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Ecopetrol SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by Ecopetrol managers to do a situational analysis of the company . It is an important technique to map out the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Ecopetrol is facing in its current business environment.
The Ecopetrol is one of the leading organizatations in its industry. Ecopetrol maintains its prominent position in market by carefully analyzing and reviewing the SWOT analysis. SWOT analysis a highly interactive process and requires effective coordination among various departments within the organization 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 helps the managers of the Ecopetrol 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 core purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Ecopetrol strengths, and eradicate its weaknesses.
Step by Step Guide to Ecopetrol SWOT Analysis
Strengths of Ecopetrol – Internal Strategic Factors
As one of the leading companies in its industry, Ecopetrol has numerous strengths that help 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 Ecopetrol are –
- Superb Performance in New Markets – Ecopetrol 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.
- Strong Free Cash Flow – Ecopetrol has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Automation of activities brought consistency of quality to Ecopetrol products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- 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.
- Successful track record of developing new products – product innovation.
- Highly skilled workforce through successful training and learning programs. Ecopetrol 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 Brand Portfolio – Over the years Ecopetrol has invested in building a strong brand portfolio. The SWOT analysis of Ecopetrol just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Highly successful at Go To Market strategies for its products.
Weakness of Ecopetrol – Internal Strategic Factors
Weakness are the areas where Ecopetrol can improve upon. Strategy is about making choices and weakness are the areas where a firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.
- Limited success outside core business – Even though Ecopetrol is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Investment in Research and Development is below the fastest growing players in the industry. Even though Ecopetrol is spending above the industry average on Research and Development, it has not been able to compete with the leading players in the industry in terms of innovation. It has come across as a mature firm looking forward to bring out products based on tested features in the market.
- High attrition rate in work force – compare to other organizations in the industry Ecopetrol has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- The marketing of the products left a lot to be desired. Even though the product is a success in terms of sale but its positioning and unique selling proposition is not clearly defined which can lead to the attacks in this segment from the competitors.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Ecopetrol 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.
- 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 Ecopetrol is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
Opportunities for Ecopetrol – External Strategic Factors
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Ecopetrol.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Ecopetrol’s products thus providing an opportunity to the company - either to boost its profitability or pass on the benefits to the customers to gain market share.
- 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 Ecopetrol 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.
- The new technology provides an opportunity to Ecopetrol 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.
- 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 Ecopetrol. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Government green drive also opens an opportunity for procurement of Ecopetrol products by the state as well as federal government contractors.
- The market development will lead to dilution of competitor’s advantage and enable Ecopetrol to increase its competitiveness compare to the other competitors.
Threats Ecopetrol Facing - External Strategic Factors
- Liability laws in different countries are different and Ecopetrol may be exposed to various liability claims given change in policies in those markets.
- 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.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- As the company is operating in numerous countries it is exposed to currency fluctuations especially given the volatile political climate in number of markets across the world.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Ecopetrol in those markets.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
Limitations of SWOT Analysis for Ecopetrol
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 Ecopetrol
- 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 Ecopetrol
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 Ecopetrol 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 Ecopetrol
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.
Example of Weighted SWOT Analysis
You can email us to get an example document of Weighted SWOT analysis.
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)
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