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NGL Energy Partners SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by NGL Energy Partners managers to do a situational analysis of the company . It is a useful technique to understand the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) NGL Energy Partners is facing in its current business environment.
The NGL Energy Partners is one of the leading organizatations in its industry. NGL Energy Partners maintains its dominant 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 known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the NGL Energy Partners 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 an organization can use to exploit external opportunities, counter threats, and build on & protect NGL Energy Partners strengths, and eradicate its weaknesses.
Step by Step Guide to NGL Energy Partners SWOT Analysis
Strengths of NGL Energy Partners – Internal Strategic Factors
As one of the leading companies in its industry, NGL Energy Partners 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 NGL Energy Partners are –
- 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.
- Strong Free Cash Flow – NGL Energy Partners has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Successful track record of integrating complimentary firms through mergers & acquisition. It has successfully integrated number of technology companies in the past few years to streamline its operations and to build a reliable supply chain.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Successful track record of developing new products – product innovation.
- Highly skilled workforce through successful training and learning programs. NGL Energy Partners 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.
- Good Returns on Capital Expenditure – NGL Energy Partners is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Strong distribution network – Over the years NGL Energy Partners has built a reliable distribution network that can reach majority of its potential market.
Weakness of NGL Energy Partners – Internal Strategic Factors
Weakness are the areas where NGL Energy Partners 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.
- Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
- 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 NGL Energy Partners is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
- 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.
- Limited success outside core business – Even though NGL Energy Partners is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- 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. NGL Energy Partners has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, NGL Energy Partners 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.
- The profitability ratio and Net Contribution % of NGL Energy Partners are below the industry average.
Opportunities for NGL Energy Partners – External Strategic Factors
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of NGL Energy Partners’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.
- 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 NGL Energy Partners in other product categories.
- The market development will lead to dilution of competitor’s advantage and enable NGL Energy Partners to increase its competitiveness compare to the other competitors.
- 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 NGL Energy Partners. 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 NGL Energy Partners products by the state as well as federal government contractors.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of NGL Energy Partners.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided NGL Energy Partners an opportunity to enter a new emerging market.
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for NGL Energy Partners to capture new customers and increase its market share.
Threats NGL Energy Partners Facing - External Strategic Factors
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- Liability laws in different countries are different and NGL Energy Partners may be exposed to various liability claims given change in policies in those markets.
- Rising raw material can pose a threat to the NGL Energy Partners profitability.
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for NGL Energy Partners in those markets.
- 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.
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of NGL Energy Partners
- 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.
Limitations of SWOT Analysis for NGL Energy Partners
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 NGL Energy Partners
- 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 NGL Energy Partners
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 NGL Energy Partners 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 NGL Energy Partners
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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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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