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Running Head: STRATEGIC ANALYSIS
Strategic Analysis: Husky Energy Inc.
Student’s Name
Institutional Affiliation
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STRATEGIC ANALYSIS
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Internal Assessment
Section Overview
This task will evaluate Husky Energy Inc.’s internal analysis. More broadly, the task
will cover resource-based analysis where intangible and tangible resources will be analyzed
in detail. The second key section will conduct a value chain analysis in which primary and
secondary activities will be analyzed. The last part offers a core competency analysis.
Resource-Based View Analysis
Tangible Resources
Financial Assets
The Resource-Based View (RVB) is a framework that views resources as central to
superior business performance. Proponents of this model argue that firms have to scan
internally to identify the resources that can deliver a competitive advantage (Lin and Wu,
2014). Subsequently, the resources should be configured in a way that competitive
advantages can emerge. The resources are either categorized into tangible and intangible
aspects. Tangible resources bear physical traits and may involve land, buildings, machinery,
raw material and capital. In contrast, intangible assets lack a physical presence. These include
trademarks, reputation, intellectual properties (IP), culture, technical know-how and market
experience among other related aspects (Lin and Wu, 2014). Comparatively, the physical
resources offer little competitive advantage as they are easily imitable by competitors.
Intangible resources can provide distinguished competitive advantages as they can be
shielded from competitors.
In the context of the case analysis, Husky Energy Inc.’s has tangible resources in the
form of finances, physical and technology. From a financial standpoint, Husky Energy has a
strong financial outlook. In 2018, its annual net earnings stood at $1.5 billion, which was
85% increase from 2017 (Globe News Wire News Room, 2019). For the same period, it had a
cash flow of $426 million while its reserve replacement ratio was 260 percent. The
illustration below captures its financial ratios.
Table 1: Financial Ratios
Source (Reuters, 2019)
STRATEGIC ANALYSIS
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As indicated above, the firm had a quick ratio of 0.89 as of 2018. The quick ratio
measures a firm’s ability to cover current liabilities using liquid current assets. A quick ratio
of 1 implies that a firm can adequately cover short term liabilities. Therefore, Husky Energy’s
ratio of 0.89 reveals that the firm can sufficiently cover its short term obligations (Reuters,
2019). Furthermore, the table shows that its current ratio stands at 1.17 which indicates that
the firm can cover its short term liabilities using current assets (Reuters, 2019). Furthermore,
its debt to equity ratio is approximately 32%, which indicates that shareholder equity exceeds
debt liability (Yahoo Finance, 2018). That is, Husky Energy has funded most of its operations
using shareholder equity, as opposed to debt. In addition, it had a gross margin of 22.96% and
a net profit margin of 0.15%, figures that confirm high revenue performance. In sum, these
financial data sets indicate that Husky Energy has a strong financial position. It has fewer
debt obligations, is highly profitable and can adequately cover its short term liabilities using
current assets.
Physical Assets
Husky energy has an extensive asset portfolio. As of 2018, it had cash and short term
investments worth Canadian Dollar (CAD) 2.86 billion and inventories valued at CAD 1.232
billion (WSJ, 2019). For the same period, its property, plant and equipment were valued at
CAD 26.797 billion. The entity further had buildings spread across the region in which it
operates. It has coffee shops, service centers and card-lock operations that act as service
outlets. Its balance sheet reveals that it has finished goods valued at CAD 435 million, raw
materials (CAD 597 million) and ‘other’ current assets worth 123 million (Husky Energy
Inc., 2019). It has different types of machines that are used in the upstream and downstream
activities. For instance, it has drilling rigs and vehicles that transport the raw materials to the
refineries. By the end of 2018, it had a staff base of about 5,157 people (Bloomberg, 2019).
This expansive asset portfolio indicates that the firm is valuable and highly productive.
Husky Energy can innovatively configure these assets to gain a competitive edge over its
rivals.
Technological
Husky Energy is a technologically strong firm. Oil and gas exploration is a sensitive
and risky initiative, thus it demands effective and reliable systems. Husky Energy utilizes
some of the best technology. In particular, it uses advanced six Lloyd thermal technology to
mine bitumen. This technology is crucial as it allows Husky Energy to produce over 82, 500
barrels per day (Husky Energy, 2018). In addition, the entity has deployed artificiallyintelligence driven production as a means of optimizing well uptime and to reduce
operational costs (JWN, 2018). That is, the AI-driven systems empower Husky Energy in
ways that enhance production and efficiency.
Furthermore, it utilizes Improved Pad Design technology that has enhanced
production by over 40%. In addition, it uses a form of technology known as Husky Diluent
Reduction (HDR) system whose core objective is to reduce waste and improve safety
(Stonehouse, 2017). The firm claims that it relies on competency networks to connect people
across the various strategic business units. Besides, it uses gas conversion technology which
allows it to turn carbon (IV) oxide into fuel (Husky Energy, 2018). In sum, Husky Energy is
driven by effective, reliable and up to date technology. It has a strong sense of innovation that
empowers it to develop superior technologies. Such technology leads to competitive
advantages as it offers cost benefits, enhances efficiency and quality. If the entity is superior
in these dimensions, it will easily out-compete its rivals. If its rivals fail to match its cost
STRATEGIC ANALYSIS
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model, quality assurances and level of efficiency, then Husky Energy will have unparalleled
market power. It will be an industry leader.
Intangible Resources
Human Resource
Although human resource can be categorized as a physical asset, the service they offer
is intangible. In particular, its employees are very innovative. They have been central to the
development of some of the innovative systems such as AI systems, the Husky Diluent
Reduction (HDR) system and the gas conversion system (Husky Energy, 2018). The
innovation is critical as it determines the level of productivity, efficiency and cost
performance. These are competitive angles that can differentiate Husky Energy at the market.
Available data shows that its employees are highly productive. The revenue per employee
stands at 4,285, 825 while income per employee was 282, 529 as of 2018 (Market Watch,
2019). This is to say that its human resource is extremely valuable.
In a different perspective, the entity has a motivated staff base as it offers an excellent
compensation package. It offers share-based payments, earnings-per-share supplementary
medical and dental care, income protection, savings plan and vacations. These perks that keep
employees motivated (Husky Energy, 2019). The motivational and reward packages can lead
to competitive advantages on the account that motivated employees are more productive,
innovative and committed. An organization with motivated employees performs relatively
better than those with less motivated workers.
Innovation and Creativity
As stated previously, Husky Energy’s business model is anchored on innovation. The
company’s innovation culture has led to the development of innovative systems and process.
Specifically, the firm has been able to develop the Husky Diluent Reduction Program which
is used to reduce waste and improve safety (Husky Energy, 2018). In addition, it has...