KLX Energy (KLXE) SWOT Analysis / TOWS Matrix / MBA Resources
Oil Well Services & Equipment
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for KLX Energy (United States)
Based on various researches at Oak Spring University , KLX Energy is operating in a macro-environment that has been destablized by – technology disruption, increasing commodity prices, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, cloud computing is disrupting traditional business models, challanges to central banks by blockchain based private currencies, supply chains are disrupted by pandemic ,
there is backlash against globalization, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that KLX Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the KLX Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which KLX 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 KLX Energy can be done for the following purposes –
1. Strategic planning of KLX Energy
2. Improving business portfolio management of KLX Energy
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 KLX Energy
Strengths of KLX Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of KLX Energy are -
High brand equity
– KLX Energy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled KLX Energy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Oil Well Services & Equipment industry
– KLX Energy has clearly differentiated products in the market place. This has enabled KLX Energy to fetch slight price premium compare to the competitors in the Oil Well Services & Equipment industry. The sustainable margins have also helped KLX Energy to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– KLX Energy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. KLX 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.
Training and development
– KLX 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.
Highly skilled collaborators
– KLX 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 Well Services & Equipment industry. Secondly the value chain collaborators of KLX Energy have helped the firm to develop new products and bring them quickly to the marketplace.
Superior customer experience
– The customer experience strategy of KLX Energy in Oil Well Services & Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– KLX Energy is one of the most innovative firm in Oil Well Services & Equipment sector.
Learning organization
- KLX Energy 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 KLX Energy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at KLX Energy emphasize – knowledge, initiative, and innovation.
High switching costs
– The high switching costs that KLX 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.
Strong track record of project management in the Oil Well Services & Equipment industry
– KLX Energy is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of KLX Energy 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.
Ability to lead change in Oil Well Services & Equipment
– KLX Energy is one of the leading players in the Oil Well Services & Equipment industry in United States. Over the years it has not only transformed the business landscape in the Oil Well Services & Equipment industry in United States but also across the existing markets. The ability to lead change has enabled KLX Energy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of KLX Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of KLX Energy are -
Compensation and incentives
– The revenue per employee of KLX Energy is just above the Oil Well Services & Equipment 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.
No frontier risks strategy
– From the 10K / annual statement of KLX Energy, 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.
Employees’ less understanding of KLX Energy strategy
– From the outside it seems that the employees of KLX Energy 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 bargaining power of channel partners in Oil Well Services & Equipment industry
– because of the regulatory requirements in United States, KLX 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 Well Services & Equipment industry.
Slow decision making process
– As mentioned earlier in the report, KLX 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 Well Services & Equipment industry over the last five years. KLX 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.
Slow to strategic competitive environment developments
– As KLX Energy is one of the leading players in the Oil Well Services & Equipment industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Oil Well Services & Equipment industry in last five years.
Products dominated business model
– Even though KLX Energy 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. KLX Energy should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the Oil Well Services & Equipment industry, KLX Energy 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.
Aligning sales with marketing
– From the outside it seems that KLX Energy needs to have more collaboration between its sales team and marketing team. Sales professionals in the Oil Well Services & Equipment industry have deep experience in developing customer relationships. Marketing department at KLX Energy can leverage the sales team experience to cultivate customer relationships as KLX Energy is planning to shift buying processes online.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, KLX Energy is slow explore the new channels of communication. These new channels of communication can help KLX Energy to provide better information regarding Oil Well Services & Equipment products and services. It can also build an online community to further reach out to potential customers.
High cash cycle compare to competitors
KLX Energy 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.
KLX Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of KLX Energy are -
Creating value in data economy
– The success of analytics program of KLX Energy has opened avenues for new revenue streams for the organization in Oil Well Services & Equipment industry. This can help KLX Energy to build a more holistic ecosystem for KLX Energy products in the Oil Well Services & Equipment industry by providing – data insight services, data privacy related products, data based consulting services, 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 KLX 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for KLX Energy 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.
Building a culture of innovation
– managers at KLX 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 Well Services & Equipment industry.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects KLX Energy can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– KLX Energy 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.
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. KLX 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. KLX 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, KLX Energy is facing challenges because of the dominance of functional experts in the organization. KLX Energy can utilize new technology in the field of Oil Well Services & Equipment industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Using analytics as competitive advantage
– KLX Energy 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 KLX Energy to build a competitive advantage using analytics. The analytics driven competitive advantage can help KLX Energy to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Learning at scale
– Online learning technologies has now opened space for KLX Energy 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.
Manufacturing automation
– KLX Energy can use the latest technology developments to improve its manufacturing and designing process in Oil Well Services & Equipment 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.
Better consumer reach
– The expansion of the 5G network will help KLX Energy to increase its market reach. KLX Energy 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, KLX 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.
Threats KLX Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of KLX Energy are -
High dependence on third party suppliers
– KLX Energy 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
– KLX 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 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 KLX Energy.
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.
Environmental challenges
– KLX Energy 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. KLX Energy can take advantage of this fund but it will also bring new competitors in the Oil Well Services & Equipment industry.
Technology acceleration in Forth Industrial Revolution
– KLX Energy has witnessed rapid integration of technology during Covid-19 in the Oil Well Services & Equipment industry. As one of the leading players in the industry, KLX Energy needs to keep up with the evolution of technology in the Oil Well Services & Equipment 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.
Increasing wage structure of KLX 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 KLX Energy.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for KLX Energy in Oil Well Services & Equipment industry. The Oil Well Services & Equipment 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.
Shortening product life cycle
– it is one of the major threat that KLX Energy 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. KLX Energy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, KLX 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 KLX Energy prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, KLX Energy 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.
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.
Weighted SWOT Analysis of KLX Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at KLX 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 KLX 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 KLX 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 KLX 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 KLX Energy needs to make to build a sustainable competitive advantage.