Phillips 66 SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

SWOT analysis is a strategic planning tool that can be used by Phillips 66 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) Phillips 66 is facing in its current business environment.

The Phillips 66 is one of the leading firms in its industry. Phillips 66 maintains its dominant position in market by critically 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.

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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 helps 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

SWOT Matrix Strategies Objective

The core purpose of SWOT matrix is to identify the strategies that an organization 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 organizations 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 –

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Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling the company to overcome any supply chain bottlenecks.
Strong distribution network – Over the years Phillips 66 has built a reliable distribution network that can reach majority of its potential market.
Successful track record of developing new products – product innovation.
Highly successful at Go To Market strategies for its 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.
Automation of activities brought consistency of quality to Phillips 66 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. Phillips 66 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.
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.

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 firm can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

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The profitability ratio and Net Contribution % of Phillips 66 are below the industry average.
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.
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 Phillips 66
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.
Limited success outside core business – Even though Phillips 66 is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Phillips 66 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.
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.

Opportunities for Phillips 66 – External Strategic Factors

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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.
Lower inflation rate – The low inflation rate bring more stability in the market, enable credit at lower interest rate to the customers of Phillips 66.
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.
Government green drive also opens an opportunity for procurement of Phillips 66 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 Phillips 66 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 Phillips 66 . 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 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.
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.

Threats Phillips 66 Facing - External Strategic Factors

New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
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.
Rising raw material can pose a threat to the Phillips 66 profitability.
Liability laws in different countries are different and Phillips 66 may be exposed to various liability claims given change in policies in those markets.
Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Phillips 66 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 Phillips 66
Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
New technologies developed by the competitor or market disruptor could be a serious threat to the industry in medium to long term future.

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.

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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

You can email us to get an example document of Weighted SWOT analysis.

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)