The Kashagan Production Sharing Agreement (PSA) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
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Case Study SWOT Analysis Solution
Case Study Description of The Kashagan Production Sharing Agreement (PSA)
When discovered in the 1990s, the Kashagan oil field was the second largest oil field in the world. The project sponsors (equity investors) signed a 40-year production sharing agreement (PSA) with the Kazakh government in 1997, with the expectation the field would be developed at a total cost of $57 billion and would be pumping oil by 2005. Unlike most contracts in the energy industry, the Kashagan agreement was a "flexible PSA" meaning the contractual terms-the allocation of risks and returns-depended on ex post realizations of such things as capital costs and profitability. The parties incorporated contingencies into the contract to make it fairer and more flexible, and to ensure it remain viable over the project's 40-year life. Due to a combination of problems and challenges, the project was still not done in mid-2007. At that time, the sponsors, led by the Italian energy company ENI, announced the project would not be completed until 2010 and the total cost was likely to be $136 billion. Although oil prices had risen dramatically between 1997 and 2007, thereby making the project worth considerably more, the Kazakh government indicated its desire to renegotiate key provisions of the contract. The sponsors had to decide whether to renegotiate the contract and, if so, which parts.
Swot Analysis of "The Kashagan Production Sharing Agreement (PSA)" written by Benjamin C. Esty, Florian Bitsch includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Kashagan Psa facing as an external strategic factors. Some of the topics covered in The Kashagan Production Sharing Agreement (PSA) case study are - Strategic Management Strategies, Collaboration, Economics, Financial analysis, Financial markets, International business, Joint ventures, Negotiations, Product development, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the The Kashagan Production Sharing Agreement (PSA) casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, geopolitical disruptions, cloud computing is disrupting traditional business models, increasing government debt because of Covid-19 spendings, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing,
central banks are concerned over increasing inflation, there is increasing trade war between United States & China, etc
Introduction to SWOT Analysis of The Kashagan Production Sharing Agreement (PSA)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The Kashagan Production Sharing Agreement (PSA) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kashagan Psa, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kashagan Psa 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 The Kashagan Production Sharing Agreement (PSA) can be done for the following purposes –
1. Strategic planning using facts provided in The Kashagan Production Sharing Agreement (PSA) case study
2. Improving business portfolio management of Kashagan Psa
3. Assessing feasibility of the new initiative in Finance & Accounting field.
4. Making a Finance & Accounting topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Kashagan Psa
Strengths The Kashagan Production Sharing Agreement (PSA) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kashagan Psa in The Kashagan Production Sharing Agreement (PSA) Harvard Business Review case study are -
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Kashagan Psa digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kashagan Psa has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
High brand equity
– Kashagan Psa has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Kashagan Psa to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Kashagan Psa 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 Kashagan Psa is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in The Kashagan Production Sharing Agreement (PSA) Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Kashagan Psa 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.
Effective Research and Development (R&D)
– Kashagan Psa 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 The Kashagan Production Sharing Agreement (PSA) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Finance & Accounting field
– Kashagan Psa 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 Kashagan Psa in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Strong track record of project management
– Kashagan Psa is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Diverse revenue streams
– Kashagan Psa is present in almost all the verticals within the industry. This has provided firm in The Kashagan Production Sharing Agreement (PSA) 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.
Innovation driven organization
– Kashagan Psa is one of the most innovative firm in sector. Manager in The Kashagan Production Sharing Agreement (PSA) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Kashagan Psa
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Kashagan Psa does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Kashagan Psa is one of the leading recruiters in the industry. Managers in the The Kashagan Production Sharing Agreement (PSA) are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Kashagan Psa in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses The Kashagan Production Sharing Agreement (PSA) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The Kashagan Production Sharing Agreement (PSA) are -
High operating costs
– Compare to the competitors, firm in the HBR case study The Kashagan Production Sharing Agreement (PSA) 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 Kashagan Psa 's lucrative customers.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study The Kashagan Production Sharing Agreement (PSA), it seems that the employees of Kashagan Psa 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.
Slow decision making process
– As mentioned earlier in the report, Kashagan Psa has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Kashagan Psa even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study The Kashagan Production Sharing Agreement (PSA), in the dynamic environment Kashagan Psa has struggled to respond to the nimble upstart competition. Kashagan Psa has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– It come across in the case study The Kashagan Production Sharing Agreement (PSA) 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 The Kashagan Production Sharing Agreement (PSA) can leverage the sales team experience to cultivate customer relationships as Kashagan Psa is planning to shift buying processes online.
Skills based hiring
– The stress on hiring functional specialists at Kashagan Psa 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.
Increasing silos among functional specialists
– The organizational structure of Kashagan Psa is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Kashagan Psa needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Kashagan Psa to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Kashagan Psa 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.
Products dominated business model
– Even though Kashagan Psa 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 - The Kashagan Production Sharing Agreement (PSA) should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Kashagan Psa 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.
Slow to strategic competitive environment developments
– As The Kashagan Production Sharing Agreement (PSA) HBR case study mentions - Kashagan Psa 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 The Kashagan Production Sharing Agreement (PSA) | 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 The Kashagan Production Sharing Agreement (PSA) are -
Manufacturing automation
– Kashagan Psa can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
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 Kashagan Psa in the consumer business. Now Kashagan Psa can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kashagan Psa in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Finance & Accounting industry, but it has also influenced the consumer preferences. Kashagan Psa can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kashagan Psa can use these opportunities to build new business models that can help the communities that Kashagan Psa operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Using analytics as competitive advantage
– Kashagan Psa 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 The Kashagan Production Sharing Agreement (PSA) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kashagan Psa to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Better consumer reach
– The expansion of the 5G network will help Kashagan Psa to increase its market reach. Kashagan Psa 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 Kashagan Psa has opened avenues for new revenue streams for the organization in the industry. This can help Kashagan Psa to build a more holistic ecosystem as suggested in the The Kashagan Production Sharing Agreement (PSA) case study. Kashagan Psa can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Kashagan Psa 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 Kashagan Psa to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Kashagan Psa can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. The Kashagan Production Sharing Agreement (PSA) 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.
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 Kashagan Psa 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 Kashagan Psa 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.
Developing new processes and practices
– Kashagan Psa can develop new processes and procedures in Finance & Accounting 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.
Threats The Kashagan Production Sharing Agreement (PSA) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The Kashagan Production Sharing Agreement (PSA) are -
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 Kashagan Psa.
Increasing wage structure of Kashagan Psa
– 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 Kashagan Psa.
Consumer confidence and its impact on Kashagan Psa 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.
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. Kashagan Psa 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.
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 Kashagan Psa 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.
Shortening product life cycle
– it is one of the major threat that Kashagan Psa is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study The Kashagan Production Sharing Agreement (PSA), Kashagan Psa may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
High dependence on third party suppliers
– Kashagan Psa 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.
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.
Environmental challenges
– Kashagan Psa 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. Kashagan Psa can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Easy access to finance
– Easy access to finance in Finance & Accounting field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Kashagan Psa can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Kashagan Psa needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Weighted SWOT Analysis of The Kashagan Production Sharing Agreement (PSA) 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 The Kashagan Production Sharing Agreement (PSA) 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 The Kashagan Production Sharing Agreement (PSA) 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 The Kashagan Production Sharing Agreement (PSA) 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 The Kashagan Production Sharing Agreement (PSA) 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 Kashagan Psa needs to make to build a sustainable competitive advantage.
