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National Oilwell Varco SWOT Analysis / Matrix
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SWOT analysis is a vital strategic planning tool that can be used by National Oilwell Varco managers to do a situational analysis of the organization . It is an important technique to evalauate the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) National Oilwell Varco is facing in its current business environment.
The National Oilwell Varco is one of the leading companies in its industry. National Oilwell Varco 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 firm 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 National Oilwell Varco 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 utilize to exploit external opportunities, counter threats, and build on & protect National Oilwell Varco strengths, and eradicate its weaknesses.
Step by Step Guide to National Oilwell Varco SWOT Analysis
Strengths of National Oilwell Varco – Internal Strategic Factors
As one of the leading companies in its industry, National Oilwell Varco 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 National Oilwell Varco are –
- Strong distribution network – Over the years National Oilwell Varco has built a reliable distribution network that can reach majority of its potential 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.
- Strong dealer community – It has built a culture among distributor & dealers where the dealers not only promote company’s products but also invest in training the sales team to explain to the customer how he/she can extract the maximum benefits out of the products.
- Highly successful at Go To Market strategies for its products.
- Good Returns on Capital Expenditure – National Oilwell Varco is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Superb Performance in New Markets – National Oilwell Varco 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 National Oilwell Varco – Internal Strategic Factors
Weakness are the areas where National Oilwell Varco 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.
- Limited success outside core business – Even though National Oilwell Varco is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
- Days inventory is high compare to the competitors – making the company raise more capital to invest in the channel. This can impact the long term growth of National Oilwell Varco
- The profitability ratio and Net Contribution % of National Oilwell Varco are below the industry average.
- High attrition rate in work force – compare to other organizations in the industry National Oilwell Varco has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Financial planning is not done properly and efficiently. The current asset ratio and liquid asset ratios suggest that the company can use the cash more efficiently than what it is doing at present.
- 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. National Oilwell Varco 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, National Oilwell Varco 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.
Opportunities for National Oilwell Varco – External Strategic Factors
- Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for National Oilwell Varco to capture new customers and increase its market share.
- 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.
- 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 National Oilwell Varco in other product categories.
- 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 National Oilwell Varco. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of National Oilwell Varco.
- 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 National Oilwell Varco to drive home its advantage in new technology and gain market share in the new product category.
- Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided National Oilwell Varco an opportunity to enter a new emerging market.
- Government green drive also opens an opportunity for procurement of National Oilwell Varco products by the state as well as federal government contractors.
Threats National Oilwell Varco Facing - External Strategic Factors
- New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- 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.
- Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
- Rising raw material can pose a threat to the National Oilwell Varco profitability.
- 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.
- 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.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
Limitations of SWOT Analysis for National Oilwell Varco
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 National Oilwell Varco
- 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 National Oilwell Varco
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 National Oilwell Varco 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 National Oilwell Varco
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
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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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