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 - – technology disruption, competitive advantages are harder to sustain because of technology dispersion, increasing household debt because of falling income levels, increasing transportation and logistics costs, increasing government debt because of Covid-19 spendings, increasing energy prices, there is increasing trade war between United States & China,
digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, 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 -
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.
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.
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.
Successful track record of launching new products
– Oil Valero has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Oil Valero 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.
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.
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.
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.
Digital Transformation in Innovation & Entrepreneurship segment
- digital transformation varies from industry to industry. For Oil Valero digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Oil Valero 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.
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.
Effective Research and Development (R&D)
– Oil Valero 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 Valero Energy Corporation and Tight Oil - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Sustainable margins compare to other players in Innovation & Entrepreneurship industry
– Valero Energy Corporation and Tight Oil firm has clearly differentiated products in the market place. This has enabled Oil Valero to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Oil Valero to invest into research and development (R&D) and innovation.
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.
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 -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Oil Valero is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Valero Energy Corporation and Tight Oil can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Oil Valero is dominated by functional specialists. It is not different from other players in the Innovation & Entrepreneurship segment. Oil Valero needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Oil Valero to focus more on services rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Oil Valero 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. Oil Valero 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.
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.
High cash cycle compare to competitors
Oil Valero 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.
Aligning sales with marketing
– It come across in the case study Valero Energy Corporation and Tight Oil 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 Valero Energy Corporation and Tight Oil can leverage the sales team experience to cultivate customer relationships as Oil Valero is planning to shift buying processes online.
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.
Low market penetration in new markets
– Outside its home market of Oil Valero, firm in the HBR case study Valero Energy Corporation and Tight Oil needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
Need for greater diversity
– Oil Valero 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.
No frontier risks strategy
– After analyzing the HBR case study Valero Energy Corporation and Tight Oil, it seems that company is thinking about the frontier risks that can impact Innovation & Entrepreneurship 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.
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 -
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.
Loyalty marketing
– Oil Valero 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.
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.
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.
Buying journey improvements
– Oil Valero can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Valero Energy Corporation and Tight Oil 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Oil Valero can use these opportunities to build new business models that can help the communities that Oil Valero operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
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.
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 Oil Valero 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 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.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Innovation & Entrepreneurship industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Oil Valero can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Oil Valero can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Oil Valero can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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 -
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.
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. Oil Valero 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Oil Valero 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 Valero Energy Corporation and Tight Oil .
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 .
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.
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.
Consumer confidence and its impact on Oil Valero 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.
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 Oil Valero business can come under increasing regulations regarding data privacy, data security, 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Oil Valero in the Innovation & Entrepreneurship industry. The Innovation & Entrepreneurship 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.
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.
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.
