Drilling South: Petrobras Evaluates Pecom, Chinese Version SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Drilling South: Petrobras Evaluates Pecom, Chinese Version
The Brazilian oil company, Petrobras, is evaluating the acquisition of an Argentine oil company, the Perez Companc Group (Pecom). The acquisition would increase Petrobras' oil reserves and expand its interests outside Brazil, a significant step for the largest company in Brazil. Pecom is for sale because it has been severely affected by the financial crisis in Argentina. Students have the opportunity to assess the impact of a severe devaluation on a company. There is also considerable uncertainty about how to value Pecom, and students must weigh the importance of country risk in determining the appropriate discount rate to use in the valuation. Finally, there is also uncertainty about Petrobras's own future as the Brazilian government has controlled it. Students are allowed to review the efficacy of changes in corporate governance implemented by Petrobras, despite its ongoing link to the Brazilian state and the associated political uncertainties of that affiliation. Students will consider different methods of valuation and the impact of politics on cross-border acquisitions. To obtain executable spreadsheets (courseware), please contact our customer service department at custserv@hbsp.harvard.edu.
Authors :: Mihir A. Desai, Ricardo Reisen de Pinho
Swot Analysis of "Drilling South: Petrobras Evaluates Pecom, Chinese Version" written by Mihir A. Desai, Ricardo Reisen de Pinho includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Pecom Petrobras facing as an external strategic factors. Some of the topics covered in Drilling South: Petrobras Evaluates Pecom, Chinese Version case study are - Strategic Management Strategies, Currency, Emerging markets, Financial analysis, Government, Mergers & acquisitions, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Drilling South: Petrobras Evaluates Pecom, Chinese Version casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, technology disruption, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%,
challanges to central banks by blockchain based private currencies, competitive advantages are harder to sustain because of technology dispersion, etc
Introduction to SWOT Analysis of Drilling South: Petrobras Evaluates Pecom, Chinese Version
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Drilling South: Petrobras Evaluates Pecom, Chinese Version case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Pecom Petrobras, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Pecom Petrobras 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 Drilling South: Petrobras Evaluates Pecom, Chinese Version can be done for the following purposes –
1. Strategic planning using facts provided in Drilling South: Petrobras Evaluates Pecom, Chinese Version case study
2. Improving business portfolio management of Pecom Petrobras
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 Pecom Petrobras
Strengths Drilling South: Petrobras Evaluates Pecom, Chinese Version | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Pecom Petrobras in Drilling South: Petrobras Evaluates Pecom, Chinese Version Harvard Business Review case study are -
Learning organization
- Pecom Petrobras 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 Pecom Petrobras is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Drilling South: Petrobras Evaluates Pecom, Chinese Version Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Pecom Petrobras 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.
Ability to lead change in Finance & Accounting field
– Pecom Petrobras 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 Pecom Petrobras in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Training and development
– Pecom Petrobras has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Drilling South: Petrobras Evaluates Pecom, Chinese Version 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Pecom Petrobras digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Pecom Petrobras 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.
Innovation driven organization
– Pecom Petrobras is one of the most innovative firm in sector. Manager in Drilling South: Petrobras Evaluates Pecom, Chinese Version Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to recruit top talent
– Pecom Petrobras is one of the leading recruiters in the industry. Managers in the Drilling South: Petrobras Evaluates Pecom, Chinese Version are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Operational resilience
– The operational resilience strategy in the Drilling South: Petrobras Evaluates Pecom, Chinese Version 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.
Highly skilled collaborators
– Pecom Petrobras 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 Drilling South: Petrobras Evaluates Pecom, Chinese Version HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Pecom Petrobras is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Pecom Petrobras 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 Mihir A. Desai, Ricardo Reisen de Pinho 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.
High switching costs
– The high switching costs that Pecom Petrobras 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.
Weaknesses Drilling South: Petrobras Evaluates Pecom, Chinese Version | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Drilling South: Petrobras Evaluates Pecom, Chinese Version are -
High cash cycle compare to competitors
Pecom Petrobras 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 bargaining power of channel partners
– Because of the regulatory requirements, Mihir A. Desai, Ricardo Reisen de Pinho suggests that, Pecom Petrobras 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.
