Phillips 66 SWOT Analysis / Matrix

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SWOT analysis is a vital strategic planning tool that can be used by Phillips 66 managers to do a situational analysis of the firm . It is an important technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) Phillips 66 is facing in its current business environment.

The Phillips 66 is one of the leading organizatations in its industry. Phillips 66 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 helps 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 Phillips 66 to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
Phillips 66 swot analysis / matrix

SWOT Matrix Strategies Objective

The main purpose of SWOT matrix is to identify the strategies that a company can use to exploit external opportunities, counter threats, and build on & protect Phillips 66 strengths, and eradicate its weaknesses.

Step by Step Guide to Phillips 66 SWOT Analysis

Strengths of Phillips 66 – Internal Strategic Factors

As one of the leading companies in its industry, Phillips 66 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 Phillips 66 are –

  • 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.
  • 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.
  • Good Returns on Capital Expenditure – Phillips 66 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 Phillips 66 has built a reliable distribution network that can reach majority of its potential market.
  • Superb Performance in New Markets – Phillips 66 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.
  • Highly successful at Go To Market strategies for its products.
  • Strong Brand Portfolio – Over the years Phillips 66 has invested in building a strong brand portfolio. The SWOT analysis of Phillips 66 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 – Phillips 66 has strong free cash flows that provide resources in the hand of the company to expand into new projects.

Weakness of Phillips 66 – Internal Strategic Factors

Weakness are the areas where Phillips 66 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.

  • 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 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.
  • 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 Phillips 66 is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
  • 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. Phillips 66 has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
  • High attrition rate in work force – compare to other organizations in the industry Phillips 66 has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
  • Not highly successful at integrating firms with different work culture. As mentioned earlier even though Phillips 66 is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
  • There are gaps in the product range sold by the company. This lack of choice can give a new competitor a foothold in the market.

Opportunities for Phillips 66 – External Strategic Factors

  • Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Phillips 66 an opportunity to enter a new emerging market.
  • The market development will lead to dilution of competitor’s advantage and enable Phillips 66 to increase its competitiveness compare to the other competitors.
  • The new technology provides an opportunity to Phillips 66 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.
  • Government green drive also opens an opportunity for procurement of Phillips 66 products by the state as well as federal government contractors.
  • New trends in the consumer behavior can open up new market for the Phillips 66 . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
  • Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Phillips 66 to capture new customers and increase its market share.
  • Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Phillips 66’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 Phillips 66 in other product categories.

Threats Phillips 66 Facing - External Strategic Factors

  • Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Phillips 66
  • 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.
  • 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.
  • New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
  • Liability laws in different countries are different and Phillips 66 may be exposed to various liability claims given change in policies in those markets.
  • Imitation of the counterfeit and low quality product is also a threat to Phillips 66’s product especially in the emerging markets and low income markets.

Limitations of SWOT Analysis for Phillips 66

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 Phillips 66
  • 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 Phillips 66

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 Phillips 66 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 Phillips 66

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)