China's National Oil Companies: Restructuring the Three Dragons SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of China's National Oil Companies: Restructuring the Three Dragons
China's three National Oil Companies (NOCs) collectively represent a potent force in the world of oil and gas. While they have been mostly focused on domestic priorities since their founding, they started a methodical program of globalization at the behest of the Chinese government in the mid 1990's. By 2016, they had completed a string of overseas acquisitions and seemed poised to gain enough strength to become contenders in the competitive battles against the more established International oil Companies (IOCs). The government had announced its intent to reform the NOCs in order to make them more efficient such that they would be able to compete against the best globally. The idea was to create a Chinese ExxonMobil out of the three NOCs. However, the road ahead appeared rocky. There were three main issues that posed formidable obstacles. First, the governance structure and state control had bred a culture that did not seem ready for transformative change. Political interference and lack of a clear strategic direction were just two of the outcomes associated with the resistive culture. These shortcomings manifested themselves in the second major obstacle namely the instinct to protect resources although the NOCs themselves did not seem to have the technology to monetize the reserves. The slow development of shale was a case in point. Despite controlling the world's largest reserves of shale, China had not been able to come anywhere close to replicating the runaway success that the US had demonstrated. The government had not articulated a clear shale development strategy, and had been dragging its feet with respect to trying imported technology and allowing foreign companies to operate leases. Lastly, there were clouds on the horizon with respect to global expansion as well. The decline in energy prices and a slowing down of domestic economic growth in China had stifled the global march of the NOCs. The case study builds on this complex context to explore whether reforms are likely to be implemented and whether they are likely to succeed.
Swot Analysis of "China's National Oil Companies: Restructuring the Three Dragons" written by Kannan Ramaswamy includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Nocs Shale facing as an external strategic factors. Some of the topics covered in China's National Oil Companies: Restructuring the Three Dragons case study are - Strategic Management Strategies, and Strategy & Execution.
Some of the macro environment factors that can be used to understand the China's National Oil Companies: Restructuring the Three Dragons casestudy better are - – there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy,
talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of China's National Oil Companies: Restructuring the Three Dragons
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in China's National Oil Companies: Restructuring the Three Dragons case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nocs Shale, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nocs Shale 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 China's National Oil Companies: Restructuring the Three Dragons can be done for the following purposes –
1. Strategic planning using facts provided in China's National Oil Companies: Restructuring the Three Dragons case study
2. Improving business portfolio management of Nocs Shale
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 Nocs Shale
Strengths China's National Oil Companies: Restructuring the Three Dragons | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nocs Shale in China's National Oil Companies: Restructuring the Three Dragons Harvard Business Review case study are -
Training and development
– Nocs Shale has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in China's National Oil Companies: Restructuring the Three Dragons 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.
Strong track record of project management
– Nocs Shale is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Nocs Shale
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Nocs Shale 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 Nocs Shale 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.
Successful track record of launching new products
– Nocs Shale has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nocs Shale 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.
Sustainable margins compare to other players in Strategy & Execution industry
– China's National Oil Companies: Restructuring the Three Dragons firm has clearly differentiated products in the market place. This has enabled Nocs Shale to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Nocs Shale to invest into research and development (R&D) and innovation.
Superior customer experience
– The customer experience strategy of Nocs Shale in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Nocs Shale 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 Kannan Ramaswamy 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.
Highly skilled collaborators
– Nocs Shale 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 China's National Oil Companies: Restructuring the Three Dragons HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Nocs Shale is present in almost all the verticals within the industry. This has provided firm in China's National Oil Companies: Restructuring the Three Dragons 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.
Learning organization
- Nocs Shale 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 Nocs Shale is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in China's National Oil Companies: Restructuring the Three Dragons Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Nocs Shale digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nocs Shale 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.
Weaknesses China's National Oil Companies: Restructuring the Three Dragons | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of China's National Oil Companies: Restructuring the Three Dragons are -
Low market penetration in new markets
– Outside its home market of Nocs Shale, firm in the HBR case study China's National Oil Companies: Restructuring the Three Dragons needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study China's National Oil Companies: Restructuring the Three Dragons, in the dynamic environment Nocs Shale has struggled to respond to the nimble upstart competition. Nocs Shale has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As China's National Oil Companies: Restructuring the Three Dragons HBR case study mentions - Nocs Shale 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the China's National Oil Companies: Restructuring the Three Dragons 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 Nocs Shale has relatively successful track record of launching new products.
High cash cycle compare to competitors
Nocs Shale 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 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 Nocs Shale supply chain. Even after few cautionary changes mentioned in the HBR case study - China's National Oil Companies: Restructuring the Three Dragons, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nocs Shale vulnerable to further global disruptions in South East Asia.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study China's National Oil Companies: Restructuring the Three Dragons, is just above the industry average. Nocs Shale 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 bargaining power of channel partners
– Because of the regulatory requirements, Kannan Ramaswamy suggests that, Nocs Shale 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study China's National Oil Companies: Restructuring the Three Dragons, it seems that the employees of Nocs Shale 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.
Capital Spending Reduction
– Even during the low interest decade, Nocs Shale 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 harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Nocs Shale is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study China's National Oil Companies: Restructuring the Three Dragons can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities China's National Oil Companies: Restructuring the Three Dragons | 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 China's National Oil Companies: Restructuring the Three Dragons 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. Nocs Shale 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. Nocs Shale 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.
Building a culture of innovation
– managers at Nocs Shale can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Manufacturing automation
– Nocs Shale 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nocs Shale 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
– Nocs Shale 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Nocs Shale 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 Nocs Shale to hire the very best people irrespective of their geographical location.
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 Nocs Shale 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.
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. Nocs Shale can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Nocs Shale 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 China's National Oil Companies: Restructuring the Three Dragons - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nocs Shale to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nocs Shale can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Nocs Shale in the consumer business. Now Nocs Shale can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nocs Shale can use these opportunities to build new business models that can help the communities that Nocs Shale operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Low interest rates
– Even though inflation is raising its head in most developed economies, Nocs Shale 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 China's National Oil Companies: Restructuring the Three Dragons External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study China's National Oil Companies: Restructuring the Three Dragons are -
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 Nocs Shale in the Strategy & Execution sector and impact the bottomline of the organization.
Environmental challenges
– Nocs Shale 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. Nocs Shale can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
High dependence on third party suppliers
– Nocs Shale 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Nocs Shale with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Shortening product life cycle
– it is one of the major threat that Nocs Shale is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Nocs Shale
– 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 Nocs Shale.
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. Nocs Shale 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.
Stagnating economy with rate increase
– Nocs Shale 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nocs Shale 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 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. Nocs Shale 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, Nocs Shale 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 China's National Oil Companies: Restructuring the Three Dragons .
Consumer confidence and its impact on Nocs Shale 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.
Weighted SWOT Analysis of China's National Oil Companies: Restructuring the Three Dragons 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 China's National Oil Companies: Restructuring the Three Dragons 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 China's National Oil Companies: Restructuring the Three Dragons 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 China's National Oil Companies: Restructuring the Three Dragons 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 China's National Oil Companies: Restructuring the Three Dragons 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 Nocs Shale needs to make to build a sustainable competitive advantage.