McDermott (MDR) SWOT Analysis / TOWS Matrix / MBA Resources
Oil Well Services & Equipment
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for McDermott (United States)
Based on various researches at Oak Spring University , McDermott is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, banking and financial system is disrupted by Bitcoin and other crypto currencies, wage bills are increasing, increasing energy prices, increasing transportation and logistics costs, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion,
technology disruption, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that McDermott can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the McDermott, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which McDermott 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 McDermott can be done for the following purposes –
1. Strategic planning of McDermott
2. Improving business portfolio management of McDermott
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 McDermott
Strengths of McDermott | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of McDermott are -
Low bargaining power of suppliers
– Suppliers of McDermott in the Energy sector have low bargaining power. McDermott has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps McDermott to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– McDermott has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled McDermott to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Oil Well Services & Equipment industry
- digital transformation varies from industry to industry. For McDermott digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. McDermott 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.
Ability to recruit top talent
– McDermott is one of the leading players in the Oil Well Services & Equipment 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.
Cross disciplinary teams
– Horizontal connected teams at the McDermott 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.
Sustainable margins compare to other players in Oil Well Services & Equipment industry
– McDermott has clearly differentiated products in the market place. This has enabled McDermott to fetch slight price premium compare to the competitors in the Oil Well Services & Equipment industry. The sustainable margins have also helped McDermott to invest into research and development (R&D) and innovation.
Operational resilience
– The operational resilience strategy of McDermott 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.
Highly skilled collaborators
– McDermott 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 McDermott have helped the firm to develop new products and bring them quickly to the marketplace.
Successful track record of launching new products
– McDermott has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. McDermott 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.
Strong track record of project management in the Oil Well Services & Equipment industry
– McDermott 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
– McDermott 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 Well Services & Equipment industry. The technology infrastructure of United States 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.
Learning organization
- McDermott 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 McDermott is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at McDermott emphasize – knowledge, initiative, and innovation.
Weaknesses of McDermott | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of McDermott are -
Compensation and incentives
– The revenue per employee of McDermott 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.
High operating costs
– Compare to the competitors, McDermott has high operating costs in the Oil Well Services & Equipment industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract McDermott lucrative customers.
Low market penetration in new markets
– Outside its home market of United States, McDermott needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on McDermott ‘s star products
– The top 2 products and services of McDermott still accounts for major business revenue. This dependence on star products in Oil Well Services & Equipment industry has resulted into insufficient focus on developing new products, even though McDermott has relatively successful track record of launching new products.
Aligning sales with marketing
– From the outside it seems that McDermott 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 McDermott can leverage the sales team experience to cultivate customer relationships as McDermott is planning to shift buying processes online.
High bargaining power of channel partners in Oil Well Services & Equipment industry
– because of the regulatory requirements in United States, McDermott 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.
Workers concerns about automation
– As automation is fast increasing in the Oil Well Services & Equipment industry, McDermott 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.
Increasing silos among functional specialists
– The organizational structure of McDermott is dominated by functional specialists. It is not different from other players in the Oil Well Services & Equipment industry, but McDermott needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help McDermott to focus more on services in the Oil Well Services & Equipment industry rather than just following the product oriented approach.
Employees’ less understanding of McDermott strategy
– From the outside it seems that the employees of McDermott 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.
Ability to respond to the competition
– As the decision making is very deliberative at McDermott, in the dynamic environment of Oil Well Services & Equipment industry it has struggled to respond to the nimble upstart competition. McDermott has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Lack of clear differentiation of McDermott products
– To increase the profitability and margins on the products, McDermott needs to provide more differentiated products than what it is currently offering in the marketplace.
McDermott Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of McDermott are -
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects McDermott can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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 McDermott 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 McDermott 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 McDermott to hire the very best people irrespective of their geographical location.
Buying journey improvements
– McDermott 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.
Using analytics as competitive advantage
– McDermott 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 McDermott to build a competitive advantage using analytics. The analytics driven competitive advantage can help McDermott to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Use of Bitcoin and other crypto currencies for transactions in Oil Well Services & Equipment industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for McDermott in the Oil Well Services & Equipment industry. Now McDermott can target international markets with far fewer capital restrictions requirements than the existing system.
Loyalty marketing
– McDermott 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, McDermott is facing challenges because of the dominance of functional experts in the organization. McDermott 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.
Better consumer reach
– The expansion of the 5G network will help McDermott to increase its market reach. McDermott 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, McDermott can use these opportunities to build new business models that can help the communities that McDermott operates in. Secondly it can use opportunities from government spending in Oil Well Services & Equipment sector.
Learning at scale
– Online learning technologies has now opened space for McDermott 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.
Building a culture of innovation
– managers at McDermott 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, McDermott 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 McDermott External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of McDermott 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 McDermott in the Oil Well Services & Equipment sector and impact the bottomline of the organization.
Shortening product life cycle
– it is one of the major threat that McDermott 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. McDermott can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.
Consumer confidence and its impact on McDermott 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 Well Services & Equipment industry and other sectors.
Increasing wage structure of McDermott
– 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 McDermott.
Environmental challenges
– McDermott 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. McDermott can take advantage of this fund but it will also bring new competitors in the Oil Well Services & Equipment industry.
Stagnating economy with rate increase
– McDermott 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, McDermott 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 McDermott prominent markets.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, McDermott 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.
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 McDermott business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– McDermott 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, McDermott 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.
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 McDermott Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at McDermott 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 McDermott 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 McDermott 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 McDermott 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 McDermott needs to make to build a sustainable competitive advantage.
