Nustar (NS) SWOT Analysis / TOWS Matrix / MBA Resources
Oil Well Services & Equipment
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Nustar (United States)
Based on various researches at Oak Spring University , Nustar 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%, competitive advantages are harder to sustain because of technology dispersion, wage bills are increasing, increasing household debt because of falling income levels, increasing government debt because of Covid-19 spendings, technology disruption, there is increasing trade war between United States & China,
supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Nustar can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Nustar, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Nustar 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 Nustar can be done for the following purposes –
1. Strategic planning of Nustar
2. Improving business portfolio management of Nustar
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 Nustar
Strengths of Nustar | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Nustar are -
Ability to recruit top talent
– Nustar 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.
High brand equity
– Nustar has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Nustar to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
High switching costs
– The high switching costs that Nustar 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.
Operational resilience
– The operational resilience strategy of Nustar 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.
Training and development
– Nustar 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.
Sustainable margins compare to other players in Oil Well Services & Equipment industry
– Nustar has clearly differentiated products in the market place. This has enabled Nustar to fetch slight price premium compare to the competitors in the Oil Well Services & Equipment industry. The sustainable margins have also helped Nustar to invest into research and development (R&D) and innovation.
Cross disciplinary teams
– Horizontal connected teams at the Nustar 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.
Digital Transformation in Oil Well Services & Equipment industry
- digital transformation varies from industry to industry. For Nustar digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Nustar 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.
Diverse revenue streams
– Nustar is present in almost all the verticals within the Oil Well Services & Equipment industry. This has provided Nustar 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 Well Services & Equipment industry
– Nustar is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Innovation driven organization
– Nustar is one of the most innovative firm in Oil Well Services & Equipment sector.
Organizational Resilience of Nustar
– The covid-19 pandemic has put organizational resilience at the centre of everthing Nustar does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Weaknesses of Nustar | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Nustar are -
Increasing silos among functional specialists
– The organizational structure of Nustar is dominated by functional specialists. It is not different from other players in the Oil Well Services & Equipment industry, but Nustar needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Nustar to focus more on services in the Oil Well Services & Equipment industry rather than just following the product oriented approach.
High cash cycle compare to competitors
Nustar 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.
Compensation and incentives
– The revenue per employee of Nustar 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.
Aligning sales with marketing
– From the outside it seems that Nustar 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 Nustar can leverage the sales team experience to cultivate customer relationships as Nustar is planning to shift buying processes online.
Lack of clear differentiation of Nustar products
– To increase the profitability and margins on the products, Nustar needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow decision making process
– As mentioned earlier in the report, Nustar 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. Nustar 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.
Products dominated business model
– Even though Nustar 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. Nustar should strive to include more intangible value offerings along with its core products and services.
Employees’ less understanding of Nustar strategy
– From the outside it seems that the employees of Nustar 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.
Need for greater diversity
– Nustar has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Ability to respond to the competition
– As the decision making is very deliberative at Nustar, in the dynamic environment of Oil Well Services & Equipment industry it has struggled to respond to the nimble upstart competition. Nustar has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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 Nustar supply chain. Even after few cautionary changes, Nustar is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Nustar vulnerable to further global disruptions in South East Asia.
Nustar Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Nustar are -
Leveraging digital technologies
– Nustar 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.
Buying journey improvements
– Nustar 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.
Learning at scale
– Online learning technologies has now opened space for Nustar 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.
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. Nustar 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. Nustar 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.
Building a culture of innovation
– managers at Nustar 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, Nustar can use these opportunities to build new business models that can help the communities that Nustar operates in. Secondly it can use opportunities from government spending in Oil Well Services & Equipment sector.
Better consumer reach
– The expansion of the 5G network will help Nustar to increase its market reach. Nustar 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.
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 Nustar 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Nustar can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Low interest rates
– Even though inflation is raising its head in most developed economies, Nustar 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.
Using analytics as competitive advantage
– Nustar 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 Nustar to build a competitive advantage using analytics. The analytics driven competitive advantage can help Nustar to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Nustar is facing challenges because of the dominance of functional experts in the organization. Nustar 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.
Developing new processes and practices
– Nustar 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 Nustar External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Nustar are -
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.
Regulatory challenges
– Nustar 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.
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 Nustar in the Oil Well Services & Equipment sector and impact the bottomline of the organization.
Increasing wage structure of Nustar
– 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 Nustar.
High dependence on third party suppliers
– Nustar 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.
Consumer confidence and its impact on Nustar 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Nustar 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 acceleration in Forth Industrial Revolution
– Nustar 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, Nustar 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.
Shortening product life cycle
– it is one of the major threat that Nustar is facing in Oil Well Services & Equipment sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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 Nustar business can come under increasing regulations regarding data privacy, data security, etc.
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. Nustar 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.
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 Nustar.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Nustar 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 Nustar prominent markets.
Weighted SWOT Analysis of Nustar Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Nustar 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 Nustar 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 Nustar 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 Nustar 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 Nustar needs to make to build a sustainable competitive advantage.