Vermilion Energy (VET) SWOT Analysis / TOWS Matrix / MBA Resources
Oil & Gas - Integrated
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Vermilion Energy (Canada)
Based on various researches at Oak Spring University , Vermilion Energy is operating in a macro-environment that has been destablized by – geopolitical disruptions, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing transportation and logistics costs, cloud computing is disrupting traditional business models,
increasing commodity prices, increasing energy prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Vermilion Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Vermilion Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Vermilion 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 Vermilion Energy can be done for the following purposes –
1. Strategic planning of Vermilion Energy
2. Improving business portfolio management of Vermilion Energy
3. Assessing feasibility of the new initiative in Canada
4. Making a Oil & Gas - Integrated sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Vermilion Energy
Strengths of Vermilion Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Vermilion Energy are -
High brand equity
– Vermilion Energy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Vermilion Energy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Vermilion Energy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Vermilion Energy 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.
Cross disciplinary teams
– Horizontal connected teams at the Vermilion 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.
Highly skilled collaborators
– Vermilion 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 - Integrated industry. Secondly the value chain collaborators of Vermilion Energy have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Vermilion 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 Vermilion Energy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Vermilion Energy emphasize – knowledge, initiative, and innovation.
Training and development
– Vermilion 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.
Innovation driven organization
– Vermilion Energy is one of the most innovative firm in Oil & Gas - Integrated sector.
Low bargaining power of suppliers
– Suppliers of Vermilion Energy in the Energy sector have low bargaining power. Vermilion Energy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Vermilion Energy to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Vermilion Energy
– The covid-19 pandemic has put organizational resilience at the centre of everthing Vermilion Energy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Sustainable margins compare to other players in Oil & Gas - Integrated industry
– Vermilion Energy has clearly differentiated products in the market place. This has enabled Vermilion Energy to fetch slight price premium compare to the competitors in the Oil & Gas - Integrated industry. The sustainable margins have also helped Vermilion Energy to invest into research and development (R&D) and innovation.
Analytics focus
– Vermilion 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 - Integrated industry. The technology infrastructure of Canada 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.
Ability to lead change in Oil & Gas - Integrated
– Vermilion Energy is one of the leading players in the Oil & Gas - Integrated industry in Canada. Over the years it has not only transformed the business landscape in the Oil & Gas - Integrated industry in Canada but also across the existing markets. The ability to lead change has enabled Vermilion Energy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Vermilion Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Vermilion Energy are -
Aligning sales with marketing
– From the outside it seems that Vermilion Energy 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 Vermilion Energy can leverage the sales team experience to cultivate customer relationships as Vermilion Energy is planning to shift buying processes online.
High bargaining power of channel partners in Oil & Gas - Integrated industry
– because of the regulatory requirements in Canada, Vermilion 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 - Integrated industry.
Workers concerns about automation
– As automation is fast increasing in the Oil & Gas - Integrated industry, Vermilion 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.
Low market penetration in new markets
– Outside its home market of Canada, Vermilion Energy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Lack of clear differentiation of Vermilion Energy products
– To increase the profitability and margins on the products, Vermilion Energy needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Vermilion 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.
Increasing silos among functional specialists
– The organizational structure of Vermilion Energy is dominated by functional specialists. It is not different from other players in the Oil & Gas - Integrated industry, but Vermilion Energy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Vermilion Energy to focus more on services in the Oil & Gas - Integrated industry rather than just following the product oriented approach.
High dependence on Vermilion Energy ‘s star products
– The top 2 products and services of Vermilion Energy still accounts for major business revenue. This dependence on star products in Oil & Gas - Integrated industry has resulted into insufficient focus on developing new products, even though Vermilion Energy has relatively successful track record of launching new products.
High operating costs
– Compare to the competitors, Vermilion Energy has high operating costs in the Oil & Gas - Integrated industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Vermilion Energy lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Vermilion Energy 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.
Slow decision making process
– As mentioned earlier in the report, Vermilion Energy 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 - Integrated industry over the last five years. Vermilion Energy 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.
Vermilion Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Vermilion Energy are -
Leveraging digital technologies
– Vermilion 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Vermilion 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 Vermilion 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Vermilion 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 - Integrated industry, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Vermilion Energy can use these opportunities to build new business models that can help the communities that Vermilion Energy operates in. Secondly it can use opportunities from government spending in Oil & Gas - Integrated sector.
Creating value in data economy
– The success of analytics program of Vermilion Energy has opened avenues for new revenue streams for the organization in Oil & Gas - Integrated industry. This can help Vermilion Energy to build a more holistic ecosystem for Vermilion Energy products in the Oil & Gas - Integrated industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Vermilion Energy is facing challenges because of the dominance of functional experts in the organization. Vermilion Energy can utilize new technology in the field of Oil & Gas - Integrated industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Developing new processes and practices
– Vermilion Energy 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.
Building a culture of innovation
– managers at Vermilion Energy 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.
Loyalty marketing
– Vermilion 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.
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. Vermilion Energy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Vermilion Energy 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
– Vermilion Energy 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.
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 Vermilion 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.
Threats Vermilion Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Vermilion Energy are -
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Vermilion Energy 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.
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 Vermilion Energy in the Oil & Gas - Integrated sector and impact the bottomline of the organization.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil & Gas - Integrated industry are lowering. It can presents Vermilion Energy 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
– Vermilion 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. Vermilion Energy can take advantage of this fund but it will also bring new competitors in the Oil & Gas - Integrated industry.
Increasing wage structure of Vermilion Energy
– 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 Vermilion Energy.
Stagnating economy with rate increase
– Vermilion 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 - Integrated industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Vermilion 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 Vermilion Energy prominent markets.
High dependence on third party suppliers
– Vermilion 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.
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. Vermilion Energy needs to understand the core reasons impacting the Oil & Gas - Integrated industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Vermilion Energy has witnessed rapid integration of technology during Covid-19 in the Oil & Gas - Integrated industry. As one of the leading players in the industry, Vermilion Energy needs to keep up with the evolution of technology in the Oil & Gas - Integrated 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.
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 Vermilion Energy.
Weighted SWOT Analysis of Vermilion Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Vermilion 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 Vermilion 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 Vermilion 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 Vermilion 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 Vermilion Energy needs to make to build a sustainable competitive advantage.