Chevron (CVX) SWOT Analysis / TOWS Matrix / MBA Resources
Oil & Gas - Integrated
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Chevron (Germany)
Based on various researches at Oak Spring University , Chevron is operating in a macro-environment that has been destablized by – wage bills are increasing, increasing government debt because of Covid-19 spendings, geopolitical disruptions, customer relationship management is fast transforming because of increasing concerns over data privacy, supply chains are disrupted by pandemic , increasing transportation and logistics costs, central banks are concerned over increasing inflation,
talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Chevron can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Chevron, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Chevron 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 Chevron can be done for the following purposes –
1. Strategic planning of Chevron
2. Improving business portfolio management of Chevron
3. Assessing feasibility of the new initiative in Germany
4. Making a Oil & Gas - Integrated sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Chevron
Strengths of Chevron | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Chevron are -
Sustainable margins compare to other players in Oil & Gas - Integrated industry
– Chevron has clearly differentiated products in the market place. This has enabled Chevron to fetch slight price premium compare to the competitors in the Oil & Gas - Integrated industry. The sustainable margins have also helped Chevron to invest into research and development (R&D) and innovation.
Successful track record of launching new products
– Chevron has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Chevron 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.
Low bargaining power of suppliers
– Suppliers of Chevron in the Energy sector have low bargaining power. Chevron has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Chevron to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Chevron 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.
Strong track record of project management in the Oil & Gas - Integrated industry
– Chevron is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Training and development
– Chevron 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.
Cross disciplinary teams
– Horizontal connected teams at the Chevron 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.
Ability to lead change in Oil & Gas - Integrated
– Chevron is one of the leading players in the Oil & Gas - Integrated industry in Germany. Over the years it has not only transformed the business landscape in the Oil & Gas - Integrated industry in Germany but also across the existing markets. The ability to lead change has enabled Chevron in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Diverse revenue streams
– Chevron is present in almost all the verticals within the Oil & Gas - Integrated industry. This has provided Chevron 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 Chevron in Oil & Gas - Integrated industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Highly skilled collaborators
– Chevron has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Oil & Gas - Integrated industry. Secondly the value chain collaborators of Chevron have helped the firm to develop new products and bring them quickly to the marketplace.
Learning organization
- Chevron 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 Chevron is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Chevron emphasize – knowledge, initiative, and innovation.
Weaknesses of Chevron | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Chevron are -
Need for greater diversity
– Chevron 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.
Increasing silos among functional specialists
– The organizational structure of Chevron is dominated by functional specialists. It is not different from other players in the Oil & Gas - Integrated industry, but Chevron needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Chevron to focus more on services in the Oil & Gas - Integrated industry rather than just following the product oriented approach.
Slow to strategic competitive environment developments
– As Chevron is one of the leading players in the Oil & Gas - Integrated industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Oil & Gas - Integrated industry in last five years.
Lack of clear differentiation of Chevron products
– To increase the profitability and margins on the products, Chevron needs to provide more differentiated products than what it is currently offering in the marketplace.
Ability to respond to the competition
– As the decision making is very deliberative at Chevron, in the dynamic environment of Oil & Gas - Integrated industry it has struggled to respond to the nimble upstart competition. Chevron has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Products dominated business model
– Even though Chevron has some of the most successful models in the Oil & Gas - Integrated industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Chevron should strive to include more intangible value offerings along with its core products and services.
High bargaining power of channel partners in Oil & Gas - Integrated industry
– because of the regulatory requirements in Germany, Chevron 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 & Gas - Integrated industry.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Chevron is slow explore the new channels of communication. These new channels of communication can help Chevron to provide better information regarding Oil & Gas - Integrated products and services. It can also build an online community to further reach out to potential customers.
Employees’ less understanding of Chevron strategy
– From the outside it seems that the employees of Chevron 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 operating costs
– Compare to the competitors, Chevron has high operating costs in the Oil & Gas - Integrated industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Chevron lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, Chevron has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Oil & Gas - Integrated industry using digital technology.
Chevron Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Chevron are -
Use of Bitcoin and other crypto currencies for transactions in Oil & Gas - Integrated industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Chevron in the Oil & Gas - Integrated industry. Now Chevron can target international markets with far fewer capital restrictions requirements than the existing system.
Manufacturing automation
– Chevron can use the latest technology developments to improve its manufacturing and designing process in Oil & Gas - Integrated 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.
Leveraging digital technologies
– Chevron 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.
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. Chevron can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Chevron 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 Chevron 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 Chevron can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Buying journey improvements
– Chevron can improve the customer journey of consumers in the Oil & Gas - Integrated 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.
Loyalty marketing
– Chevron 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
– Chevron has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Oil & Gas - Integrated sector. This continuous investment in analytics has enabled Chevron to build a competitive advantage using analytics. The analytics driven competitive advantage can help Chevron 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, Chevron is facing challenges because of the dominance of functional experts in the organization. Chevron can utilize new technology in the field of Oil & Gas - Integrated industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Learning at scale
– Online learning technologies has now opened space for Chevron 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.
Developing new processes and practices
– Chevron can develop new processes and procedures in Oil & Gas - Integrated 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.
Building a culture of innovation
– managers at Chevron 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 & Gas - Integrated industry.
Threats Chevron External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Chevron are -
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. Chevron needs to understand the core reasons impacting the Oil & Gas - Integrated industry. This will help it in building a better workplace.
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 Chevron in the Oil & Gas - Integrated sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Chevron 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 & Gas - Integrated sector.
Increasing wage structure of Chevron
– 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 Chevron.
High dependence on third party suppliers
– Chevron 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.
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. Chevron 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 acceleration in Forth Industrial Revolution
– Chevron has witnessed rapid integration of technology during Covid-19 in the Oil & Gas - Integrated industry. As one of the leading players in the industry, Chevron needs to keep up with the evolution of technology in the Oil & Gas - Integrated 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 & Gas - Integrated industry are lowering. It can presents Chevron with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Oil & Gas - Integrated sector.
Environmental challenges
– Chevron 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. Chevron can take advantage of this fund but it will also bring new competitors in the Oil & Gas - Integrated industry.
Easy access to finance
– Easy access to finance in Oil & Gas - Integrated industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Chevron 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, Chevron 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 Chevron prominent markets.
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.
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.
Weighted SWOT Analysis of Chevron Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Chevron 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 Chevron 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 Chevron 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 Chevron 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 Chevron needs to make to build a sustainable competitive advantage.