Saudi Aramco and Corporate Venture Capital SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Innovation & Entrepreneurship
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Saudi Aramco and Corporate Venture Capital
Saudi Aramco launched an internal venture capital arm in 2011, which promptly became the world's largest investor in energy related startups. In choosing to proceed, the company's New Business Development unit (NPD) wrestled with a number of challenges. How should the fund be structured, as a fully independent, venture capital partnership or as a business unit? How should it be governed, and how should the investment committee function? Could mechanisms be developed that ensured the expertise of Saudi Aramco's famously conservative engineering resources could be harnessed in the investment process and its business units enlisted to work with portfolio companies? How could the fund be structured to reflect Saudi Aramco's role in modernizing the economy of Saudi Arabia? The case provides a vehicle for discussing the basics of corporate venture capital and the challenges large corporations face in participating in the world of startups. It also describes how certain industries, like energy, are poorly suited to the investment profile of traditional venture capitalists. The product development cycle is too long and the capital required to develop and test products too great for ordinary, general partnerships to sustain. The case also introduces interesting themes in the role of parastatals in contributing to national economic competitiveness.
Authors :: Joseph Fuller, Matthew Rhodes-Kropf, Nathaniel Burbank
Swot Analysis of "Saudi Aramco and Corporate Venture Capital" written by Joseph Fuller, Matthew Rhodes-Kropf, Nathaniel Burbank includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Saudi Aramco's facing as an external strategic factors. Some of the topics covered in Saudi Aramco and Corporate Venture Capital case study are - Strategic Management Strategies, and Innovation & Entrepreneurship.
Some of the macro environment factors that can be used to understand the Saudi Aramco and Corporate Venture Capital casestudy better are - – increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, there is backlash against globalization, central banks are concerned over increasing inflation, increasing commodity prices, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs,
wage bills are increasing, increasing household debt because of falling income levels, etc
Introduction to SWOT Analysis of Saudi Aramco and Corporate Venture Capital
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Saudi Aramco and Corporate Venture Capital case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Saudi Aramco's, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Saudi Aramco's 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 Saudi Aramco and Corporate Venture Capital can be done for the following purposes –
1. Strategic planning using facts provided in Saudi Aramco and Corporate Venture Capital case study
2. Improving business portfolio management of Saudi Aramco's
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 Saudi Aramco's
Strengths Saudi Aramco and Corporate Venture Capital | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Saudi Aramco's in Saudi Aramco and Corporate Venture Capital Harvard Business Review case study are -
Learning organization
- Saudi Aramco's 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 Saudi Aramco's is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Saudi Aramco and Corporate Venture Capital Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Saudi Aramco's 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 Saudi Aramco and Corporate Venture Capital HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Saudi Aramco's has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Saudi Aramco's to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Successful track record of launching new products
– Saudi Aramco's has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Saudi Aramco's 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 Innovation & Entrepreneurship industry
– Saudi Aramco and Corporate Venture Capital firm has clearly differentiated products in the market place. This has enabled Saudi Aramco's to fetch slight price premium compare to the competitors in the Innovation & Entrepreneurship industry. The sustainable margins have also helped Saudi Aramco's to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Saudi Aramco's 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 Saudi Aramco and Corporate Venture Capital - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Low bargaining power of suppliers
– Suppliers of Saudi Aramco's in the sector have low bargaining power. Saudi Aramco and Corporate Venture Capital has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Saudi Aramco's to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Saudi Aramco's is present in almost all the verticals within the industry. This has provided firm in Saudi Aramco and Corporate Venture Capital 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.
Ability to recruit top talent
– Saudi Aramco's is one of the leading recruiters in the industry. Managers in the Saudi Aramco and Corporate Venture Capital are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Superior customer experience
– The customer experience strategy of Saudi Aramco's in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Innovation & Entrepreneurship field
– Saudi Aramco's 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 Saudi Aramco's in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Analytics focus
– Saudi Aramco's 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 Joseph Fuller, Matthew Rhodes-Kropf, Nathaniel Burbank 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.
