CNOOC (883) SWOT Analysis / TOWS Matrix / MBA Resources
Oil & Gas Operations
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for CNOOC (Hong Kong)
Based on various researches at Oak Spring University , CNOOC is operating in a macro-environment that has been destablized by – central banks are concerned over increasing inflation, increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, supply chains are disrupted by pandemic , competitive advantages are harder to sustain because of technology dispersion, there is increasing trade war between United States & China, increasing commodity prices,
wage bills are increasing, 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 CNOOC can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the CNOOC, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which CNOOC 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 CNOOC can be done for the following purposes –
1. Strategic planning of CNOOC
2. Improving business portfolio management of CNOOC
3. Assessing feasibility of the new initiative in Hong Kong
4. Making a Oil & Gas Operations sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of CNOOC
Strengths of CNOOC | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of CNOOC are -
Diverse revenue streams
– CNOOC is present in almost all the verticals within the Oil & Gas Operations industry. This has provided CNOOC 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.
Innovation driven organization
– CNOOC is one of the most innovative firm in Oil & Gas Operations sector.
High brand equity
– CNOOC has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled CNOOC to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Oil & Gas Operations industry
– CNOOC has clearly differentiated products in the market place. This has enabled CNOOC to fetch slight price premium compare to the competitors in the Oil & Gas Operations industry. The sustainable margins have also helped CNOOC to invest into research and development (R&D) and innovation.
Analytics focus
– CNOOC 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 Operations industry. The technology infrastructure of Hong Kong 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.
Highly skilled collaborators
– CNOOC 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 Operations industry. Secondly the value chain collaborators of CNOOC have helped the firm to develop new products and bring them quickly to the marketplace.
Ability to lead change in Oil & Gas Operations
– CNOOC is one of the leading players in the Oil & Gas Operations industry in Hong Kong. Over the years it has not only transformed the business landscape in the Oil & Gas Operations industry in Hong Kong but also across the existing markets. The ability to lead change has enabled CNOOC in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Digital Transformation in Oil & Gas Operations industry
- digital transformation varies from industry to industry. For CNOOC digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. CNOOC 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.
Learning organization
- CNOOC 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 CNOOC is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at CNOOC emphasize – knowledge, initiative, and innovation.
Superior customer experience
– The customer experience strategy of CNOOC in Oil & Gas Operations industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Cross disciplinary teams
– Horizontal connected teams at the CNOOC 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.
Low bargaining power of suppliers
– Suppliers of CNOOC in the Energy sector have low bargaining power. CNOOC has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps CNOOC to manage not only supply disruptions but also source products at highly competitive prices.
Weaknesses of CNOOC | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of CNOOC are -
Skills based hiring in Oil & Gas Operations industry
– The stress on hiring functional specialists at CNOOC 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.
Need for greater diversity
– CNOOC 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.
High bargaining power of channel partners in Oil & Gas Operations industry
– because of the regulatory requirements in Hong Kong, CNOOC 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 Operations industry.
Lack of clear differentiation of CNOOC products
– To increase the profitability and margins on the products, CNOOC needs to provide more differentiated products than what it is currently offering in the marketplace.
Employees’ less understanding of CNOOC strategy
– From the outside it seems that the employees of CNOOC 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.
Slow decision making process
– As mentioned earlier in the report, CNOOC 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 Operations industry over the last five years. CNOOC 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.
High operating costs
– Compare to the competitors, CNOOC has high operating costs in the Oil & Gas Operations industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract CNOOC lucrative customers.
Capital Spending Reduction
– Even during the low interest decade, CNOOC 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 Operations industry using digital technology.
Ability to respond to the competition
– As the decision making is very deliberative at CNOOC, in the dynamic environment of Oil & Gas Operations industry it has struggled to respond to the nimble upstart competition. CNOOC has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, CNOOC is slow explore the new channels of communication. These new channels of communication can help CNOOC to provide better information regarding Oil & Gas Operations products and services. It can also build an online community to further reach out to potential customers.
High cash cycle compare to competitors
CNOOC has a high cash cycle compare to other players in the Oil & Gas Operations industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
CNOOC Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of CNOOC are -
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. CNOOC can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Oil & Gas Operations industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. CNOOC 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. CNOOC 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.
Manufacturing automation
– CNOOC can use the latest technology developments to improve its manufacturing and designing process in Oil & Gas Operations 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.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for CNOOC to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for CNOOC to hire the very best people irrespective of their geographical location.
Building a culture of innovation
– managers at CNOOC 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 Operations industry.
Learning at scale
– Online learning technologies has now opened space for CNOOC 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.
Buying journey improvements
– CNOOC can improve the customer journey of consumers in the Oil & Gas Operations 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
– CNOOC 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.
Better consumer reach
– The expansion of the 5G network will help CNOOC to increase its market reach. CNOOC 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.
Developing new processes and practices
– CNOOC can develop new processes and procedures in Oil & Gas Operations 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
– CNOOC 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.
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 CNOOC 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.
Low interest rates
– Even though inflation is raising its head in most developed economies, CNOOC 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.
Threats CNOOC External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of CNOOC are -
Increasing wage structure of CNOOC
– 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 CNOOC.
Shortening product life cycle
– it is one of the major threat that CNOOC is facing in Oil & Gas Operations sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Easy access to finance
– Easy access to finance in Oil & Gas Operations industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. CNOOC can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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 CNOOC business can come under increasing regulations regarding data privacy, data security, etc.
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. CNOOC needs to understand the core reasons impacting the Oil & Gas Operations industry. This will help it in building a better workplace.
Environmental challenges
– CNOOC 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. CNOOC can take advantage of this fund but it will also bring new competitors in the Oil & Gas Operations industry.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Oil & Gas Operations industry are lowering. It can presents CNOOC with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Oil & Gas Operations sector.
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. CNOOC 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
– CNOOC 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 Operations 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.
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 CNOOC in the Oil & Gas Operations sector and impact the bottomline of the organization.
Consumer confidence and its impact on CNOOC 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 Operations industry and other sectors.
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 CNOOC.
Weighted SWOT Analysis of CNOOC Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at CNOOC 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 CNOOC 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 CNOOC 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 CNOOC 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 CNOOC needs to make to build a sustainable competitive advantage.