SWOT Analysis / TOWS Matrix for Sinopec Oilfield Equipment (China)
Based on various researches at Oak Spring University , Sinopec Oilfield Equipment is operating in a macro-environment that has been destablized by – increasing government debt because of Covid-19 spendings, supply chains are disrupted by pandemic , wage bills are increasing, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, increasing energy prices, central banks are concerned over increasing inflation,
digital marketing is dominated by two big players Facebook and Google, technology disruption, etc
Introduction to SWOT Analysis of Sinopec Oilfield Equipment
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Sinopec Oilfield Equipment can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sinopec Oilfield Equipment, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment can be done for the following purposes –
1. Strategic planning of Sinopec Oilfield Equipment
2. Improving business portfolio management of Sinopec Oilfield Equipment
3. Assessing feasibility of the new initiative in China
4. Making a Oil Well Services & Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sinopec Oilfield Equipment
Strengths of Sinopec Oilfield Equipment | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sinopec Oilfield Equipment are -
Low bargaining power of suppliers
– Suppliers of Sinopec Oilfield Equipment in the Energy sector have low bargaining power. Sinopec Oilfield Equipment has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Sinopec Oilfield Equipment to manage not only supply disruptions but also source products at highly competitive prices.
Highly skilled collaborators
– Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment have helped the firm to develop new products and bring them quickly to the marketplace.
Analytics focus
– Sinopec Oilfield Equipment 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 China 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.
Learning organization
- Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Sinopec Oilfield Equipment emphasize – knowledge, initiative, and innovation.
Sustainable margins compare to other players in Oil Well Services & Equipment industry
– Sinopec Oilfield Equipment has clearly differentiated products in the market place. This has enabled Sinopec Oilfield Equipment to fetch slight price premium compare to the competitors in the Oil Well Services & Equipment industry. The sustainable margins have also helped Sinopec Oilfield Equipment to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Sinopec Oilfield Equipment has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sinopec Oilfield Equipment 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.
High brand equity
– Sinopec Oilfield Equipment has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sinopec Oilfield Equipment to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Sinopec Oilfield Equipment in Oil Well Services & Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Organizational Resilience of Sinopec Oilfield Equipment
– The covid-19 pandemic has put organizational resilience at the centre of everthing Sinopec Oilfield Equipment does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Effective Research and Development (R&D)
– Sinopec Oilfield Equipment has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Sinopec Oilfield Equipment 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.
Digital Transformation in Oil Well Services & Equipment industry
- digital transformation varies from industry to industry. For Sinopec Oilfield Equipment digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sinopec Oilfield Equipment 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.
Diverse revenue streams
– Sinopec Oilfield Equipment is present in almost all the verticals within the Oil Well Services & Equipment industry. This has provided Sinopec Oilfield Equipment 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.
Weaknesses of Sinopec Oilfield Equipment | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Sinopec Oilfield Equipment are -
Compensation and incentives
– The revenue per employee of Sinopec Oilfield Equipment 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.
Slow to strategic competitive environment developments
– As Sinopec Oilfield Equipment 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.
Skills based hiring in Oil Well Services & Equipment industry
– The stress on hiring functional specialists at Sinopec Oilfield Equipment 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.
Increasing silos among functional specialists
– The organizational structure of Sinopec Oilfield Equipment is dominated by functional specialists. It is not different from other players in the Oil Well Services & Equipment industry, but Sinopec Oilfield Equipment needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Sinopec Oilfield Equipment to focus more on services in the Oil Well Services & Equipment industry rather than just following the product oriented approach.
High cash cycle compare to competitors
Sinopec Oilfield Equipment 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.
Capital Spending Reduction
– Even during the low interest decade, Sinopec Oilfield Equipment 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.
Slow decision making process
– As mentioned earlier in the report, Sinopec Oilfield Equipment has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Oil Well Services & Equipment industry over the last five years. Sinopec Oilfield Equipment even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
No frontier risks strategy
– From the 10K / annual statement of Sinopec Oilfield Equipment, 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.
Interest costs
– Compare to the competition, Sinopec Oilfield Equipment 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.
High dependence on Sinopec Oilfield Equipment ‘s star products
– The top 2 products and services of Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment has relatively successful track record of launching new products.
Low market penetration in new markets
– Outside its home market of China, Sinopec Oilfield Equipment needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
Sinopec Oilfield Equipment Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Sinopec Oilfield Equipment are -
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. Sinopec Oilfield Equipment can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
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. Sinopec Oilfield Equipment can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Leveraging digital technologies
– Sinopec Oilfield Equipment 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
– Sinopec Oilfield Equipment 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.
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 Sinopec Oilfield Equipment 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.
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. Sinopec Oilfield Equipment 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. Sinopec Oilfield Equipment 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.
Learning at scale
– Online learning technologies has now opened space for Sinopec Oilfield Equipment 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.
Creating value in data economy
– The success of analytics program of Sinopec Oilfield Equipment has opened avenues for new revenue streams for the organization in Oil Well Services & Equipment industry. This can help Sinopec Oilfield Equipment to build a more holistic ecosystem for Sinopec Oilfield Equipment products in the Oil Well Services & Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.
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 Sinopec Oilfield Equipment in the Oil Well Services & Equipment industry. Now Sinopec Oilfield Equipment can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sinopec Oilfield Equipment 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.
Threats Sinopec Oilfield Equipment External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Sinopec Oilfield Equipment are -
Regulatory challenges
– Sinopec Oilfield Equipment 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.
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. Sinopec Oilfield Equipment 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, Sinopec Oilfield Equipment 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.
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.
Stagnating economy with rate increase
– Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment
– 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 Sinopec Oilfield Equipment.
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. Sinopec Oilfield Equipment needs to understand the core reasons impacting the Oil Well Services & Equipment industry. This will help it in building a better workplace.
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 Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment.
Consumer confidence and its impact on Sinopec Oilfield Equipment 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.
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. Sinopec Oilfield Equipment can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Environmental challenges
– Sinopec Oilfield Equipment 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. Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment in the Oil Well Services & Equipment sector and impact the bottomline of the organization.
Weighted SWOT Analysis of Sinopec Oilfield Equipment Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment needs to make to build a sustainable competitive advantage.