Weaknesses Saudi Aramco and Corporate Venture Capital | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Saudi Aramco and Corporate Venture Capital are -
No frontier risks strategy
– After analyzing the HBR case study Saudi Aramco and Corporate Venture Capital, 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Joseph Fuller, Matthew Rhodes-Kropf, Nathaniel Burbank suggests that, Saudi Aramco's 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Saudi Aramco and Corporate Venture Capital, in the dynamic environment Saudi Aramco's has struggled to respond to the nimble upstart competition. Saudi Aramco's has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Workers concerns about automation
– As automation is fast increasing in the segment, Saudi Aramco's 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.
Slow decision making process
– As mentioned earlier in the report, Saudi Aramco's 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. Saudi Aramco's 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.
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study Saudi Aramco and Corporate Venture Capital, it seems that the employees of Saudi Aramco's 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.
Aligning sales with marketing
– It come across in the case study Saudi Aramco and Corporate Venture Capital 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 Saudi Aramco and Corporate Venture Capital can leverage the sales team experience to cultivate customer relationships as Saudi Aramco's is planning to shift buying processes online.
Skills based hiring
– The stress on hiring functional specialists at Saudi Aramco's 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.
Need for greater diversity
– Saudi Aramco's 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.
Interest costs
– Compare to the competition, Saudi Aramco's 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.
Slow to strategic competitive environment developments
– As Saudi Aramco and Corporate Venture Capital HBR case study mentions - Saudi Aramco's takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the industry in last five years.
Opportunities Saudi Aramco and Corporate Venture Capital | 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 Saudi Aramco and Corporate Venture Capital are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Saudi Aramco's can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Saudi Aramco's 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.
Manufacturing automation
– Saudi Aramco's 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Saudi Aramco's can use these opportunities to build new business models that can help the communities that Saudi Aramco's operates in. Secondly it can use opportunities from government spending in Innovation & Entrepreneurship sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Saudi Aramco's 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, Saudi Aramco and Corporate Venture Capital, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Leveraging digital technologies
– Saudi Aramco's 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.
Using analytics as competitive advantage
– Saudi Aramco's 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 Saudi Aramco and Corporate Venture Capital - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Saudi Aramco's to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Saudi Aramco's 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 Saudi Aramco's to hire the very best people irrespective of their geographical location.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Saudi Aramco's is facing challenges because of the dominance of functional experts in the organization. Saudi Aramco and Corporate Venture Capital 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. Saudi Aramco's can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Saudi Aramco's to increase its market reach. Saudi Aramco's 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 Saudi Aramco's 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.
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 Saudi Aramco's in the consumer business. Now Saudi Aramco's can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Saudi Aramco and Corporate Venture Capital External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Saudi Aramco and Corporate Venture Capital are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Saudi Aramco's 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 Saudi Aramco and Corporate Venture Capital .
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 Saudi Aramco's in the Innovation & Entrepreneurship sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that Saudi Aramco's is facing in Innovation & Entrepreneurship sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing wage structure of Saudi Aramco's
– 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 Saudi Aramco's.
Stagnating economy with rate increase
– Saudi Aramco's can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High dependence on third party suppliers
– Saudi Aramco's 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 Saudi Aramco's business can come under increasing regulations regarding data privacy, data security, etc.
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. Saudi Aramco's needs to understand the core reasons impacting the Innovation & Entrepreneurship industry. This will help it in building a better workplace.
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. Saudi Aramco's 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.
Easy access to finance
– Easy access to finance in Innovation & Entrepreneurship field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Saudi Aramco's can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Saudi Aramco's 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. Saudi Aramco's can take advantage of this fund but it will also bring new competitors in the Innovation & Entrepreneurship industry.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Saudi Aramco and Corporate Venture Capital, Saudi Aramco's 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 .
Weighted SWOT Analysis of Saudi Aramco and Corporate Venture Capital 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 Saudi Aramco and Corporate Venture Capital 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 Saudi Aramco and Corporate Venture Capital 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 Saudi Aramco and Corporate Venture Capital 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 Saudi Aramco and Corporate Venture Capital 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 Saudi Aramco's needs to make to build a sustainable competitive advantage.
