Lyondell Chemical Company SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Lyondell Chemical Company
Hit with an industry recession and the global financial crisis of 2008, in January 2009 LyondellBasell Industries AF S.C.A., one of the world's largest internationally diversified chemical companies and headquartered in The Netherlands, placed its U.S. operations and a German subsidiary under U.S. Chapter 11 bankruptcy protection. To successfully reorganize as a going concern, the company sought to raise over $8 billion in a super-priority "Debtor-in-Possession (DIP)" loan from a group of thirteen financial institutions, including commercial banks, investment banks, hedge funds, and private equity funds. Representing one of the largest DIP loans in history, this financing was considered critical to the company's survival. One unique and controversial feature of the financing was a $3.25 billion 'Roll-Up" facility, under which a number of Lyondell's pre-bankruptcy lenders were allowed to significantly elevate the priority of debts they were already owed (so that they ranked ahead of all other pre-bankruptcy debts owed by the company), provided the lenders advanced new loans to the company to help finance its restructuring. With a costly liquidation as the alternative, various creditor groups objected to the DIP financing package, putting Lyondell's reorganization, and survival as a going concern, at significant risk.
Swot Analysis of "Lyondell Chemical Company" written by Stuart C. Gilson, Sarah L. Abbott includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Dip Lyondell's facing as an external strategic factors. Some of the topics covered in Lyondell Chemical Company case study are - Strategic Management Strategies, Crisis management, International business, Recession, Reorganization and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Lyondell Chemical Company casestudy better are - – customer relationship management is fast transforming because of increasing concerns over data privacy, challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, geopolitical disruptions, wage bills are increasing, there is backlash against globalization,
technology disruption, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Lyondell Chemical Company
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lyondell Chemical Company case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Dip Lyondell's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Dip Lyondell's 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 Lyondell Chemical Company can be done for the following purposes –
1. Strategic planning using facts provided in Lyondell Chemical Company case study
2. Improving business portfolio management of Dip Lyondell's
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 Dip Lyondell's
Strengths Lyondell Chemical Company | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Dip Lyondell's in Lyondell Chemical Company Harvard Business Review case study are -
High brand equity
– Dip Lyondell's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Dip Lyondell's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Low bargaining power of suppliers
– Suppliers of Dip Lyondell's in the sector have low bargaining power. Lyondell Chemical Company has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Dip Lyondell's to manage not only supply disruptions but also source products at highly competitive prices.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Dip Lyondell's digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Dip Lyondell's 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.
Analytics focus
– Dip Lyondell's 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 Stuart C. Gilson, Sarah L. Abbott 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.
Effective Research and Development (R&D)
– Dip Lyondell's 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 Lyondell Chemical Company - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High switching costs
– The high switching costs that Dip Lyondell's 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.
Training and development
– Dip Lyondell's has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Lyondell Chemical Company 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 Finance & Accounting industry
– Lyondell Chemical Company firm has clearly differentiated products in the market place. This has enabled Dip Lyondell's to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Dip Lyondell's to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Dip Lyondell's 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.
Highly skilled collaborators
– Dip Lyondell's 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 Lyondell Chemical Company HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Dip Lyondell's is one of the most innovative firm in sector. Manager in Lyondell Chemical Company Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Diverse revenue streams
– Dip Lyondell's is present in almost all the verticals within the industry. This has provided firm in Lyondell Chemical Company 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.
Weaknesses Lyondell Chemical Company | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lyondell Chemical Company are -
Workers concerns about automation
– As automation is fast increasing in the segment, Dip Lyondell's 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.
Aligning sales with marketing
– It come across in the case study Lyondell Chemical Company 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 Lyondell Chemical Company can leverage the sales team experience to cultivate customer relationships as Dip Lyondell's is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Dip Lyondell's 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. Dip Lyondell's 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Lyondell Chemical Company, is just above the industry average. Dip Lyondell's 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.
Interest costs
– Compare to the competition, Dip Lyondell's 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.
Slow to strategic competitive environment developments
– As Lyondell Chemical Company HBR case study mentions - Dip Lyondell's 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.
Increasing silos among functional specialists
– The organizational structure of Dip Lyondell's is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Dip Lyondell's needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Dip Lyondell's to focus more on services rather than just following the product oriented approach.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Lyondell Chemical Company, it seems that the employees of Dip Lyondell's don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
No frontier risks strategy
– After analyzing the HBR case study Lyondell Chemical Company, 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 dependence on star products
– The top 2 products and services of the firm as mentioned in the Lyondell Chemical Company 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 Dip Lyondell's has relatively successful track record of launching new products.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Dip Lyondell's is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Lyondell Chemical Company can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Opportunities Lyondell Chemical Company | 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 Lyondell Chemical Company are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Dip Lyondell's can use these opportunities to build new business models that can help the communities that Dip Lyondell's operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
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. Dip Lyondell's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 Dip Lyondell's in the consumer business. Now Dip Lyondell's can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– Dip Lyondell's 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.
Creating value in data economy
– The success of analytics program of Dip Lyondell's has opened avenues for new revenue streams for the organization in the industry. This can help Dip Lyondell's to build a more holistic ecosystem as suggested in the Lyondell Chemical Company case study. Dip Lyondell's can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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. Dip Lyondell's can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Dip Lyondell's 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. Dip Lyondell's 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.
Buying journey improvements
– Dip Lyondell's can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Lyondell Chemical Company 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.
Developing new processes and practices
– Dip Lyondell's 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Dip Lyondell's 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 Dip Lyondell's to hire the very best people irrespective of their geographical location.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Dip Lyondell's can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Lyondell Chemical Company, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Better consumer reach
– The expansion of the 5G network will help Dip Lyondell's to increase its market reach. Dip Lyondell's 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.
Manufacturing automation
– Dip Lyondell's can use the latest technology developments to improve its manufacturing and designing process in Finance & Accounting 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.
Threats Lyondell Chemical Company External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lyondell Chemical Company are -
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. Dip Lyondell's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Dip Lyondell's business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Dip Lyondell's 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
– Dip Lyondell's 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. Dip Lyondell's can take advantage of this fund but it will also bring new competitors in the Finance & Accounting industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Lyondell Chemical Company, Dip Lyondell's may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Finance & Accounting .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Dip Lyondell's with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Dip Lyondell's 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 Lyondell Chemical Company .
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.
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. Dip Lyondell's 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.
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. Dip Lyondell's needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
Consumer confidence and its impact on Dip Lyondell's 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Dip Lyondell's 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.
Weighted SWOT Analysis of Lyondell Chemical Company 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 Lyondell Chemical Company 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 Lyondell Chemical Company 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 Lyondell Chemical Company 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 Lyondell Chemical Company 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 Dip Lyondell's needs to make to build a sustainable competitive advantage.
