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 transportation and logistics costs, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, customer relationship management is fast transforming because of increasing concerns over data privacy, digital marketing is dominated by two big players Facebook and Google, banking and financial system is disrupted by Bitcoin and other crypto currencies,
increasing energy prices, challanges to central banks by blockchain based private currencies, 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 -
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.
Training and development
– Sinopec Oilfield Equipment 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.
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.
Cross disciplinary teams
– Horizontal connected teams at the Sinopec Oilfield Equipment are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Oil Well Services & Equipment industry
- digital transformation varies from industry to industry. For 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.
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.
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.
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.
High switching costs
– The high switching costs that Sinopec Oilfield Equipment 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.
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.
Innovation driven organization
– Sinopec Oilfield Equipment is one of the most innovative firm in Oil Well Services & Equipment sector.
Strong track record of project management in the Oil Well Services & Equipment industry
– Sinopec Oilfield Equipment is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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 -
Employees’ less understanding of Sinopec Oilfield Equipment strategy
– From the outside it seems that the employees of Sinopec Oilfield Equipment 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.
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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sinopec Oilfield Equipment is slow explore the new channels of communication. These new channels of communication can help Sinopec Oilfield Equipment 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.
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.
Ability to respond to the competition
– As the decision making is very deliberative at Sinopec Oilfield Equipment, in the dynamic environment of Oil Well Services & Equipment industry it has struggled to respond to the nimble upstart competition. Sinopec Oilfield Equipment has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
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.
Products dominated business model
– Even though Sinopec Oilfield Equipment 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. Sinopec Oilfield Equipment should strive to include more intangible value offerings along with its core products and services.
Lack of clear differentiation of Sinopec Oilfield Equipment products
– To increase the profitability and margins on the products, Sinopec Oilfield Equipment needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
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 -
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.
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.
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.
Using analytics as competitive advantage
– Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sinopec Oilfield Equipment to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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.
Developing new processes and practices
– Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment to hire the very best people irrespective of their geographical location.
Loyalty marketing
– Sinopec Oilfield Equipment has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Sinopec Oilfield Equipment can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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.
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 -
Shortening product life cycle
– it is one of the major threat that Sinopec Oilfield Equipment is facing in Oil Well Services & Equipment sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sinopec Oilfield Equipment 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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil Well Services & Equipment industry are lowering. It can presents Sinopec Oilfield Equipment 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.
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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sinopec Oilfield Equipment 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 Sinopec Oilfield Equipment prominent markets.
High dependence on third party suppliers
– Sinopec Oilfield Equipment 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.
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.
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.
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.
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 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.