Essays /

Not Sure Of This Essay

Essay preview

CR Vol.16, No. 3&4, 2006

by Carolina Duarte, Lawrence P. Ettkin, Marilyn M. Helms, and Michael S. Anderson

EXECUTIVE SUMMARY Venezuela ranks fifth in the world in oil proven reserves and has the largest accumulation of liquid fuel in the world. With its importance as an oil country, many countries including the U.S. have expressed concerns about Venezuela’s current economic and political situation. Using the popular SWOT analysis, Strengths, Weaknesses, Opportunities and Threats facing the country, are identified. The discussion and conclusions summarize the observations and address the relative tradeoffs within the country. Finally goals and policies appropriate for Venezuelan reform are presented.

INTRODUCTION A Strategic Assessment Methodology Porter’s (1990) Competitive Advantage of Nations “National Diamond” model has been widely used when analyzing a nation’s competitiveness. Porter’s theory utilizes a multitude of factors including choosing industries, locations, alliances, and ways to be more competitive. Porter and van der Linde used the “cluster analysis” of strategy, rivalry, demand conditions, factor inputs, and related or supporting industries to identify two cluster profiles for Venezuela (see -- the petroleum and petrochemicals cluster across the entire country and the entertainment or

“telenovelas” cluster in Caracas. This second cluster includes television advertising, music, recording, and beauty pageants. While these two clusters can aid competition and Porter (1999) supports the competitiveness of locations, he does agree factor endowments are less valuable in the global economy. Porter further states (p. 871), “the prominence of clusters suggests that much of competitive advantage lies outside companies and even outside their industries.” Thus most of Porter’s ideas are commonly applied to citizens and regions as well as firms and industries. No new clusters have emerged for Venezuela. Are there other resources and skills available? What are the factor and demand conditions in the country today? Before these questions can be addressed and placed into Porter’s Diamond of National Advantage, a closer look at the country as a whole is needed. Thus SWOT analysis was selected to study Venezuela due to its efficiency, ease in the basic scanning of a situation, and providing a macro situation of a country which then could lead to more indepth analytical breakdown via Porters model. SWOT, is an acronym from its Strengths, principal components: Weaknesses, Opportunities, and Threats (Glaister & Falshaw, 1999). In its simplest form, Kay defines the SWOT analysis as “simply a list” (1993, p. 268). In itself, it is not an analysis but, as a tool, it can aid in effectively performing a broad analysis. SWOT is a way to analyze the environment, allowing for the segregation of the environment into internal strengths and weaknesses and external opportunities and threats as well as positive and negative environments. Bullington (2005) agrees SWOT analysis can be effectively used in an early environmental analysis due to its categorical structure.


CR Vol.16, No. 3&4, 2006 “Environmental scanning” and “situation analysis” are other terms often substituted for SWOT analyses, and help to describe what a SWOT analysis does, i.e., define what strengths can be used to build upon; what weaknesses should be covered; what opportunities can be captured; and which threats should be defended against. The strengths and weaknesses criteria include natural and financial resources, work force, education levels of the population, markets and products for trade opportunities, technological capabilities, capital structures, and similar factors. The opportunities and threats criteria include: demographics, economy, political and legal aspects, cultural and historical factors, environmental concerns, and sociological factors (Mercer, 1991). SWOT analysis was originally performed in complex business environments for the purpose of formulating business strategies (Xiaomin, 2000). Since its origination in the 1950s by two Harvard Business School graduates, George Albert Smith, Jr. and C. Roland Christensen, it has gained increasing success as a management tool (Panagiotou, 2003). Perhaps its bestknown success came in the 1980s when Jack Welch of General Electric implemented SWOT to analyze GE’s strategies, and helped GE triple its productivity (Slocum & McGill, 1994). Today, most major companies utilize SWOT analysis (Backman & Butler, 2003). SWOT analysis was also used effectively at the United Nations’ Office of Planning Services to analyze proposals and increase staff accountability. The result was an increase in the speed of proposal processing, greater staff participation, a more orderly process, better interdepartmental cooperation, and the reduction in the use of expensive, outside consultants (Dijkzeul, 2000). SWOT analysis has expanded to encompass larger territories. Brinkerhoff and Coston (1999) used SWOT analysis as a tool for International development management in the globalized world. Backman and Butler (2003) applied SWOT to the entire continent of Asia. And Rahnama, Samavati, and Dilts (1995) used SWOT to study business in developing countries. SWOT assists in the identification of environmental relationships as well as the development of suitable paths for countries, organizations, or other entities to follow (see Ansoff, 1965; Andrews, 1987; Porter, 1991; Hofer & Schendel, 1978; Valentin, 2001). This conceptual framework can assist policy makers in identifying key forces affecting this country. SWOT has been used extensively in a number of developed as well as developing economies to aid in understanding a variety of decisions including: Succeeding in business and manufacturing location decisions in China (Helms, 1999); penetration strategies for UK and Chinese exports promotions and joint ventures (Zhang & Kelvin, 1999); regional economic development in Australia (Roberts & Stimson, 1998); performance and behavior of new micro-firms in Scotland (Smith, 1999), and business opportunities and strategic planning in Bahrain (Khan & Al-Buarki, 1992). SWOT analysis has also been applied by government agencies to analyze expansive regional projects such as India’s offshore outsourcing in the state of Kerala (Nair & Prasad, 2000); India’s commuting and transportation systems (Vijayaraghavan, 1995); the Zhongguancun Science Park in China (Xiaomin, 2000); entrepreneurship in Japan (Helms, 2003), and the competitiveness of Spanish industry (Ahijado, Begg & Mayes, 1993). Another use of this analysis tool is a study of multi-


