Case Study Description of Sinopec: Refining its Strategy
China's oil industry, with majority ownership vested in the government, had engaged in an "equity oil" strategy for the past few years--acquiring equity interests in oil producing nations including Sudan, Angola, and Iran. Outside critics, however, suggested that the Chinese companies could buy oil in the highly fungible global marketplace. But Sinopec, the nations largest refiner, was one of the three companies (together with PetroChina and CNOOC) engaged in the equity oil play. With China's energy demands swelling--especially petroleum of which it had limited reserves--Sinopec was struggling to increase output rapidly enough to keep pace with the rapid growth of their automobile sector. And it had to make money soon.
Swot Analysis of "Sinopec: Refining its Strategy" written by Richard H.K. Vietor, Julia Galef includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sinopec Oil facing as an external strategic factors. Some of the topics covered in Sinopec: Refining its Strategy case study are - Strategic Management Strategies, Policy and Strategy & Execution.
Some of the macro environment factors that can be used to understand the Sinopec: Refining its Strategy casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, increasing energy prices, there is increasing trade war between United States & China, increasing inequality as vast percentage of new income is going to the top 1%,
supply chains are disrupted by pandemic , there is backlash against globalization, etc
Introduction to SWOT Analysis of Sinopec: Refining its Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Sinopec: Refining its Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sinopec Oil, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sinopec Oil 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 Sinopec: Refining its Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Sinopec: Refining its Strategy case study
2. Improving business portfolio management of Sinopec Oil
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 Sinopec Oil
Strengths Sinopec: Refining its Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sinopec Oil in Sinopec: Refining its Strategy Harvard Business Review case study are -
Successful track record of launching new products
– Sinopec Oil has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sinopec Oil 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.
Organizational Resilience of Sinopec Oil
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Sinopec Oil does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Sinopec Oil is one of the leading recruiters in the industry. Managers in the Sinopec: Refining its Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Innovation driven organization
– Sinopec Oil is one of the most innovative firm in sector. Manager in Sinopec: Refining its Strategy Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Sinopec Oil 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.
Low bargaining power of suppliers
– Suppliers of Sinopec Oil in the sector have low bargaining power. Sinopec: Refining its Strategy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sinopec Oil to manage not only supply disruptions but also source products at highly competitive prices.
Effective Research and Development (R&D)
– Sinopec Oil 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 Sinopec: Refining its Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the Sinopec: Refining its Strategy 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.
Superior customer experience
– The customer experience strategy of Sinopec Oil in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Sinopec Oil is present in almost all the verticals within the industry. This has provided firm in Sinopec: Refining its Strategy 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.
Training and development
– Sinopec Oil has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Sinopec: Refining its Strategy 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.
Sustainable margins compare to other players in Strategy & Execution industry
– Sinopec: Refining its Strategy firm has clearly differentiated products in the market place. This has enabled Sinopec Oil to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Sinopec Oil to invest into research and development (R&D) and innovation.
Weaknesses Sinopec: Refining its Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sinopec: Refining its Strategy are -
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 Sinopec Oil supply chain. Even after few cautionary changes mentioned in the HBR case study - Sinopec: Refining its Strategy, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sinopec Oil vulnerable to further global disruptions in South East Asia.
Skills based hiring
– The stress on hiring functional specialists at Sinopec Oil 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Richard H.K. Vietor, Julia Galef suggests that, Sinopec Oil 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.
Lack of clear differentiation of Sinopec Oil products
– To increase the profitability and margins on the products, Sinopec Oil needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sinopec Oil is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Sinopec: Refining its Strategy can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Sinopec: Refining its Strategy, in the dynamic environment Sinopec Oil has struggled to respond to the nimble upstart competition. Sinopec Oil has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Sinopec: Refining its Strategy 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 Sinopec Oil has relatively successful track record of launching new products.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Sinopec: Refining its Strategy, is just above the industry average. Sinopec Oil 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 cash cycle compare to competitors
Sinopec Oil 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.
Low market penetration in new markets
– Outside its home market of Sinopec Oil, firm in the HBR case study Sinopec: Refining its Strategy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Sinopec Oil 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 - Sinopec: Refining its Strategy should strive to include more intangible value offerings along with its core products and services.
Opportunities Sinopec: Refining its Strategy | 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 Sinopec: Refining its Strategy are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Sinopec Oil is facing challenges because of the dominance of functional experts in the organization. Sinopec: Refining its Strategy case study suggests that firm can utilize new technology to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Sinopec Oil 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.
Leveraging digital technologies
– Sinopec Oil 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sinopec Oil can use these opportunities to build new business models that can help the communities that Sinopec Oil operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Creating value in data economy
– The success of analytics program of Sinopec Oil has opened avenues for new revenue streams for the organization in the industry. This can help Sinopec Oil to build a more holistic ecosystem as suggested in the Sinopec: Refining its Strategy case study. Sinopec Oil can build new products and services such as - data insight services, data privacy related products, data based consulting services, 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. Sinopec Oil can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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. Sinopec Oil can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sinopec Oil can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Sinopec Oil 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.
Manufacturing automation
– Sinopec Oil 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 Sinopec Oil 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sinopec Oil 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.
Buying journey improvements
– Sinopec Oil can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Sinopec: Refining its Strategy 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.
Threats Sinopec: Refining its Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Sinopec: Refining its Strategy are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Sinopec: Refining its Strategy, Sinopec Oil 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 .
High dependence on third party suppliers
– Sinopec Oil 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 acceleration in Forth Industrial Revolution
– Sinopec Oil has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Sinopec Oil 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sinopec Oil 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 Sinopec: Refining its Strategy .
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. Sinopec Oil can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Sinopec Oil is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Sinopec Oil in the Strategy & Execution sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sinopec Oil with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Sinopec Oil 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.
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 Sinopec Oil.
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. Sinopec Oil needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
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 Sinopec Oil business can come under increasing regulations regarding data privacy, data security, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sinopec Oil 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.
Weighted SWOT Analysis of Sinopec: Refining its Strategy 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 Sinopec: Refining its Strategy 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 Sinopec: Refining its Strategy 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 Sinopec: Refining its Strategy 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 Sinopec: Refining its Strategy 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 Sinopec Oil needs to make to build a sustainable competitive advantage.
