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 - – there is backlash against globalization, central banks are concerned over increasing inflation, supply chains are disrupted by pandemic , there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings,
competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, 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 -
High switching costs
– The high switching costs that Drilling Offshore 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.
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.
Operational resilience
– The operational resilience strategy in the Pacific Drilling: The Preferred Offshore Driller 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.
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.
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.
Diverse revenue streams
– Drilling Offshore is present in almost all the verticals within the industry. This has provided firm in Pacific Drilling: The Preferred Offshore Driller 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.
Superior customer experience
– The customer experience strategy of Drilling Offshore 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
– 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.
Low bargaining power of suppliers
– Suppliers of Drilling Offshore in the sector have low bargaining power. Pacific Drilling: The Preferred Offshore Driller has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Drilling Offshore to manage not only supply disruptions but also source products at highly competitive prices.
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.
Strong track record of project management
– Drilling Offshore is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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 -
Slow decision making process
– As mentioned earlier in the report, Drilling Offshore 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. Drilling Offshore 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.
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 Drilling Offshore supply chain. Even after few cautionary changes mentioned in the HBR case study - Pacific Drilling: The Preferred Offshore Driller, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Drilling Offshore vulnerable to further global disruptions in South East Asia.
Interest costs
– Compare to the competition, Drilling Offshore 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.
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.
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.
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.
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.
Products dominated business model
– Even though Drilling Offshore 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 - Pacific Drilling: The Preferred Offshore Driller 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 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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Drilling Offshore is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study Pacific Drilling: The Preferred Offshore Driller can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
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 -
Lowering marketing communication costs
– 5G expansion will open new opportunities for Drilling Offshore 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.
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.
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.
Buying journey improvements
– Drilling Offshore can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Pacific Drilling: The Preferred Offshore Driller 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.
Manufacturing automation
– Drilling Offshore 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.
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.
Leveraging digital technologies
– Drilling Offshore can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Drilling Offshore 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, Pacific Drilling: The Preferred Offshore Driller, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Drilling Offshore 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. Drilling Offshore 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.
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.
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.
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.
Better consumer reach
– The expansion of the 5G network will help Drilling Offshore to increase its market reach. Drilling Offshore will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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 -
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.
Regulatory challenges
– Drilling Offshore 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.
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 Drilling Offshore business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Drilling Offshore has witnessed rapid integration of technology during Covid-19 in the Leadership & Managing People industry. As one of the leading players in the industry, Drilling Offshore 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.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Pacific Drilling: The Preferred Offshore Driller, Drilling Offshore 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 Drilling Offshore with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
High 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.
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.
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.
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.
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. Drilling Offshore 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 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.