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 – geopolitical disruptions, digital marketing is dominated by two big players Facebook and Google, competitive advantages are harder to sustain because of technology dispersion, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, talent flight as more people leaving formal jobs, increasing transportation and logistics costs,
banking and financial system is disrupted by Bitcoin and other crypto currencies, supply chains are disrupted by pandemic , 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 -
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.
Ability to lead change in Oil & Gas - Integrated
– Chevron 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 Chevron in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
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.
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.
Digital Transformation in Oil & Gas - Integrated industry
- digital transformation varies from industry to industry. For Chevron digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Chevron 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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Chevron 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
– 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.
Superior customer experience
– The customer experience strategy of Chevron in Oil & Gas - Integrated industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Chevron is one of the most innovative firm in Oil & Gas - Integrated sector.
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.
Weaknesses of Chevron | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Chevron are -
Low market penetration in new markets
– Outside its home market of United States, Chevron needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
Slow decision making process
– As mentioned earlier in the report, Chevron 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. Chevron 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.
Compensation and incentives
– The revenue per employee of Chevron is just above the Oil & Gas - Integrated industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
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.
High operating costs
– Compare to the competitors, Chevron 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 Chevron lucrative customers.
Employees’ less understanding of Chevron strategy
– From the outside it seems that the employees of Chevron don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
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.
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.
Products dominated business model
– Even though Chevron 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. Chevron should strive to include more intangible value offerings along with its core products and services.
Chevron Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Chevron are -
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.
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. Chevron 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 Chevron to increase its market reach. Chevron 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.
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.
Leveraging digital technologies
– Chevron 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, 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.
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.
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.
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 Chevron in the Oil & Gas - Integrated industry. Now Chevron can target international markets with far fewer capital restrictions requirements than the existing system.
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.
Learning at scale
– Online learning technologies has now opened space for Chevron 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 Chevron External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Chevron are -
Consumer confidence and its impact on Chevron 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.
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.
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 Chevron in the Oil & Gas - Integrated sector and impact the bottomline of the organization.
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.
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.
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.
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.
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.
Increasing wage structure of Chevron
– 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 Chevron.
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.
Regulatory challenges
– Chevron 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.
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.
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.
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.