SWOT Analysis / TOWS Matrix for Zhenhai Petrochemical (China)
Based on various researches at Oak Spring University , Zhenhai Petrochemical is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, increasing commodity prices, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization, central banks are concerned over increasing inflation, increasing government debt because of Covid-19 spendings,
digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , etc
Introduction to SWOT Analysis of Zhenhai Petrochemical
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Zhenhai Petrochemical can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Zhenhai Petrochemical, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Zhenhai Petrochemical 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 Zhenhai Petrochemical can be done for the following purposes –
1. Strategic planning of Zhenhai Petrochemical
2. Improving business portfolio management of Zhenhai Petrochemical
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 Zhenhai Petrochemical
Strengths of Zhenhai Petrochemical | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Zhenhai Petrochemical are -
Strong track record of project management in the Oil Well Services & Equipment industry
– Zhenhai Petrochemical is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Organizational Resilience of Zhenhai Petrochemical
– The covid-19 pandemic has put organizational resilience at the centre of everthing Zhenhai Petrochemical does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Digital Transformation in Oil Well Services & Equipment industry
- digital transformation varies from industry to industry. For Zhenhai Petrochemical digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Zhenhai Petrochemical 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.
Superior customer experience
– The customer experience strategy of Zhenhai Petrochemical in Oil Well Services & Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Diverse revenue streams
– Zhenhai Petrochemical is present in almost all the verticals within the Oil Well Services & Equipment industry. This has provided Zhenhai Petrochemical 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.
Successful track record of launching new products
– Zhenhai Petrochemical has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Zhenhai Petrochemical 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.
Innovation driven organization
– Zhenhai Petrochemical is one of the most innovative firm in Oil Well Services & Equipment sector.
Highly skilled collaborators
– Zhenhai Petrochemical 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 Zhenhai Petrochemical have helped the firm to develop new products and bring them quickly to the marketplace.
High brand equity
– Zhenhai Petrochemical has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Zhenhai Petrochemical to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Oil Well Services & Equipment industry
– Zhenhai Petrochemical has clearly differentiated products in the market place. This has enabled Zhenhai Petrochemical to fetch slight price premium compare to the competitors in the Oil Well Services & Equipment industry. The sustainable margins have also helped Zhenhai Petrochemical to invest into research and development (R&D) and innovation.
Training and development
– Zhenhai Petrochemical 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.
Low bargaining power of suppliers
– Suppliers of Zhenhai Petrochemical in the Energy sector have low bargaining power. Zhenhai Petrochemical has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Zhenhai Petrochemical to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of Zhenhai Petrochemical | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Zhenhai Petrochemical are -
High cash cycle compare to competitors
Zhenhai Petrochemical 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.
Ability to respond to the competition
– As the decision making is very deliberative at Zhenhai Petrochemical, in the dynamic environment of Oil Well Services & Equipment industry it has struggled to respond to the nimble upstart competition. Zhenhai Petrochemical has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
No frontier risks strategy
– From the 10K / annual statement of Zhenhai Petrochemical, 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.
Slow to strategic competitive environment developments
– As Zhenhai Petrochemical 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.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Zhenhai Petrochemical is slow explore the new channels of communication. These new channels of communication can help Zhenhai Petrochemical 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 Zhenhai Petrochemical 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.
High bargaining power of channel partners in Oil Well Services & Equipment industry
– because of the regulatory requirements in China, Zhenhai Petrochemical 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.
Need for greater diversity
– Zhenhai Petrochemical 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.
Interest costs
– Compare to the competition, Zhenhai Petrochemical 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.
Slow decision making process
– As mentioned earlier in the report, Zhenhai Petrochemical 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. Zhenhai Petrochemical 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.
Skills based hiring in Oil Well Services & Equipment industry
– The stress on hiring functional specialists at Zhenhai Petrochemical 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.
Zhenhai Petrochemical Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Zhenhai Petrochemical are -
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 Zhenhai Petrochemical 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.
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. Zhenhai Petrochemical can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Using analytics as competitive advantage
– Zhenhai Petrochemical 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 Zhenhai Petrochemical to build a competitive advantage using analytics. The analytics driven competitive advantage can help Zhenhai Petrochemical to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Zhenhai Petrochemical 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 Zhenhai Petrochemical to hire the very best people irrespective of their geographical location.
Better consumer reach
– The expansion of the 5G network will help Zhenhai Petrochemical to increase its market reach. Zhenhai Petrochemical will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Learning at scale
– Online learning technologies has now opened space for Zhenhai Petrochemical 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.
Leveraging digital technologies
– Zhenhai Petrochemical 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
– Zhenhai Petrochemical 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.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Zhenhai Petrochemical 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 Zhenhai Petrochemical to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Zhenhai Petrochemical can use these opportunities to build new business models that can help the communities that Zhenhai Petrochemical operates in. Secondly it can use opportunities from government spending in Oil Well Services & Equipment sector.
Building a culture of innovation
– managers at Zhenhai Petrochemical 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Zhenhai Petrochemical can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Creating value in data economy
– The success of analytics program of Zhenhai Petrochemical has opened avenues for new revenue streams for the organization in Oil Well Services & Equipment industry. This can help Zhenhai Petrochemical to build a more holistic ecosystem for Zhenhai Petrochemical products in the Oil Well Services & Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Threats Zhenhai Petrochemical External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Zhenhai Petrochemical are -
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. Zhenhai Petrochemical needs to understand the core reasons impacting the Oil Well Services & Equipment industry. This will help it in building a better workplace.
Regulatory challenges
– Zhenhai Petrochemical 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.
Environmental challenges
– Zhenhai Petrochemical 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. Zhenhai Petrochemical can take advantage of this fund but it will also bring new competitors 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 Zhenhai Petrochemical 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.
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 Zhenhai Petrochemical.
High dependence on third party suppliers
– Zhenhai Petrochemical 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.
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.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Zhenhai Petrochemical 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 Zhenhai Petrochemical prominent markets.
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 Zhenhai Petrochemical in the Oil Well Services & Equipment sector and impact the bottomline of the organization.
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 Zhenhai Petrochemical business can come under increasing regulations regarding data privacy, data security, etc.
Technology acceleration in Forth Industrial Revolution
– Zhenhai Petrochemical 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, Zhenhai Petrochemical 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.
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. Zhenhai Petrochemical can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Weighted SWOT Analysis of Zhenhai Petrochemical Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Zhenhai Petrochemical 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 Zhenhai Petrochemical 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 Zhenhai Petrochemical 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 Zhenhai Petrochemical 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 Zhenhai Petrochemical needs to make to build a sustainable competitive advantage.