Low market penetration in new markets
– Outside its home market of Pecom Petrobras, firm in the HBR case study Drilling South: Petrobras Evaluates Pecom, Chinese Version needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Aligning sales with marketing
– It come across in the case study Drilling South: Petrobras Evaluates Pecom, Chinese Version 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 Drilling South: Petrobras Evaluates Pecom, Chinese Version can leverage the sales team experience to cultivate customer relationships as Pecom Petrobras is planning to shift buying processes online.
High operating costs
– Compare to the competitors, firm in the HBR case study Drilling South: Petrobras Evaluates Pecom, Chinese Version 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 Pecom Petrobras 's lucrative customers.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Drilling South: Petrobras Evaluates Pecom, Chinese Version, is just above the industry average. Pecom Petrobras 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.
Skills based hiring
– The stress on hiring functional specialists at Pecom Petrobras 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.
Capital Spending Reduction
– Even during the low interest decade, Pecom Petrobras 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.
Interest costs
– Compare to the competition, Pecom Petrobras 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.
Increasing silos among functional specialists
– The organizational structure of Pecom Petrobras is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Pecom Petrobras needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Pecom Petrobras to focus more on services rather than just following the product oriented approach.
Lack of clear differentiation of Pecom Petrobras products
– To increase the profitability and margins on the products, Pecom Petrobras needs to provide more differentiated products than what it is currently offering in the marketplace.
Opportunities Drilling South: Petrobras Evaluates Pecom, Chinese Version | 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 Drilling South: Petrobras Evaluates Pecom, Chinese Version are -
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 Pecom Petrobras in the consumer business. Now Pecom Petrobras can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Pecom Petrobras 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Pecom Petrobras 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.
Better consumer reach
– The expansion of the 5G network will help Pecom Petrobras to increase its market reach. Pecom Petrobras 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Pecom Petrobras in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Finance & Accounting segment, and it will provide faster access to the consumers.
Leveraging digital technologies
– Pecom Petrobras 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Pecom Petrobras can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Learning at scale
– Online learning technologies has now opened space for Pecom Petrobras 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.
Buying journey improvements
– Pecom Petrobras can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Drilling South: Petrobras Evaluates Pecom, Chinese Version 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.
Loyalty marketing
– Pecom Petrobras 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.
Using analytics as competitive advantage
– Pecom Petrobras 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 Drilling South: Petrobras Evaluates Pecom, Chinese Version - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Pecom Petrobras to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Pecom Petrobras 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 Finance & Accounting segment.
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 Pecom Petrobras 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.
Threats Drilling South: Petrobras Evaluates Pecom, Chinese Version External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Drilling South: Petrobras Evaluates Pecom, Chinese Version are -
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.
Increasing wage structure of Pecom Petrobras
– 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 Pecom Petrobras.
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.
Regulatory challenges
– Pecom Petrobras 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.
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. Pecom Petrobras needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Environmental challenges
– Pecom Petrobras 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. Pecom Petrobras can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Pecom Petrobras 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 Drilling South: Petrobras Evaluates Pecom, Chinese Version .
Shortening product life cycle
– it is one of the major threat that Pecom Petrobras is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Pecom Petrobras business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Pecom Petrobras 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.
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 Pecom Petrobras in the Finance & Accounting sector and impact the bottomline of the organization.
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. Pecom Petrobras can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Pecom Petrobras will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Weighted SWOT Analysis of Drilling South: Petrobras Evaluates Pecom, Chinese Version 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 Drilling South: Petrobras Evaluates Pecom, Chinese Version 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 Drilling South: Petrobras Evaluates Pecom, Chinese Version 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 Drilling South: Petrobras Evaluates Pecom, Chinese Version 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 Drilling South: Petrobras Evaluates Pecom, Chinese Version 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 Pecom Petrobras needs to make to build a sustainable competitive advantage.