Santos (STO) SWOT Analysis / TOWS Matrix / MBA Resources
Oil & Gas - Integrated
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Santos (Australia)
Based on various researches at Oak Spring University , Santos is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, geopolitical disruptions, increasing energy prices, technology disruption, wage bills are increasing, increasing government debt because of Covid-19 spendings, there is increasing trade war between United States & China,
customer relationship management is fast transforming because of increasing concerns over data privacy, there is backlash against globalization, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Santos can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Santos, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Santos 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 Santos can be done for the following purposes –
1. Strategic planning of Santos
2. Improving business portfolio management of Santos
3. Assessing feasibility of the new initiative in Australia
4. Making a Oil & Gas - Integrated sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Santos
Strengths of Santos | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Santos are -
Training and development
– Santos 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.
Digital Transformation in Oil & Gas - Integrated industry
- digital transformation varies from industry to industry. For Santos digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Santos 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
– Santos is one of the most innovative firm in Oil & Gas - Integrated sector.
High switching costs
– The high switching costs that Santos 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.
Sustainable margins compare to other players in Oil & Gas - Integrated industry
– Santos has clearly differentiated products in the market place. This has enabled Santos to fetch slight price premium compare to the competitors in the Oil & Gas - Integrated industry. The sustainable margins have also helped Santos to invest into research and development (R&D) and innovation.
Effective Research and Development (R&D)
– Santos has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Santos staying ahead in the Oil & Gas - Integrated industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Organizational Resilience of Santos
– The covid-19 pandemic has put organizational resilience at the centre of everthing Santos does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of Santos comprises – understanding the underlying the factors in the Oil & Gas - Integrated 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 recruit top talent
– Santos is one of the leading players in the Oil & Gas - Integrated industry in Australia. It is in a position to attract the best talent available in Australia. The firm has a robust talent identification program that helps in identifying the brightest.
Diverse revenue streams
– Santos is present in almost all the verticals within the Oil & Gas - Integrated industry. This has provided Santos 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 - Integrated industry
– Santos is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Analytics focus
– Santos is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Oil & Gas - Integrated industry. The technology infrastructure of Australia is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses of Santos | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Santos are -
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Santos is slow explore the new channels of communication. These new channels of communication can help Santos to provide better information regarding Oil & Gas - Integrated products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners in Oil & Gas - Integrated industry
– because of the regulatory requirements in Australia, Santos 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 - Integrated industry.
Increasing silos among functional specialists
– The organizational structure of Santos is dominated by functional specialists. It is not different from other players in the Oil & Gas - Integrated industry, but Santos needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Santos to focus more on services in the Oil & Gas - Integrated industry rather than just following the product oriented approach.
Slow decision making process
– As mentioned earlier in the report, Santos 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 - Integrated industry over the last five years. Santos 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.
High cash cycle compare to competitors
Santos has a high cash cycle compare to other players in the Oil & Gas - Integrated industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Slow to strategic competitive environment developments
– As Santos is one of the leading players in the Oil & Gas - Integrated 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 - Integrated industry in last five years.
No frontier risks strategy
– From the 10K / annual statement of Santos, it seems that company is thinking out the frontier risks that can impact Oil & Gas - Integrated 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.
Low market penetration in new markets
– Outside its home market of Australia, Santos needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Capital Spending Reduction
– Even during the low interest decade, Santos 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 - Integrated industry using digital technology.
Interest costs
– Compare to the competition, Santos 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.
Aligning sales with marketing
– From the outside it seems that Santos needs to have more collaboration between its sales team and marketing team. Sales professionals in the Oil & Gas - Integrated industry have deep experience in developing customer relationships. Marketing department at Santos can leverage the sales team experience to cultivate customer relationships as Santos is planning to shift buying processes online.
Santos Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Santos are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Santos can use these opportunities to build new business models that can help the communities that Santos operates in. Secondly it can use opportunities from government spending in Oil & Gas - Integrated sector.
Loyalty marketing
– Santos 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.
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 Santos 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.
Leveraging digital technologies
– Santos 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Santos can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Santos is facing challenges because of the dominance of functional experts in the organization. Santos can utilize new technology in the field of Oil & Gas - Integrated industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Oil & Gas - Integrated industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Santos 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. Santos 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 - Integrated industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Santos in the Oil & Gas - Integrated industry. Now Santos can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Santos has opened avenues for new revenue streams for the organization in Oil & Gas - Integrated industry. This can help Santos to build a more holistic ecosystem for Santos products in the Oil & Gas - Integrated industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Santos 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 - Integrated industry, and it will provide faster access to the consumers.
Using analytics as competitive advantage
– Santos has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Oil & Gas - Integrated sector. This continuous investment in analytics has enabled Santos to build a competitive advantage using analytics. The analytics driven competitive advantage can help Santos to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Buying journey improvements
– Santos can improve the customer journey of consumers in the Oil & Gas - Integrated 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.
Manufacturing automation
– Santos can use the latest technology developments to improve its manufacturing and designing process in Oil & Gas - Integrated 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.
Threats Santos External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Santos are -
Stagnating economy with rate increase
– Santos 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 - Integrated industry.
Environmental challenges
– Santos 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. Santos can take advantage of this fund but it will also bring new competitors in the Oil & Gas - Integrated industry.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Santos 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 Santos prominent markets.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil & Gas - Integrated industry are lowering. It can presents Santos with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Oil & Gas - Integrated 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 Santos in the Oil & Gas - Integrated sector and impact the bottomline of the organization.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Santos in Oil & Gas - Integrated industry. The Oil & Gas - Integrated 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
– Santos has witnessed rapid integration of technology during Covid-19 in the Oil & Gas - Integrated industry. As one of the leading players in the industry, Santos needs to keep up with the evolution of technology in the Oil & Gas - Integrated 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.
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. Santos needs to understand the core reasons impacting the Oil & Gas - Integrated industry. This will help it in building a better workplace.
Easy access to finance
– Easy access to finance in Oil & Gas - Integrated industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Santos can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Santos is facing in Oil & Gas - Integrated sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Santos.
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. Santos 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.
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 Santos business can come under increasing regulations regarding data privacy, data security, etc.
Weighted SWOT Analysis of Santos Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Santos 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 Santos 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 Santos 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 Santos 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 Santos needs to make to build a sustainable competitive advantage.
