Bonanza Creek Energy Inc. SWOT Analysis / Matrix

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

The Bonanza Creek Energy Inc. is one of the leading firms in its industry. Bonanza Creek Energy 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 organization 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 Bonanza Creek Energy Inc. to develop four types of strategies:

  • SO (strengths-opportunities) Strategies
  • WO (weaknesses-opportunities) Strategies
  • ST (strengths-threats) Strategies
  •  WT (weaknesses-threats) Strategies
Bonanza Creek Energy Inc. swot analysis / matrix

SWOT Matrix Strategies Objective

The primary purpose of SWOT matrix is to identify the strategies that a firm can utilize to exploit external opportunities, counter threats, and build on & protect Bonanza Creek Energy Inc. strengths, and eradicate its weaknesses.

Step by Step Guide to Bonanza Creek Energy Inc. SWOT Analysis

Strengths of Bonanza Creek Energy Inc. – Internal Strategic Factors

As one of the leading organizations in its industry, Bonanza Creek Energy 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 Bonanza Creek Energy Inc. are –

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  • Superb Performance in New Markets – Bonanza Creek Energy 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.
  • 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.
  • 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.
  • 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 Bonanza Creek Energy Inc. has built a reliable distribution network that can reach majority of its potential market.
  • Good Returns on Capital Expenditure – Bonanza Creek Energy Inc. is relatively successful at execution of new projects and generated good returns on capital expenditure by building new revenue streams.
  • Successful track record of developing new products – product innovation.

Weakness of Bonanza Creek Energy Inc. – Internal Strategic Factors

Weakness are the areas where Bonanza Creek Energy Inc. 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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  • 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.
  • 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. Bonanza Creek Energy Inc. has to build internal feedback mechanism directly from sales team on ground to counter these challenges.
  • Not highly successful at integrating firms with different work culture. As mentioned earlier even though Bonanza Creek Energy Inc. is successful at integrating small companies it has its share of failure to merge firms that have different work culture.
  • Need more investment in new technologies. Given the scale of expansion and different geographies the company is planning to expand into, Bonanza Creek Energy 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.
  • High attrition rate in work force – compare to other organizations in the industry Bonanza Creek Energy Inc. 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 Bonanza Creek Energy 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.
  • 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.

Opportunities for Bonanza Creek Energy Inc. – External Strategic Factors

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  • The new taxation policy can significantly impact the way of doing business and can open new opportunity for established players such as Bonanza Creek Energy Inc. to increase its profitability.
  • 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 Bonanza Creek Energy Inc. 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 Bonanza Creek Energy Inc. to capture new customers and increase its 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 Bonanza Creek Energy Inc..
  • Opening up of new markets because of government agreement – the adoption of new technology standard and government free trade agreement has provided Bonanza Creek Energy Inc. 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 Bonanza Creek Energy Inc.. In the next few years the company can leverage this opportunity by knowing its customer better and serving their needs using big data analytics.
  • Decreasing cost of transportation because of lower shipping prices can also bring down the cost of Bonanza Creek Energy 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.
  • The market development will lead to dilution of competitor’s advantage and enable Bonanza Creek Energy Inc. to increase its competitiveness compare to the other competitors.

Threats Bonanza Creek Energy Inc. Facing - External Strategic Factors

  • 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 Bonanza Creek Energy Inc.   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 Bonanza Creek Energy Inc.
  • 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.
  • 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 .
  • Imitation of the counterfeit and low quality product is also a threat to Bonanza Creek Energy Inc.’s product especially in the emerging markets and low income markets.
  • 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.

Limitations of SWOT Analysis for Bonanza Creek Energy 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 Bonanza Creek Energy 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 Bonanza Creek Energy 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 Bonanza Creek Energy 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 Bonanza Creek Energy 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)