Valero Energy Corporation and Tight Oil SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Valero Energy Corporation and Tight Oil
To maximize their effectiveness, color cases should be printed in color.Valero Energy, an incredibly successful US refiner, needs to make some decisions about tight oil. As production of light tight oil increases-from Eagle Ford, Bakken and elsewhere-Valero considers whether to add topping capacity to handle it, on top of its recent investments for heavy oil. Political decisions, however, are pending on Keystone XL, on crude oil exports, and on LNG exports. Prices, therefore, are up in the air, especially as global capacity increases. Petrochemical companies and oil producers have conflicting views on the appropriate policy. Bill Klesse, the CEO, can either sit back and wait, or move to capture greater market share.
Authors :: Richard H.K. Vietor, Eric Adamson, Aaron Byrd, Ned Chiverton
Swot Analysis of "Valero Energy Corporation and Tight Oil" written by Richard H.K. Vietor, Eric Adamson, Aaron Byrd, Ned Chiverton includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Oil Valero facing as an external strategic factors. Some of the topics covered in Valero Energy Corporation and Tight Oil case study are - Strategic Management Strategies, Corporate governance, Customers, Demographics, Economy, Globalization, Strategy execution, Sustainability, Workspaces and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Valero Energy Corporation and Tight Oil casestudy better are - – geopolitical disruptions, central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, wage bills are increasing, talent flight as more people leaving formal jobs, increasing commodity prices,
increasing transportation and logistics costs, increasing inequality as vast percentage of new income is going to the top 1%, etc
Introduction to SWOT Analysis of Valero Energy Corporation and Tight Oil
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Valero Energy Corporation and Tight Oil case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Oil Valero, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Oil Valero 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 Valero Energy Corporation and Tight Oil can be done for the following purposes –
1. Strategic planning using facts provided in Valero Energy Corporation and Tight Oil case study
2. Improving business portfolio management of Oil Valero
3. Assessing feasibility of the new initiative in Innovation & Entrepreneurship field.
4. Making a Innovation & Entrepreneurship topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Oil Valero
Strengths Valero Energy Corporation and Tight Oil | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Oil Valero in Valero Energy Corporation and Tight Oil Harvard Business Review case study are -
Low bargaining power of suppliers
– Suppliers of Oil Valero in the sector have low bargaining power. Valero Energy Corporation and Tight Oil has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Oil Valero to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Oil Valero is one of the most innovative firm in sector. Manager in Valero Energy Corporation and Tight Oil Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
High switching costs
– The high switching costs that Oil Valero 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.
Ability to recruit top talent
– Oil Valero is one of the leading recruiters in the industry. Managers in the Valero Energy Corporation and Tight Oil are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Cross disciplinary teams
– Horizontal connected teams at the Oil Valero 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.
Training and development
– Oil Valero has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Valero Energy Corporation and Tight Oil 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.
Ability to lead change in Innovation & Entrepreneurship field
– Oil Valero 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 Oil Valero in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Oil Valero
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Oil Valero does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Analytics focus
– Oil Valero 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 Richard H.K. Vietor, Eric Adamson, Aaron Byrd, Ned Chiverton 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.
Diverse revenue streams
– Oil Valero is present in almost all the verticals within the industry. This has provided firm in Valero Energy Corporation and Tight Oil 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 Valero Energy Corporation and Tight Oil 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.
High brand equity
– Oil Valero has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Oil Valero to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses Valero Energy Corporation and Tight Oil | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Valero Energy Corporation and Tight Oil are -
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Valero Energy Corporation and Tight Oil, in the dynamic environment Oil Valero has struggled to respond to the nimble upstart competition. Oil Valero has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High operating costs
– Compare to the competitors, firm in the HBR case study Valero Energy Corporation and Tight Oil 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 Oil Valero 's lucrative customers.
Interest costs
– Compare to the competition, Oil Valero 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.
Products dominated business model
– Even though Oil Valero 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 - Valero Energy Corporation and Tight Oil should strive to include more intangible value offerings along with its core products and services.
Skills based hiring
– The stress on hiring functional specialists at Oil Valero 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.
Capital Spending Reduction
– Even during the low interest decade, Oil Valero 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Valero Energy Corporation and Tight Oil, is just above the industry average. Oil Valero 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 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 Oil Valero supply chain. Even after few cautionary changes mentioned in the HBR case study - Valero Energy Corporation and Tight Oil, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Oil Valero vulnerable to further global disruptions in South East Asia.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Valero Energy Corporation and Tight Oil, it seems that the employees of Oil Valero 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Oil Valero 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Valero Energy Corporation and Tight Oil 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 Oil Valero has relatively successful track record of launching new products.
Opportunities Valero Energy Corporation and Tight Oil | 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 Valero Energy Corporation and Tight Oil are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Oil Valero 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, Valero Energy Corporation and Tight Oil, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Oil Valero 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 Oil Valero to hire the very best people irrespective of their geographical location.
Creating value in data economy
– The success of analytics program of Oil Valero has opened avenues for new revenue streams for the organization in the industry. This can help Oil Valero to build a more holistic ecosystem as suggested in the Valero Energy Corporation and Tight Oil case study. Oil Valero can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Oil Valero in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Innovation & Entrepreneurship segment, and it will provide faster access to the consumers.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Innovation & Entrepreneurship industry, but it has also influenced the consumer preferences. Oil Valero can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Low interest rates
– Even though inflation is raising its head in most developed economies, Oil Valero 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.
Using analytics as competitive advantage
– Oil Valero 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 Valero Energy Corporation and Tight Oil - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Oil Valero to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Building a culture of innovation
– managers at Oil Valero 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 Innovation & Entrepreneurship segment.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Oil Valero is facing challenges because of the dominance of functional experts in the organization. Valero Energy Corporation and Tight Oil 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.
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. Oil Valero can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Manufacturing automation
– Oil Valero can use the latest technology developments to improve its manufacturing and designing process in Innovation & Entrepreneurship 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.
Better consumer reach
– The expansion of the 5G network will help Oil Valero to increase its market reach. Oil Valero 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.
Learning at scale
– Online learning technologies has now opened space for Oil Valero 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.
Threats Valero Energy Corporation and Tight Oil External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Valero Energy Corporation and Tight Oil 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.
Technology acceleration in Forth Industrial Revolution
– Oil Valero has witnessed rapid integration of technology during Covid-19 in the Innovation & Entrepreneurship industry. As one of the leading players in the industry, Oil Valero needs to keep up with the evolution of technology in the Innovation & Entrepreneurship 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Oil Valero with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Regulatory challenges
– Oil Valero 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 Innovation & Entrepreneurship industry regulations.
Increasing wage structure of Oil Valero
– 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 Oil Valero.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Valero Energy Corporation and Tight Oil, Oil Valero may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Innovation & Entrepreneurship .
Environmental challenges
– Oil Valero 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. Oil Valero can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
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. Oil Valero needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
Shortening product life cycle
– it is one of the major threat that Oil Valero is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Oil Valero in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Stagnating economy with rate increase
– Oil Valero 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.
High dependence on third party suppliers
– Oil Valero 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.
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 Oil Valero.
Weighted SWOT Analysis of Valero Energy Corporation and Tight Oil 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 Valero Energy Corporation and Tight Oil 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 Valero Energy Corporation and Tight Oil 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 Valero Energy Corporation and Tight Oil 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 Valero Energy Corporation and Tight Oil 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 Oil Valero needs to make to build a sustainable competitive advantage.