Based on various researches at Oak Spring University , Shell Midstream Partners LP is operating in a macro-environment that has been destablized by – technology disruption, competitive advantages are harder to sustain because of technology dispersion, digital marketing is dominated by two big players Facebook and Google, 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,
increasing household debt because of falling income levels, central banks are concerned over increasing inflation, etc
Introduction to SWOT Analysis of Shell Midstream Partners LP
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Shell Midstream Partners LP can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Shell Midstream Partners LP, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Shell Midstream 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 Shell Midstream Partners LP can be done for the following purposes –
1. Strategic planning of Shell Midstream Partners LP
2. Improving business portfolio management of Shell Midstream 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 Shell Midstream Partners LP
Strengths of Shell Midstream Partners LP | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Shell Midstream Partners LP are -
Effective Research and Development (R&D)
– Shell Midstream Partners LP has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Shell Midstream 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.
Analytics focus
– Shell Midstream Partners LP 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 Well Services & Equipment 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.
Strong track record of project management in the Oil Well Services & Equipment industry
– Shell Midstream Partners LP is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Low bargaining power of suppliers
– Suppliers of Shell Midstream Partners LP in the Energy sector have low bargaining power. Shell Midstream Partners LP has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Shell Midstream Partners LP to manage not only supply disruptions but also source products at highly competitive prices.
Innovation driven organization
– Shell Midstream Partners LP is one of the most innovative firm in Oil Well Services & Equipment sector.
High brand equity
– Shell Midstream Partners LP has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Shell Midstream Partners LP to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Oil Well Services & Equipment industry
- digital transformation varies from industry to industry. For Shell Midstream Partners LP digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Shell Midstream 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.
Sustainable margins compare to other players in Oil Well Services & Equipment industry
– Shell Midstream Partners LP has clearly differentiated products in the market place. This has enabled Shell Midstream Partners LP to fetch slight price premium compare to the competitors in the Oil Well Services & Equipment industry. The sustainable margins have also helped Shell Midstream Partners LP to invest into research and development (R&D) and innovation.
Learning organization
- Shell Midstream Partners LP 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 Shell Midstream Partners LP is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Shell Midstream Partners LP emphasize – knowledge, initiative, and innovation.
Successful track record of launching new products
– Shell Midstream Partners LP has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Shell Midstream Partners LP 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.
Diverse revenue streams
– Shell Midstream Partners LP is present in almost all the verticals within the Oil Well Services & Equipment industry. This has provided Shell Midstream Partners LP 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 Shell Midstream 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.
Weaknesses of Shell Midstream Partners LP | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Shell Midstream Partners LP are -
Skills based hiring in Oil Well Services & Equipment industry
– The stress on hiring functional specialists at Shell Midstream 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.
Need for greater diversity
– Shell Midstream 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.
High cash cycle compare to competitors
Shell Midstream Partners LP has a high cash cycle compare to other players in the Oil Well Services & Equipment industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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 Shell Midstream Partners LP supply chain. Even after few cautionary changes, Shell Midstream Partners LP is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Shell Midstream Partners LP vulnerable to further global disruptions in South East Asia.
Increasing silos among functional specialists
– The organizational structure of Shell Midstream Partners LP is dominated by functional specialists. It is not different from other players in the Oil Well Services & Equipment industry, but Shell Midstream Partners LP needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Shell Midstream Partners LP to focus more on services in the Oil Well Services & Equipment industry rather than just following the product oriented approach.
Capital Spending Reduction
– Even during the low interest decade, Shell Midstream Partners LP 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.
Compensation and incentives
– The revenue per employee of Shell Midstream 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.
Ability to respond to the competition
– As the decision making is very deliberative at Shell Midstream Partners LP, in the dynamic environment of Oil Well Services & Equipment industry it has struggled to respond to the nimble upstart competition. Shell Midstream Partners LP has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to strategic competitive environment developments
– As Shell Midstream Partners LP 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 dependence on Shell Midstream Partners LP ‘s star products
– The top 2 products and services of Shell Midstream Partners LP 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 Shell Midstream Partners LP has relatively successful track record of launching new products.
Interest costs
– Compare to the competition, Shell Midstream 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.
Shell Midstream Partners LP Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Shell Midstream Partners LP are -
Creating value in data economy
– The success of analytics program of Shell Midstream Partners LP has opened avenues for new revenue streams for the organization in Oil Well Services & Equipment industry. This can help Shell Midstream Partners LP to build a more holistic ecosystem for Shell Midstream Partners LP products in the Oil Well Services & Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Learning at scale
– Online learning technologies has now opened space for Shell Midstream 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.
Building a culture of innovation
– managers at Shell Midstream 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.
Leveraging digital technologies
– Shell Midstream Partners LP 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.
Buying journey improvements
– Shell Midstream Partners LP 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.
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. Shell Midstream Partners LP can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Shell Midstream 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. Shell Midstream 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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Shell Midstream Partners LP 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Shell Midstream 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.
Manufacturing automation
– Shell Midstream 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.
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 Shell Midstream 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Shell Midstream Partners LP is facing challenges because of the dominance of functional experts in the organization. Shell Midstream Partners LP 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Shell Midstream 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 Shell Midstream 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.
Threats Shell Midstream Partners LP External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Shell Midstream Partners LP are -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil Well Services & Equipment industry are lowering. It can presents Shell Midstream Partners LP 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.
Environmental challenges
– Shell Midstream 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. Shell Midstream Partners LP can take advantage of this fund but it will also bring new competitors in the Oil Well Services & Equipment industry.
Shortening product life cycle
– it is one of the major threat that Shell Midstream Partners LP is facing in Oil Well Services & Equipment sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
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. Shell Midstream 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, Shell Midstream 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 Shell Midstream Partners LP prominent markets.
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. Shell Midstream 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Shell Midstream Partners LP 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.
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 Shell Midstream Partners LP.
Technology acceleration in Forth Industrial Revolution
– Shell Midstream 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, Shell Midstream 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.
Consumer confidence and its impact on Shell Midstream 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.
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. Shell Midstream Partners LP needs to understand the core reasons impacting the Oil Well Services & Equipment industry. This will help it in building a better workplace.
Increasing wage structure of Shell Midstream Partners LP
– 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 Shell Midstream 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.
Weighted SWOT Analysis of Shell Midstream Partners LP Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Shell Midstream 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 Shell Midstream 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 Shell Midstream 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 Shell Midstream 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 Shell Midstream Partners LP needs to make to build a sustainable competitive advantage.