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NuStar Energy SWOT Analysis / Matrix
Essays, Term Papers & Research Papers
SWOT analysis is a vital strategic planning tool that can be used by NuStar Energy managers to do a situational analysis of the firm . It is a handy technique to analyze the present Strengths (S), Weakness (W), Opportunities (O) & Threats (T) NuStar Energy is facing in its current business environment.
The NuStar Energy is one of the leading firms in its industry. NuStar Energy 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 organization 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 NuStar Energy 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 NuStar Energy strengths, and eradicate its weaknesses.
Step by Step Guide to NuStar Energy SWOT Analysis
Strengths of NuStar Energy – Internal Strategic Factors
As one of the leading firms in its industry, NuStar Energy 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 NuStar Energy 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.
- Highly successful at Go To Market strategies for its products.
- 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.
- Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
- Automation of activities brought consistency of quality to NuStar Energy products and has enabled the company to scale up and scale down based on the demand conditions in the market.
- Good Returns on Capital Expenditure – NuStar Energy is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
- 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 skilled workforce through successful training and learning programs. NuStar Energy 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.
Weakness of NuStar Energy – Internal Strategic Factors
Weakness are the areas where NuStar Energy 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.
- High attrition rate in work force – compare to other organizations in the industry NuStar Energy has a higher attrition rate and have to spend a lot more compare to its competitors on training and development of its employees.
- Investment in Research and Development is below the fastest growing players in the industry. Even though NuStar Energy 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.
- 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 NuStar Energy
- 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. NuStar Energy has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
- The profitability ratio and Net Contribution % of NuStar Energy are below the industry average.
- 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 NuStar Energy – External Strategic Factors
- Decreasing cost of transportation because of lower shipping prices can also bring down the cost of NuStar Energy’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 NuStar Energy an opportunity to enter a new emerging market.
- 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 NuStar Energy. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
- The new technology provides an opportunity to NuStar Energy 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 NuStar Energy products by the state as well as federal government contractors.
- 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 NuStar Energy to drive home its advantage in new technology and gain market share in the new product category.
- New trends in the consumer behavior can open up new market for the NuStar Energy . 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 NuStar Energy to capture new customers and increase its market share.
Threats NuStar Energy 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.
- The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.
- Imitation of the counterfeit and low quality product is also a threat to NuStar Energy’s product especially in the emerging markets and low income 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.
- 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.
- Liability laws in different countries are different and NuStar Energy may be exposed to various liability claims given change in policies in those 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 NuStar Energy
- 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 NuStar Energy
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 NuStar Energy
- 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 NuStar Energy
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 NuStar Energy 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 NuStar Energy
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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