Dril-Quip (DRQ) SWOT Analysis / TOWS Matrix / MBA Resources
Oil Well Services & Equipment
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Dril-Quip (United States)
Based on various researches at Oak Spring University , Dril-Quip is operating in a macro-environment that has been destablized by – challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, technology disruption, supply chains are disrupted by pandemic , there is increasing trade war between United States & China,
talent flight as more people leaving formal jobs, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Dril-Quip can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Dril-Quip, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Dril-Quip 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 Dril-Quip can be done for the following purposes –
1. Strategic planning of Dril-Quip
2. Improving business portfolio management of Dril-Quip
3. Assessing feasibility of the new initiative in United States
4. Making a Oil Well Services & Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Dril-Quip
Strengths of Dril-Quip | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Dril-Quip are -
High brand equity
– Dril-Quip has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Dril-Quip to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Diverse revenue streams
– Dril-Quip is present in almost all the verticals within the Oil Well Services & Equipment industry. This has provided Dril-Quip 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
- Dril-Quip 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 Dril-Quip is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Dril-Quip emphasize – knowledge, initiative, and innovation.
Effective Research and Development (R&D)
– Dril-Quip has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Dril-Quip staying ahead in the Oil Well Services & Equipment industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to recruit top talent
– Dril-Quip is one of the leading players in the Oil Well Services & Equipment 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.
High switching costs
– The high switching costs that Dril-Quip 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.
Cross disciplinary teams
– Horizontal connected teams at the Dril-Quip 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.
Training and development
– Dril-Quip 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
– Dril-Quip is one of the most innovative firm in Oil Well Services & Equipment sector.
Operational resilience
– The operational resilience strategy of Dril-Quip comprises – understanding the underlying the factors in the Oil Well Services & Equipment 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.
Organizational Resilience of Dril-Quip
– The covid-19 pandemic has put organizational resilience at the centre of everthing Dril-Quip does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Highly skilled collaborators
– Dril-Quip has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Oil Well Services & Equipment industry. Secondly the value chain collaborators of Dril-Quip have helped the firm to develop new products and bring them quickly to the marketplace.
Weaknesses of Dril-Quip | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Dril-Quip are -
Lack of clear differentiation of Dril-Quip products
– To increase the profitability and margins on the products, Dril-Quip needs to provide more differentiated products than what it is currently offering in the marketplace.
Capital Spending Reduction
– Even during the low interest decade, Dril-Quip 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 Well Services & Equipment industry using digital technology.
Skills based hiring in Oil Well Services & Equipment industry
– The stress on hiring functional specialists at Dril-Quip 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.
Need for greater diversity
– Dril-Quip 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.
Interest costs
– Compare to the competition, Dril-Quip 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.
Increasing silos among functional specialists
– The organizational structure of Dril-Quip is dominated by functional specialists. It is not different from other players in the Oil Well Services & Equipment industry, but Dril-Quip needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Dril-Quip to focus more on services in the Oil Well Services & Equipment industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of United States, Dril-Quip needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Products dominated business model
– Even though Dril-Quip has some of the most successful models in the Oil Well Services & Equipment industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Dril-Quip should strive to include more intangible value offerings along with its core products and services.
Employees’ less understanding of Dril-Quip strategy
– From the outside it seems that the employees of Dril-Quip 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 cash cycle compare to competitors
Dril-Quip has a high cash cycle compare to other players in the Oil Well Services & Equipment industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– From the 10K / annual statement of Dril-Quip, it seems that company is thinking out the frontier risks that can impact Oil Well Services & Equipment 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.
Dril-Quip Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Dril-Quip are -
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Oil Well Services & Equipment industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Dril-Quip 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. Dril-Quip 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Dril-Quip can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Dril-Quip 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 Well Services & Equipment 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, Dril-Quip can use these opportunities to build new business models that can help the communities that Dril-Quip operates in. Secondly it can use opportunities from government spending in Oil Well Services & Equipment sector.
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 Dril-Quip 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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Oil Well Services & Equipment industry, but it has also influenced the consumer preferences. Dril-Quip can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Loyalty marketing
– Dril-Quip 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.
Use of Bitcoin and other crypto currencies for transactions in Oil Well Services & Equipment industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Dril-Quip in the Oil Well Services & Equipment industry. Now Dril-Quip can target international markets with far fewer capital restrictions requirements than the existing system.
Developing new processes and practices
– Dril-Quip can develop new processes and procedures in Oil Well Services & Equipment 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.
Using analytics as competitive advantage
– Dril-Quip has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Oil Well Services & Equipment sector. This continuous investment in analytics has enabled Dril-Quip to build a competitive advantage using analytics. The analytics driven competitive advantage can help Dril-Quip to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Dril-Quip can improve the customer journey of consumers in the Oil Well Services & Equipment 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.
Building a culture of innovation
– managers at Dril-Quip 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 Well Services & Equipment industry.
Low interest rates
– Even though inflation is raising its head in most developed economies, Dril-Quip 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.
Threats Dril-Quip External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Dril-Quip are -
Shortening product life cycle
– it is one of the major threat that Dril-Quip is facing in Oil Well Services & Equipment sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Oil Well Services & Equipment industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Dril-Quip can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Dril-Quip 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. Dril-Quip can take advantage of this fund but it will also bring new competitors in the Oil Well Services & Equipment industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil Well Services & Equipment industry are lowering. It can presents Dril-Quip with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Oil Well Services & Equipment sector.
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 Dril-Quip in the Oil Well Services & Equipment sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Dril-Quip 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 Well Services & Equipment sector.
Regulatory challenges
– Dril-Quip 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 Well Services & Equipment industry regulations.
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. Dril-Quip needs to understand the core reasons impacting the Oil Well Services & Equipment industry. This will help it in building a better workplace.
Increasing wage structure of Dril-Quip
– 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 Dril-Quip.
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.
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.
Stagnating economy with rate increase
– Dril-Quip 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 Well Services & Equipment industry.
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 Dril-Quip.
Weighted SWOT Analysis of Dril-Quip Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Dril-Quip 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 Dril-Quip 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 Dril-Quip 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 Dril-Quip 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 Dril-Quip needs to make to build a sustainable competitive advantage.