Gastar Exploration Inc. SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

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

The Gastar Exploration Inc. is one of the leading companies in its industry. Gastar Exploration Inc. maintains its dominant 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 firm such as – marketing, finance, operations, management information systems and strategic planning.

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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 helps the managers of the Gastar Exploration Inc. to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
Gastar Exploration Inc. swot analysis / matrix

SWOT Matrix Strategies Objective

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

Step by Step Guide to Gastar Exploration Inc. SWOT Analysis

Strengths of Gastar Exploration Inc. – Internal Strategic Factors

As one of the leading organizations in its industry, Gastar Exploration Inc. 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 Gastar Exploration Inc. are –

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  • 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.
  • Superb Performance in New Markets – Gastar Exploration Inc. 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.
  • Automation of activities brought consistency of quality to Gastar Exploration Inc. 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 – Gastar Exploration Inc. 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.
  • 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.
  • Highly skilled workforce through successful training and learning programs. Gastar Exploration Inc. 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 Brand Portfolio – Over the years Gastar Exploration Inc. has invested in building a strong brand portfolio. The SWOT analysis of Gastar Exploration Inc. just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.

Weakness of Gastar Exploration Inc. – Internal Strategic Factors

Weakness are the areas where Gastar Exploration Inc. 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.

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  • 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 Gastar Exploration Inc.
  • The profitability ratio and Net Contribution % of Gastar Exploration Inc. are below the industry average.
  • 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. Gastar Exploration Inc. has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
  • 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 Gastar Exploration Inc. is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
  • Investment in Research and Development is below the fastest growing players in the industry. Even though Gastar Exploration Inc. 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.
  • Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Gastar Exploration Inc. 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 Gastar Exploration Inc. – External Strategic Factors

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  • New trends in the consumer behavior can open up new market for the Gastar Exploration Inc. . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
  • The new technology provides an opportunity to Gastar Exploration Inc. 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 environmental policies – The new opportunities will create a level playing field for all the players in the industry. It represent a great opportunity for Gastar Exploration Inc. to drive home its advantage in new technology and gain market share in the new product category.
  • Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Gastar Exploration Inc.’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.
  • Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Gastar Exploration Inc..
  • 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 Gastar Exploration Inc. in other product categories.
  • 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.
  • Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Gastar Exploration Inc. an opportunity to enter a new emerging market.

Threats Gastar Exploration Inc. Facing - External Strategic Factors

  • 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.
  • Rising raw material can pose a threat to the Gastar Exploration Inc. 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.
  • Rising pay level especially movements such as $15 an hour and increasing prices in the China can lead to serious pressure on profitability of Gastar Exploration Inc.
  • Changing consumer buying behavior from online channel could be a threat to the existing physical infrastructure driven supply chain model.
  • Liability laws in different countries are different and Gastar Exploration Inc. may be exposed to various liability claims given change in policies in those markets.
  • 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.
  • The company can face lawsuits in various markets given - different laws and continuous fluctuations regarding product standards in those markets.

Limitations of SWOT Analysis for Gastar Exploration Inc.

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 Gastar Exploration Inc.
  • 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.

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Weighted SWOT Analysis of Gastar Exploration Inc.

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 Gastar Exploration Inc. 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 Gastar Exploration Inc.

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)