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 – increasing household debt because of falling income levels, increasing energy prices, there is increasing trade war between United States & China, cloud computing is disrupting traditional business models, digital marketing is dominated by two big players Facebook and Google, supply chains are disrupted by pandemic , technology disruption,
challanges to central banks by blockchain based private currencies, banking and financial system is disrupted by Bitcoin and other crypto currencies, 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 -
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.
Effective Research and Development (R&D)
– Zhenhai Petrochemical has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Zhenhai Petrochemical 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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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 operating costs
– Compare to the competitors, Zhenhai Petrochemical has high operating costs in the Oil Well Services & Equipment industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Zhenhai Petrochemical lucrative customers.
Products dominated business model
– Even though Zhenhai Petrochemical 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. Zhenhai Petrochemical should strive to include more intangible value offerings along with its core products and services.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Zhenhai Petrochemical supply chain. Even after few cautionary changes, Zhenhai Petrochemical is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Zhenhai Petrochemical vulnerable to further global disruptions in South East Asia.
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.
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.
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.
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.
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.
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.
Lack of clear differentiation of Zhenhai Petrochemical products
– To increase the profitability and margins on the products, Zhenhai Petrochemical needs to provide more differentiated products than what it is currently offering in the marketplace.
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.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Zhenhai Petrochemical is facing challenges because of the dominance of functional experts in the organization. Zhenhai Petrochemical can utilize new technology in the field of Oil Well Services & Equipment industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Manufacturing automation
– Zhenhai Petrochemical 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.
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.
Threats Zhenhai Petrochemical External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Zhenhai Petrochemical are -
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.
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.
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.
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.
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.
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. Zhenhai Petrochemical 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.
Stagnating economy with rate increase
– Zhenhai Petrochemical 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.
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.
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.
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.
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.
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.