In March 2000, plans for the initial public offering of shares in PetroChina were proceeding on schedule, and institutional investors were evaluating the deal. PetroChina was China's largest oil and gas company and an attractive play on China's continued economic growth. The imminent listing on the Hong Kong and New York stock exchanges was designed to raise revenue and produce discipline for the firm. Disclosure policies and a new management compensation system with management rewards based on stock prices suggested a focus on investor interests. At the same time, the AFL-CIO drew attention both to corporate governance concerns with PetroChina and to human and labor rights issues linked to PetroChina's parent company. Was PetroChina an investment to avoid or a risk worth taking? Also raises broader questions about the roles of the state and the private sector.
Authors :: Alexander Dyck, Yasheng Huang, David Lane
Swot Analysis of "PetroChina" written by Alexander Dyck, Yasheng Huang, David Lane includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Petrochina Afl facing as an external strategic factors. Some of the topics covered in PetroChina case study are - Strategic Management Strategies, Economy, Government and Global Business.
Some of the macro environment factors that can be used to understand the PetroChina casestudy better are - – banking and financial system is disrupted by Bitcoin and other crypto currencies, geopolitical disruptions, challanges to central banks by blockchain based private currencies, talent flight as more people leaving formal jobs, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, supply chains are disrupted by pandemic ,
increasing energy prices, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in PetroChina case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Petrochina Afl, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Petrochina Afl 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 PetroChina can be done for the following purposes –
1. Strategic planning using facts provided in PetroChina case study
2. Improving business portfolio management of Petrochina Afl
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 Petrochina Afl
Strengths PetroChina | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Petrochina Afl in PetroChina Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Petrochina Afl in the sector have low bargaining power. PetroChina has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Petrochina Afl to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Petrochina Afl is one of the most innovative firm in sector. Manager in PetroChina Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Petrochina Afl 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.
Learning organization
- Petrochina Afl 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 Petrochina Afl is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in PetroChina Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Petrochina Afl has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in PetroChina 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)
– Petrochina Afl 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 PetroChina - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy in the PetroChina 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.
Superior customer experience
– The customer experience strategy of Petrochina Afl in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Petrochina Afl 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 PetroChina HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Petrochina Afl 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 Alexander Dyck, Yasheng Huang, David Lane 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.
Successful track record of launching new products
– Petrochina Afl has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Petrochina Afl 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.
Sustainable margins compare to other players in Global Business industry
– PetroChina firm has clearly differentiated products in the market place. This has enabled Petrochina Afl to fetch slight price premium compare to the competitors in the Global Business industry. The sustainable margins have also helped Petrochina Afl to invest into research and development (R&D) and innovation.
Weaknesses PetroChina | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of PetroChina are -
Capital Spending Reduction
– Even during the low interest decade, Petrochina Afl 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 PetroChina 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 Petrochina Afl has relatively successful track record of launching new products.
Products dominated business model
– Even though Petrochina Afl 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 - PetroChina should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the segment, Petrochina Afl 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.
Interest costs
– Compare to the competition, Petrochina Afl 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.
High cash cycle compare to competitors
Petrochina Afl 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.
Slow decision making process
– As mentioned earlier in the report, Petrochina Afl 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. Petrochina Afl 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.
Increasing silos among functional specialists
– The organizational structure of Petrochina Afl is dominated by functional specialists. It is not different from other players in the Global Business segment. Petrochina Afl needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Petrochina Afl to focus more on services rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study PetroChina, is just above the industry average. Petrochina Afl 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study PetroChina, it seems that the employees of Petrochina Afl 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.
Skills based hiring
– The stress on hiring functional specialists at Petrochina Afl 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.
Opportunities PetroChina | 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 PetroChina are -
Learning at scale
– Online learning technologies has now opened space for Petrochina Afl 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Global Business industry, but it has also influenced the consumer preferences. Petrochina Afl can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Creating value in data economy
– The success of analytics program of Petrochina Afl has opened avenues for new revenue streams for the organization in the industry. This can help Petrochina Afl to build a more holistic ecosystem as suggested in the PetroChina case study. Petrochina Afl can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Petrochina Afl can develop new processes and procedures in Global Business 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.
Leveraging digital technologies
– Petrochina Afl 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Petrochina Afl can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Petrochina Afl can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Petrochina Afl in the consumer business. Now Petrochina Afl can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Petrochina Afl 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Petrochina Afl can use these opportunities to build new business models that can help the communities that Petrochina Afl operates in. Secondly it can use opportunities from government spending in Global Business sector.
Building a culture of innovation
– managers at Petrochina Afl 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.
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 Petrochina Afl 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Petrochina Afl 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 Petrochina Afl to hire the very best people irrespective of their geographical location.
Threats PetroChina External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study PetroChina are -
Consumer confidence and its impact on Petrochina Afl 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 Petrochina Afl in the Global Business industry. The Global Business 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study PetroChina, Petrochina Afl 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 .
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 Petrochina Afl business can come under increasing regulations regarding data privacy, data security, 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 Petrochina Afl.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Petrochina Afl with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Petrochina Afl in the Global Business sector and impact the bottomline of the organization.
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. Petrochina Afl 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.
Regulatory challenges
– Petrochina Afl 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.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Petrochina Afl 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 PetroChina .
Environmental challenges
– Petrochina Afl 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. Petrochina Afl can take advantage of this fund but it will also bring new competitors in the Global Business industry.
Weighted SWOT Analysis of PetroChina 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 PetroChina 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 PetroChina 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 PetroChina 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 PetroChina 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 Petrochina Afl needs to make to build a sustainable competitive advantage.
