The Kashagan Production Sharing Agreement (PSA) SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Finance & Accounting
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of The Kashagan Production Sharing Agreement (PSA)
When discovered in the 1990s, the Kashagan oil field was the second largest oil field in the world. The project sponsors (equity investors) signed a 40-year production sharing agreement (PSA) with the Kazakh government in 1997, with the expectation the field would be developed at a total cost of $57 billion and would be pumping oil by 2005. Unlike most contracts in the energy industry, the Kashagan agreement was a "flexible PSA" meaning the contractual terms-the allocation of risks and returns-depended on ex post realizations of such things as capital costs and profitability. The parties incorporated contingencies into the contract to make it fairer and more flexible, and to ensure it remain viable over the project's 40-year life. Due to a combination of problems and challenges, the project was still not done in mid-2007. At that time, the sponsors, led by the Italian energy company ENI, announced the project would not be completed until 2010 and the total cost was likely to be $136 billion. Although oil prices had risen dramatically between 1997 and 2007, thereby making the project worth considerably more, the Kazakh government indicated its desire to renegotiate key provisions of the contract. The sponsors had to decide whether to renegotiate the contract and, if so, which parts.
Swot Analysis of "The Kashagan Production Sharing Agreement (PSA)" written by Benjamin C. Esty, Florian Bitsch includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Kashagan Psa facing as an external strategic factors. Some of the topics covered in The Kashagan Production Sharing Agreement (PSA) case study are - Strategic Management Strategies, Collaboration, Economics, Financial analysis, Financial markets, International business, Joint ventures, Negotiations, Product development, Risk management and Finance & Accounting.
Some of the macro environment factors that can be used to understand the The Kashagan Production Sharing Agreement (PSA) casestudy better are - – challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, technology disruption, increasing government debt because of Covid-19 spendings, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation,
there is backlash against globalization, geopolitical disruptions, etc
Introduction to SWOT Analysis of The Kashagan Production Sharing Agreement (PSA)
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in The Kashagan Production Sharing Agreement (PSA) case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Kashagan Psa, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Kashagan Psa 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 The Kashagan Production Sharing Agreement (PSA) can be done for the following purposes –
1. Strategic planning using facts provided in The Kashagan Production Sharing Agreement (PSA) case study
2. Improving business portfolio management of Kashagan Psa
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 Kashagan Psa
Strengths The Kashagan Production Sharing Agreement (PSA) | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Kashagan Psa in The Kashagan Production Sharing Agreement (PSA) Harvard Business Review case study are -
High switching costs
– The high switching costs that Kashagan Psa 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 Kashagan Psa digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Kashagan Psa 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.
Low bargaining power of suppliers
– Suppliers of Kashagan Psa in the sector have low bargaining power. The Kashagan Production Sharing Agreement (PSA) has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Kashagan Psa to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Kashagan Psa is present in almost all the verticals within the industry. This has provided firm in The Kashagan Production Sharing Agreement (PSA) 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.
Strong track record of project management
– Kashagan Psa is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Kashagan Psa in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Operational resilience
– The operational resilience strategy in the The Kashagan Production Sharing Agreement (PSA) 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.
Training and development
– Kashagan Psa has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in The Kashagan Production Sharing Agreement (PSA) 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)
– Kashagan Psa 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 The Kashagan Production Sharing Agreement (PSA) - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Cross disciplinary teams
– Horizontal connected teams at the Kashagan Psa 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.
Successful track record of launching new products
– Kashagan Psa has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Kashagan Psa has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Innovation driven organization
– Kashagan Psa is one of the most innovative firm in sector. Manager in The Kashagan Production Sharing Agreement (PSA) Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses The Kashagan Production Sharing Agreement (PSA) | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of The Kashagan Production Sharing Agreement (PSA) are -
Aligning sales with marketing
– It come across in the case study The Kashagan Production Sharing Agreement (PSA) 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 The Kashagan Production Sharing Agreement (PSA) can leverage the sales team experience to cultivate customer relationships as Kashagan Psa is planning to shift buying processes online.
Interest costs
– Compare to the competition, Kashagan Psa 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.
No frontier risks strategy
– After analyzing the HBR case study The Kashagan Production Sharing Agreement (PSA), 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.
Increasing silos among functional specialists
– The organizational structure of Kashagan Psa is dominated by functional specialists. It is not different from other players in the Finance & Accounting segment. Kashagan Psa needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Kashagan Psa to focus more on services rather than just following the product oriented approach.
Need for greater diversity
– Kashagan Psa 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.
Lack of clear differentiation of Kashagan Psa products
– To increase the profitability and margins on the products, Kashagan Psa needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Benjamin C. Esty, Florian Bitsch suggests that, Kashagan Psa 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.
Products dominated business model
– Even though Kashagan Psa 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 - The Kashagan Production Sharing Agreement (PSA) 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 Kashagan Psa, firm in the HBR case study The Kashagan Production Sharing Agreement (PSA) needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High operating costs
– Compare to the competitors, firm in the HBR case study The Kashagan Production Sharing Agreement (PSA) 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 Kashagan Psa 's lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Kashagan Psa 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.
Opportunities The Kashagan Production Sharing Agreement (PSA) | 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 The Kashagan Production Sharing Agreement (PSA) are -
Manufacturing automation
– Kashagan Psa 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.
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 Kashagan Psa 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 Kashagan Psa to increase its market reach. Kashagan Psa 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Kashagan Psa 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 Kashagan Psa to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Kashagan Psa 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Kashagan Psa can use these opportunities to build new business models that can help the communities that Kashagan Psa operates in. Secondly it can use opportunities from government spending in Finance & Accounting sector.
Using analytics as competitive advantage
– Kashagan Psa 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 The Kashagan Production Sharing Agreement (PSA) - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Kashagan Psa to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Kashagan Psa can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Kashagan Psa can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Kashagan Psa 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.
Developing new processes and practices
– Kashagan Psa 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.
Building a culture of innovation
– managers at Kashagan Psa 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 Kashagan Psa has opened avenues for new revenue streams for the organization in the industry. This can help Kashagan Psa to build a more holistic ecosystem as suggested in the The Kashagan Production Sharing Agreement (PSA) case study. Kashagan Psa can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Threats The Kashagan Production Sharing Agreement (PSA) External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study The Kashagan Production Sharing Agreement (PSA) are -
Shortening product life cycle
– it is one of the major threat that Kashagan Psa is facing in Finance & Accounting sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Kashagan Psa 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.
Technology acceleration in Forth Industrial Revolution
– Kashagan Psa has witnessed rapid integration of technology during Covid-19 in the Finance & Accounting industry. As one of the leading players in the industry, Kashagan Psa needs to keep up with the evolution of technology in the Finance & Accounting sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
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.
Consumer confidence and its impact on Kashagan Psa 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.
Environmental challenges
– Kashagan Psa 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. Kashagan Psa 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 The Kashagan Production Sharing Agreement (PSA), Kashagan Psa 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 .
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. Kashagan Psa 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.
Stagnating economy with rate increase
– Kashagan Psa 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.
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, Kashagan Psa 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 The Kashagan Production Sharing Agreement (PSA) .
High dependence on third party suppliers
– Kashagan Psa 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.
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. Kashagan Psa can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of The Kashagan Production Sharing Agreement (PSA) 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 The Kashagan Production Sharing Agreement (PSA) 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 The Kashagan Production Sharing Agreement (PSA) 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 The Kashagan Production Sharing Agreement (PSA) 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 The Kashagan Production Sharing Agreement (PSA) 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 Kashagan Psa needs to make to build a sustainable competitive advantage.