Baker Hughes A (BHGE) SWOT Analysis / TOWS Matrix / MBA Resources
Oil & Gas - Integrated
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Baker Hughes A (United States)
Based on various researches at Oak Spring University , Baker Hughes A is operating in a macro-environment that has been destablized by – banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing commodity prices, wage bills are increasing, there is increasing trade war between United States & China, increasing government debt because of Covid-19 spendings, geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google,
increasing transportation and logistics costs, talent flight as more people leaving formal jobs, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Baker Hughes A can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Baker Hughes A, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Baker Hughes A 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 Baker Hughes A can be done for the following purposes –
1. Strategic planning of Baker Hughes A
2. Improving business portfolio management of Baker Hughes A
3. Assessing feasibility of the new initiative in United States
4. Making a Oil & Gas - Integrated sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Baker Hughes A
Strengths of Baker Hughes A | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Baker Hughes A are -
Sustainable margins compare to other players in Oil & Gas - Integrated industry
– Baker Hughes A has clearly differentiated products in the market place. This has enabled Baker Hughes A to fetch slight price premium compare to the competitors in the Oil & Gas - Integrated industry. The sustainable margins have also helped Baker Hughes A to invest into research and development (R&D) and innovation.
Innovation driven organization
– Baker Hughes A is one of the most innovative firm in Oil & Gas - Integrated sector.
Ability to lead change in Oil & Gas - Integrated
– Baker Hughes A is one of the leading players in the Oil & Gas - Integrated industry in United States. Over the years it has not only transformed the business landscape in the Oil & Gas - Integrated industry in United States but also across the existing markets. The ability to lead change has enabled Baker Hughes A in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
High switching costs
– The high switching costs that Baker Hughes A 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.
Effective Research and Development (R&D)
– Baker Hughes A has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Baker Hughes A staying ahead in the Oil & Gas - Integrated industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Highly skilled collaborators
– Baker Hughes A 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 - Integrated industry. Secondly the value chain collaborators of Baker Hughes A have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Baker Hughes A has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Baker Hughes A to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Baker Hughes A 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 Baker Hughes A is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Baker Hughes A emphasize – knowledge, initiative, and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Baker Hughes A 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.
Strong track record of project management in the Oil & Gas - Integrated industry
– Baker Hughes A 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 Baker Hughes A in Oil & Gas - Integrated industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Digital Transformation in Oil & Gas - Integrated industry
- digital transformation varies from industry to industry. For Baker Hughes A digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Baker Hughes A 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.
Weaknesses of Baker Hughes A | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Baker Hughes A are -
Lack of clear differentiation of Baker Hughes A products
– To increase the profitability and margins on the products, Baker Hughes A needs to provide more differentiated products than what it is currently offering in the marketplace.
Increasing silos among functional specialists
– The organizational structure of Baker Hughes A is dominated by functional specialists. It is not different from other players in the Oil & Gas - Integrated industry, but Baker Hughes A needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Baker Hughes A to focus more on services in the Oil & Gas - Integrated industry rather than just following the product oriented approach.
High bargaining power of channel partners in Oil & Gas - Integrated industry
– because of the regulatory requirements in United States, Baker Hughes A 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 - Integrated industry.
Capital Spending Reduction
– Even during the low interest decade, Baker Hughes A 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 - Integrated industry using digital technology.
No frontier risks strategy
– From the 10K / annual statement of Baker Hughes A, it seems that company is thinking out the frontier risks that can impact Oil & Gas - Integrated industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Need for greater diversity
– Baker Hughes A 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 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 Baker Hughes A supply chain. Even after few cautionary changes, Baker Hughes A is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Baker Hughes A vulnerable to further global disruptions in South East Asia.
Aligning sales with marketing
– From the outside it seems that Baker Hughes A needs to have more collaboration between its sales team and marketing team. Sales professionals in the Oil & Gas - Integrated industry have deep experience in developing customer relationships. Marketing department at Baker Hughes A can leverage the sales team experience to cultivate customer relationships as Baker Hughes A is planning to shift buying processes online.
Skills based hiring in Oil & Gas - Integrated industry
– The stress on hiring functional specialists at Baker Hughes A 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.
Interest costs
– Compare to the competition, Baker Hughes A 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.
Low market penetration in new markets
– Outside its home market of United States, Baker Hughes A needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Baker Hughes A Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Baker Hughes A are -
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. Baker Hughes A can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Creating value in data economy
– The success of analytics program of Baker Hughes A has opened avenues for new revenue streams for the organization in Oil & Gas - Integrated industry. This can help Baker Hughes A to build a more holistic ecosystem for Baker Hughes A products in the Oil & Gas - Integrated industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Oil & Gas - Integrated industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Baker Hughes A 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. Baker Hughes A 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Baker Hughes A 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 Baker Hughes A to hire the very best people irrespective of their geographical location.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Baker Hughes A 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 - Integrated industry, and it will provide faster access to the consumers.
Learning at scale
– Online learning technologies has now opened space for Baker Hughes A 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.
Building a culture of innovation
– managers at Baker Hughes A 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 - Integrated industry.
Low interest rates
– Even though inflation is raising its head in most developed economies, Baker Hughes A 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Oil & Gas - Integrated industry, but it has also influenced the consumer preferences. Baker Hughes A can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Leveraging digital technologies
– Baker Hughes A 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.
Buying journey improvements
– Baker Hughes A can improve the customer journey of consumers in the Oil & Gas - Integrated 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.
Developing new processes and practices
– Baker Hughes A can develop new processes and procedures in Oil & Gas - Integrated 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.
Loyalty marketing
– Baker Hughes A has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Threats Baker Hughes A External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Baker Hughes A are -
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Baker Hughes A 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 - Integrated sector.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil & Gas - Integrated industry are lowering. It can presents Baker Hughes A with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Oil & Gas - Integrated sector.
Environmental challenges
– Baker Hughes A 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. Baker Hughes A can take advantage of this fund but it will also bring new competitors in the Oil & Gas - Integrated industry.
Easy access to finance
– Easy access to finance in Oil & Gas - Integrated industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Baker Hughes A 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 Baker Hughes A.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Baker Hughes A 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 Baker Hughes A prominent markets.
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 Baker Hughes A in the Oil & Gas - Integrated sector and impact the bottomline of the organization.
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. Baker Hughes A needs to understand the core reasons impacting the Oil & Gas - Integrated industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Baker Hughes A in Oil & Gas - Integrated industry. The Oil & Gas - Integrated 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.
Increasing wage structure of Baker Hughes A
– 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 Baker Hughes A.
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 Baker Hughes A business can come under increasing regulations regarding data privacy, data security, etc.
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. Baker Hughes A 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.
Weighted SWOT Analysis of Baker Hughes A Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Baker Hughes A 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 Baker Hughes A 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 Baker Hughes A 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 Baker Hughes A 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 Baker Hughes A needs to make to build a sustainable competitive advantage.