Hess (HES) SWOT Analysis / TOWS Matrix / MBA Resources

Introduction to SWOT Analysis

SWOT Analysis / TOWS Matrix for Hess (United States)

Based on various researches at Oak Spring University , Hess is operating in a macro-environment that has been destablized by – customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, there is increasing trade war between United States & China, challanges to central banks by blockchain based private currencies, increasing energy prices, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, etc

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Introduction to SWOT Analysis of Hess

SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Hess can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Hess, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Hess 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.

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SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix

SWOT analysis of Hess can be done for the following purposes –
1. Strategic planning of Hess
2. Improving business portfolio management of Hess
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 Hess

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Strengths of Hess | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The strengths of Hess are -

Ability to recruit top talent

– Hess is one of the leading players in the Oil & Gas Operations 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.

Training and development

– Hess 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.

Low bargaining power of suppliers

– Suppliers of Hess in the Energy sector have low bargaining power. Hess has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Hess to manage not only supply disruptions but also source products at highly competitive prices.

Effective Research and Development (R&D)

– Hess has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Hess 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.

Successful track record of launching new products

– Hess has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Hess 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.

High brand equity

– Hess has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Hess to keep acquiring new customers and building profitable relationship with both the new and loyal customers.

Strong track record of project management in the Oil & Gas Operations industry

– Hess is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.

Sustainable margins compare to other players in Oil & Gas Operations industry

– Hess has clearly differentiated products in the market place. This has enabled Hess to fetch slight price premium compare to the competitors in the Oil & Gas Operations industry. The sustainable margins have also helped Hess to invest into research and development (R&D) and innovation.

High switching costs

– The high switching costs that Hess 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.

Operational resilience

– The operational resilience strategy of Hess comprises – understanding the underlying the factors in the Oil & Gas Operations 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.

Ability to lead change in Oil & Gas Operations

– Hess is one of the leading players in the Oil & Gas Operations industry in United States. Over the years it has not only transformed the business landscape in the Oil & Gas Operations industry in United States but also across the existing markets. The ability to lead change has enabled Hess in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.

Learning organization

- Hess 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 Hess is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Hess emphasize – knowledge, initiative, and innovation.

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Weaknesses of Hess | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The weaknesses of Hess are -

High bargaining power of channel partners in Oil & Gas Operations industry

– because of the regulatory requirements in United States, Hess 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.

Compensation and incentives

– The revenue per employee of Hess is just above the Oil & Gas Operations 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 Hess products

– To increase the profitability and margins on the products, Hess needs to provide more differentiated products than what it is currently offering in the marketplace.

Increasing silos among functional specialists

– The organizational structure of Hess is dominated by functional specialists. It is not different from other players in the Oil & Gas Operations industry, but Hess needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Hess to focus more on services in the Oil & Gas Operations industry rather than just following the product oriented approach.

Products dominated business model

– Even though Hess 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. Hess should strive to include more intangible value offerings along with its core products and services.

High cash cycle compare to competitors

Hess 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.

Need for greater diversity

– Hess 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.

Capital Spending Reduction

– Even during the low interest decade, Hess 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 Operations industry using digital technology.

Employees’ less understanding of Hess strategy

– From the outside it seems that the employees of Hess 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 operating costs

– Compare to the competitors, Hess 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 Hess lucrative customers.

Slow to harness new channels of communication

– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Hess is slow explore the new channels of communication. These new channels of communication can help Hess 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.

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Hess Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The opportunities of Hess are -

Leveraging digital technologies

– Hess 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.

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 Hess 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 & Gas Operations industry, but it has also influenced the consumer preferences. Hess can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.

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. Hess 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. Hess 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.

Manufacturing automation

– Hess can use the latest technology developments to improve its manufacturing and designing process in Oil & Gas Operations 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.

Increase in government spending

– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Hess can use these opportunities to build new business models that can help the communities that Hess operates in. Secondly it can use opportunities from government spending in Oil & Gas Operations sector.

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. Hess can explore opportunities that can attract volunteers and are consistent with its mission and vision.

Loyalty marketing

– Hess 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.

Low interest rates

– Even though inflation is raising its head in most developed economies, Hess 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.

Lowering marketing communication costs

– 5G expansion will open new opportunities for Hess 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 Operations industry, and it will provide faster access to the consumers.

Redefining models of collaboration and team work

– As explained in the weaknesses section, Hess is facing challenges because of the dominance of functional experts in the organization. Hess can utilize new technology in the field of Oil & Gas Operations industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.

Buying journey improvements

– Hess 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.

Learning at scale

– Online learning technologies has now opened space for Hess 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.

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Threats Hess External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis

The threats of Hess are -

Learning curve for new practices

– As the technology based on artificial intelligence and machine learning platform is getting complex, Hess 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 Operations sector.

Trade war between China and United States

– The trade war between two of the biggest economies can hugely impact the opportunities for Hess 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.

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.

Easy access to finance

– Easy access to finance in Oil & Gas Operations industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Hess can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.

Consumer confidence and its impact on Hess 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.

Technology acceleration in Forth Industrial Revolution

– Hess has witnessed rapid integration of technology during Covid-19 in the Oil & Gas Operations industry. As one of the leading players in the industry, Hess 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.

Stagnating economy with rate increase

– Hess 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.

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 Hess in the Oil & Gas Operations sector and impact the bottomline of the organization.

Increasing wage structure of Hess

– 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 Hess.

Barriers of entry lowering

– As technology is more democratized, the barriers to entry to Oil & Gas Operations industry are lowering. It can presents Hess with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Oil & Gas Operations sector.

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 Hess.

Shortening product life cycle

– it is one of the major threat that Hess is facing in Oil & Gas Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.

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Weighted SWOT Analysis of Hess Template, Example

Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Hess 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 Hess 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 Hess 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 Hess 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 Hess needs to make to build a sustainable competitive advantage.

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