SWOT Analysis / TOWS Matrix for Hengyuan Refining (Malaysia)
Based on various researches at Oak Spring University , Hengyuan Refining is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, supply chains are disrupted by pandemic , increasing commodity prices, increasing inequality as vast percentage of new income is going to the top 1%, increasing household debt because of falling income levels, there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing government debt because of Covid-19 spendings, digital marketing is dominated by two big players Facebook and Google, etc
Introduction to SWOT Analysis of Hengyuan Refining
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hengyuan Refining can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hengyuan Refining, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hengyuan Refining 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 Hengyuan Refining can be done for the following purposes –
1. Strategic planning of Hengyuan Refining
2. Improving business portfolio management of Hengyuan Refining
3. Assessing feasibility of the new initiative in Malaysia
4. Making a Oil & Gas Operations sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Hengyuan Refining
Strengths of Hengyuan Refining | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Hengyuan Refining are -
Ability to lead change in Oil & Gas Operations
– Hengyuan Refining is one of the leading players in the Oil & Gas Operations industry in Malaysia. Over the years it has not only transformed the business landscape in the Oil & Gas Operations industry in Malaysia but also across the existing markets. The ability to lead change has enabled Hengyuan Refining in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High brand equity
– Hengyuan Refining has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hengyuan Refining to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Organizational Resilience of Hengyuan Refining
– The covid-19 pandemic has put organizational resilience at the centre of everthing Hengyuan Refining does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Hengyuan Refining 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 Hengyuan Refining have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Hengyuan Refining in the Energy sector have low bargaining power. Hengyuan Refining has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hengyuan Refining to manage not only supply disruptions but also source products at highly competitive prices.
Superior customer experience
– The customer experience strategy of Hengyuan Refining in Oil & Gas Operations industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Sustainable margins compare to other players in Oil & Gas Operations industry
– Hengyuan Refining has clearly differentiated products in the market place. This has enabled Hengyuan Refining to fetch slight price premium compare to the competitors in the Oil & Gas Operations industry. The sustainable margins have also helped Hengyuan Refining to invest into research and development (R&D) and innovation.
Learning organization
- Hengyuan Refining 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 Hengyuan Refining is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hengyuan Refining emphasize – knowledge, initiative, and innovation.
Operational resilience
– The operational resilience strategy of Hengyuan Refining 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
– Hengyuan Refining 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 Malaysia 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.
Training and development
– Hengyuan Refining 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
– Hengyuan Refining has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hengyuan Refining 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.
Weaknesses of Hengyuan Refining | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Hengyuan Refining are -
Capital Spending Reduction
– Even during the low interest decade, Hengyuan Refining 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.
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 Hengyuan Refining supply chain. Even after few cautionary changes, Hengyuan Refining is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Hengyuan Refining vulnerable to further global disruptions in South East Asia.
Slow decision making process
– As mentioned earlier in the report, Hengyuan Refining 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. Hengyuan Refining 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.
Interest costs
– Compare to the competition, Hengyuan Refining has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
High operating costs
– Compare to the competitors, Hengyuan Refining 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 Hengyuan Refining lucrative customers.
Slow to strategic competitive environment developments
– As Hengyuan Refining 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.
Increasing silos among functional specialists
– The organizational structure of Hengyuan Refining is dominated by functional specialists. It is not different from other players in the Oil & Gas Operations industry, but Hengyuan Refining needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hengyuan Refining to focus more on services in the Oil & Gas Operations industry rather than just following the product oriented approach.
Lack of clear differentiation of Hengyuan Refining products
– To increase the profitability and margins on the products, Hengyuan Refining needs to provide more differentiated products than what it is currently offering in the marketplace.
High dependence on Hengyuan Refining ‘s star products
– The top 2 products and services of Hengyuan Refining 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 Hengyuan Refining has relatively successful track record of launching new products.
Need for greater diversity
– Hengyuan Refining 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.
Skills based hiring in Oil & Gas Operations industry
– The stress on hiring functional specialists at Hengyuan Refining 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.
Hengyuan Refining Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Hengyuan Refining are -
Developing new processes and practices
– Hengyuan Refining 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.
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. Hengyuan Refining 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. Hengyuan Refining can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Hengyuan Refining can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hengyuan Refining can use these opportunities to build new business models that can help the communities that Hengyuan Refining operates in. Secondly it can use opportunities from government spending in Oil & Gas Operations sector.
Using analytics as competitive advantage
– Hengyuan Refining 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 Hengyuan Refining to build a competitive advantage using analytics. The analytics driven competitive advantage can help Hengyuan Refining 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 Hengyuan Refining 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.
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. Hengyuan Refining can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Building a culture of innovation
– managers at Hengyuan Refining 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Hengyuan Refining 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Hengyuan Refining can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Hengyuan Refining 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.
Creating value in data economy
– The success of analytics program of Hengyuan Refining has opened avenues for new revenue streams for the organization in Oil & Gas Operations industry. This can help Hengyuan Refining to build a more holistic ecosystem for Hengyuan Refining products in the Oil & Gas Operations industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Buying journey improvements
– Hengyuan Refining 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.
Threats Hengyuan Refining External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Hengyuan Refining are -
High dependence on third party suppliers
– Hengyuan Refining 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. Hengyuan Refining needs to understand the core reasons impacting the Oil & Gas Operations industry. This will help it in building a better workplace.
Consumer confidence and its impact on Hengyuan Refining 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.
Environmental challenges
– Hengyuan Refining 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. Hengyuan Refining can take advantage of this fund but it will also bring new competitors in the Oil & Gas Operations industry.
Shortening product life cycle
– it is one of the major threat that Hengyuan Refining is facing in Oil & Gas Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, 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 Hengyuan Refining.
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 Hengyuan Refining in the Oil & Gas Operations sector and impact the bottomline of the organization.
Regulatory challenges
– Hengyuan Refining 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.
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 Hengyuan Refining business can come under increasing regulations regarding data privacy, data security, etc.
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. Hengyuan Refining can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Hengyuan Refining 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 Hengyuan Refining prominent markets.
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. Hengyuan Refining 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.
Technology acceleration in Forth Industrial Revolution
– Hengyuan Refining has witnessed rapid integration of technology during Covid-19 in the Oil & Gas Operations industry. As one of the leading players in the industry, Hengyuan Refining 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 Hengyuan Refining Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hengyuan Refining 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 Hengyuan Refining 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 Hengyuan Refining 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 Hengyuan Refining 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 Hengyuan Refining needs to make to build a sustainable competitive advantage.