Baker Hughes SWOT Analysis / Matrix

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

The Baker Hughes is one of the leading firms in its industry. Baker Hughes maintains its prominent position in market by carefully 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 enables 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 Baker Hughes 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 primary purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Baker Hughes strengths, and eradicate its weaknesses.

Step by Step Guide to Baker Hughes SWOT Analysis

Strengths of Baker Hughes – Internal Strategic Factors

As one of the leading firms in its industry, Baker Hughes 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 Baker Hughes are –

Successful track record of developing new products – product innovation.
Highly skilled workforce through successful training and learning programs. Baker Hughes 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.
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.
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.
Automation of activities brought consistency of quality to Baker Hughes products and has enabled the company to scale up and scale down based on the demand conditions in the market.
Strong Brand Portfolio – Over the years Baker Hughes has invested in building a strong brand portfolio. The SWOT analysis of Baker Hughes just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
Strong Free Cash Flow – Baker Hughes has strong free cash flows that provide resources in the hand of the company to expand into new projects.
Superb Performance in New Markets – Baker Hughes 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.

Weakness of Baker Hughes – Internal Strategic Factors

Weakness are the areas where Baker Hughes can improve upon. Strategy is about making choices and weakness are the areas where an organization 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 highly successful at integrating firms with different work culture. As mentioned earlier even though Baker Hughes is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
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.
High attrition rate in work force – compare to other organizations in the industry Baker Hughes has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
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. Baker Hughes has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
The profitability ratio and Net Contribution % of Baker Hughes are below the industry average.
Investment in Research and Development is below the fastest growing players in the industry. Even though Baker Hughes 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.

Opportunities for Baker Hughes – External Strategic Factors

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.
Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Baker Hughes’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.
Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Baker Hughes an opportunity to enter a new emerging market.
The new technology provides an opportunity to Baker Hughes 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 trends in the consumer behavior can open up new market for the Baker Hughes . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Baker Hughes.
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 Baker Hughes to drive home its advantage in new technology and gain market share in the new product category.
Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Baker Hughes to capture new customers and increase its market share.

Threats Baker Hughes Facing - External Strategic Factors

Rising raw material can pose a threat to the Baker Hughes profitability.
Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Baker Hughes in those markets.
Imitation of the counterfeit and low quality product is also a threat to Baker Hughes’s product especially in the emerging markets and low income markets.
Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
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.
New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.

Limitations of SWOT Analysis for Baker Hughes

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 Baker Hughes
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 Baker Hughes

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 Baker Hughes 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 Baker Hughes

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)