ProPetro (PUMP) SWOT Analysis / TOWS Matrix / MBA Resources
Oil Well Services & Equipment
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for ProPetro (United States)
Based on various researches at Oak Spring University , ProPetro is operating in a macro-environment that has been destablized by – there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, wage bills are increasing, there is backlash against globalization, talent flight as more people leaving formal jobs, increasing transportation and logistics costs, challanges to central banks by blockchain based private currencies,
increasing energy prices, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that ProPetro can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the ProPetro, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which ProPetro 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 ProPetro can be done for the following purposes –
1. Strategic planning of ProPetro
2. Improving business portfolio management of ProPetro
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 ProPetro
Strengths of ProPetro | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of ProPetro are -
High switching costs
– The high switching costs that ProPetro 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
– ProPetro 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.
Digital Transformation in Oil Well Services & Equipment industry
- digital transformation varies from industry to industry. For ProPetro digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. ProPetro 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.
Learning organization
- ProPetro 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 ProPetro is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at ProPetro emphasize – knowledge, initiative, and innovation.
Strong track record of project management in the Oil Well Services & Equipment industry
– ProPetro is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
High brand equity
– ProPetro has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled ProPetro to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Ability to lead change in Oil Well Services & Equipment
– ProPetro 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 ProPetro in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of ProPetro in the Energy sector have low bargaining power. ProPetro has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps ProPetro to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– ProPetro is one of the most innovative firm in Oil Well Services & Equipment sector.
Cross disciplinary teams
– Horizontal connected teams at the ProPetro 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.
Ability to recruit top talent
– ProPetro 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.
Successful track record of launching new products
– ProPetro has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. ProPetro 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.
Weaknesses of ProPetro | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of ProPetro are -
Low market penetration in new markets
– Outside its home market of United States, ProPetro needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
No frontier risks strategy
– From the 10K / annual statement of ProPetro, 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.
Lack of clear differentiation of ProPetro products
– To increase the profitability and margins on the products, ProPetro needs to provide more differentiated products than what it is currently offering in the marketplace.
Compensation and incentives
– The revenue per employee of ProPetro 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.
Capital Spending Reduction
– Even during the low interest decade, ProPetro 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 Well Services & Equipment industry using digital technology.
Ability to respond to the competition
– As the decision making is very deliberative at ProPetro, in the dynamic environment of Oil Well Services & Equipment industry it has struggled to respond to the nimble upstart competition. ProPetro 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 ProPetro 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. ProPetro should strive to include more intangible value offerings along with its core products and services.
Slow to strategic competitive environment developments
– As ProPetro is one of the leading players in the Oil Well Services & Equipment industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Oil Well Services & Equipment industry in last five years.
High operating costs
– Compare to the competitors, ProPetro has high operating costs in the Oil Well Services & Equipment industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract ProPetro lucrative customers.
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 ProPetro supply chain. Even after few cautionary changes, ProPetro is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left ProPetro vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of ProPetro is dominated by functional specialists. It is not different from other players in the Oil Well Services & Equipment industry, but ProPetro needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help ProPetro to focus more on services in the Oil Well Services & Equipment industry rather than just following the product oriented approach.
ProPetro Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of ProPetro are -
Lowering marketing communication costs
– 5G expansion will open new opportunities for ProPetro 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.
Creating value in data economy
– The success of analytics program of ProPetro has opened avenues for new revenue streams for the organization in Oil Well Services & Equipment industry. This can help ProPetro to build a more holistic ecosystem for ProPetro products in the Oil Well Services & Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Developing new processes and practices
– ProPetro 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for ProPetro 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 ProPetro to hire the very best people irrespective of their geographical location.
Buying journey improvements
– ProPetro 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.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, ProPetro can use these opportunities to build new business models that can help the communities that ProPetro 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 ProPetro to increase its market reach. ProPetro 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.
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. ProPetro can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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 ProPetro in the Oil Well Services & Equipment industry. Now ProPetro can target international markets with far fewer capital restrictions requirements than the existing system.
Leveraging digital technologies
– ProPetro 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, ProPetro 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, ProPetro 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 ProPetro to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Oil Well Services & Equipment industry, but it has also influenced the consumer preferences. ProPetro can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Threats ProPetro External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of ProPetro are -
Environmental challenges
– ProPetro 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. ProPetro can take advantage of this fund but it will also bring new competitors in the Oil Well Services & Equipment industry.
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 ProPetro in the Oil Well Services & Equipment sector and impact the bottomline of the organization.
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. ProPetro needs to understand the core reasons impacting the Oil Well Services & Equipment industry. This will help it in building a better workplace.
Stagnating economy with rate increase
– ProPetro 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.
Regulatory challenges
– ProPetro 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.
High dependence on third party suppliers
– ProPetro 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil Well Services & Equipment industry are lowering. It can presents ProPetro 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 ProPetro 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.
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 ProPetro business can come under increasing regulations regarding data privacy, data security, etc.
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 ProPetro.
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.
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. ProPetro can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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. ProPetro 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.
Weighted SWOT Analysis of ProPetro Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at ProPetro 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 ProPetro 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 ProPetro 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 ProPetro 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 ProPetro needs to make to build a sustainable competitive advantage.