Medco Energi Internasional SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Medco Energi Internasional
In late 2004, Hilmi Panigoro, CEO of the publicly traded Indonesian oil company Medco Energi Internasional, is striving to regain majority control of the company his brother Arifin founded in 1980. The Asian financial crisis of 1999 led to a major restructuring that left the Panigoros with a 34.1% equity stake in Medco. Two other large shareholders are now looking to sell their combined stake of the 50.9% and have selected Temasek, the Singapore government's investment arm, as their preferred bidder. The Panigoros have a right of first refusal, but only a four-month window to raise the capital needed to head off Temasek's bid. The Panigoro brothers are considering a two-stage plan: a leveraged buyout to be followed by a secondary equity offering at a share price high enough to enable them to repay the loan and maintain majority control of their company. As attractive as the plan seems, they worry about the high cost of the loan and the risk that the offering might fail. In January 2005, with no time left to consider alternative financing plans, the Panigoro brothers have to decide whether to go ahead with the plan or lose control of Medco to Temasek.
Authors :: Belen Villalonga, Raphael Amit, Chris Hartman
Swot Analysis of "Medco Energi Internasional" written by Belen Villalonga, Raphael Amit, Chris Hartman includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Medco Panigoro facing as an external strategic factors. Some of the topics covered in Medco Energi Internasional case study are - Strategic Management Strategies, Financial management, Mergers & acquisitions, Negotiations, Reorganization, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the Medco Energi Internasional casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , geopolitical disruptions, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, increasing commodity prices, increasing government debt because of Covid-19 spendings,
talent flight as more people leaving formal jobs, there is backlash against globalization, etc
Introduction to SWOT Analysis of Medco Energi Internasional
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Medco Energi Internasional case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Medco Panigoro, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Medco Panigoro 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 Medco Energi Internasional can be done for the following purposes –
1. Strategic planning using facts provided in Medco Energi Internasional case study
2. Improving business portfolio management of Medco Panigoro
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 Medco Panigoro
Strengths Medco Energi Internasional | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Medco Panigoro in Medco Energi Internasional Harvard Business Review case study are -
High switching costs
– The high switching costs that Medco Panigoro 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.
Digital Transformation in Finance & Accounting segment
- digital transformation varies from industry to industry. For Medco Panigoro digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Medco Panigoro 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.
Sustainable margins compare to other players in Finance & Accounting industry
– Medco Energi Internasional firm has clearly differentiated products in the market place. This has enabled Medco Panigoro to fetch slight price premium compare to the competitors in the Finance & Accounting industry. The sustainable margins have also helped Medco Panigoro to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy in the Medco Energi Internasional 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.
Innovation driven organization
– Medco Panigoro is one of the most innovative firm in sector. Manager in Medco Energi Internasional Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High brand equity
– Medco Panigoro has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Medco Panigoro to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Medco Panigoro 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 Medco Panigoro is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Medco Energi Internasional Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Medco Panigoro is one of the leading recruiters in the industry. Managers in the Medco Energi Internasional are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Medco Panigoro 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 Belen Villalonga, Raphael Amit, Chris Hartman 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.
Strong track record of project management
– Medco Panigoro is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Medco Panigoro 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 Medco Energi Internasional - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Training and development
– Medco Panigoro has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Medco Energi Internasional 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.
Weaknesses Medco Energi Internasional | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Medco Energi Internasional are -
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Medco Energi Internasional, is just above the industry average. Medco Panigoro 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
Medco Panigoro 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 operating costs
– Compare to the competitors, firm in the HBR case study Medco Energi Internasional 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 Medco Panigoro 's lucrative customers.
Skills based hiring
– The stress on hiring functional specialists at Medco Panigoro 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Medco Energi Internasional, it seems that the employees of Medco Panigoro 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.
Slow to strategic competitive environment developments
– As Medco Energi Internasional HBR case study mentions - Medco Panigoro 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.
Capital Spending Reduction
– Even during the low interest decade, Medco Panigoro 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.
Need for greater diversity
– Medco Panigoro has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Products dominated business model
– Even though Medco Panigoro 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 - Medco Energi Internasional should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Medco Panigoro, firm in the HBR case study Medco Energi Internasional needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Increasing silos among functional specialists
– The organizational structure of Medco Panigoro is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Medco Panigoro needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Medco Panigoro to focus more on services rather than just following the product oriented approach.
Opportunities Medco Energi Internasional | 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 Medco Energi Internasional are -
Developing new processes and practices
– Medco Panigoro 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Medco Panigoro 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, Medco Energi Internasional, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Medco Panigoro 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.
Creating value in data economy
– The success of analytics program of Medco Panigoro has opened avenues for new revenue streams for the organization in the industry. This can help Medco Panigoro to build a more holistic ecosystem as suggested in the Medco Energi Internasional case study. Medco Panigoro can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Medco Panigoro is facing challenges because of the dominance of functional experts in the organization. Medco Energi Internasional 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Medco Panigoro can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Medco Panigoro 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Medco Panigoro 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 Medco Panigoro to hire the very best people irrespective of their geographical location.
Learning at scale
– Online learning technologies has now opened space for Medco Panigoro 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.
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 Medco Panigoro in the consumer business. Now Medco Panigoro can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Medco Panigoro 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.
Better consumer reach
– The expansion of the 5G network will help Medco Panigoro to increase its market reach. Medco Panigoro 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.
Buying journey improvements
– Medco Panigoro can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Medco Energi Internasional 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 Medco Energi Internasional External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Medco Energi Internasional are -
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. Medco Panigoro needs to understand the core reasons impacting the Finance & Accounting industry. This will help it in building a better workplace.
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 Medco Panigoro in the Finance & Accounting sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Medco Panigoro is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Medco Panigoro.
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. Medco Panigoro 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 Medco Panigoro business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Medco Energi Internasional, Medco Panigoro 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 .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Medco Panigoro 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 Medco Energi Internasional .
Increasing wage structure of Medco Panigoro
– 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 Medco Panigoro.
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.
High dependence on third party suppliers
– Medco Panigoro 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.
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. Medco Panigoro 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Medco Panigoro 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 Medco Energi Internasional 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 Medco Energi Internasional 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 Medco Energi Internasional 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 Medco Energi Internasional 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 Medco Energi Internasional 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 Medco Panigoro needs to make to build a sustainable competitive advantage.