Semgroup (SEMG) SWOT Analysis / TOWS Matrix / MBA Resources
Oil Well Services & Equipment
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Semgroup (United States)
Based on various researches at Oak Spring University , Semgroup is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, increasing commodity prices, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China,
geopolitical disruptions, increasing inequality as vast percentage of new income is going to the top 1%, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Semgroup can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Semgroup, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Semgroup 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 Semgroup can be done for the following purposes –
1. Strategic planning of Semgroup
2. Improving business portfolio management of Semgroup
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 Semgroup
Strengths of Semgroup | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Semgroup are -
Sustainable margins compare to other players in Oil Well Services & Equipment industry
– Semgroup has clearly differentiated products in the market place. This has enabled Semgroup to fetch slight price premium compare to the competitors in the Oil Well Services & Equipment industry. The sustainable margins have also helped Semgroup to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Semgroup has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Semgroup 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.
Low bargaining power of suppliers
– Suppliers of Semgroup in the Energy sector have low bargaining power. Semgroup has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Semgroup to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Semgroup has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Oil Well Services & Equipment industry. Secondly the value chain collaborators of Semgroup have helped the firm to develop new products and bring them quickly to the marketplace.
Diverse revenue streams
– Semgroup is present in almost all the verticals within the Oil Well Services & Equipment industry. This has provided Semgroup 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.
Cross disciplinary teams
– Horizontal connected teams at the Semgroup 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.
High brand equity
– Semgroup has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Semgroup to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Semgroup 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 Semgroup is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Semgroup emphasize – knowledge, initiative, and innovation.
Innovation driven organization
– Semgroup is one of the most innovative firm in Oil Well Services & Equipment sector.
Organizational Resilience of Semgroup
– The covid-19 pandemic has put organizational resilience at the centre of everthing Semgroup does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Semgroup has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Semgroup 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.
Ability to recruit top talent
– Semgroup 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.
Weaknesses of Semgroup | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Semgroup are -
Skills based hiring in Oil Well Services & Equipment industry
– The stress on hiring functional specialists at Semgroup 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 dependence on Semgroup ‘s star products
– The top 2 products and services of Semgroup still accounts for major business revenue. This dependence on star products in Oil Well Services & Equipment industry has resulted into insufficient focus on developing new products, even though Semgroup has relatively successful track record of launching new products.
Employees’ less understanding of Semgroup strategy
– From the outside it seems that the employees of Semgroup 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.
Low market penetration in new markets
– Outside its home market of United States, Semgroup needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Interest costs
– Compare to the competition, Semgroup 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.
Products dominated business model
– Even though Semgroup 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. Semgroup should strive to include more intangible value offerings along with its core products and services.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Semgroup is slow explore the new channels of communication. These new channels of communication can help Semgroup 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.
Compensation and incentives
– The revenue per employee of Semgroup 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.
Lack of clear differentiation of Semgroup products
– To increase the profitability and margins on the products, Semgroup needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners in Oil Well Services & Equipment industry
– because of the regulatory requirements in United States, Semgroup 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.
No frontier risks strategy
– From the 10K / annual statement of Semgroup, 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.
Semgroup Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Semgroup are -
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Semgroup can use these opportunities to build new business models that can help the communities that Semgroup operates in. Secondly it can use opportunities from government spending in Oil Well Services & Equipment sector.
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. Semgroup 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. Semgroup 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Semgroup is facing challenges because of the dominance of functional experts in the organization. Semgroup 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.
Learning at scale
– Online learning technologies has now opened space for Semgroup 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.
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 Semgroup in the Oil Well Services & Equipment industry. Now Semgroup can target international markets with far fewer capital restrictions requirements than the existing system.
Using analytics as competitive advantage
– Semgroup 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 Semgroup to build a competitive advantage using analytics. The analytics driven competitive advantage can help Semgroup to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Leveraging digital technologies
– Semgroup 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Semgroup 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 Semgroup to hire the very best people irrespective of their geographical location.
Manufacturing automation
– Semgroup 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.
Building a culture of innovation
– managers at Semgroup 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.
Creating value in data economy
– The success of analytics program of Semgroup has opened avenues for new revenue streams for the organization in Oil Well Services & Equipment industry. This can help Semgroup to build a more holistic ecosystem for Semgroup products in the Oil Well Services & Equipment 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. Semgroup can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Semgroup 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 Semgroup to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Threats Semgroup External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Semgroup are -
Environmental challenges
– Semgroup 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. Semgroup can take advantage of this fund but it will also bring new competitors in the Oil Well Services & Equipment industry.
Technology acceleration in Forth Industrial Revolution
– Semgroup 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, Semgroup 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Semgroup 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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Semgroup 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 Semgroup prominent markets.
Stagnating economy with rate increase
– Semgroup 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.
Increasing wage structure of Semgroup
– 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 Semgroup.
Consumer confidence and its impact on Semgroup 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.
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.
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. Semgroup needs to understand the core reasons impacting the Oil Well Services & Equipment industry. This will help it in building a better workplace.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Semgroup 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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil Well Services & Equipment industry are lowering. It can presents Semgroup 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.
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 Semgroup in the Oil Well Services & Equipment sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Semgroup Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Semgroup 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 Semgroup 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 Semgroup 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 Semgroup 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 Semgroup needs to make to build a sustainable competitive advantage.
