Shell and the Arctic SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Leadership & Managing People
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Shell and the Arctic
In 2005, Royal Dutch Shell (Shell) invested in oil exploration leases in the Beaufort Sea in the Alaska Arctic. A few years later, additional leases were acquired in the nearby Chukchi Sea. After years of delays, Shell began drilling in the summer of 2012 with two drillships. More delays and the short drilling season resulted in only two partially drilled wells. On the journey south after drilling was completed, one of the ships had an engine fire and the other one ran aground. The Kulluk, the drillship that ran aground, was eventually scrapped. After spending more than $5 billion on its Arctic exploration program between 2005 and 2015, the company had very few results for its efforts, raising questions about Shell's and the industry's ability to manage large complex oil and gas projects in the Arctic.
Swot Analysis of "Shell and the Arctic" written by Andrew C. Inkpen includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Arctic Shell facing as an external strategic factors. Some of the topics covered in Shell and the Arctic case study are - Strategic Management Strategies, Risk management, Sustainability and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Shell and the Arctic casestudy better are - – increasing transportation and logistics costs, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, supply chains are disrupted by pandemic ,
there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Shell and the Arctic
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Shell and the Arctic case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Arctic Shell, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Arctic Shell 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 Shell and the Arctic can be done for the following purposes –
1. Strategic planning using facts provided in Shell and the Arctic case study
2. Improving business portfolio management of Arctic Shell
3. Assessing feasibility of the new initiative in Leadership & Managing People field.
4. Making a Leadership & Managing People topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Arctic Shell
Strengths Shell and the Arctic | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Arctic Shell in Shell and the Arctic Harvard Business Review case study are -
High switching costs
– The high switching costs that Arctic Shell 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.
Sustainable margins compare to other players in Leadership & Managing People industry
– Shell and the Arctic firm has clearly differentiated products in the market place. This has enabled Arctic Shell to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Arctic Shell to invest into research and development (R&D) and innovation.
Training and development
– Arctic Shell has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Shell and the Arctic 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.
High brand equity
– Arctic Shell has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Arctic Shell to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Arctic Shell
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Arctic Shell does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Diverse revenue streams
– Arctic Shell is present in almost all the verticals within the industry. This has provided firm in Shell and the Arctic 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.
Successful track record of launching new products
– Arctic Shell has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Arctic Shell 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.
Superior customer experience
– The customer experience strategy of Arctic Shell in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to lead change in Leadership & Managing People field
– Arctic Shell 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 Arctic Shell in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Arctic Shell 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 Arctic Shell is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Shell and the Arctic Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Arctic Shell 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 Shell and the Arctic - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Arctic Shell is one of the most innovative firm in sector. Manager in Shell and the Arctic Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Weaknesses Shell and the Arctic | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shell and the Arctic are -
Interest costs
– Compare to the competition, Arctic Shell 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.
Lack of clear differentiation of Arctic Shell products
– To increase the profitability and margins on the products, Arctic Shell needs to provide more differentiated products than what it is currently offering in the marketplace.
Skills based hiring
– The stress on hiring functional specialists at Arctic Shell 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.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Shell and the Arctic 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 Arctic Shell has relatively successful track record of launching new products.
High cash cycle compare to competitors
Arctic Shell 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Shell and the Arctic, in the dynamic environment Arctic Shell has struggled to respond to the nimble upstart competition. Arctic Shell has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High bargaining power of channel partners
– Because of the regulatory requirements, Andrew C. Inkpen suggests that, Arctic Shell 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.
Slow decision making process
– As mentioned earlier in the report, Arctic Shell 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. Arctic Shell 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.
Workers concerns about automation
– As automation is fast increasing in the segment, Arctic Shell 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.
Increasing silos among functional specialists
– The organizational structure of Arctic Shell is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Arctic Shell needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Arctic Shell to focus more on services rather than just following the product oriented approach.
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 Arctic Shell supply chain. Even after few cautionary changes mentioned in the HBR case study - Shell and the Arctic, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Arctic Shell vulnerable to further global disruptions in South East Asia.
Opportunities Shell and the Arctic | 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 Shell and the Arctic are -
Redefining models of collaboration and team work
– As explained in the weaknesses section, Arctic Shell is facing challenges because of the dominance of functional experts in the organization. Shell and the Arctic 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.
Creating value in data economy
– The success of analytics program of Arctic Shell has opened avenues for new revenue streams for the organization in the industry. This can help Arctic Shell to build a more holistic ecosystem as suggested in the Shell and the Arctic case study. Arctic Shell 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 Arctic Shell in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Leadership & Managing People segment, and it will provide faster access to the consumers.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Arctic Shell 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 Arctic Shell to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Arctic Shell can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Shell and the Arctic 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Arctic Shell can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Loyalty marketing
– Arctic Shell 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.
Manufacturing automation
– Arctic Shell can use the latest technology developments to improve its manufacturing and designing process in Leadership & Managing People 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, Arctic Shell can use these opportunities to build new business models that can help the communities that Arctic Shell operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Leadership & Managing People industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Arctic Shell 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. Arctic Shell 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Arctic Shell 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 Arctic Shell 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.
Building a culture of innovation
– managers at Arctic Shell 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 Leadership & Managing People segment.
Threats Shell and the Arctic External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Shell and the Arctic are -
Consumer confidence and its impact on Arctic Shell 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.
Easy access to finance
– Easy access to finance in Leadership & Managing People field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Arctic Shell can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Arctic Shell needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Environmental challenges
– Arctic Shell 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. Arctic Shell can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
Stagnating economy with rate increase
– Arctic Shell 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.
Increasing wage structure of Arctic Shell
– 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 Arctic Shell.
Regulatory challenges
– Arctic Shell 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 Leadership & Managing People industry regulations.
High dependence on third party suppliers
– Arctic Shell 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.
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. Arctic Shell 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.
Technology acceleration in Forth Industrial Revolution
– Arctic Shell has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Arctic Shell needs to keep up with the evolution of technology in the Leadership & Managing People 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.
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 Arctic Shell in the Leadership & Managing People sector and impact the bottomline of the organization.
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 Arctic Shell business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Shell and the Arctic 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 Shell and the Arctic 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 Shell and the Arctic 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 Shell and the Arctic 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 Shell and the Arctic 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 Arctic Shell needs to make to build a sustainable competitive advantage.
