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 - – increasing inequality as vast percentage of new income is going to the top 1%, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, increasing energy prices,
technology disruption, there is backlash against globalization, 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.
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.
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.
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.
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.
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.
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.
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.
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.
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 -
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.
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.
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.
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.
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.
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.
Lack of clear differentiation of Drilling Offshore products
– To increase the profitability and margins on the products, Drilling Offshore needs to provide more differentiated products than what it is currently offering in the marketplace.
No frontier risks strategy
– After analyzing the HBR case study Pacific Drilling: The Preferred Offshore Driller, 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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Pacific Drilling: The Preferred Offshore Driller, is just above the industry average. Drilling Offshore needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
High operating costs
– Compare to the competitors, firm in the HBR case study Pacific Drilling: The Preferred Offshore Driller has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Drilling Offshore 's lucrative customers.
High bargaining power of channel partners
– Because of the regulatory requirements, Haiyang Li, Frederic Jacquemin, Toby Li suggests that, Drilling Offshore 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.
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 -
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Loyalty marketing
– Drilling Offshore has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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 -
High dependence on third party suppliers
– Drilling Offshore 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.
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.
Environmental challenges
– Drilling Offshore 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. Drilling Offshore can take advantage of this fund but it will also bring new competitors in the Leadership & Managing People industry.
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.
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.
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 .
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.
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.
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.
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.
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.
