Case Study Description of Lyondell Petrochemical Co.
In August 1994, Lyondell Petrochemical Co.'s corporate parent and largest single shareholder effectively shed its stock, resulting in the resignation of 5 of its 11 directors. The remaining outside directors immediately acted to overhaul the executive compensation plan used to pay the CEO and other top officers. This case examines the role played by the compensation committee of the board of directors in this initiative. Also addresses several important aspects of the compensation process, including the role played by outside consultants, appropriate ways of measuring performance, and the motivational impact of pay plans on management.
Swot Analysis of "Lyondell Petrochemical Co." written by Jay W. Lorsch, Daniel P. Erikson includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Lyondell Petrochemical facing as an external strategic factors. Some of the topics covered in Lyondell Petrochemical Co. case study are - Strategic Management Strategies, Executive compensation, Motivating people and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Lyondell Petrochemical Co. casestudy better are - – competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , geopolitical disruptions, central banks are concerned over increasing inflation, increasing commodity prices, talent flight as more people leaving formal jobs, challanges to central banks by blockchain based private currencies,
technology disruption, cloud computing is disrupting traditional business models, etc
Introduction to SWOT Analysis of Lyondell Petrochemical Co.
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Lyondell Petrochemical Co. case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lyondell Petrochemical, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lyondell Petrochemical 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 Lyondell Petrochemical Co. can be done for the following purposes –
1. Strategic planning using facts provided in Lyondell Petrochemical Co. case study
2. Improving business portfolio management of Lyondell Petrochemical
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 Lyondell Petrochemical
Strengths Lyondell Petrochemical Co. | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lyondell Petrochemical in Lyondell Petrochemical Co. Harvard Business Review case study are -
Highly skilled collaborators
– Lyondell Petrochemical 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 Lyondell Petrochemical Co. HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Lyondell Petrochemical is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Learning organization
- Lyondell Petrochemical 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 Lyondell Petrochemical is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Lyondell Petrochemical Co. Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Low bargaining power of suppliers
– Suppliers of Lyondell Petrochemical in the sector have low bargaining power. Lyondell Petrochemical Co. has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lyondell Petrochemical to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Lyondell Petrochemical is one of the most innovative firm in sector. Manager in Lyondell Petrochemical Co. Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Cross disciplinary teams
– Horizontal connected teams at the Lyondell Petrochemical 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.
Operational resilience
– The operational resilience strategy in the Lyondell Petrochemical Co. 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.
Digital Transformation in Leadership & Managing People segment
- digital transformation varies from industry to industry. For Lyondell Petrochemical digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lyondell Petrochemical 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.
Diverse revenue streams
– Lyondell Petrochemical is present in almost all the verticals within the industry. This has provided firm in Lyondell Petrochemical Co. 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
– Lyondell Petrochemical has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lyondell Petrochemical 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.
Ability to recruit top talent
– Lyondell Petrochemical is one of the leading recruiters in the industry. Managers in the Lyondell Petrochemical Co. are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Training and development
– Lyondell Petrochemical has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Lyondell Petrochemical Co. 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.
Weaknesses Lyondell Petrochemical Co. | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lyondell Petrochemical Co. are -
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 Lyondell Petrochemical supply chain. Even after few cautionary changes mentioned in the HBR case study - Lyondell Petrochemical Co., it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Lyondell Petrochemical vulnerable to further global disruptions in South East Asia.
Products dominated business model
– Even though Lyondell Petrochemical 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 - Lyondell Petrochemical Co. should strive to include more intangible value offerings along with its core products and services.
Low market penetration in new markets
– Outside its home market of Lyondell Petrochemical, firm in the HBR case study Lyondell Petrochemical Co. needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Workers concerns about automation
– As automation is fast increasing in the segment, Lyondell Petrochemical 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 Lyondell Petrochemical is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Lyondell Petrochemical needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lyondell Petrochemical to focus more on services rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Lyondell Petrochemical 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. Lyondell Petrochemical 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.
Need for greater diversity
– Lyondell Petrochemical 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Lyondell Petrochemical is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Lyondell Petrochemical Co. can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Slow to strategic competitive environment developments
– As Lyondell Petrochemical Co. HBR case study mentions - Lyondell Petrochemical 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.
Interest costs
– Compare to the competition, Lyondell Petrochemical 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.
Skills based hiring
– The stress on hiring functional specialists at Lyondell Petrochemical has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Opportunities Lyondell Petrochemical Co. | 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 Lyondell Petrochemical Co. are -
Developing new processes and practices
– Lyondell Petrochemical can develop new processes and procedures in Leadership & Managing People industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Using analytics as competitive advantage
– Lyondell Petrochemical 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 Lyondell Petrochemical Co. - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lyondell Petrochemical to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lyondell Petrochemical can use these opportunities to build new business models that can help the communities that Lyondell Petrochemical operates in. Secondly it can use opportunities from government spending in Leadership & Managing People sector.
Creating value in data economy
– The success of analytics program of Lyondell Petrochemical has opened avenues for new revenue streams for the organization in the industry. This can help Lyondell Petrochemical to build a more holistic ecosystem as suggested in the Lyondell Petrochemical Co. case study. Lyondell Petrochemical can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lyondell Petrochemical can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Lyondell Petrochemical in the consumer business. Now Lyondell Petrochemical can target international markets with far fewer capital restrictions requirements than the existing system.
Low interest rates
– Even though inflation is raising its head in most developed economies, Lyondell Petrochemical 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.
Buying journey improvements
– Lyondell Petrochemical can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Lyondell Petrochemical Co. 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.
Building a culture of innovation
– managers at Lyondell Petrochemical 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lyondell Petrochemical 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Lyondell Petrochemical is facing challenges because of the dominance of functional experts in the organization. Lyondell Petrochemical Co. 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.
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 Lyondell Petrochemical 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.
Learning at scale
– Online learning technologies has now opened space for Lyondell Petrochemical 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 Lyondell Petrochemical Co. External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Lyondell Petrochemical Co. are -
Shortening product life cycle
– it is one of the major threat that Lyondell Petrochemical is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Lyondell Petrochemical Co., Lyondell Petrochemical may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Leadership & Managing People .
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Lyondell Petrochemical with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
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. Lyondell Petrochemical needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Regulatory challenges
– Lyondell Petrochemical 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.
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 Lyondell Petrochemical.
Technology acceleration in Forth Industrial Revolution
– Lyondell Petrochemical has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Lyondell Petrochemical 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.
High dependence on third party suppliers
– Lyondell Petrochemical 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.
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.
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 Lyondell Petrochemical business can come under increasing regulations regarding data privacy, data security, etc.
Stagnating economy with rate increase
– Lyondell Petrochemical 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.
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. Lyondell Petrochemical 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.
Weighted SWOT Analysis of Lyondell Petrochemical Co. 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 Lyondell Petrochemical Co. 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 Lyondell Petrochemical Co. 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 Lyondell Petrochemical Co. 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 Lyondell Petrochemical Co. 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 Lyondell Petrochemical needs to make to build a sustainable competitive advantage.
