Nine Energy (NINE) SWOT Analysis / TOWS Matrix / MBA Resources
Oil Well Services & Equipment
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nine Energy (United States)
Based on various researches at Oak Spring University , Nine Energy is operating in a macro-environment that has been destablized by – supply chains are disrupted by pandemic , cloud computing is disrupting traditional business models, customer relationship management is fast transforming because of increasing concerns over data privacy, talent flight as more people leaving formal jobs, banking and financial system is disrupted by Bitcoin and other crypto currencies, digital marketing is dominated by two big players Facebook and Google, wage bills are increasing,
geopolitical disruptions, increasing commodity prices, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nine Energy can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nine Energy, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nine 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 Nine Energy can be done for the following purposes –
1. Strategic planning of Nine Energy
2. Improving business portfolio management of Nine 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 Nine Energy
Strengths of Nine Energy | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nine Energy are -
Low bargaining power of suppliers
– Suppliers of Nine Energy in the Energy sector have low bargaining power. Nine Energy has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Nine Energy to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Nine 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.
Ability to recruit top talent
– Nine Energy 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.
Superior customer experience
– The customer experience strategy of Nine Energy in Oil Well Services & Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Successful track record of launching new products
– Nine Energy has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Nine 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.
Analytics focus
– Nine Energy 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
- Nine 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 Nine Energy is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Nine Energy emphasize – knowledge, initiative, and innovation.
High brand equity
– Nine Energy has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nine Energy to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Effective Research and Development (R&D)
– Nine Energy has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Nine Energy staying ahead in the Oil Well Services & Equipment industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Innovation driven organization
– Nine Energy is one of the most innovative firm in Oil Well Services & Equipment sector.
Organizational Resilience of Nine Energy
– The covid-19 pandemic has put organizational resilience at the centre of everthing Nine Energy does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to lead change in Oil Well Services & Equipment
– Nine 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 Nine Energy in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Weaknesses of Nine Energy | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nine Energy are -
Skills based hiring in Oil Well Services & Equipment industry
– The stress on hiring functional specialists at Nine Energy 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.
Ability to respond to the competition
– As the decision making is very deliberative at Nine Energy, in the dynamic environment of Oil Well Services & Equipment industry it has struggled to respond to the nimble upstart competition. Nine Energy has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Interest costs
– Compare to the competition, Nine Energy 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.
High dependence on Nine Energy ‘s star products
– The top 2 products and services of Nine Energy 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 Nine Energy has relatively successful track record of launching new products.
Workers concerns about automation
– As automation is fast increasing in the Oil Well Services & Equipment industry, Nine 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.
Slow decision making process
– As mentioned earlier in the report, Nine 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. Nine 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.
Employees’ less understanding of Nine Energy strategy
– From the outside it seems that the employees of Nine 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.
Low market penetration in new markets
– Outside its home market of United States, Nine Energy needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– From the 10K / annual statement of Nine 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.
Products dominated business model
– Even though Nine 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. Nine Energy should strive to include more intangible value offerings along with its core products and services.
High cash cycle compare to competitors
Nine 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.
Nine Energy Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nine Energy are -
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. Nine Energy can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Better consumer reach
– The expansion of the 5G network will help Nine Energy to increase its market reach. Nine 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, Nine 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Nine Energy can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Nine Energy to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Nine 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. Nine 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.
Creating value in data economy
– The success of analytics program of Nine Energy has opened avenues for new revenue streams for the organization in Oil Well Services & Equipment industry. This can help Nine Energy to build a more holistic ecosystem for Nine Energy products in the Oil Well Services & Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nine Energy is facing challenges because of the dominance of functional experts in the organization. Nine 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.
Loyalty marketing
– Nine Energy 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Nine 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.
Buying journey improvements
– Nine 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.
Building a culture of innovation
– managers at Nine 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Nine Energy can use these opportunities to build new business models that can help the communities that Nine Energy operates in. Secondly it can use opportunities from government spending in Oil Well Services & Equipment sector.
Developing new processes and practices
– Nine Energy can develop new processes and procedures in Oil Well Services & Equipment 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.
Threats Nine Energy External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nine Energy are -
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 Nine Energy business can come under increasing regulations regarding data privacy, data security, 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.
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 Nine Energy.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Nine 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.
Regulatory challenges
– Nine Energy 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 Well Services & Equipment industry regulations.
Shortening product life cycle
– it is one of the major threat that Nine 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. Nine Energy can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 Nine Energy in the Oil Well Services & Equipment sector and impact the bottomline of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil Well Services & Equipment industry are lowering. It can presents Nine Energy with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Oil Well Services & Equipment sector.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Nine 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Nine 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 Nine Energy prominent markets.
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.
Stagnating economy with rate increase
– Nine 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.
Weighted SWOT Analysis of Nine Energy Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nine 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 Nine 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 Nine 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 Nine 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 Nine Energy needs to make to build a sustainable competitive advantage.