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 – increasing transportation and logistics costs, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, challanges to central banks by blockchain based private currencies, increasing household debt because of falling income levels, increasing commodity prices, technology disruption,
geopolitical disruptions, increasing energy prices, 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 -
Ability to recruit top talent
– Baker Hughes A is one of the leading players in the Oil & Gas - Integrated industry in United States. It is in a position to attract the best talent available in United States. The firm has a robust talent identification program that helps in identifying the brightest.
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.
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.
Low bargaining power of suppliers
– Suppliers of Baker Hughes A in the Energy sector have low bargaining power. Baker Hughes A has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Baker Hughes A to manage not only supply disruptions but also source products at highly competitive prices.
Successful track record of launching new products
– Baker Hughes A has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Baker Hughes A 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.
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.
Innovation driven organization
– Baker Hughes A is one of the most innovative firm in Oil & Gas - Integrated sector.
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.
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.
Diverse revenue streams
– Baker Hughes A is present in almost all the verticals within the Oil & Gas - Integrated industry. This has provided Baker Hughes A 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.
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.
Operational resilience
– The operational resilience strategy of Baker Hughes A comprises – understanding the underlying the factors in the Oil & Gas - Integrated 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.
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 -
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.
Workers concerns about automation
– As automation is fast increasing in the Oil & Gas - Integrated industry, Baker Hughes A 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.
Ability to respond to the competition
– As the decision making is very deliberative at Baker Hughes A, in the dynamic environment of Oil & Gas - Integrated industry it has struggled to respond to the nimble upstart competition. Baker Hughes A has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Slow to strategic competitive environment developments
– As Baker Hughes A is one of the leading players in the Oil & Gas - Integrated 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 - Integrated industry in last five years.
High cash cycle compare to competitors
Baker Hughes A has a high cash cycle compare to other players in the Oil & Gas - Integrated industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Products dominated business model
– Even though Baker Hughes A has some of the most successful models in the Oil & Gas - Integrated industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Baker Hughes A should strive to include more intangible value offerings along with its core products and services.
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.
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.
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.
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 -
Manufacturing automation
– Baker Hughes A can use the latest technology developments to improve its manufacturing and designing process in Oil & Gas - Integrated 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.
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.
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.
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.
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.
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.
Use of Bitcoin and other crypto currencies for transactions in Oil & Gas - Integrated industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Baker Hughes A in the Oil & Gas - Integrated industry. Now Baker Hughes A can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Baker Hughes A 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 Baker Hughes A to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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.
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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Baker Hughes A can use these opportunities to build new business models that can help the communities that Baker Hughes A operates in. Secondly it can use opportunities from government spending in Oil & Gas - Integrated sector.
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.
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 -
Shortening product life cycle
– it is one of the major threat that Baker Hughes A is facing in Oil & Gas - Integrated sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
Consumer confidence and its impact on Baker Hughes A 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 - Integrated industry and other sectors.
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.
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.
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.
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.
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.
Stagnating economy with rate increase
– Baker Hughes A 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 - Integrated industry.
Regulatory challenges
– Baker Hughes A 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 - Integrated industry regulations.
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.