SWOT Analysis / TOWS Matrix for Laredo Petroleum (United States)
Based on various researches at Oak Spring University , Laredo Petroleum is operating in a macro-environment that has been destablized by – increasing transportation and logistics costs, wage bills are increasing, technology disruption, competitive advantages are harder to sustain because of technology dispersion, geopolitical disruptions, supply chains are disrupted by pandemic , increasing inequality as vast percentage of new income is going to the top 1%,
talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Laredo Petroleum can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Laredo Petroleum, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Laredo Petroleum 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 Laredo Petroleum can be done for the following purposes –
1. Strategic planning of Laredo Petroleum
2. Improving business portfolio management of Laredo Petroleum
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 Laredo Petroleum
Strengths of Laredo Petroleum | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Laredo Petroleum are -
Sustainable margins compare to other players in Oil & Gas Operations industry
– Laredo Petroleum has clearly differentiated products in the market place. This has enabled Laredo Petroleum to fetch slight price premium compare to the competitors in the Oil & Gas Operations industry. The sustainable margins have also helped Laredo Petroleum to invest into research and development (R&D) and innovation.
Digital Transformation in Oil & Gas Operations industry
- digital transformation varies from industry to industry. For Laredo Petroleum digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Laredo Petroleum 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.
Superior customer experience
– The customer experience strategy of Laredo Petroleum in Oil & Gas Operations industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Innovation driven organization
– Laredo Petroleum is one of the most innovative firm in Oil & Gas Operations sector.
Operational resilience
– The operational resilience strategy of Laredo Petroleum 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.
Organizational Resilience of Laredo Petroleum
– The covid-19 pandemic has put organizational resilience at the centre of everthing Laredo Petroleum does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Low bargaining power of suppliers
– Suppliers of Laredo Petroleum in the Energy sector have low bargaining power. Laredo Petroleum has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Laredo Petroleum to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Laredo Petroleum 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 Laredo Petroleum have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Laredo Petroleum is present in almost all the verticals within the Oil & Gas Operations industry. This has provided Laredo Petroleum 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.
Strong track record of project management in the Oil & Gas Operations industry
– Laredo Petroleum is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Laredo Petroleum 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.
Ability to lead change in Oil & Gas Operations
– Laredo Petroleum 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 Laredo Petroleum in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Laredo Petroleum | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Laredo Petroleum are -
Capital Spending Reduction
– Even during the low interest decade, Laredo Petroleum 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.
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 Laredo Petroleum supply chain. Even after few cautionary changes, Laredo Petroleum is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Laredo Petroleum vulnerable to further global disruptions in South East Asia.
High cash cycle compare to competitors
Laredo Petroleum 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.
Compensation and incentives
– The revenue per employee of Laredo Petroleum 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.
Skills based hiring in Oil & Gas Operations industry
– The stress on hiring functional specialists at Laredo Petroleum 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.
Slow to strategic competitive environment developments
– As Laredo Petroleum is one of the leading players in the Oil & Gas Operations industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Oil & Gas Operations industry in last five years.
High bargaining power of channel partners in Oil & Gas Operations industry
– because of the regulatory requirements in United States, Laredo Petroleum 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.
Workers concerns about automation
– As automation is fast increasing in the Oil & Gas Operations industry, Laredo Petroleum 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.
Products dominated business model
– Even though Laredo Petroleum 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. Laredo Petroleum should strive to include more intangible value offerings along with its core products and services.
No frontier risks strategy
– From the 10K / annual statement of Laredo Petroleum, 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.
Lack of clear differentiation of Laredo Petroleum products
– To increase the profitability and margins on the products, Laredo Petroleum needs to provide more differentiated products than what it is currently offering in the marketplace.
Laredo Petroleum Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Laredo Petroleum are -
Better consumer reach
– The expansion of the 5G network will help Laredo Petroleum to increase its market reach. Laredo Petroleum 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.
Manufacturing automation
– Laredo Petroleum 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.
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 Laredo Petroleum 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Laredo Petroleum can use these opportunities to build new business models that can help the communities that Laredo Petroleum operates in. Secondly it can use opportunities from government spending in Oil & Gas Operations sector.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Laredo Petroleum can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Laredo Petroleum 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. Laredo Petroleum 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.
Loyalty marketing
– Laredo Petroleum 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.
Building a culture of innovation
– managers at Laredo Petroleum 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
– Laredo Petroleum 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Laredo Petroleum 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.
Developing new processes and practices
– Laredo Petroleum can develop new processes and procedures in Oil & Gas Operations 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Laredo Petroleum 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Laredo Petroleum 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 Laredo Petroleum to hire the very best people irrespective of their geographical location.
Threats Laredo Petroleum External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Laredo Petroleum are -
Shortening product life cycle
– it is one of the major threat that Laredo Petroleum is facing in Oil & Gas Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Laredo Petroleum 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 acceleration in Forth Industrial Revolution
– Laredo Petroleum has witnessed rapid integration of technology during Covid-19 in the Oil & Gas Operations industry. As one of the leading players in the industry, Laredo Petroleum 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.
Environmental challenges
– Laredo Petroleum 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. Laredo Petroleum can take advantage of this fund but it will also bring new competitors in the Oil & Gas Operations industry.
Regulatory challenges
– Laredo Petroleum 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 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.
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. Laredo Petroleum needs to understand the core reasons impacting the Oil & Gas Operations industry. This will help it in building a better workplace.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Laredo Petroleum 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 Laredo Petroleum prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Laredo Petroleum 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.
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. Laredo Petroleum can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. Laredo Petroleum 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.
Stagnating economy with rate increase
– Laredo Petroleum 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.
Weighted SWOT Analysis of Laredo Petroleum Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Laredo Petroleum 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 Laredo Petroleum 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 Laredo Petroleum 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 Laredo Petroleum 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 Laredo Petroleum needs to make to build a sustainable competitive advantage.