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 – challanges to central banks by blockchain based private currencies, increasing government debt because of Covid-19 spendings, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China, talent flight as more people leaving formal jobs, increasing household debt because of falling income levels,
technology disruption, increasing commodity prices, 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 -
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.
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.
Ability to lead change in Oil Well Services & Equipment
– Zhenhai Petrochemical is one of the leading players in the Oil Well Services & Equipment industry in China. Over the years it has not only transformed the business landscape in the Oil Well Services & Equipment industry in China but also across the existing markets. The ability to lead change has enabled Zhenhai Petrochemical in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Innovation driven organization
– Zhenhai Petrochemical is one of the most innovative firm in Oil Well Services & Equipment sector.
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.
Learning organization
- Zhenhai Petrochemical 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 Zhenhai Petrochemical is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Zhenhai Petrochemical emphasize – knowledge, initiative, and innovation.
Ability to recruit top talent
– Zhenhai Petrochemical is one of the leading players in the Oil Well Services & Equipment industry in China. It is in a position to attract the best talent available in China. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Operational resilience
– The operational resilience strategy of Zhenhai Petrochemical comprises – understanding the underlying the factors in the Oil Well Services & Equipment industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
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.
Analytics focus
– Zhenhai Petrochemical 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.
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.
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 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.
Increasing silos among functional specialists
– The organizational structure of Zhenhai Petrochemical is dominated by functional specialists. It is not different from other players in the Oil Well Services & Equipment industry, but Zhenhai Petrochemical needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Zhenhai Petrochemical to focus more on services in the Oil Well Services & Equipment industry rather than just following the product oriented approach.
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.
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.
Low market penetration in new markets
– Outside its home market of China, Zhenhai Petrochemical needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High dependence on Zhenhai Petrochemical ‘s star products
– The top 2 products and services of Zhenhai Petrochemical 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 Zhenhai Petrochemical has relatively successful track record of launching new products.
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.
Aligning sales with marketing
– From the outside it seems that Zhenhai Petrochemical needs to have more collaboration between its sales team and marketing team. Sales professionals in the Oil Well Services & Equipment industry have deep experience in developing customer relationships. Marketing department at Zhenhai Petrochemical can leverage the sales team experience to cultivate customer relationships as Zhenhai Petrochemical is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the Oil Well Services & Equipment industry, Zhenhai Petrochemical needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
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.
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.
Zhenhai Petrochemical Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Zhenhai Petrochemical are -
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Zhenhai Petrochemical 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.
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.
Developing new processes and practices
– Zhenhai Petrochemical 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.
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. Zhenhai Petrochemical 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. Zhenhai Petrochemical 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 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.
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. Zhenhai Petrochemical can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Zhenhai Petrochemical 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.
Loyalty marketing
– Zhenhai Petrochemical 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.
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.
Threats Zhenhai Petrochemical External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Zhenhai Petrochemical are -
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.
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.
Increasing wage structure of Zhenhai Petrochemical
– 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 Zhenhai Petrochemical.
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.
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.
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.
Consumer confidence and its impact on Zhenhai Petrochemical demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Oil Well Services & Equipment industry and other sectors.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Zhenhai Petrochemical 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.
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.
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.
Shortening product life cycle
– it is one of the major threat that Zhenhai Petrochemical 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 Zhenhai Petrochemical 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.
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.