Alon Natural Gas (ALGS) SWOT Analysis / TOWS Matrix / MBA Resources
Oil & Gas Operations
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Alon Natural Gas (Israel)
Based on various researches at Oak Spring University , Alon Natural Gas is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, competitive advantages are harder to sustain because of technology dispersion, supply chains are disrupted by pandemic , talent flight as more people leaving formal jobs, wage bills are increasing, increasing transportation and logistics costs,
geopolitical disruptions, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Alon Natural Gas can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Alon Natural Gas, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Alon Natural Gas 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 Alon Natural Gas can be done for the following purposes –
1. Strategic planning of Alon Natural Gas
2. Improving business portfolio management of Alon Natural Gas
3. Assessing feasibility of the new initiative in Israel
4. Making a Oil & Gas Operations sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Alon Natural Gas
Strengths of Alon Natural Gas | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Alon Natural Gas are -
Effective Research and Development (R&D)
– Alon Natural Gas has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Alon Natural Gas staying ahead in the Oil & Gas Operations industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Alon Natural Gas is one of the most innovative firm in Oil & Gas Operations sector.
Sustainable margins compare to other players in Oil & Gas Operations industry
– Alon Natural Gas has clearly differentiated products in the market place. This has enabled Alon Natural Gas to fetch slight price premium compare to the competitors in the Oil & Gas Operations industry. The sustainable margins have also helped Alon Natural Gas to invest into research and development (R&D) and innovation.
Diverse revenue streams
– Alon Natural Gas is present in almost all the verticals within the Oil & Gas Operations industry. This has provided Alon Natural Gas 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.
Ability to lead change in Oil & Gas Operations
– Alon Natural Gas is one of the leading players in the Oil & Gas Operations industry in Israel. Over the years it has not only transformed the business landscape in the Oil & Gas Operations industry in Israel but also across the existing markets. The ability to lead change has enabled Alon Natural Gas in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Learning organization
- Alon Natural Gas 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 Alon Natural Gas is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Alon Natural Gas emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that Alon Natural Gas 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.
Successful track record of launching new products
– Alon Natural Gas has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Alon Natural Gas 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.
Superior customer experience
– The customer experience strategy of Alon Natural Gas in Oil & Gas Operations industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Ability to recruit top talent
– Alon Natural Gas is one of the leading players in the Oil & Gas Operations industry in Israel. It is in a position to attract the best talent available in Israel. The firm has a robust talent identification program that helps in identifying the brightest.
Organizational Resilience of Alon Natural Gas
– The covid-19 pandemic has put organizational resilience at the centre of everthing Alon Natural Gas does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of Alon Natural Gas comprises – understanding the underlying the factors in the Oil & Gas Operations 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.
Weaknesses of Alon Natural Gas | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Alon Natural Gas are -
Interest costs
– Compare to the competition, Alon Natural Gas 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.
Products dominated business model
– Even though Alon Natural Gas has some of the most successful models in the Oil & Gas Operations industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Alon Natural Gas should strive to include more intangible value offerings along with its core products and services.
High operating costs
– Compare to the competitors, Alon Natural Gas has high operating costs in the Oil & Gas Operations industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Alon Natural Gas lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the Oil & Gas Operations industry, Alon Natural Gas 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 bargaining power of channel partners in Oil & Gas Operations industry
– because of the regulatory requirements in Israel, Alon Natural Gas 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 Oil & Gas Operations industry.
High dependence on Alon Natural Gas ‘s star products
– The top 2 products and services of Alon Natural Gas still accounts for major business revenue. This dependence on star products in Oil & Gas Operations industry has resulted into insufficient focus on developing new products, even though Alon Natural Gas has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Alon Natural Gas has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Oil & Gas Operations industry over the last five years. Alon Natural Gas 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.
Lack of clear differentiation of Alon Natural Gas products
– To increase the profitability and margins on the products, Alon Natural Gas needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Alon Natural Gas is one of the leading players in the Oil & Gas Operations industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Oil & Gas Operations industry in last five years.
Skills based hiring in Oil & Gas Operations industry
– The stress on hiring functional specialists at Alon Natural Gas 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.
Need for greater diversity
– Alon Natural Gas 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.
Alon Natural Gas Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Alon Natural Gas are -
Better consumer reach
– The expansion of the 5G network will help Alon Natural Gas to increase its market reach. Alon Natural Gas 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Alon Natural Gas 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 Alon Natural Gas to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Building a culture of innovation
– managers at Alon Natural Gas 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 Oil & Gas Operations industry.
Use of Bitcoin and other crypto currencies for transactions in Oil & Gas Operations industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Alon Natural Gas in the Oil & Gas Operations industry. Now Alon Natural Gas can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Alon Natural Gas can develop new processes and procedures in Oil & Gas Operations 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Alon Natural Gas can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Alon Natural Gas 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Alon Natural Gas is facing challenges because of the dominance of functional experts in the organization. Alon Natural Gas can utilize new technology in the field of Oil & Gas Operations industry 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 Alon Natural Gas 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 Alon Natural Gas to hire the very best people irrespective of their geographical location.
Leveraging digital technologies
– Alon Natural Gas 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Alon Natural Gas can use these opportunities to build new business models that can help the communities that Alon Natural Gas operates in. Secondly it can use opportunities from government spending in Oil & Gas Operations sector.
Creating value in data economy
– The success of analytics program of Alon Natural Gas has opened avenues for new revenue streams for the organization in Oil & Gas Operations industry. This can help Alon Natural Gas to build a more holistic ecosystem for Alon Natural Gas products in the Oil & Gas Operations industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Manufacturing automation
– Alon Natural Gas can use the latest technology developments to improve its manufacturing and designing process in Oil & Gas Operations sector. 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 Alon Natural Gas External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Alon Natural Gas are -
Increasing wage structure of Alon Natural Gas
– 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 Alon Natural Gas.
Consumer confidence and its impact on Alon Natural Gas 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 Oil & Gas Operations industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Alon Natural Gas in Oil & Gas Operations industry. The Oil & Gas Operations 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.
Stagnating economy with rate increase
– Alon Natural Gas 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 Oil & Gas Operations industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil & Gas Operations industry are lowering. It can presents Alon Natural Gas with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Oil & Gas Operations sector.
High dependence on third party suppliers
– Alon Natural Gas 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. Alon Natural Gas needs to understand the core reasons impacting the Oil & Gas Operations industry. This will help it in building a better workplace.
Regulatory challenges
– Alon Natural Gas 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 Oil & Gas Operations industry regulations.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Alon Natural Gas.
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. Alon Natural Gas 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
– Alon Natural Gas 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. Alon Natural Gas can take advantage of this fund but it will also bring new competitors in the Oil & Gas Operations industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Alon Natural Gas 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 Alon Natural Gas prominent markets.
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 Alon Natural Gas in the Oil & Gas Operations sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Alon Natural Gas Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Alon Natural Gas 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 Alon Natural Gas 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 Alon Natural Gas 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 Alon Natural Gas 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 Alon Natural Gas needs to make to build a sustainable competitive advantage.