Valero Energy Corporation SWOT Analysis / Matrix

Business Essays, Term Papers & Research Papers

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

The Valero Energy Corporation is one of the leading companies in its industry. Valero Energy Corporation 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.

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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 known as SWOT Matrix.

The Strengths-Weaknesses-Opportunities-Threats (SWOT) Analysis / Matrix helps the managers of the Valero Energy Corporation to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
Valero Energy Corporation swot analysis / matrix

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 Valero Energy Corporation strengths, and eradicate its weaknesses.

Step by Step Guide to Valero Energy Corporation SWOT Analysis

Strengths of Valero Energy Corporation – Internal Strategic Factors

As one of the leading firms in its industry, Valero Energy Corporation 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 Valero Energy Corporation are –

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  • Automation of activities brought consistency of quality to Valero Energy Corporation products and has enabled the company to scale up and scale down based on the demand conditions in the market.
  • Strong distribution network – Over the years Valero Energy Corporation has built a reliable distribution network that can reach majority of its potential market.
  • 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.
  • Strong Brand Portfolio – Over the years Valero Energy Corporation has invested in building a strong brand portfolio. The SWOT analysis of Valero Energy Corporation just underlines this fact. This brand portfolio can be extremely useful if the organization wants to expand into new product categories.
  • Highly skilled workforce through successful training and learning programs. Valero Energy Corporation 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.
  • Highly successful at Go To Market strategies for its products.
  • Successful track record of developing new products – product innovation.

Weakness of Valero Energy Corporation – Internal Strategic Factors

Weakness are the areas where Valero Energy Corporation can improve upon. Strategy is about making choices and weakness are the areas where an organization can improve using SWOT analysis and build on its competitive advantage and strategic positioning.

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  • Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Valero Energy Corporation 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.
  • Limited success outside core business – Even though Valero Energy Corporation is one of the leading organizations in its industry it has faced challenges in moving to other product segments with its present culture.
  • 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 Valero Energy Corporation is not very good at demand forecasting thus end up keeping higher inventory both in-house and in channel.
  • 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.
  • Not highly successful at integrating firms with different work culture. As mentioned earlier even though Valero Energy Corporation is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
  • Organization structure is only compatible with present business model thus limiting expansion in adjacent product segments.
  • Investment in Research and Development is below the fastest growing players in the industry. Even though Valero Energy Corporation 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.

Opportunities for Valero Energy Corporation – External Strategic Factors

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  • 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 Valero Energy Corporation to drive home its advantage in new technology and gain market share in the new product category.
  • Economic uptick and increase in customer spending, after years of recession and slow growth rate in the industry, is an opportunity for Valero Energy Corporation to capture new customers and increase its market share.
  • The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Valero Energy Corporation to increase its profitability.
  • The market development will lead to dilution of competitor’s advantage and enable Valero Energy Corporation to increase its competitiveness compare to the other competitors.
  • Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Valero Energy Corporation’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 Valero Energy Corporation products by the state as well as federal government contractors.
  • New trends in the consumer behavior can open up new market for the Valero Energy Corporation . It provides a great opportunity for the organization to build new revenue streams and diversify into new product categories too.
  • 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 Valero Energy Corporation in other product categories.

Threats Valero Energy Corporation Facing - External Strategic Factors

  • 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.
  • New environment regulations under Paris agreement (2016) could be a threat to certain existing product categories .
  • Increasing trend toward isolationism in the American economy can lead to similar reaction from other government thus negatively impacting the international sales.
  • Liability laws in different countries are different and Valero Energy Corporation 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 Valero Energy Corporation
  • Growing strengths of local distributors also presents a threat in some markets as the competition is paying higher margins to the local distributors.
  • 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.
  • Shortage of skilled workforce in certain global market represents a threat to steady growth of profits for Valero Energy Corporation   in those markets.

Limitations of SWOT Analysis for Valero Energy Corporation

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 Valero Energy Corporation
  • 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 Valero Energy Corporation

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 Valero Energy Corporation 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 Valero Energy Corporation

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)