Devon Energy (DVN) SWOT Analysis / TOWS Matrix / MBA Resources
Oil & Gas Operations
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Devon Energy (United States)
Based on various researches at Oak Spring University , Devon Energy is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, competitive advantages are harder to sustain because of technology dispersion, central banks are concerned over increasing inflation, increasing household debt because of falling income levels, supply chains are disrupted by pandemic , geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%,
wage bills are increasing, there is increasing trade war between United States & China, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Devon Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Devon Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Devon 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 Devon Energy can be done for the following purposes –
1. Strategic planning of Devon Energy
2. Improving business portfolio management of Devon 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 Devon Energy
Strengths of Devon Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Devon Energy are -
Digital Transformation in Oil & Gas Operations industry
- digital transformation varies from industry to industry. For Devon Energy digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Devon Energy 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.
Innovation driven organization
– Devon Energy is one of the most innovative firm in Oil & Gas Operations sector.
Superior customer experience
– The customer experience strategy of Devon Energy in Oil & Gas Operations industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Devon 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 Devon Energy have helped the firm to develop new products and bring them quickly to the marketplace.
Effective Research and Development (R&D)
– Devon Energy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Devon 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.
Organizational Resilience of Devon Energy
– The covid-19 pandemic has put organizational resilience at the centre of everthing Devon 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 Operations industry
– Devon Energy has clearly differentiated products in the market place. This has enabled Devon Energy to fetch slight price premium compare to the competitors in the Oil & Gas Operations industry. The sustainable margins have also helped Devon Energy to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Devon Energy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Devon Energy has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Low bargaining power of suppliers
– Suppliers of Devon Energy in the Energy sector have low bargaining power. Devon Energy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Devon Energy to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Devon Energy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Devon Energy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Training and development
– Devon 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.
High switching costs
– The high switching costs that Devon 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.
Weaknesses of Devon Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Devon Energy are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Devon Energy is slow explore the new channels of communication. These new channels of communication can help Devon Energy to provide better information regarding Oil & Gas Operations products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Devon Energy is dominated by functional specialists. It is not different from other players in the Oil & Gas Operations industry, but Devon Energy needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Devon Energy to focus more on services in the Oil & Gas Operations industry rather than just following the product oriented approach.
High bargaining power of channel partners in Oil & Gas Operations industry
– because of the regulatory requirements in United States, Devon 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.
Skills based hiring in Oil & Gas Operations industry
– The stress on hiring functional specialists at Devon Energy 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.
Interest costs
– Compare to the competition, Devon 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.
Products dominated business model
– Even though Devon 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. Devon Energy should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Devon 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 operating costs
– Compare to the competitors, Devon 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 Devon Energy lucrative customers.
Slow decision making process
– As mentioned earlier in the report, Devon 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 Operations industry over the last five years. Devon 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.
No frontier risks strategy
– From the 10K / annual statement of Devon 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.
High dependence on Devon Energy ‘s star products
– The top 2 products and services of Devon Energy still accounts for major business revenue. This dependence on star products in Oil & Gas Operations industry has resulted into insufficient focus on developing new products, even though Devon Energy has relatively successful track record of launching new products.
Devon Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Devon Energy are -
Creating value in data economy
– The success of analytics program of Devon Energy has opened avenues for new revenue streams for the organization in Oil & Gas Operations industry. This can help Devon Energy to build a more holistic ecosystem for Devon Energy products in the Oil & Gas Operations industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Devon 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 Devon 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.
Building a culture of innovation
– managers at Devon 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 Operations industry.
Buying journey improvements
– Devon 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.
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 Devon 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Devon Energy 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 Devon Energy to hire the very best people irrespective of their geographical location.
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. Devon 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. Devon 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.
Use of Bitcoin and other crypto currencies for transactions in Oil & Gas Operations industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Devon Energy in the Oil & Gas Operations industry. Now Devon Energy 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, Devon Energy can use these opportunities to build new business models that can help the communities that Devon Energy operates in. Secondly it can use opportunities from government spending in Oil & Gas Operations sector.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Oil & Gas Operations industry, but it has also influenced the consumer preferences. Devon Energy can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Using analytics as competitive advantage
– Devon Energy has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Oil & Gas Operations sector. This continuous investment in analytics has enabled Devon Energy to build a competitive advantage using analytics. The analytics driven competitive advantage can help Devon Energy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Devon 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.
Loyalty marketing
– Devon 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.
Threats Devon Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Devon Energy are -
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 Devon Energy in the Oil & Gas Operations sector and impact the bottomline of the organization.
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 Devon Energy business can come under increasing regulations regarding data privacy, data security, etc.
Shortening product life cycle
– it is one of the major threat that Devon Energy is facing in Oil & Gas Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Devon 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Devon 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 Devon Energy prominent markets.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Devon Energy in Oil & Gas Operations industry. The Oil & Gas Operations 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. Devon 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.
Consumer confidence and its impact on Devon 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.
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. Devon Energy needs to understand the core reasons impacting the Oil & Gas Operations industry. This will help it in building a better workplace.
Increasing wage structure of Devon 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 Devon Energy.
Regulatory challenges
– Devon Energy 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 Operations industry regulations.
Technology acceleration in Forth Industrial Revolution
– Devon Energy has witnessed rapid integration of technology during Covid-19 in the Oil & Gas Operations industry. As one of the leading players in the industry, Devon Energy needs to keep up with the evolution of technology in the Oil & Gas Operations 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.
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.
Weighted SWOT Analysis of Devon Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Devon 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 Devon 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 Devon 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 Devon 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 Devon Energy needs to make to build a sustainable competitive advantage.