Chevron (CVX) SWOT Analysis / TOWS Matrix / MBA Resources
Oil & Gas - Integrated
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Chevron (United States)
Based on various researches at Oak Spring University , Chevron is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing, 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, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Chevron can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Chevron, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Chevron 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 Chevron can be done for the following purposes –
1. Strategic planning of Chevron
2. Improving business portfolio management of Chevron
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 Chevron
Strengths of Chevron | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Chevron are -
Training and development
– Chevron 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.
High brand equity
– Chevron has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Chevron to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Chevron is present in almost all the verticals within the Oil & Gas - Integrated industry. This has provided Chevron 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
- Chevron 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 Chevron is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Chevron emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Chevron 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.
Strong track record of project management in the Oil & Gas - Integrated industry
– Chevron is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Highly skilled collaborators
– Chevron 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 Chevron have helped the firm to develop new products and bring them quickly to the marketplace.
Low bargaining power of suppliers
– Suppliers of Chevron in the Energy sector have low bargaining power. Chevron has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Chevron to manage not only supply disruptions but also source products at highly competitive prices.
Organizational Resilience of Chevron
– The covid-19 pandemic has put organizational resilience at the centre of everthing Chevron does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Innovation driven organization
– Chevron is one of the most innovative firm in Oil & Gas - Integrated sector.
High switching costs
– The high switching costs that Chevron 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)
– Chevron has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Chevron 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.
Weaknesses of Chevron | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Chevron are -
Skills based hiring in Oil & Gas - Integrated industry
– The stress on hiring functional specialists at Chevron 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.
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 Chevron supply chain. Even after few cautionary changes, Chevron is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Chevron vulnerable to further global disruptions in South East Asia.
Workers concerns about automation
– As automation is fast increasing in the Oil & Gas - Integrated industry, Chevron 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 Chevron, in the dynamic environment of Oil & Gas - Integrated industry it has struggled to respond to the nimble upstart competition. Chevron has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Aligning sales with marketing
– From the outside it seems that Chevron 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 Chevron can leverage the sales team experience to cultivate customer relationships as Chevron is planning to shift buying processes online.
Capital Spending Reduction
– Even during the low interest decade, Chevron 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.
Lack of clear differentiation of Chevron products
– To increase the profitability and margins on the products, Chevron needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Chevron 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 bargaining power of channel partners in Oil & Gas - Integrated industry
– because of the regulatory requirements in United States, Chevron 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.
High dependence on Chevron ‘s star products
– The top 2 products and services of Chevron 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 Chevron has relatively successful track record of launching new products.
No frontier risks strategy
– From the 10K / annual statement of Chevron, 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.
Chevron Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Chevron are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Chevron can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Chevron 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. Chevron 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.
Using analytics as competitive advantage
– Chevron has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Oil & Gas - Integrated sector. This continuous investment in analytics has enabled Chevron to build a competitive advantage using analytics. The analytics driven competitive advantage can help Chevron to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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. Chevron can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Chevron 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 Chevron to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Chevron 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.
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 Chevron 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, Chevron can use these opportunities to build new business models that can help the communities that Chevron 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 Chevron has opened avenues for new revenue streams for the organization in Oil & Gas - Integrated industry. This can help Chevron to build a more holistic ecosystem for Chevron products in the Oil & Gas - Integrated industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Chevron 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 Chevron to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Chevron 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Chevron is facing challenges because of the dominance of functional experts in the organization. Chevron 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.
Manufacturing automation
– Chevron 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.
Threats Chevron External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Chevron are -
Environmental challenges
– Chevron 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. Chevron can take advantage of this fund but it will also bring new competitors in the Oil & Gas - Integrated industry.
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.
Shortening product life cycle
– it is one of the major threat that Chevron is facing in Oil & Gas - Integrated sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Chevron 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 Chevron prominent markets.
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 Chevron business can come under increasing regulations regarding data privacy, data security, etc.
High dependence on third party suppliers
– Chevron 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.
Technology acceleration in Forth Industrial Revolution
– Chevron has witnessed rapid integration of technology during Covid-19 in the Oil & Gas - Integrated industry. As one of the leading players in the industry, Chevron 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.
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. Chevron can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Chevron 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.
Stagnating economy with rate increase
– Chevron 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Chevron 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.
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. Chevron 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 Chevron Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Chevron 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 Chevron 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 Chevron 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 Chevron 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 Chevron needs to make to build a sustainable competitive advantage.