SWOT Analysis / TOWS Matrix for Lukoil DRC (United Kingdom)
Based on various researches at Oak Spring University , Lukoil DRC is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, technology disruption, increasing commodity prices, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs,
increasing inequality as vast percentage of new income is going to the top 1%, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Lukoil DRC can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Lukoil DRC, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Lukoil DRC 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 Lukoil DRC can be done for the following purposes –
1. Strategic planning of Lukoil DRC
2. Improving business portfolio management of Lukoil DRC
3. Assessing feasibility of the new initiative in United Kingdom
4. Making a Oil & Gas Operations sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Lukoil DRC
Strengths of Lukoil DRC | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Lukoil DRC are -
Ability to lead change in Oil & Gas Operations
– Lukoil DRC is one of the leading players in the Oil & Gas Operations industry in United Kingdom. Over the years it has not only transformed the business landscape in the Oil & Gas Operations industry in United Kingdom but also across the existing markets. The ability to lead change has enabled Lukoil DRC 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 Lukoil DRC in the Energy sector have low bargaining power. Lukoil DRC has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Lukoil DRC to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Lukoil DRC has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Oil & Gas Operations industry. Secondly the value chain collaborators of Lukoil DRC have helped the firm to develop new products and bring them quickly to the marketplace.
Innovation driven organization
– Lukoil DRC is one of the most innovative firm in Oil & Gas Operations sector.
Sustainable margins compare to other players in Oil & Gas Operations industry
– Lukoil DRC has clearly differentiated products in the market place. This has enabled Lukoil DRC to fetch slight price premium compare to the competitors in the Oil & Gas Operations industry. The sustainable margins have also helped Lukoil DRC to invest into research and development (R&D) and innovation.
Training and development
– Lukoil DRC has one of the best training and development program in Energy industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Successful track record of launching new products
– Lukoil DRC has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Lukoil DRC 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.
Cross disciplinary teams
– Horizontal connected teams at the Lukoil DRC 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.
Digital Transformation in Oil & Gas Operations industry
- digital transformation varies from industry to industry. For Lukoil DRC digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Lukoil DRC has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Strong track record of project management in the Oil & Gas Operations industry
– Lukoil DRC is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Superior customer experience
– The customer experience strategy of Lukoil DRC in Oil & Gas Operations industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Learning organization
- Lukoil DRC 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 Lukoil DRC is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Lukoil DRC emphasize – knowledge, initiative, and innovation.
Weaknesses of Lukoil DRC | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Lukoil DRC are -
Increasing silos among functional specialists
– The organizational structure of Lukoil DRC is dominated by functional specialists. It is not different from other players in the Oil & Gas Operations industry, but Lukoil DRC needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Lukoil DRC to focus more on services in the Oil & Gas Operations industry rather than just following the product oriented approach.
Compensation and incentives
– The revenue per employee of Lukoil DRC is just above the Oil & Gas Operations industry average. It 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.
Products dominated business model
– Even though Lukoil DRC 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. Lukoil DRC should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the Oil & Gas Operations industry, Lukoil DRC 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.
Need for greater diversity
– Lukoil DRC has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
High dependence on Lukoil DRC ‘s star products
– The top 2 products and services of Lukoil DRC 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 Lukoil DRC has relatively successful track record of launching new products.
Capital Spending Reduction
– Even during the low interest decade, Lukoil DRC 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 Oil & Gas Operations industry using digital technology.
Interest costs
– Compare to the competition, Lukoil DRC 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.
Ability to respond to the competition
– As the decision making is very deliberative at Lukoil DRC, in the dynamic environment of Oil & Gas Operations industry it has struggled to respond to the nimble upstart competition. Lukoil DRC has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– From the outside it seems that Lukoil DRC needs to have more collaboration between its sales team and marketing team. Sales professionals in the Oil & Gas Operations industry have deep experience in developing customer relationships. Marketing department at Lukoil DRC can leverage the sales team experience to cultivate customer relationships as Lukoil DRC is planning to shift buying processes online.
Slow decision making process
– As mentioned earlier in the report, Lukoil DRC 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. Lukoil DRC 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.
Lukoil DRC Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Lukoil DRC are -
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Lukoil DRC 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 Lukoil DRC to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Lukoil DRC to increase its market reach. Lukoil DRC 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Lukoil DRC can use these opportunities to build new business models that can help the communities that Lukoil DRC operates in. Secondly it can use opportunities from government spending in Oil & Gas Operations sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Oil & Gas Operations industry, but it has also influenced the consumer preferences. Lukoil DRC can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Lukoil DRC 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.
Using analytics as competitive advantage
– Lukoil DRC has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Oil & Gas Operations sector. This continuous investment in analytics has enabled Lukoil DRC to build a competitive advantage using analytics. The analytics driven competitive advantage can help Lukoil DRC 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 Lukoil DRC 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 Lukoil DRC 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 Lukoil DRC in the Oil & Gas Operations industry. Now Lukoil DRC can target international markets with far fewer capital restrictions requirements than the existing system.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Oil & Gas Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Lukoil DRC 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. Lukoil DRC 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.
Leveraging digital technologies
– Lukoil DRC 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Lukoil DRC in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Oil & Gas Operations industry, and it will provide faster access to the consumers.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Lukoil DRC can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Lukoil DRC External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Lukoil DRC are -
Increasing wage structure of Lukoil DRC
– 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 Lukoil DRC.
Stagnating economy with rate increase
– Lukoil DRC 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.
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.
Environmental challenges
– Lukoil DRC 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. Lukoil DRC can take advantage of this fund but it will also bring new competitors in the Oil & Gas Operations industry.
Consumer confidence and its impact on Lukoil DRC 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.
Regulatory challenges
– Lukoil DRC 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 Lukoil DRC.
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. Lukoil DRC needs to understand the core reasons impacting the Oil & Gas Operations industry. This will help it in building a better workplace.
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 Lukoil DRC in the Oil & Gas Operations sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Lukoil DRC 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.
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 Lukoil DRC business can come under increasing regulations regarding data privacy, data security, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Lukoil DRC 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 Lukoil DRC prominent markets.
Technology acceleration in Forth Industrial Revolution
– Lukoil DRC has witnessed rapid integration of technology during Covid-19 in the Oil & Gas Operations industry. As one of the leading players in the industry, Lukoil DRC needs to keep up with the evolution of technology in the Oil & Gas Operations 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.
Weighted SWOT Analysis of Lukoil DRC Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Lukoil DRC 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 Lukoil DRC 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 Lukoil DRC 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 Lukoil DRC 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 Lukoil DRC needs to make to build a sustainable competitive advantage.
