Schlumberger AG (SLBG34) SWOT Analysis / TOWS Matrix / MBA Resources
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Schlumberger AG (Brazil)
Based on various researches at Oak Spring University , Schlumberger AG is operating in a macro-environment that has been destablized by – increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google, there is backlash against globalization, increasing inequality as vast percentage of new income is going to the top 1%, wage bills are increasing, increasing commodity prices, increasing energy prices,
central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Schlumberger AG can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Schlumberger AG, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Schlumberger AG 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 Schlumberger AG can be done for the following purposes –
1. Strategic planning of Schlumberger AG
2. Improving business portfolio management of Schlumberger AG
3. Assessing feasibility of the new initiative in Brazil
4. Making a sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Schlumberger AG
Strengths of Schlumberger AG | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Schlumberger AG are -
Ability to recruit top talent
– Schlumberger AG is one of the leading players in the industry in Brazil. It is in a position to attract the best talent available in Brazil. The firm has a robust talent identification program that helps in identifying the brightest.
Sustainable margins compare to other players in industry
– Schlumberger AG has clearly differentiated products in the market place. This has enabled Schlumberger AG to fetch slight price premium compare to the competitors in the industry. The sustainable margins have also helped Schlumberger AG to invest into research and development (R&D) and innovation.
Low bargaining power of suppliers
– Suppliers of Schlumberger AG in the sector have low bargaining power. Schlumberger AG has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Schlumberger AG to manage not only supply disruptions but also source products at highly competitive prices.
Analytics focus
– Schlumberger AG 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 industry. The technology infrastructure of Brazil 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.
Diverse revenue streams
– Schlumberger AG is present in almost all the verticals within the industry. This has provided Schlumberger AG 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.
Learning organization
- Schlumberger AG 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 Schlumberger AG is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Schlumberger AG emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Schlumberger AG in industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Training and development
– Schlumberger AG has one of the best training and development program in 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.
Ability to lead change in
– Schlumberger AG is one of the leading players in the industry in Brazil. Over the years it has not only transformed the business landscape in the industry in Brazil but also across the existing markets. The ability to lead change has enabled Schlumberger AG in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Effective Research and Development (R&D)
– Schlumberger AG has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Schlumberger AG 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
– Schlumberger AG has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Schlumberger AG to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Cross disciplinary teams
– Horizontal connected teams at the Schlumberger AG 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.
Weaknesses of Schlumberger AG | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Schlumberger AG are -
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 Schlumberger AG supply chain. Even after few cautionary changes, Schlumberger AG is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Schlumberger AG vulnerable to further global disruptions in South East Asia.
Low market penetration in new markets
– Outside its home market of Brazil, Schlumberger AG needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Employees’ less understanding of Schlumberger AG strategy
– From the outside it seems that the employees of Schlumberger AG don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
High operating costs
– Compare to the competitors, Schlumberger AG has high operating costs in the industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Schlumberger AG lucrative customers.
Increasing silos among functional specialists
– The organizational structure of Schlumberger AG is dominated by functional specialists. It is not different from other players in the industry, but Schlumberger AG needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Schlumberger AG to focus more on services in the industry rather than just following the product oriented approach.
Interest costs
– Compare to the competition, Schlumberger AG 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.
Capital Spending Reduction
– Even during the low interest decade, Schlumberger AG 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.
Ability to respond to the competition
– As the decision making is very deliberative at Schlumberger AG, in the dynamic environment of industry it has struggled to respond to the nimble upstart competition. Schlumberger AG has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Schlumberger AG is slow explore the new channels of communication. These new channels of communication can help Schlumberger AG to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Compensation and incentives
– The revenue per employee of Schlumberger AG is just above the 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.
Skills based hiring in industry
– The stress on hiring functional specialists at Schlumberger AG 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.
Schlumberger AG Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Schlumberger AG are -
Use of Bitcoin and other crypto currencies for transactions in industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Schlumberger AG in the industry. Now Schlumberger AG can target international markets with far fewer capital restrictions requirements than the existing system.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Schlumberger AG in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the industry, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Schlumberger AG has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in sector. This continuous investment in analytics has enabled Schlumberger AG to build a competitive advantage using analytics. The analytics driven competitive advantage can help Schlumberger AG to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Schlumberger AG is facing challenges because of the dominance of functional experts in the organization. Schlumberger AG can utilize new technology in the field of industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at Schlumberger AG 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 industry.
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 Schlumberger AG 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.
Creating value in data economy
– The success of analytics program of Schlumberger AG has opened avenues for new revenue streams for the organization in industry. This can help Schlumberger AG to build a more holistic ecosystem for Schlumberger AG products in the industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– Schlumberger AG can develop new processes and procedures in 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in industry, but it has also influenced the consumer preferences. Schlumberger AG 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
– Schlumberger AG can use the latest technology developments to improve its manufacturing and designing process in 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Schlumberger AG can use these opportunities to build new business models that can help the communities that Schlumberger AG operates in. Secondly it can use opportunities from government spending in sector.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Schlumberger AG 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 Schlumberger AG to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Schlumberger AG 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 Schlumberger AG to hire the very best people irrespective of their geographical location.
Threats Schlumberger AG External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Schlumberger AG are -
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Schlumberger AG 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 Schlumberger AG prominent markets.
Easy access to finance
– Easy access to finance in industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Schlumberger AG can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Schlumberger AG.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Schlumberger AG in industry. The 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.
Environmental challenges
– Schlumberger AG 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. Schlumberger AG can take advantage of this fund but it will also bring new competitors in the industry.
Technology acceleration in Forth Industrial Revolution
– Schlumberger AG has witnessed rapid integration of technology during Covid-19 in the industry. As one of the leading players in the industry, Schlumberger AG needs to keep up with the evolution of technology in the 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
– Schlumberger AG 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 industry regulations.
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.
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 Schlumberger AG in the sector and impact the bottomline of the organization.
Increasing wage structure of Schlumberger AG
– 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 Schlumberger AG.
High dependence on third party suppliers
– Schlumberger AG 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.
Consumer confidence and its impact on Schlumberger AG 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 industry and other sectors.
Shortening product life cycle
– it is one of the major threat that Schlumberger AG is facing in sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Weighted SWOT Analysis of Schlumberger AG Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Schlumberger AG 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 Schlumberger AG 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 Schlumberger AG 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 Schlumberger AG 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 Schlumberger AG needs to make to build a sustainable competitive advantage.