Case Study Description of Environmental Risk Management at Chevron Corp.
Chevron Corp., headquartered in San Francisco, manages a worldwide, vertically integrated value chain from the oil well to the gasoline station. Mishandling of oil at any stage of production can damage the natural environment, human health, corporate profitability, or all three. But at the same time Chevron needs to be prudent about the amount of money it spends on measures to manage these risks, and environmental programs within the firm can conflict with a long-standing tradition of decentralized management. To manage risks more efficiently, Chevron executives are contemplating the use of quantitative decision tools that enable operating managers to compute rough benefit-cost ratios for various alternative risk management projects. The case focuses on the pros and cons of using such tools within the context of Chevron's overall system for environmental risk management.
Authors :: Forest Reinhardt, Monica Mandelli, Jennifer Burns
Swot Analysis of "Environmental Risk Management at Chevron Corp." written by Forest Reinhardt, Monica Mandelli, Jennifer Burns includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Chevron Environmental facing as an external strategic factors. Some of the topics covered in Environmental Risk Management at Chevron Corp. case study are - Strategic Management Strategies, International business, Organizational structure, Risk management, Supply chain, Sustainability and Global Business.
Some of the macro environment factors that can be used to understand the Environmental Risk Management at Chevron Corp. casestudy better are - – there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, competitive advantages are harder to sustain because of technology dispersion, talent flight as more people leaving formal jobs, wage bills are increasing,
banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Environmental Risk Management at Chevron Corp.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Environmental Risk Management at Chevron Corp. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Chevron Environmental, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Chevron Environmental 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 Environmental Risk Management at Chevron Corp. can be done for the following purposes –
1. Strategic planning using facts provided in Environmental Risk Management at Chevron Corp. case study
2. Improving business portfolio management of Chevron Environmental
3. Assessing feasibility of the new initiative in Global Business field.
4. Making a Global Business topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Chevron Environmental
Strengths Environmental Risk Management at Chevron Corp. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Chevron Environmental in Environmental Risk Management at Chevron Corp. Harvard Business Review case study are -
Ability to recruit top talent
– Chevron Environmental is one of the leading recruiters in the industry. Managers in the Environmental Risk Management at Chevron Corp. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Global Business industry
– Environmental Risk Management at Chevron Corp. firm has clearly differentiated products in the market place. This has enabled Chevron Environmental to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Chevron Environmental to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Chevron Environmental is present in almost all the verticals within the industry. This has provided firm in Environmental Risk Management at Chevron Corp. 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.
Operational resilience
– The operational resilience strategy in the Environmental Risk Management at Chevron Corp. 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.
Learning organization
- Chevron Environmental 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 Chevron Environmental is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Environmental Risk Management at Chevron Corp. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Chevron Environmental 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
– Chevron Environmental 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 Environmental Risk Management at Chevron Corp. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Chevron Environmental 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 Forest Reinhardt, Monica Mandelli, Jennifer Burns 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.
Organizational Resilience of Chevron Environmental
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Chevron Environmental does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Strong track record of project management
– Chevron Environmental is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Chevron Environmental is one of the most innovative firm in sector. Manager in Environmental Risk Management at Chevron Corp. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Ability to lead change in Global Business field
– Chevron Environmental 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 Chevron Environmental in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses Environmental Risk Management at Chevron Corp. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Environmental Risk Management at Chevron Corp. are -
Slow decision making process
– As mentioned earlier in the report, Chevron Environmental 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. Chevron Environmental 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.
Capital Spending Reduction
– Even during the low interest decade, Chevron Environmental 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Environmental Risk Management at Chevron Corp. 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 Chevron Environmental has relatively successful track record of launching new products.
Need for greater diversity
– Chevron Environmental 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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Chevron Environmental supply chain. Even after few cautionary changes mentioned in the HBR case study - Environmental Risk Management at Chevron Corp., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Chevron Environmental vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Chevron Environmental 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 Environmental Risk Management at Chevron Corp., it seems that company is thinking about the frontier risks that can impact Global Business 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Environmental Risk Management at Chevron Corp., in the dynamic environment Chevron Environmental has struggled to respond to the nimble upstart competition. Chevron Environmental has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners
– Because of the regulatory requirements, Forest Reinhardt, Monica Mandelli, Jennifer Burns suggests that, Chevron Environmental 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Chevron Environmental 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Environmental Risk Management at Chevron Corp., is just above the industry average. Chevron Environmental 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.
Opportunities Environmental Risk Management at Chevron Corp. | 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 Environmental Risk Management at Chevron Corp. are -
Leveraging digital technologies
– Chevron Environmental 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.
Manufacturing automation
– Chevron Environmental can use the latest technology developments to improve its manufacturing and designing process in Global Business 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.
Creating value in data economy
– The success of analytics program of Chevron Environmental has opened avenues for new revenue streams for the organization in the industry. This can help Chevron Environmental to build a more holistic ecosystem as suggested in the Environmental Risk Management at Chevron Corp. case study. Chevron Environmental can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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. Chevron Environmental can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Chevron Environmental can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Environmental Risk Management at Chevron Corp. 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Chevron Environmental is facing challenges because of the dominance of functional experts in the organization. Environmental Risk Management at Chevron Corp. 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.
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 Chevron Environmental 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 Chevron Environmental to increase its market reach. Chevron Environmental 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.
Building a culture of innovation
– managers at Chevron Environmental 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 Global Business segment.
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 Chevron Environmental in the consumer business. Now Chevron Environmental can target international markets with far fewer capital restrictions requirements than the existing system.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Chevron Environmental can use these opportunities to build new business models that can help the communities that Chevron Environmental operates in. Secondly it can use opportunities from government spending in Global Business sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Chevron Environmental can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Chevron Environmental 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.
Threats Environmental Risk Management at Chevron Corp. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Environmental Risk Management at Chevron Corp. are -
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.
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 Chevron Environmental.
Stagnating economy with rate increase
– Chevron Environmental 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Chevron Environmental with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Chevron Environmental 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 Global Business industry regulations.
Technology acceleration in Forth Industrial Revolution
– Chevron Environmental has witnessed rapid integration of technology during Covid-19 in the Global Business industry. As one of the leading players in the industry, Chevron Environmental needs to keep up with the evolution of technology in the Global Business 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.
Easy access to finance
– Easy access to finance in Global Business field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Chevron Environmental can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
High dependence on third party suppliers
– Chevron Environmental 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.
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 Chevron Environmental 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 Environmental Risk Management at Chevron Corp., Chevron Environmental may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Global Business .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Chevron Environmental 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 Environmental Risk Management at Chevron Corp. .
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 Chevron Environmental in the Global Business sector and impact the bottomline of the organization.
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. Chevron Environmental needs to understand the core reasons impacting the Global Business industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Environmental Risk Management at Chevron Corp. 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 Environmental Risk Management at Chevron Corp. 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 Environmental Risk Management at Chevron Corp. 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 Environmental Risk Management at Chevron Corp. 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 Environmental Risk Management at Chevron Corp. 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 Chevron Environmental needs to make to build a sustainable competitive advantage.