MGMT4489 Saint Mary's University Husky Energy Inc Strategic Analysis

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MGMT 4489 Strategic Management Strategic Analysis Capstone Project - Assignment Guidelines Assignment Overview Strategic management has become one of the most fascinating and complex fields of management. As such, it poses challenges to managers and organizations, which you will explore during your strategic analysis of a company of your choice. There is a list of companies posted on the course site from which you can choose. Sign-up is on a first come – first serve basis as only one student per company is allowed. Please signup for your company as soon as possible to ensure you have a good selection to choose from. The other option is to select a company of your own choice. The course Professor must approve your choice. If you select your own company, you will need to do some preliminary research to ensure your company is a viable choice and that you will be able to find the information necessary for the project. It is recommended that you choose a publicly traded company, as the availability of strategic and financial information is limited with privately held companies. Introduction The role of the Strategic Management process is to answer some fundamental questions regarding the future direction and scope of the company such as: u u u u u u u Who are we and what do we do? Where are we now? How did we get here? Where are we heading? Where would we like to be? Are we on course? How do we get there? In an effort to answer these questions strategists (and budding strategists) employ a variety of tools to help them make sense of the current and future situations facing the organization. This involves performing an assessment of the current strategic direction, a macro-environmental scan of the general environment, an analysis of the industry in which the company competes and matching these against a value chain analysis and an internal review or audit of the organization. Revised: Spring 2019 1 The end result of these five tasks is a portrait of the relative ability of the organization to mobilize its inherent strengths or overcome its weaknesses in order to take advantage of external opportunities or defend against external threats. We call this portrayal a SWOT analysis and it is the culmination of matching the findings from the External Environmental Scan with the Internal Assessment findings. You will then determine which of the generic strategies are currently being employed by your company in order to realize their current strategic objectives. Finally, you will use the SWOT analysis to determine which generic strategy SHOULD be used in order to achieve the new strategic objectives revealed through the SWOT analysis. The project is divided into 3 individual assignments and will involve the completion of an: 1. Assessment of your organizations current strategic situation, external environmental analysis and a competitive analysis; 2. Internal assessment of the organization; and, 3. SWOT, generic strategy analysis and strategic recommendations. Your project will be a work in progress throughout the term with three different assignment submissions. It is suggested that you work on the various assignments as we progress through the material in class so that you have an understanding of the material and are able to complete a sufficiently thorough analysis. Leaving each assignment until just before the due date will result in a rush to complete them and may impact your grade significantly. Here are the required elements for each assignment and a suggested outline that covers the questions to be addressed in each. You can organize the elements with additional subheadings of your choice: Revised: Spring 2019 2 Assignment # 1 (10%) INTRODUCTION (answers the questions – Who are we? What do we do?) v Give a brief company overview including the: o Current Mission o Current Vision o Current Strategic Objectives v Analyze these components against the criteria that determine a good vision and mission. Conduct a SMART analysis of the strategic objectives. (Analysis criteria provided in class lecture notes) EXTERNAL ANALYSIS (answers the questions – Where are we now?) v External environmental scan o PESTEL analysis (this can be done is a chart / table format with 2-3 trends per macro-environmental segment) - Political - Economic - Socio-cultural/Demographic - Technology - Ecological - Legal/Regulatory v Select three macro-environmental trends from your above analysis (no more than one trend per category) that will affect your company’s strategic direction, complete a brief discussion of each explaining the impact it will have on the company. v Identify a minimum of 3 Key Industry Pressures (KIP) that are currently affecting the industry your company operates in. Complete a competitive analysis on your industry that takes into consideration the impact of each KIP on each of the 5 forces (note: some KIPs may not impact some forces but you should indicate why this is so). o Competitive / Industry Analysis – Porter’s Five Forces - Industry Rivalry - Threat of New Entrants - Threat of Substitutes - Bargaining Power of Buyers - Bargaining Power of Suppliers This assignment should be no more than 5-7 pages in length not including appendices cover page, etc. It should be single-spaced in business report style and use APA format for in-text citations and referencing. Revised: Spring 2019 3 Assignment # 2 (10%) INTERNAL ANALYSIS (answers the questions – How did we get here?) v Internal Assessment o Resource-Based View Analysis - Tangible Resources • Financial (be sure to include a financial performance analysis – details provided in class lecture notes) • Physical • Technological - Intangible Resources • Human resources • Innovation & creativity • Reputation o Value Chain Analysis - Primary • Inbound logistics • Operations • Outbound logistics • Marketing and sales • Service - Secondary • Procurement • Technology Development • Human Resource Management • General Administration o Core Competency Analysis - Organizational Capabilities • Specific knowledge, skills and abilities • VRIO analysis - Key Success Factors (KSFs) • Identify a minimum of 3 KSFs that support your company in achieving competitive advantage. This assignment should be no more than 8-10 pages in length not including appendices cover page, etc. It should be single-spaced in business report style and use APA format for in-text citations and referencing. Revised: Spring 2019 4 Assignment # 3 (5%) SWOT ANALYSIS v Compilation of the key external and internal strategic factors (SWOT) – this can be a chart that summarizes your findings from the external (assignment # 1) and internal analyses (assignment # 2) GENERIC STRATEGY (answers the questions – Where are we heading? Where would we like to be?) v What generic strategy does your company employ? Support your choice with evidence from the company’s organizational and strategic activities. DISCUSSION & RECOMMENDATIONS (answers the questions – Are we on course? How do we get there?) v Using your SWOT analysis, the company’s current generic strategy and the strategic objectives from Assignment # 1: o Should the company stay the course and stick with their current strategy and strategic objectives (is so, why) OR o Should they adopt a new course and if so what should it be (recommend a new generic strategy and new strategic objectives). Note: You must support your discussion and recommendations with evidence from your external and internal analyses. This assignment should be no more than 3-5 pages in length not including appendices cover page, etc. It should be single-spaced in business report style and use APA format for in-text citations and referencing. Revised: Spring 2019 5 Deliverable Each individual is required to submit three assignments in business report format with appropriate cover page, sections and pagination to show distinct report sections, references and appendices that contain the required elements and should thereby answer the fundamental questions. Each assignment should have an appropriate cover page, a brief introduction to the assignment and a brief summary / conclusion of the assignment. Any worksheets, tables / grids etc. can be included as appendices / additional pages within each report if they are not directly relevant to the analysis. Any and all external sources of information, data, analysis, ideas and/or suggestions external to the group are to be documented in full and in accordance with the University Policy on Academic Integrity. Due Date: Your strategic analysis assignments are due by 11:30 PM Halifax time – May 21st, June 4th and June 11th and must be submitted through the assignment drop-box of Brightspace. Late submissions will not be accepted without a valid reason that is in compliance with university guidelines for work submitted late. Late assignments that do not fall within the university guidelines will not be accepted without prior approval of an extension. The Professor reserves the right to assign a late penalty up to 10% per day and assignments submitted more than 3 days late will receive a grade of Zero. Revised: Spring 2019 6
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Explanation & Answer

Attached.

Running Head: STRATEGIC ANALYSIS

Strategic Analysis: Husky Energy Inc.
Student’s Name
Institutional Affiliation

1

STRATEGIC ANALYSIS

2
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...


Anonymous
Excellent resource! Really helped me get the gist of things.

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