Chesapeake Energy (CHK) SWOT Analysis / TOWS Matrix / MBA Resources
Oil & Gas Operations
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Chesapeake Energy (United States)
Based on various researches at Oak Spring University , Chesapeake Energy is operating in a macro-environment that has been destablized by – geopolitical disruptions, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, talent flight as more people leaving formal jobs, increasing government debt because of Covid-19 spendings, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion,
increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
Introduction to SWOT Analysis of Chesapeake Energy
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Chesapeake Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Chesapeake Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Chesapeake Energy 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 Chesapeake Energy can be done for the following purposes –
1. Strategic planning of Chesapeake Energy
2. Improving business portfolio management of Chesapeake Energy
3. Assessing feasibility of the new initiative in United States
4. Making a Oil & Gas Operations sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Chesapeake Energy
Strengths of Chesapeake Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Chesapeake Energy are -
Cross disciplinary teams
– Horizontal connected teams at the Chesapeake Energy 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.
Ability to lead change in Oil & Gas Operations
– Chesapeake Energy is one of the leading players in the Oil & Gas Operations industry in United States. Over the years it has not only transformed the business landscape in the Oil & Gas Operations industry in United States but also across the existing markets. The ability to lead change has enabled Chesapeake Energy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Chesapeake Energy is one of the most innovative firm in Oil & Gas Operations sector.
Learning organization
- Chesapeake Energy 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 Chesapeake Energy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Chesapeake Energy emphasize – knowledge, initiative, and innovation.
Strong track record of project management in the Oil & Gas Operations industry
– Chesapeake Energy is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Chesapeake Energy 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 States 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.
Effective Research and Development (R&D)
– Chesapeake Energy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Chesapeake Energy staying ahead in the Oil & Gas Operations industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Superior customer experience
– The customer experience strategy of Chesapeake Energy in Oil & Gas Operations industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Chesapeake Energy is present in almost all the verticals within the Oil & Gas Operations industry. This has provided Chesapeake Energy 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.
High switching costs
– The high switching costs that Chesapeake Energy 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.
Training and development
– Chesapeake Energy 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.
Highly skilled collaborators
– Chesapeake Energy 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 Chesapeake Energy have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Chesapeake Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Chesapeake Energy are -
Interest costs
– Compare to the competition, Chesapeake Energy 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 cash cycle compare to competitors
Chesapeake Energy 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.
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 Chesapeake Energy supply chain. Even after few cautionary changes, Chesapeake Energy is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Chesapeake Energy vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, Chesapeake Energy 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 Chesapeake Energy lucrative customers.
Workers concerns about automation
– As automation is fast increasing in the Oil & Gas Operations industry, Chesapeake Energy 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.
Need for greater diversity
– Chesapeake Energy 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.
No frontier risks strategy
– From the 10K / annual statement of Chesapeake Energy, it seems that company is thinking out the frontier risks that can impact Oil & Gas Operations 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.
Low market penetration in new markets
– Outside its home market of United States, Chesapeake Energy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Slow to strategic competitive environment developments
– As Chesapeake Energy 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.
High bargaining power of channel partners in Oil & Gas Operations industry
– because of the regulatory requirements in United States, Chesapeake Energy 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.
Products dominated business model
– Even though Chesapeake Energy has some of the most successful models in the Oil & Gas Operations industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Chesapeake Energy should strive to include more intangible value offerings along with its core products and services.
Chesapeake Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Chesapeake Energy 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. Chesapeake Energy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Chesapeake Energy to increase its market reach. Chesapeake Energy 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Chesapeake Energy 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 Chesapeake Energy to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Chesapeake Energy 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.
Loyalty marketing
– Chesapeake Energy 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.
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 Chesapeake Energy 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Chesapeake Energy can use these opportunities to build new business models that can help the communities that Chesapeake Energy operates in. Secondly it can use opportunities from government spending in Oil & Gas Operations sector.
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. Chesapeake Energy 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. Chesapeake Energy 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.
Leveraging digital technologies
– Chesapeake Energy 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Chesapeake Energy 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Chesapeake Energy 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Chesapeake Energy is facing challenges because of the dominance of functional experts in the organization. Chesapeake Energy 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.
Learning at scale
– Online learning technologies has now opened space for Chesapeake Energy 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.
Threats Chesapeake Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Chesapeake Energy are -
Consumer confidence and its impact on Chesapeake Energy 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Chesapeake Energy 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil & Gas Operations industry are lowering. It can presents Chesapeake Energy 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Chesapeake Energy 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 Chesapeake Energy prominent markets.
Shortening product life cycle
– it is one of the major threat that Chesapeake Energy is facing in Oil & Gas Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
High dependence on third party suppliers
– Chesapeake Energy 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. Chesapeake Energy 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.
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. Chesapeake Energy needs to understand the core reasons impacting the Oil & Gas Operations industry. This will help it in building a better workplace.
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 Chesapeake Energy business can come under increasing regulations regarding data privacy, data security, etc.
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 Chesapeake Energy in the Oil & Gas Operations sector and impact the bottomline of the organization.
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 Chesapeake Energy.
Stagnating economy with rate increase
– Chesapeake Energy 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 Operations industry.
Environmental challenges
– Chesapeake Energy 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. Chesapeake Energy can take advantage of this fund but it will also bring new competitors in the Oil & Gas Operations industry.
Weighted SWOT Analysis of Chesapeake Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Chesapeake Energy 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 Chesapeake Energy 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 Chesapeake Energy 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 Chesapeake Energy 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 Chesapeake Energy needs to make to build a sustainable competitive advantage.