 (A) HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Strategy & Execution field
– Petrobras Salt 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 Petrobras Salt in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Strategy & Execution industry
– Equity Capital Raising: The SEO of Petrobras 2010 (A) firm has clearly differentiated products in the market place. This has enabled Petrobras Salt to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Petrobras Salt to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Petrobras Salt has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Petrobras Salt 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.
Strong track record of project management
– Petrobras Salt is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Petrobras Salt 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 Nuno Fernandes, Lars-Fredrik Forberg 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
– Petrobras Salt has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Petrobras Salt to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Petrobras Salt 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 Equity Capital Raising: The SEO of Petrobras 2010 (A) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Petrobras Salt
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Petrobras Salt does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses Equity Capital Raising: The SEO of Petrobras 2010 (A) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Equity Capital Raising: The SEO of Petrobras 2010 (A) are -
Need for greater diversity
– Petrobras Salt 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.
Interest costs
– Compare to the competition, Petrobras Salt 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.
High cash cycle compare to competitors
Petrobras Salt 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Nuno Fernandes, Lars-Fredrik Forberg suggests that, Petrobras Salt 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.
Aligning sales with marketing
– It come across in the case study Equity Capital Raising: The SEO of Petrobras 2010 (A) 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 Equity Capital Raising: The SEO of Petrobras 2010 (A) can leverage the sales team experience to cultivate customer relationships as Petrobras Salt is planning to shift buying processes online.
Lack of clear differentiation of Petrobras Salt products
– To increase the profitability and margins on the products, Petrobras Salt needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Equity Capital Raising: The SEO of Petrobras 2010 (A) 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 Petrobras Salt has relatively successful track record of launching new products.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Equity Capital Raising: The SEO of Petrobras 2010 (A), it seems that the employees of Petrobras Salt 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Equity Capital Raising: The SEO of Petrobras 2010 (A), is just above the industry average. Petrobras Salt 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.
High operating costs
– Compare to the competitors, firm in the HBR case study Equity Capital Raising: The SEO of Petrobras 2010 (A) 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 Petrobras Salt 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Petrobras Salt 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.
Opportunities Equity Capital Raising: The SEO of Petrobras 2010 (A) | 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 Equity Capital Raising: The SEO of Petrobras 2010 (A) are -
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. Petrobras Salt 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. Petrobras Salt 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.
Buying journey improvements
– Petrobras Salt can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Equity Capital Raising: The SEO of Petrobras 2010 (A) 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.
Leveraging digital technologies
– Petrobras Salt 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.
Better consumer reach
– The expansion of the 5G network will help Petrobras Salt to increase its market reach. Petrobras Salt 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, Petrobras Salt can use these opportunities to build new business models that can help the communities that Petrobras Salt operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Petrobras Salt is facing challenges because of the dominance of functional experts in the organization. Equity Capital Raising: The SEO of Petrobras 2010 (A) 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Petrobras Salt 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.
Loyalty marketing
– Petrobras Salt 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.
Developing new processes and practices
– Petrobras Salt 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
– Petrobras Salt 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 Equity Capital Raising: The SEO of Petrobras 2010 (A) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Petrobras Salt to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Petrobras Salt 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.
Learning at scale
– Online learning technologies has now opened space for Petrobras Salt 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.
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. Petrobras Salt can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Equity Capital Raising: The SEO of Petrobras 2010 (A) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Equity Capital Raising: The SEO of Petrobras 2010 (A) 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. Petrobras Salt can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Petrobras Salt business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Petrobras Salt with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Petrobras Salt 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.
High dependence on third party suppliers
– Petrobras Salt 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.
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. Petrobras Salt needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Petrobras Salt 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 Equity Capital Raising: The SEO of Petrobras 2010 (A) .
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. Petrobras Salt 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.
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 Petrobras Salt in the Strategy & Execution sector and impact the bottomline of the organization.
Technology acceleration in Forth Industrial Revolution
– Petrobras Salt has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Petrobras Salt 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.
Environmental challenges
– Petrobras Salt 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. Petrobras Salt can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
Weighted SWOT Analysis of Equity Capital Raising: The SEO of Petrobras 2010 (A) 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 Equity Capital Raising: The SEO of Petrobras 2010 (A) 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 Equity Capital Raising: The SEO of Petrobras 2010 (A) 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 Equity Capital Raising: The SEO of Petrobras 2010 (A) 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 Equity Capital Raising: The SEO of Petrobras 2010 (A) 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 Petrobras Salt needs to make to build a sustainable competitive advantage.
