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, cloud computing is disrupting traditional business models, competitive advantages are harder to sustain because of technology dispersion, increasing transportation and logistics costs, central banks are concerned over increasing inflation, increasing energy prices, challanges to central banks by blockchain based private currencies,
digital marketing is dominated by two big players Facebook and Google, technology disruption, 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 -
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.
Effective Research and Development (R&D)
– Chevron has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Chevron staying ahead in the Oil & Gas - Integrated industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Analytics focus
– Chevron 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 & Gas - Integrated industry. The technology infrastructure of Germany 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.
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.
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.
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.
Innovation driven organization
– Chevron is one of the most innovative firm in Oil & Gas - Integrated sector.
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.
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.
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.
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.
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.
Weaknesses of Chevron | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Chevron are -
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 dependence on Chevron ‘s star products
– The top 2 products and services of Chevron still accounts for major business revenue. This dependence on star products in Oil & Gas - Integrated industry has resulted into insufficient focus on developing new products, even though Chevron has relatively successful track record of launching new products.
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.
Slow decision making process
– As mentioned earlier in the report, Chevron 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 & Gas - Integrated industry over the last five years. Chevron 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.
Low market penetration in new markets
– Outside its home market of Germany, Chevron needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Chevron has a high cash cycle compare to other players in the Oil & Gas - Integrated industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
No frontier risks strategy
– From the 10K / annual statement of Chevron, it seems that company is thinking out the frontier risks that can impact Oil & Gas - Integrated 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.
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.
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.
Skills based hiring in Oil & Gas - Integrated industry
– The stress on hiring functional specialists at Chevron 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.
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.
Chevron Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Chevron are -
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.
Better consumer reach
– The expansion of the 5G network will help Chevron to increase its market reach. Chevron 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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Chevron 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.
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.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Oil & Gas - Integrated industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Chevron 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. Chevron 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.
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.
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.
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.
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 Chevron 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.
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.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Oil & Gas - Integrated industry, but it has also influenced the consumer preferences. Chevron can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
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.
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.
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.
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.
Regulatory challenges
– Chevron 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 & Gas - Integrated industry regulations.
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 Chevron.
Stagnating economy with rate increase
– Chevron 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 & Gas - Integrated industry.
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.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Consumer confidence and its impact on Chevron 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 & Gas - Integrated industry and other sectors.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Chevron in Oil & Gas - Integrated industry. The Oil & Gas - Integrated 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 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.
