Equity Capital Raising: The SEO of Petrobras 2010 (A) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Strategy & Execution
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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 household debt because of falling income levels, customer relationship management is fast transforming because of increasing concerns over data privacy, 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 , competitive advantages are harder to sustain because of technology dispersion,
increasing commodity prices, increasing transportation and logistics costs, 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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
Superior customer experience
– The customer experience strategy of Petrobras Salt in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
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.
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.
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 -
Products dominated business model
– Even though Petrobras Salt 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 - Equity Capital Raising: The SEO of Petrobras 2010 (A) should strive to include more intangible value offerings along with its core products and services.
Capital Spending Reduction
– Even during the low interest decade, Petrobras Salt 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.
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.
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.
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 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Equity Capital Raising: The SEO of Petrobras 2010 (A), in the dynamic environment Petrobras Salt has struggled to respond to the nimble upstart competition. Petrobras Salt has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Petrobras Salt is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Equity Capital Raising: The SEO of Petrobras 2010 (A) can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow decision making process
– As mentioned earlier in the report, Petrobras Salt 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. Petrobras Salt 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.
Slow to strategic competitive environment developments
– As Equity Capital Raising: The SEO of Petrobras 2010 (A) HBR case study mentions - Petrobras Salt 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 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 -
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.
Creating value in data economy
– The success of analytics program of Petrobras Salt has opened avenues for new revenue streams for the organization in the industry. This can help Petrobras Salt to build a more holistic ecosystem as suggested in the Equity Capital Raising: The SEO of Petrobras 2010 (A) case study. Petrobras Salt can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
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.
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.
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.
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.
Building a culture of innovation
– managers at Petrobras Salt 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.
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.
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.
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.
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 -
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.
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
– 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.
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.
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.
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.
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.
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.
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 .
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.
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.
Consumer confidence and its impact on Petrobras Salt 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.
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.
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.