Penn West Petroleum Ltd. SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Penn West Petroleum Ltd.
Penn West Petroleum Ltd. (Penn West), a large Canadian oil company, made multiple acquisitions that led to a buildup of goodwill (i.e., the purchase price was higher than the net book value of the acquisitions). When the economic environment worsened, there was concern that this goodwill had been impaired. The concern deepened as economic factors improved but Penn West's stock performance continued to be poor, indicating that the market believed that the company was potentially overvalued. A review of Penn West's accounting practices revealed irregularities, and industry analysts - as well as the U.S. Securities and Exchange Commission - began to question the value of the company's goodwill. It was becoming clear that Penn West had been overly optimistic in its forecasts regarding revenue streams from its properties. Would the company be able to move forward? How?
Authors :: Martin Persson, Vaughan Radcliffe, Mitchell Stein, Hammad Siddiqui
Swot Analysis of "Penn West Petroleum Ltd." written by Martin Persson, Vaughan Radcliffe, Mitchell Stein, Hammad Siddiqui includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Penn Goodwill facing as an external strategic factors. Some of the topics covered in Penn West Petroleum Ltd. case study are - Strategic Management Strategies, Financial markets and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Penn West Petroleum Ltd. casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, competitive advantages are harder to sustain because of technology dispersion, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, wage bills are increasing, challanges to central banks by blockchain based private currencies,
cloud computing is disrupting traditional business models, technology disruption, etc
Introduction to SWOT Analysis of Penn West Petroleum Ltd.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Penn West Petroleum Ltd. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Penn Goodwill, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Penn Goodwill 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 Penn West Petroleum Ltd. can be done for the following purposes –
1. Strategic planning using facts provided in Penn West Petroleum Ltd. case study
2. Improving business portfolio management of Penn Goodwill
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 Penn Goodwill
Strengths Penn West Petroleum Ltd. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Penn Goodwill in Penn West Petroleum Ltd. Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Penn Goodwill in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Penn Goodwill 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.
Cross disciplinary teams
– Horizontal connected teams at the Penn Goodwill 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.
Innovation driven organization
– Penn Goodwill is one of the most innovative firm in sector. Manager in Penn West Petroleum Ltd. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Low bargaining power of suppliers
– Suppliers of Penn Goodwill in the sector have low bargaining power. Penn West Petroleum Ltd. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Penn Goodwill to manage not only supply disruptions but also source products at highly competitive prices.
Training and development
– Penn Goodwill has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Penn West Petroleum Ltd. 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.
Effective Research and Development (R&D)
– Penn Goodwill 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 Penn West Petroleum Ltd. - 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 recruit top talent
– Penn Goodwill is one of the leading recruiters in the industry. Managers in the Penn West Petroleum Ltd. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Finance & Accounting field
– Penn Goodwill 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 Penn Goodwill in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Penn Goodwill 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 Martin Persson, Vaughan Radcliffe, Mitchell Stein, Hammad Siddiqui 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Penn West Petroleum Ltd. firm has clearly differentiated products in the market place. This has enabled Penn Goodwill to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Penn Goodwill to invest into research and development (R&D) and innovation.
Highly skilled collaborators
– Penn Goodwill 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 Penn West Petroleum Ltd. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses Penn West Petroleum Ltd. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Penn West Petroleum Ltd. are -
Capital Spending Reduction
– Even during the low interest decade, Penn Goodwill 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Penn West Petroleum Ltd., is just above the industry average. Penn Goodwill 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Penn West Petroleum Ltd., in the dynamic environment Penn Goodwill has struggled to respond to the nimble upstart competition. Penn Goodwill has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Penn Goodwill 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 - Penn West Petroleum Ltd. should strive to include more intangible value offerings along with its core products and services.
Aligning sales with marketing
– It come across in the case study Penn West Petroleum Ltd. 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 Penn West Petroleum Ltd. can leverage the sales team experience to cultivate customer relationships as Penn Goodwill is planning to shift buying processes online.
High bargaining power of channel partners
– Because of the regulatory requirements, Martin Persson, Vaughan Radcliffe, Mitchell Stein, Hammad Siddiqui suggests that, Penn Goodwill is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High cash cycle compare to competitors
Penn Goodwill 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.
Increasing silos among functional specialists
– The organizational structure of Penn Goodwill is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Penn Goodwill needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Penn Goodwill to focus more on services rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of Penn Goodwill, firm in the HBR case study Penn West Petroleum Ltd. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– After analyzing the HBR case study Penn West Petroleum Ltd., it seems that company is thinking about the frontier risks that can impact Finance & Accounting strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High operating costs
– Compare to the competitors, firm in the HBR case study Penn West Petroleum Ltd. 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 Penn Goodwill 's lucrative customers.
Opportunities Penn West Petroleum Ltd. | 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 Penn West Petroleum Ltd. are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Finance & Accounting industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Penn Goodwill 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. Penn Goodwill 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.
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. Penn Goodwill can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Penn Goodwill has opened avenues for new revenue streams for the organization in the industry. This can help Penn Goodwill to build a more holistic ecosystem as suggested in the Penn West Petroleum Ltd. case study. Penn Goodwill can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Penn Goodwill 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.
Leveraging digital technologies
– Penn Goodwill 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.
Buying journey improvements
– Penn Goodwill can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Penn West Petroleum Ltd. 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.
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 Penn Goodwill in the consumer business. Now Penn Goodwill can target international markets with far fewer capital restrictions requirements than the existing system.
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 Penn Goodwill 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.
Better consumer reach
– The expansion of the 5G network will help Penn Goodwill to increase its market reach. Penn Goodwill 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.
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. Penn Goodwill can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Penn Goodwill is facing challenges because of the dominance of functional experts in the organization. Penn West Petroleum Ltd. 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
– Penn Goodwill 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.
Using analytics as competitive advantage
– Penn Goodwill 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 Penn West Petroleum Ltd. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Penn Goodwill to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Threats Penn West Petroleum Ltd. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Penn West Petroleum Ltd. are -
Environmental challenges
– Penn Goodwill 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. Penn Goodwill can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing wage structure of Penn Goodwill
– 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 Penn Goodwill.
High dependence on third party suppliers
– Penn Goodwill 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.
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 Penn Goodwill.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Penn Goodwill in the Finance & Accounting industry. The Finance & Accounting 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.
Consumer confidence and its impact on Penn Goodwill 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.
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 Penn Goodwill in the Finance & Accounting sector and impact the bottomline of the organization.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Penn Goodwill with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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. Penn Goodwill needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Regulatory challenges
– Penn Goodwill 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 Finance & Accounting industry regulations.
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. Penn Goodwill can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Weighted SWOT Analysis of Penn West Petroleum Ltd. 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 Penn West Petroleum Ltd. 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 Penn West Petroleum Ltd. 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 Penn West Petroleum Ltd. 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 Penn West Petroleum Ltd. 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 Penn Goodwill needs to make to build a sustainable competitive advantage.