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 - – central banks are concerned over increasing inflation, increasing energy prices, cloud computing is disrupting traditional business models, geopolitical disruptions, increasing household debt because of falling income levels, challanges to central banks by blockchain based private currencies, wage bills are increasing,
competitive advantages are harder to sustain because of technology dispersion, 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 -
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Petrobras Salt 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.
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.
Operational resilience
– The operational resilience strategy in the Equity Capital Raising: The SEO of Petrobras 2010 (A) 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.
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.
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.
High switching costs
– The high switching costs that Petrobras Salt 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
- 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.
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.
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.
Innovation driven organization
– Petrobras Salt is one of the most innovative firm in sector. Manager in Equity Capital Raising: The SEO of Petrobras 2010 (A) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
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 -
Increasing silos among functional specialists
– The organizational structure of Petrobras Salt is dominated by functional specialists. It is not different from other players in the Strategy & Execution segment. Petrobras Salt needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Petrobras Salt to focus more on services rather than just following the product oriented approach.
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.
No frontier risks strategy
– After analyzing the HBR case study Equity Capital Raising: The SEO of Petrobras 2010 (A), 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.
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.
Workers concerns about automation
– As automation is fast increasing in the segment, Petrobras Salt 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.
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 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.
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 Petrobras Salt supply chain. Even after few cautionary changes mentioned in the HBR case study - Equity Capital Raising: The SEO of Petrobras 2010 (A), it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Petrobras Salt vulnerable to further global disruptions in South East Asia.
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.
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.
Low market penetration in new markets
– Outside its home market of Petrobras Salt, firm in the HBR case study Equity Capital Raising: The SEO of Petrobras 2010 (A) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 -
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Petrobras Salt can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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. Petrobras Salt can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Petrobras Salt 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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Petrobras Salt 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.
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.
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.
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.
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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Petrobras Salt 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 Petrobras Salt to hire the very best people irrespective of their geographical location.
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.
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 -
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.
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.
Regulatory challenges
– Petrobras Salt 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.
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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Equity Capital Raising: The SEO of Petrobras 2010 (A), Petrobras Salt 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 .
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.
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 Petrobras Salt.
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.
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.
Increasing wage structure of Petrobras Salt
– 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 Petrobras Salt.
Stagnating economy with rate increase
– Petrobras Salt 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 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.
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.