Case Study Description of Pacific Drilling: The Preferred Offshore Driller
Founded in 2006, Pacific Drilling was a fast-growing offshore drilling company. From the beginning, the company's chief executive officer was determined to create a unique drilling company by focusing exclusively on ultra-deepwater drilling and technological innovation. By the end of 2014, the company had more than 1,600 employees and was generating US$1 billion in annual revenues. However, the company also faced several challenges, such as being overly reliant on one key customer (Chevron) and the high costs of differentiation. With oil prices plummeting, the company was struggling to acquire new customers. To what extent could the company rely on what it had successfully accomplished in the past, and to what extent would it need to create and adapt to a new strategy? Haiyang Li is affiliated with Rice University.
Authors :: Haiyang Li, Frederic Jacquemin, Toby Li
Swot Analysis of "Pacific Drilling: The Preferred Offshore Driller" written by Haiyang Li, Frederic Jacquemin, Toby Li includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Drilling Offshore facing as an external strategic factors. Some of the topics covered in Pacific Drilling: The Preferred Offshore Driller case study are - Strategic Management Strategies, Competitive strategy, Entrepreneurship, Operations management and Leadership & Managing People.
Some of the macro environment factors that can be used to understand the Pacific Drilling: The Preferred Offshore Driller casestudy better are - – talent flight as more people leaving formal jobs, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, customer relationship management is fast transforming because of increasing concerns over data privacy, geopolitical disruptions, central banks are concerned over increasing inflation,
challanges to central banks by blockchain based private currencies, increasing transportation and logistics costs, etc
Introduction to SWOT Analysis of Pacific Drilling: The Preferred Offshore Driller
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Pacific Drilling: The Preferred Offshore Driller case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Drilling Offshore, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Drilling Offshore 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 Pacific Drilling: The Preferred Offshore Driller can be done for the following purposes –
1. Strategic planning using facts provided in Pacific Drilling: The Preferred Offshore Driller case study
2. Improving business portfolio management of Drilling Offshore
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 Drilling Offshore
Strengths Pacific Drilling: The Preferred Offshore Driller | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Drilling Offshore in Pacific Drilling: The Preferred Offshore Driller Harvard Business Review case study are -
Innovation driven organization
– Drilling Offshore is one of the most innovative firm in sector. Manager in Pacific Drilling: The Preferred Offshore Driller Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Organizational Resilience of Drilling Offshore
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Drilling Offshore does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Drilling Offshore is one of the leading recruiters in the industry. Managers in the Pacific Drilling: The Preferred Offshore Driller are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Analytics focus
– Drilling Offshore 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 Haiyang Li, Frederic Jacquemin, Toby Li 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.
Cross disciplinary teams
– Horizontal connected teams at the Drilling Offshore 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.
Ability to lead change in Leadership & Managing People field
– Drilling Offshore 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 Drilling Offshore in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Sustainable margins compare to other players in Leadership & Managing People industry
– Pacific Drilling: The Preferred Offshore Driller firm has clearly differentiated products in the market place. This has enabled Drilling Offshore to fetch slight price premium compare to the competitors in the Leadership & Managing People industry. The sustainable margins have also helped Drilling Offshore to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Drilling Offshore has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Drilling Offshore 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.
Effective Research and Development (R&D)
– Drilling Offshore 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 Pacific Drilling: The Preferred Offshore Driller - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
High brand equity
– Drilling Offshore has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Drilling Offshore to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Highly skilled collaborators
– Drilling Offshore 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 Pacific Drilling: The Preferred Offshore Driller HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Drilling Offshore 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 Drilling Offshore is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Pacific Drilling: The Preferred Offshore Driller Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses Pacific Drilling: The Preferred Offshore Driller | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Pacific Drilling: The Preferred Offshore Driller are -
Aligning sales with marketing
– It come across in the case study Pacific Drilling: The Preferred Offshore Driller 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 Pacific Drilling: The Preferred Offshore Driller can leverage the sales team experience to cultivate customer relationships as Drilling Offshore is planning to shift buying processes online.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Pacific Drilling: The Preferred Offshore Driller 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 Drilling Offshore has relatively successful track record of launching new products.
