Esso SWOT Analysis / Matrix

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SWOT analysis is a strategic planning tool that can be used by Esso managers to do a situational analysis of the company . It is a handy technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Esso is facing in its current business environment.

The Esso is one of the leading organizatations in its industry. Esso maintains its dominant position in market by critically analyzing and reviewing the SWOT analysis. SWOT analysis an immensenly interactive process and requires effective coordination among various departments within the company such as – marketing, finance, operations, management information systems and strategic planning.

The SWOT Analysis framework facilitates an organization to identify the internal strategic factors such as -strengths and weaknesses, & external strategic factors such as - opportunities and threats. It leads to a 2X2 matrix – also called SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the Esso to develop four types of strategies:

SO (strengths-opportunities) Strategies
WO (weaknesses-opportunities) Strategies
ST (strengths-threats) Strategies
WT (weaknesses-threats) Strategies

SWOT Matrix Strategies Objective

The main purpose of SWOT matrix is to identify the strategies that a firm can use to exploit external opportunities, counter threats, and build on & protect Esso strengths, and eradicate its weaknesses.

Step by Step Guide to Esso SWOT Analysis

Strengths of Esso – Internal Strategic Factors

As one of the leading companies in its industry, Esso has numerous strengths that enable it to thrive in the market place. These strengths not only help it to protect the market share in existing markets but also help in penetrating new markets. Based on Fern Fort University extensive research – some of the strengths of Esso are –

Good Returns on Capital Expenditure – Esso is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
Superb Performance in New Markets – Esso has built expertise at entering new markets and making success of them. The expansion has helped the organization to build new revenue stream and diversify the economic cycle risk in the markets it operates in.
Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
High level of customer satisfaction – the company with its dedicated customer relationship management department has able to achieve a high level of customer satisfaction among present customers and good brand equity among the potential customers.
Highly skilled workforce through successful training and learning programs. Esso is investing huge resources in training and development of its employees resulting in a workforce that is not only highly skilled but also motivated to achieve more.
Strong Free Cash Flow – Esso has strong free cash flows that provide resources in the hand of the company to expand into new projects.
Highly successful at Go To Market strategies for its products.
Automation of activities brought consistency of quality to Esso products and has enabled the company to scale up and scale down based on the demand conditions in the market.

Weakness of Esso – Internal Strategic Factors

Weakness are the areas where Esso can improve upon. Strategy is about making choices and weakness are the areas where a company can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

High attrition rate in work force – compare to other organizations in the industry Esso has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Esso needs to put more money in technology to integrate the processes across the board. Right now the investment in technologies is not at par with the vision of the company.
Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
The company has not being able to tackle the challenges present by the new entrants in the segment and has lost small market share in the niche categories. Esso has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
Not very good at product demand forecasting leading to higher rate of missed opportunities compare to its competitors. One of the reason why the days inventory is high compare to its competitors is that Esso is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
Limited success outside core business – Even though Esso is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
The profitability ratio and Net Contribution % of Esso are below the industry average.

Opportunities for Esso – External Strategic Factors

New customers from online channel – Over the past few years the company has invested vast sum of money into the online platform. This investment has opened new sales channel for Esso. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
The new technology provides an opportunity to Esso to practices differentiated pricing strategy in the new market. It will enable the firm to maintain its loyal customers with great service and lure new customers through other value oriented propositions.
Stable free cash flow provides opportunities to invest in adjacent product segments. With more cash in bank the company can invest in new technologies as well as in new products segments. This should open a window of opportunity for Esso in other product categories.
The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Esso to increase its profitability.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Esso an opportunity to enter a new emerging market.
New trends in the consumer behavior can open up new market for the Esso . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
New environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Esso to drive home its advantage in new technology and gain market share in the new product category.
Organization’s core competencies can be a success in similar other products field. A comparative example could be - GE healthcare research helped it in developing better Oil drilling machines.

Threats Esso Facing - External Strategic Factors

Intense competition – Stable profitability has increased the number of players in the industry over last two years which has put downward pressure on not only profitability but also on overall sales.
No regular supply of innovative products – Over the years the company has developed numerous products but those are often response to the development by other players. Secondly the supply of new products is not regular thus leading to high and low swings in the sales number over period of time.
Imitation of the counterfeit and low quality product is also a threat to Esso’s product especially in the emerging markets and low income markets.
Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Esso
The demand of the highly profitable products is seasonal in nature and any unlikely event during the peak season may impact the profitability of the company in short to medium term.
Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.

Limitations of SWOT Analysis for Esso

Although the SWOT analysis is widely used as a strategic planning tool, the analysis does have its share of limitations.

Certain capabilities or factors of an organization can be both a strength and weakness at the same time. This is one of the major limitations of SWOT analysis . For example changing environmental regulations can be both a threat to company it can also be an opportunity in a sense that it will enable the company to be on a level playing field or at advantage to competitors if it able to develop the products faster than the competitors.
SWOT does not show how to achieve a competitive advantage, so it must not be an end in itself.
The matrix is only a starting point for a discussion on how proposed strategies could be implemented. It provided an evaluation window but not an implementation plan based on strategic competitiveness of Esso
SWOT is a static assessment - analysis of status quo with few prospective changes. As circumstances, capabilities, threats, and strategies change, the dynamics of a competitive environment may not be revealed in a single matrix.
SWOT analysis may lead the firm to overemphasize a single internal or external factor in formulating strategies. There are interrelationships among the key internal and external factors that SWOT does not reveal that may be important in devising strategies.

Weighted SWOT Analysis of Esso

In light of the above mentioned limitations of the SWOT analysis / matrix, corporate managers decided to provide weightage to each internal strength and weakness of the firm. Organizations also assess the likelihood of events taking place in the coming future and how strong their impact could be on company's performance.

This method is called Weighted SWOT analysis. It is better than doing simplistic SWOT analysis because with Weighted SWOT Analysis Esso managers can focus on the most critical factors and discount the non-important one. It also solves the long list problem where organizations ends up making a long list but none of the factors deemed too critical.

Limitation of Weighted SWOT analysis of Esso

This approach also suffers from one major drawback - it focus on individual importance of factor rather than how they are collectively important and impact the business holistically.

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Example of Weighted SWOT Analysis

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SWOT Worksheet & Template

If you like to do your own SWOT analysis or want to make your own Weighted SWOT SWOT matrix then feel free to download Fern Fort University SWOT Analysis Template.

References / Citations & Bibliography

M. E. Porter, Competitive Strategy(New York: Free Press, 1980)
A. D. Chandler, Strategy and Structure (Cambridge, Mass.: MIT Press, 1962)
O. E. Williamson, Markets and Hierarchies(New York: Free Press, 1975);
L. Wrigley, Divisional Autonomy and Diversification (PhD, Harvard Business School, 1970)
R. E. White, Generic Business Strategies, Organizational Context and Performance: An Empirical Investigation, Strategic Management Journal7 (1986)