SWOT Analysis / TOWS Matrix for Phillips 66 (United States)
Based on various researches at Oak Spring University , Phillips 66 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, increasing inequality as vast percentage of new income is going to the top 1%, increasing commodity prices, cloud computing is disrupting traditional business models, there is backlash against globalization, digital marketing is dominated by two big players Facebook and Google,
wage bills are increasing, 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 Phillips 66 can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Phillips 66, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Phillips 66 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 Phillips 66 can be done for the following purposes –
1. Strategic planning of Phillips 66
2. Improving business portfolio management of Phillips 66
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 Phillips 66
Strengths of Phillips 66 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Phillips 66 are -
Ability to lead change in Oil & Gas Operations
– Phillips 66 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 Phillips 66 in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Phillips 66 is one of the most innovative firm in Oil & Gas Operations sector.
Highly skilled collaborators
– Phillips 66 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 Phillips 66 have helped the firm to develop new products and bring them quickly to the marketplace.
High switching costs
– The high switching costs that Phillips 66 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.
Training and development
– Phillips 66 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 & Gas Operations industry
– Phillips 66 has clearly differentiated products in the market place. This has enabled Phillips 66 to fetch slight price premium compare to the competitors in the Oil & Gas Operations industry. The sustainable margins have also helped Phillips 66 to invest into research and development (R&D) and innovation.
High brand equity
– Phillips 66 has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Phillips 66 to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Phillips 66 in Oil & Gas Operations industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Effective Research and Development (R&D)
– Phillips 66 has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Phillips 66 staying ahead in the Oil & Gas Operations industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Successful track record of launching new products
– Phillips 66 has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Phillips 66 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.
Operational resilience
– The operational resilience strategy of Phillips 66 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.
Learning organization
- Phillips 66 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 Phillips 66 is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Phillips 66 emphasize – knowledge, initiative, and innovation.
Weaknesses of Phillips 66 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Phillips 66 are -
High cash cycle compare to competitors
Phillips 66 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.
Capital Spending Reduction
– Even during the low interest decade, Phillips 66 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.
Lack of clear differentiation of Phillips 66 products
– To increase the profitability and margins on the products, Phillips 66 needs to provide more differentiated products than what it is currently offering in the marketplace.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Phillips 66 is slow explore the new channels of communication. These new channels of communication can help Phillips 66 to provide better information regarding Oil & Gas Operations products and services. It can also build an online community to further reach out to potential customers.
Increasing silos among functional specialists
– The organizational structure of Phillips 66 is dominated by functional specialists. It is not different from other players in the Oil & Gas Operations industry, but Phillips 66 needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Phillips 66 to focus more on services in the Oil & Gas Operations industry rather than just following the product oriented approach.
Low market penetration in new markets
– Outside its home market of United States, Phillips 66 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Compensation and incentives
– The revenue per employee of Phillips 66 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.
Aligning sales with marketing
– From the outside it seems that Phillips 66 needs to have more collaboration between its sales team and marketing team. Sales professionals in the Oil & Gas Operations industry have deep experience in developing customer relationships. Marketing department at Phillips 66 can leverage the sales team experience to cultivate customer relationships as Phillips 66 is planning to shift buying processes online.
Need for greater diversity
– Phillips 66 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.
No frontier risks strategy
– From the 10K / annual statement of Phillips 66, 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.
Ability to respond to the competition
– As the decision making is very deliberative at Phillips 66, in the dynamic environment of Oil & Gas Operations industry it has struggled to respond to the nimble upstart competition. Phillips 66 has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Phillips 66 Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Phillips 66 are -
Leveraging digital technologies
– Phillips 66 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.
Learning at scale
– Online learning technologies has now opened space for Phillips 66 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.
Using analytics as competitive advantage
– Phillips 66 has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Oil & Gas Operations sector. This continuous investment in analytics has enabled Phillips 66 to build a competitive advantage using analytics. The analytics driven competitive advantage can help Phillips 66 to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Phillips 66 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 Phillips 66 to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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 Phillips 66 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.
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. Phillips 66 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. Phillips 66 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Phillips 66 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
– Phillips 66 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Phillips 66 can use these opportunities to build new business models that can help the communities that Phillips 66 operates in. Secondly it can use opportunities from government spending in Oil & Gas Operations sector.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Phillips 66 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 Phillips 66 to hire the very best people irrespective of their geographical location.
Buying journey improvements
– Phillips 66 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.
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. Phillips 66 can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Oil & Gas Operations industry, but it has also influenced the consumer preferences. Phillips 66 can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats Phillips 66 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Phillips 66 are -
Regulatory challenges
– Phillips 66 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.
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 Phillips 66 in the Oil & Gas Operations sector and impact the bottomline of the organization.
High dependence on third party suppliers
– Phillips 66 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 Phillips 66 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 & Gas Operations industry and other sectors.
Increasing wage structure of Phillips 66
– 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 Phillips 66.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Phillips 66 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 Phillips 66 prominent markets.
Stagnating economy with rate increase
– Phillips 66 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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil & Gas Operations industry are lowering. It can presents Phillips 66 with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Oil & Gas Operations 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 Phillips 66 business can come under increasing regulations regarding data privacy, data security, etc.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Phillips 66 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.
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. Phillips 66 needs to understand the core reasons impacting the Oil & Gas Operations industry. This will help it in building a better workplace.
Weighted SWOT Analysis of Phillips 66 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Phillips 66 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 Phillips 66 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 Phillips 66 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 Phillips 66 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 Phillips 66 needs to make to build a sustainable competitive advantage.