Based on various researches at Oak Spring University , Neste Oil Oyj is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, digital marketing is dominated by two big players Facebook and Google, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, increasing commodity prices,
technology disruption, increasing transportation and logistics costs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Neste Oil Oyj can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Neste Oil Oyj, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Neste Oil Oyj 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 Neste Oil Oyj can be done for the following purposes –
1. Strategic planning of Neste Oil Oyj
2. Improving business portfolio management of Neste Oil Oyj
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 Neste Oil Oyj
Strengths of Neste Oil Oyj | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Neste Oil Oyj are -
High switching costs
– The high switching costs that Neste Oil Oyj 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.
Ability to recruit top talent
– Neste Oil Oyj is one of the leading players in the Oil & Gas Operations industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Learning organization
- Neste Oil Oyj 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 Neste Oil Oyj is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Neste Oil Oyj emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Neste Oil Oyj 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 Neste Oil Oyj have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Neste Oil Oyj 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.
Sustainable margins compare to other players in Oil & Gas Operations industry
– Neste Oil Oyj has clearly differentiated products in the market place. This has enabled Neste Oil Oyj to fetch slight price premium compare to the competitors in the Oil & Gas Operations industry. The sustainable margins have also helped Neste Oil Oyj to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy of Neste Oil Oyj 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.
Analytics focus
– Neste Oil Oyj is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Oil & Gas Operations industry. The technology infrastructure of United Kingdom is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Digital Transformation in Oil & Gas Operations industry
- digital transformation varies from industry to industry. For Neste Oil Oyj digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Neste Oil Oyj 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
– Neste Oil Oyj is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Neste Oil Oyj is one of the most innovative firm in Oil & Gas Operations sector.
High brand equity
– Neste Oil Oyj has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Neste Oil Oyj to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Weaknesses of Neste Oil Oyj | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Neste Oil Oyj are -
High bargaining power of channel partners in Oil & Gas Operations industry
– because of the regulatory requirements in United Kingdom, Neste Oil Oyj 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.
Ability to respond to the competition
– As the decision making is very deliberative at Neste Oil Oyj, in the dynamic environment of Oil & Gas Operations industry it has struggled to respond to the nimble upstart competition. Neste Oil Oyj has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High cash cycle compare to competitors
Neste Oil Oyj has a high cash cycle compare to other players in the Oil & Gas Operations industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– From the outside it seems that Neste Oil Oyj 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 Neste Oil Oyj can leverage the sales team experience to cultivate customer relationships as Neste Oil Oyj is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Neste Oil Oyj 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.
Increasing silos among functional specialists
– The organizational structure of Neste Oil Oyj is dominated by functional specialists. It is not different from other players in the Oil & Gas Operations industry, but Neste Oil Oyj needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Neste Oil Oyj to focus more on services in the Oil & Gas Operations industry rather than just following the product oriented approach.
High dependence on Neste Oil Oyj ‘s star products
– The top 2 products and services of Neste Oil Oyj 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 Neste Oil Oyj has relatively successful track record of launching new products.
Lack of clear differentiation of Neste Oil Oyj products
– To increase the profitability and margins on the products, Neste Oil Oyj needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to strategic competitive environment developments
– As Neste Oil Oyj 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.
Interest costs
– Compare to the competition, Neste Oil Oyj 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.
Compensation and incentives
– The revenue per employee of Neste Oil Oyj 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.
Neste Oil Oyj Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Neste Oil Oyj are -
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 Neste Oil Oyj in the Oil & Gas Operations industry. Now Neste Oil Oyj can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Neste Oil Oyj has opened avenues for new revenue streams for the organization in Oil & Gas Operations industry. This can help Neste Oil Oyj to build a more holistic ecosystem for Neste Oil Oyj products in the Oil & Gas Operations industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Better consumer reach
– The expansion of the 5G network will help Neste Oil Oyj to increase its market reach. Neste Oil Oyj 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.
Buying journey improvements
– Neste Oil Oyj can improve the customer journey of consumers in the Oil & Gas Operations industry by using analytics and artificial intelligence. It 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Neste Oil Oyj is facing challenges because of the dominance of functional experts in the organization. Neste Oil Oyj 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.
Using analytics as competitive advantage
– Neste Oil Oyj 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 Neste Oil Oyj to build a competitive advantage using analytics. The analytics driven competitive advantage can help Neste Oil Oyj to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for Neste Oil Oyj 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Neste Oil Oyj can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 Neste Oil Oyj 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.
Leveraging digital technologies
– Neste Oil Oyj 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.
Manufacturing automation
– Neste Oil Oyj 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.
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. Neste Oil Oyj can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Neste Oil Oyj 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.
Threats Neste Oil Oyj External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Neste Oil Oyj are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Neste Oil Oyj may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Oil & Gas Operations sector.
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. Neste Oil Oyj needs to understand the core reasons impacting the Oil & Gas Operations industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Neste Oil Oyj has witnessed rapid integration of technology during Covid-19 in the Oil & Gas Operations industry. As one of the leading players in the industry, Neste Oil Oyj 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.
Regulatory challenges
– Neste Oil Oyj 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil & Gas Operations industry are lowering. It can presents Neste Oil Oyj 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
– Neste Oil Oyj 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.
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. Neste Oil Oyj 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Neste Oil Oyj 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.
Easy access to finance
– Easy access to finance in Oil & Gas Operations industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Neste Oil Oyj can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Neste Oil Oyj business can come under increasing regulations regarding data privacy, data security, etc.
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 Neste Oil Oyj.
Increasing wage structure of Neste Oil Oyj
– 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 Neste Oil Oyj.
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.
Weighted SWOT Analysis of Neste Oil Oyj Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Neste Oil Oyj 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 Neste Oil Oyj 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 Neste Oil Oyj 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 Neste Oil Oyj 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 Neste Oil Oyj needs to make to build a sustainable competitive advantage.