CR Vol.16, No. 3&4, 2006 sectoral qualitative analysis for assessing competitiveness, core competence, economic and trade possibilities, and economic risk of regions (Roberts and Stimson, 1998). These international studies identify the complex environmental relationships and formulate a solution for the country, building on the advantages and opportunities presented. These studies confirm a SWOT analysis of Venezuela is both suitable and useful and should advance intellectual understanding about the country. estimated a further 45 TCF and 36 TCF respectively represent probable and possible reserves. A new natural gas regime, OGL (Ley Organica de Hidrocarburos Gaseosos), was approved in late 1999. The OGL creates a modern, legally secure framework for a market-oriented gas business. Without a required national oil company involvement, the sector will be open to international private, domestic private, and state participation (Uisdean and Lujan, 1999). Mining Venezuela includes one of the largest mining reserves in the world, as well as one of the largest areas of resources. Venezuela has important coal deposits in the Eastern and Western parts of the country. Most of the country's gold, diamond, iron, and other base metal exploration and exploitation occur at the Guyana Shield, in the southern state of Bolivar. The Ministry of Energy and Mines (MEM) indicates proven reserves of minerals are: iron, 15.000 million metric tons; coal 8,270 million tons; nickel, 56 million metric tons; Gold, 10.000 metric tons; and diamond with no overall estimates. Attractions The shores of Venezuela, discovered by Christopher Columbus during his third voyage to the New World in 1498, were his first sightings of the American mainland. The beauty of the landscape impressed Columbus to name the new territories "Land of Grace." His reports of bounties led to the exploration of ...