Slow to strategic competitive environment developments
– As Pacific Drilling: The Preferred Offshore Driller HBR case study mentions - Drilling Offshore 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.
Increasing silos among functional specialists
– The organizational structure of Drilling Offshore is dominated by functional specialists. It is not different from other players in the Leadership & Managing People segment. Drilling Offshore needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Drilling Offshore to focus more on services rather than just following the product oriented approach.
Workers concerns about automation
– As automation is fast increasing in the segment, Drilling Offshore 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.
High cash cycle compare to competitors
Drilling Offshore 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.
Low market penetration in new markets
– Outside its home market of Drilling Offshore, firm in the HBR case study Pacific Drilling: The Preferred Offshore Driller needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Need for greater diversity
– Drilling Offshore 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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Pacific Drilling: The Preferred Offshore Driller, in the dynamic environment Drilling Offshore has struggled to respond to the nimble upstart competition. Drilling Offshore has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Skills based hiring
– The stress on hiring functional specialists at Drilling Offshore 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.
Capital Spending Reduction
– Even during the low interest decade, Drilling Offshore 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.
Opportunities Pacific Drilling: The Preferred Offshore Driller | 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 Pacific Drilling: The Preferred Offshore Driller are -
Using analytics as competitive advantage
– Drilling Offshore 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 Pacific Drilling: The Preferred Offshore Driller - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Drilling Offshore to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Drilling Offshore 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Drilling Offshore can use these opportunities to build new business models that can help the communities that Drilling Offshore 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 Drilling Offshore has opened avenues for new revenue streams for the organization in the industry. This can help Drilling Offshore to build a more holistic ecosystem as suggested in the Pacific Drilling: The Preferred Offshore Driller case study. Drilling Offshore can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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. Drilling Offshore can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Drilling Offshore is facing challenges because of the dominance of functional experts in the organization. Pacific Drilling: The Preferred Offshore Driller 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Drilling Offshore 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 Drilling Offshore to hire the very best people irrespective of their geographical location.
Developing new processes and practices
– Drilling Offshore 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.
Building a culture of innovation
– managers at Drilling Offshore 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.
Learning at scale
– Online learning technologies has now opened space for Drilling Offshore 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. Drilling Offshore can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Low interest rates
– Even though inflation is raising its head in most developed economies, Drilling Offshore 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Drilling Offshore can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Pacific Drilling: The Preferred Offshore Driller External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Pacific Drilling: The Preferred Offshore Driller are -
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. Drilling Offshore can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Stagnating economy with rate increase
– Drilling Offshore 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.
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.
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 Drilling Offshore.
Shortening product life cycle
– it is one of the major threat that Drilling Offshore is facing in Leadership & Managing People sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Consumer confidence and its impact on Drilling Offshore 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.
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. Drilling Offshore needs to understand the core reasons impacting the Leadership & Managing People industry. This will help it in building a better workplace.
Increasing wage structure of Drilling Offshore
– 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 Drilling Offshore.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Drilling Offshore in the Leadership & Managing People industry. The Leadership & Managing People industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Drilling Offshore with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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 Drilling Offshore in the Leadership & Managing People sector and impact the bottomline of the organization.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Drilling Offshore 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 Pacific Drilling: The Preferred Offshore Driller .
Weighted SWOT Analysis of Pacific Drilling: The Preferred Offshore Driller 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 Pacific Drilling: The Preferred Offshore Driller 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 Pacific Drilling: The Preferred Offshore Driller 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 Pacific Drilling: The Preferred Offshore Driller 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 Pacific Drilling: The Preferred Offshore Driller 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 Drilling Offshore needs to make to build a sustainable competitive advantage.