Case Study Description of Statoil's Evolving Strategy
Statoil ASA, the Norwegian government-controlled oil and gas company, was widely acknowledged as one of the best performing National Oil Companies (NOCs). Statoil was founded in 1972 after oil was discovered on the Norwegian continental shelf (NCS). The government of Norway owned 67% of Statoil, and the company was listed on the Oslo and New York Stock exchanges. In 2014, Statoil was faced with some serious challenges. The company's oil and gas production was not growing, and international performance lagged behind Norwegian results. The company had recently announced it was going to back off its 2020 production targets and cut back on capital expenditure.
Swot Analysis of "Statoil's Evolving Strategy" written by Andrew Inkpen, Michael Moffett includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Statoil Norwegian facing as an external strategic factors. Some of the topics covered in Statoil's Evolving Strategy case study are - Strategic Management Strategies, and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Statoil's Evolving Strategy casestudy better are - – talent flight as more people leaving formal jobs, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, increasing government debt because of Covid-19 spendings, increasing energy prices, increasing household debt because of falling income levels, banking and financial system is disrupted by Bitcoin and other crypto currencies,
there is increasing trade war between United States & China, increasing commodity prices, etc
Introduction to SWOT Analysis of Statoil's Evolving Strategy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Statoil's Evolving Strategy case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Statoil Norwegian, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Statoil Norwegian 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 Statoil's Evolving Strategy can be done for the following purposes –
1. Strategic planning using facts provided in Statoil's Evolving Strategy case study
2. Improving business portfolio management of Statoil Norwegian
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 Statoil Norwegian
Strengths Statoil's Evolving Strategy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Statoil Norwegian in Statoil's Evolving Strategy Harvard Business Review case study are -
High switching costs
– The high switching costs that Statoil Norwegian 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.
Learning organization
- Statoil Norwegian 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 Statoil Norwegian is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Statoil's Evolving Strategy Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Training and development
– Statoil Norwegian has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Statoil's Evolving Strategy 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.
Strong track record of project management
– Statoil Norwegian is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Effective Research and Development (R&D)
– Statoil Norwegian 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 Statoil's Evolving Strategy - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Statoil Norwegian 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 Statoil's Evolving Strategy HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Cross disciplinary teams
– Horizontal connected teams at the Statoil Norwegian 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.
Analytics focus
– Statoil Norwegian 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 Andrew Inkpen, Michael Moffett can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Diverse revenue streams
– Statoil Norwegian is present in almost all the verticals within the industry. This has provided firm in Statoil's Evolving Strategy 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
– Statoil Norwegian has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Statoil Norwegian 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
– Statoil Norwegian is one of the leading recruiters in the industry. Managers in the Statoil's Evolving Strategy are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in Leadership & Managing People industry
– Statoil's Evolving Strategy firm has clearly differentiated products in the market place. This has enabled Statoil Norwegian to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Statoil Norwegian to invest into research and development (R&D) and innovation.
Weaknesses Statoil's Evolving Strategy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Statoil's Evolving Strategy are -
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Statoil's Evolving Strategy 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 Statoil Norwegian has relatively successful track record of launching new products.
Products dominated business model
– Even though Statoil Norwegian 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 - Statoil's Evolving Strategy should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Statoil Norwegian 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.
Capital Spending Reduction
– Even during the low interest decade, Statoil Norwegian has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
Interest costs
– Compare to the competition, Statoil Norwegian 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.
Need for greater diversity
– Statoil Norwegian 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.
High bargaining power of channel partners
– Because of the regulatory requirements, Andrew Inkpen, Michael Moffett suggests that, Statoil Norwegian 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, Statoil Norwegian 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. Statoil Norwegian 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.
No frontier risks strategy
– After analyzing the HBR case study Statoil's Evolving Strategy, it seems that company is thinking about the frontier risks that can impact Leadership & Managing People 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.
Increasing silos among functional specialists
– The organizational structure of Statoil Norwegian is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Statoil Norwegian needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Statoil Norwegian to focus more on services rather than just following the product oriented approach.
Skills based hiring
– The stress on hiring functional specialists at Statoil Norwegian 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 Statoil's Evolving Strategy | 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 Statoil's Evolving Strategy are -
Learning at scale
– Online learning technologies has now opened space for Statoil Norwegian 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.
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. Statoil Norwegian can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Statoil Norwegian 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.
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 Statoil Norwegian 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Statoil Norwegian 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, Statoil's Evolving Strategy, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Statoil Norwegian can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Statoil's Evolving Strategy 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Statoil Norwegian can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Using analytics as competitive advantage
– Statoil Norwegian 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 Statoil's Evolving Strategy - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Statoil Norwegian 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 Statoil Norwegian 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 Statoil Norwegian to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Statoil Norwegian 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.
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 Statoil Norwegian in the consumer business. Now Statoil Norwegian can target international markets with far fewer capital restrictions requirements than the existing system.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Leadership & Managing People industry, but it has also influenced the consumer preferences. Statoil Norwegian can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Statoil Norwegian 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.
Threats Statoil's Evolving Strategy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Statoil's Evolving Strategy are -
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 Statoil Norwegian in the Leadership & Managing People sector and impact the bottomline of the organization.
Regulatory challenges
– Statoil Norwegian 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.
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. Statoil Norwegian can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Statoil Norwegian
– 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 Statoil Norwegian.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Statoil's Evolving Strategy, Statoil Norwegian 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 .
Stagnating economy with rate increase
– Statoil Norwegian 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. Statoil Norwegian 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.
Environmental challenges
– Statoil Norwegian 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. Statoil Norwegian can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
High dependence on third party suppliers
– Statoil Norwegian 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.
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. Statoil Norwegian needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
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 international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Statoil Norwegian 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 Statoil's Evolving Strategy .
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 Statoil Norwegian.
Weighted SWOT Analysis of Statoil's Evolving Strategy 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 Statoil's Evolving Strategy 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 Statoil's Evolving Strategy 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 Statoil's Evolving Strategy 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 Statoil's Evolving Strategy 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 Statoil Norwegian needs to make to build a sustainable competitive advantage.