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 – supply chains are disrupted by pandemic , increasing transportation and logistics costs, wage bills are increasing, increasing energy prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, talent flight as more people leaving formal jobs, geopolitical disruptions,
customer relationship management is fast transforming because of increasing concerns over data privacy, technology disruption, 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 -
Innovation driven organization
– Phillips 66 is one of the most innovative firm in Oil & Gas Operations sector.
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.
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.
Digital Transformation in Oil & Gas Operations industry
- digital transformation varies from industry to industry. For Phillips 66 digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Phillips 66 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.
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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Phillips 66 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.
Analytics focus
– Phillips 66 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 Operations 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.
Organizational Resilience of Phillips 66
– The covid-19 pandemic has put organizational resilience at the centre of everthing Phillips 66 does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Diverse revenue streams
– Phillips 66 is present in almost all the verticals within the Oil & Gas Operations industry. This has provided Phillips 66 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.
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.
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 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 Phillips 66 supply chain. Even after few cautionary changes, Phillips 66 is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Phillips 66 vulnerable to further global disruptions in South East Asia.
High operating costs
– Compare to the competitors, Phillips 66 has high operating costs in the Oil & Gas Operations industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Phillips 66 lucrative customers.
Slow to strategic competitive environment developments
– As Phillips 66 is one of the leading players in the Oil & Gas Operations 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 Operations industry in last five years.
High dependence on Phillips 66 ‘s star products
– The top 2 products and services of Phillips 66 still accounts for major business revenue. This dependence on star products in Oil & Gas Operations industry has resulted into insufficient focus on developing new products, even though Phillips 66 has relatively successful track record of launching new products.
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.
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.
Products dominated business model
– Even though Phillips 66 has some of the most successful models in the Oil & Gas Operations industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Phillips 66 should strive to include more intangible value offerings along with its core products and services.
Interest costs
– Compare to the competition, Phillips 66 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.
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.
Skills based hiring in Oil & Gas Operations industry
– The stress on hiring functional specialists at Phillips 66 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.
Employees’ less understanding of Phillips 66 strategy
– From the outside it seems that the employees of Phillips 66 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.
Phillips 66 Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Phillips 66 are -
Creating value in data economy
– The success of analytics program of Phillips 66 has opened avenues for new revenue streams for the organization in Oil & Gas Operations industry. This can help Phillips 66 to build a more holistic ecosystem for Phillips 66 products in the Oil & Gas Operations industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Phillips 66 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.
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.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Phillips 66 is facing challenges because of the dominance of functional experts in the organization. Phillips 66 can utilize new technology in the field of Oil & Gas Operations industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Building a culture of innovation
– managers at Phillips 66 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 & Gas Operations industry.
Use of Bitcoin and other crypto currencies for transactions in Oil & Gas Operations industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Phillips 66 in the Oil & Gas Operations industry. Now Phillips 66 can target international markets with far fewer capital restrictions requirements than the existing system.
Better consumer reach
– The expansion of the 5G network will help Phillips 66 to increase its market reach. Phillips 66 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Phillips 66 can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Threats Phillips 66 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Phillips 66 are -
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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Phillips 66 is facing in Oil & Gas Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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.
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.
Easy access to finance
– Easy access to finance in Oil & Gas Operations industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Phillips 66 can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Phillips 66 in Oil & Gas Operations industry. The Oil & Gas Operations 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.
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 Phillips 66.
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. Phillips 66 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.
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.
Technology acceleration in Forth Industrial Revolution
– Phillips 66 has witnessed rapid integration of technology during Covid-19 in the Oil & Gas Operations industry. As one of the leading players in the industry, Phillips 66 needs to keep up with the evolution of technology in the Oil & Gas Operations 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.
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.
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.
