Vallourec (VLLP) SWOT Analysis / TOWS Matrix / MBA Resources
Oil Well Services & Equipment
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Vallourec (Germany)
Based on various researches at Oak Spring University , Vallourec is operating in a macro-environment that has been destablized by – there is backlash against globalization, there is increasing trade war between United States & China, technology disruption, increasing transportation and logistics costs, supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, increasing inequality as vast percentage of new income is going to the top 1%,
increasing commodity prices, increasing household debt because of falling income levels, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Vallourec can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Vallourec, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Vallourec 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 Vallourec can be done for the following purposes –
1. Strategic planning of Vallourec
2. Improving business portfolio management of Vallourec
3. Assessing feasibility of the new initiative in Germany
4. Making a Oil Well Services & Equipment sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Vallourec
Strengths of Vallourec | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Vallourec are -
High brand equity
– Vallourec has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Vallourec to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Digital Transformation in Oil Well Services & Equipment industry
- digital transformation varies from industry to industry. For Vallourec digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Vallourec 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.
Cross disciplinary teams
– Horizontal connected teams at the Vallourec 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.
Strong track record of project management in the Oil Well Services & Equipment industry
– Vallourec is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Operational resilience
– The operational resilience strategy of Vallourec 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 Vallourec in the Energy sector have low bargaining power. Vallourec has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Vallourec to manage not only supply disruptions but also source products at highly competitive prices.
Diverse revenue streams
– Vallourec is present in almost all the verticals within the Oil Well Services & Equipment industry. This has provided Vallourec 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.
Effective Research and Development (R&D)
– Vallourec has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Vallourec 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.
Analytics focus
– Vallourec 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 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.
Innovation driven organization
– Vallourec is one of the most innovative firm in Oil Well Services & Equipment sector.
Learning organization
- Vallourec 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 Vallourec is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Vallourec emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of Vallourec in Oil Well Services & Equipment industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses of Vallourec | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Vallourec are -
High cash cycle compare to competitors
Vallourec 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.
Compensation and incentives
– The revenue per employee of Vallourec 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 Germany, Vallourec 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.
Products dominated business model
– Even though Vallourec 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. Vallourec 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 Vallourec supply chain. Even after few cautionary changes, Vallourec is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Vallourec vulnerable to further global disruptions in South East Asia.
Slow to strategic competitive environment developments
– As Vallourec 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
– Vallourec 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.
Workers concerns about automation
– As automation is fast increasing in the Oil Well Services & Equipment industry, Vallourec 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.
High operating costs
– Compare to the competitors, Vallourec 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 Vallourec lucrative customers.
Skills based hiring in Oil Well Services & Equipment industry
– The stress on hiring functional specialists at Vallourec 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.
Increasing silos among functional specialists
– The organizational structure of Vallourec is dominated by functional specialists. It is not different from other players in the Oil Well Services & Equipment industry, but Vallourec needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Vallourec to focus more on services in the Oil Well Services & Equipment industry rather than just following the product oriented approach.
Vallourec Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Vallourec are -
Learning at scale
– Online learning technologies has now opened space for Vallourec 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.
Creating value in data economy
– The success of analytics program of Vallourec has opened avenues for new revenue streams for the organization in Oil Well Services & Equipment industry. This can help Vallourec to build a more holistic ecosystem for Vallourec products in the Oil Well Services & Equipment industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Vallourec 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.
Better consumer reach
– The expansion of the 5G network will help Vallourec to increase its market reach. Vallourec 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.
Use of Bitcoin and other crypto currencies for transactions in Oil Well Services & Equipment industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Vallourec in the Oil Well Services & Equipment industry. Now Vallourec can target international markets with far fewer capital restrictions requirements than the existing system.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Vallourec 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 Vallourec to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Using analytics as competitive advantage
– Vallourec 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 Vallourec to build a competitive advantage using analytics. The analytics driven competitive advantage can help Vallourec to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Developing new processes and practices
– Vallourec 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.
Leveraging digital technologies
– Vallourec 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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Vallourec is facing challenges because of the dominance of functional experts in the organization. Vallourec 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.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Vallourec can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
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. Vallourec can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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. Vallourec can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Threats Vallourec External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Vallourec 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. Vallourec can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Consumer confidence and its impact on Vallourec 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.
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. Vallourec 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
– Vallourec 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.
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.
Technology acceleration in Forth Industrial Revolution
– Vallourec 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, Vallourec 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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Vallourec 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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Vallourec 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.
Environmental challenges
– Vallourec 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. Vallourec can take advantage of this fund but it will also bring new competitors in the Oil Well Services & Equipment industry.
Shortening product life cycle
– it is one of the major threat that Vallourec 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
– Vallourec 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 Vallourec
– 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 Vallourec.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Vallourec 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 Vallourec prominent markets.
Weighted SWOT Analysis of Vallourec Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Vallourec 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 Vallourec 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 Vallourec 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 Vallourec 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 Vallourec needs to make to build a sustainable competitive advantage.