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ConocoPhillips SWOT Analysis / Matrix
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SWOT analysis is a strategic planning tool that can be used by ConocoPhillips managers to do a situational analysis of the firm . It is a useful technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) ConocoPhillips is facing in its current business environment.
The ConocoPhillips is one of the leading companies in its industry. ConocoPhillips maintains its prominent 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 company 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 known as SWOT Matrix.
The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix enables the managers of the ConocoPhillips 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 ConocoPhillips strengths, and eradicate its weaknesses.
Step by Step Guide to ConocoPhillips SWOT Analysis
Strengths of ConocoPhillips – Internal Strategic Factors
As one of the leading organizations in its industry, ConocoPhillips 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 ConocoPhillips are –
- Strong Free Cash Flow – ConocoPhillips has strong free cash flows that provide resources in the hand of the company to expand into new projects.
- Strong Brand Portfolio – Over the years ConocoPhillips has invested in building a strong brand portfolio. The SWOT analysis of ConocoPhillips just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
- Superb Performance in New Markets – ConocoPhillips 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.
- Successful track record of developing new products – product innovation.
- Good Returns on Capital Expenditure – ConocoPhillips is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- Automation of activities brought consistency of quality to ConocoPhillips products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Highly skilled workforce through successful training and learning programs. ConocoPhillips 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 distribution network – Over the years ConocoPhillips has built a reliable distribution network that can reach majority of its potential market.
Weakness of ConocoPhillips – Internal Strategic Factors
Weakness are the areas where ConocoPhillips 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.
- Not highly successful at integrating firms with different work culture. As mentioned earlier even though ConocoPhillips is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
- 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.
- 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 ConocoPhillips
- Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, ConocoPhillips 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.
- Investment in Research and Development is below the fastest growing players in the industry. Even though ConocoPhillips 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.
- 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. ConocoPhillips has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- The profitability ratio and Net Contribution % of ConocoPhillips are below the industry average.
Opportunities for ConocoPhillips – 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 ConocoPhillips.
- The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as ConocoPhillips to increase its profitability.
- New trends in the consumer behavior can open up new market for the ConocoPhillips . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of ConocoPhillips’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.
- Government green drive also opens an opportunity for procurement of ConocoPhillips products by the state as well as federal government contractors.
- 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.
- 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 ConocoPhillips 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 ConocoPhillips an opportunity to enter a new emerging market.
Threats ConocoPhillips Facing - External Strategic Factors
- Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
- New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
- Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for ConocoPhillips in those markets.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Liability laws in different countries are different and ConocoPhillips may be exposed to various liability claims given change in policies in those markets.
- Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
- Imitation of the counterfeit and low quality product is also a threat to ConocoPhillips’s product especially in the emerging markets and low income markets.
- Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of ConocoPhillips
Limitations of SWOT Analysis for ConocoPhillips
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 ConocoPhillips
- 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 ConocoPhillips
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 ConocoPhillips 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 ConocoPhillips
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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