Based on various researches at Oak Spring University , Phillips 66 Partners LP is operating in a macro-environment that has been destablized by – geopolitical disruptions, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, increasing inequality as vast percentage of new income is going to the top 1%, increasing government debt because of Covid-19 spendings, competitive advantages are harder to sustain because of technology dispersion, cloud computing is disrupting traditional business models,
central banks are concerned over increasing inflation, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of Phillips 66 Partners LP
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Phillips 66 Partners LP can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Phillips 66 Partners LP, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Phillips 66 Partners LP 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 Partners LP can be done for the following purposes –
1. Strategic planning of Phillips 66 Partners LP
2. Improving business portfolio management of Phillips 66 Partners LP
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 Phillips 66 Partners LP
Strengths of Phillips 66 Partners LP | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Phillips 66 Partners LP are -
Ability to recruit top talent
– Phillips 66 Partners LP 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.
Sustainable margins compare to other players in Oil Well Services & Equipment industry
– Phillips 66 Partners LP has clearly differentiated products in the market place. This has enabled Phillips 66 Partners LP to fetch slight price premium compare to the competitors in the Oil Well Services & Equipment industry. The sustainable margins have also helped Phillips 66 Partners LP to invest into research and development (R&D) and innovation.
Training and development
– Phillips 66 Partners LP 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 Partners LP 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 Partners LP 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 Phillips 66 Partners LP digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Phillips 66 Partners LP 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.
Organizational Resilience of Phillips 66 Partners LP
– The covid-19 pandemic has put organizational resilience at the centre of everthing Phillips 66 Partners LP does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Operational resilience
– The operational resilience strategy of Phillips 66 Partners LP 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.
Effective Research and Development (R&D)
– Phillips 66 Partners LP has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Phillips 66 Partners LP 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.
Low bargaining power of suppliers
– Suppliers of Phillips 66 Partners LP in the Energy sector have low bargaining power. Phillips 66 Partners LP has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Phillips 66 Partners LP to manage not only supply disruptions but also source products at highly competitive prices.
High brand equity
– Phillips 66 Partners LP has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Phillips 66 Partners LP 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 Partners LP in Oil Well Services & Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Phillips 66 Partners LP | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Phillips 66 Partners LP are -
Low market penetration in new markets
– Outside its home market of United States, Phillips 66 Partners LP needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 Partners LP supply chain. Even after few cautionary changes, Phillips 66 Partners LP is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Phillips 66 Partners LP vulnerable to further global disruptions in South East Asia.
Skills based hiring in Oil Well Services & Equipment industry
– The stress on hiring functional specialists at Phillips 66 Partners LP 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.
High bargaining power of channel partners in Oil Well Services & Equipment industry
– because of the regulatory requirements in United States, Phillips 66 Partners LP 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Phillips 66 Partners LP is slow explore the new channels of communication. These new channels of communication can help Phillips 66 Partners LP to provide better information regarding Oil Well Services & Equipment products and services. It can also build an online community to further reach out to potential customers.
Interest costs
– Compare to the competition, Phillips 66 Partners LP 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.
Ability to respond to the competition
– As the decision making is very deliberative at Phillips 66 Partners LP, in the dynamic environment of Oil Well Services & Equipment industry it has struggled to respond to the nimble upstart competition. Phillips 66 Partners LP has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Phillips 66 Partners LP 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. Phillips 66 Partners LP should strive to include more intangible value offerings along with its core products and services.
Need for greater diversity
– Phillips 66 Partners LP 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.
Aligning sales with marketing
– From the outside it seems that Phillips 66 Partners LP 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 Phillips 66 Partners LP can leverage the sales team experience to cultivate customer relationships as Phillips 66 Partners LP is planning to shift buying processes online.
Compensation and incentives
– The revenue per employee of Phillips 66 Partners LP 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.
Phillips 66 Partners LP Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Phillips 66 Partners LP 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. Phillips 66 Partners LP 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 Phillips 66 Partners LP to increase its market reach. Phillips 66 Partners LP 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Phillips 66 Partners LP 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 Partners LP to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Developing new processes and practices
– Phillips 66 Partners LP 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.
Using analytics as competitive advantage
– Phillips 66 Partners LP 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 Phillips 66 Partners LP to build a competitive advantage using analytics. The analytics driven competitive advantage can help Phillips 66 Partners LP to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 Partners LP can use these opportunities to build new business models that can help the communities that Phillips 66 Partners LP operates in. Secondly it can use opportunities from government spending in Oil Well Services & Equipment sector.
Manufacturing automation
– Phillips 66 Partners LP can use the latest technology developments to improve its manufacturing and designing process in Oil Well Services & Equipment sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Low interest rates
– Even though inflation is raising its head in most developed economies, Phillips 66 Partners LP 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.
Building a culture of innovation
– managers at Phillips 66 Partners LP 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.
Learning at scale
– Online learning technologies has now opened space for Phillips 66 Partners LP 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. Phillips 66 Partners LP 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 Partners LP 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.
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 Partners LP 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.
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 Phillips 66 Partners LP in the Oil Well Services & Equipment industry. Now Phillips 66 Partners LP can target international markets with far fewer capital restrictions requirements than the existing system.
Threats Phillips 66 Partners LP External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Phillips 66 Partners LP are -
Regulatory challenges
– Phillips 66 Partners LP 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Phillips 66 Partners LP 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.
Stagnating economy with rate increase
– Phillips 66 Partners LP 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.
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 Partners LP 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.
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. Phillips 66 Partners LP can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Phillips 66 Partners LP 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 Partners LP prominent markets.
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 Partners LP.
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.
High dependence on third party suppliers
– Phillips 66 Partners LP 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.
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 Partners LP needs to understand the core reasons impacting the Oil Well Services & Equipment industry. This will help it in building a better workplace.
Consumer confidence and its impact on Phillips 66 Partners LP 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.
Technology acceleration in Forth Industrial Revolution
– Phillips 66 Partners LP 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, Phillips 66 Partners LP 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.
Environmental challenges
– Phillips 66 Partners LP 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. Phillips 66 Partners LP can take advantage of this fund but it will also bring new competitors in the Oil Well Services & Equipment industry.
Weighted SWOT Analysis of Phillips 66 Partners LP Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Phillips 66 Partners LP 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 Partners LP 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 Partners LP 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 Partners LP 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 Partners LP needs to make to build a sustainable competitive advantage.