Read more


-10 -104 -117 -14 -200 -252 -264 -29 -3582 -377 -40 -494 -67 -69 -73 -880 -98 /). /cia/publications/factboo /cia/publications/factbook/geos /cp) /cp. /destinations/sough_a /emeu/cabs/ /emeu/cabs/ /scripts/c /scripts/cg /ve.htm /wservice=globalone001/glob /wservice=globalone001/globalone/ 000 0219 1 1.7 10 10.000 101 107116 12 13 138 14 146 148 1498 15 15.000 154 16 16.7 165 17 18 18.2 18.5 1807425 185 1920s 1950s 1958 1965 1970s 1978 1980 1980s 1987 1990 1990s 1991 1992 1993 1994 1995 1998 1999 19th 2 20 2000 2001 2002 2003 2004 200405 2005 2006 2025 21 213 217 22 23 233 234 235 236 237 238 239 24 240 241 242 243 244 245 246 247 25 26 268 27 270 277 28 3 30 30720 31 32 3347 34 346 35 36 374 37403 4 4.2 42 44 45 469 48 5 5.4 50 53095 54 56 59 6 60 615 647 7 72 78 8 80 800 8409 841 8412 85 871 89.5 9 90 94 95 97 a14 a2 aberdeen abil abl abund access accion accord account accumul achiev acr acronym across activ actor adapt add addit address administr advanc advantag advertis affect agenc aggress agre agreement agricultur ahijado aid airport al al-buarki aladi albert albornoz alien align alleg alli allianc alloc allow almost alone/htm/news_article.r along also altern although amazon america american americo ameriven amid among analys analysi analyt analyz andean anderson [email protected] andes andrew angel angela annal annual anoth ansoff answer anti anti-western antitrust anyon anyth anytim anywher apart appear appli approach appropri approv approxim april area argentina arm around asia asian aspect assess asset assign assist associ attempt attend attract audienc august australia authoritarian autio autonomi avail avenu aviat award away b b2b babson back backlog backman bahrain balanc bank barrel base basic basingstok beach beauti becom begg begin begun behavior behind believ belt benefit best bestknown better beyond big billion bitter black black-market boiler bold bolivar bolivarian bolivia book border boston bottom bounti brain brand brazil breakdown bring brinkerhoff british broad buarki budget build bulletin bullington bump burden busi butler buy bygrav c came camp campaign canada canadian cannot capabl capit capita capital-intens captur caraca caribbean caricom carolina carri cartagena case castro categor cater cattl caudillo caus [email protected] censor center central centuri cerro certif chair challeng chart chattanooga chave chavez chavista chemic chile china chines choos chosen christensen christian christoph cia citi citizen civil civilian climb close closer cluster coal coast collaps colleg colombia colombian colonel columbia columbian columbus column com/destinations/sough_america/venezuela come comit commerc commit common communic communiti commut compani compaq compar compet competit complet complex complic compon compos compulsori concept conceptu concern conclus condit confer confid confirm conflict consid consider constitut consult consum contain contin continu contribut control cooper cordoba core corpor corrupt cost coston could council counter counti countri coup cover cr crack creat creation credibl credit crime crimin crise crisi criteria critic crude ct cuba cuban cubic cultur currenc current curs cut d dalton danger data day de decad decemb decis declin defeat defend deficit defin degre demand democraci democratica demograph depart depend deposit depress der describ desir despit destruct determin detriment devalu devast develop development diamond differenti digit dijkzeul dilt diplomat disagre discov discuss dispar disput distort distribut divers diversifi divid divis dollar domest domin done doubl drain drive driven drop duart due dwell dynam e e.k earli earn eas east eastern econ econom economi economist ecuador edc edit educ edward effect effici el elect elector electr eleven elimin els embark embassi emerg emerging-market emergingmarket employe encompass encourag end endow endur energi engin enhanc ensur enterpris entertain entir entiti entrepreneuri entrepreneurship entri environ environment errat especi essenti estim et ettkin european even everi evid exampl excel excess exchang exchange-r exclud execut expand expans expect expens experienc expert expertis exploit explor exponenti export export-import exposit express expropri extend extens extern extra extra-heavi extract face fact factbook factor fail fall falshaw far fare farm favor fear februari feet fidel fifth figur final financ financi firm first fiscal five flexibl flight flow fluctuat focus follow food foot forc forecast foreign forero form former formul fortun foster found foundat four framework free frequent fria friend fuel fulli fund futur g g3 ga gain gas gaseoso gasolin gdp ge general genuin geograph georg giip.exe giip.exe/wservice=globalone001/globalone/ give given glaister global go goal gold gonzalez good govern government grace graduat gran grant greater group grow growth guid gulf guyana h half hardship hardwar harm harvard hatch head healthcar heavi helm help hidrocarburo high higher highest highlight hike hill hinder histor histori hofer home homewood hood hostil hous houston howev hp htm/news_article.r huge hugo human hurt hydrocarbon hydropow i.e ibm idea ideal identif identifi ideolog idl iip.exe iip.exe/wservice=globalone001/glob il imf impact impedi imper implement import importsubstitut impress incent includ incom increas independ independient indepth index india indic industri industry.national ineffici inexperi infant inflat inflationari inform infrastructur inher initi innov input insid instabl instead institut integr intellectu intens interdepartment interest intern interven introduc introduct invas invest investor involv iran iron irwin isol issn issu italian j j.d jack januari japan job john joint jose journal jr juan juancandelario/legisl/lohg.htm judici jump jump-start june jungl k k/geos/ve.html kauffman kay keep kelvin kerala key khan kidnap kimbal known l labor lack lake land landscap larg larger largest last late latin latinamerican law lawrenc [email protected] lead leader lean learn least leav led left left-lean legal less level ley liber libya licens lie lieuten lieutenant-colonel like limit lind linger link liquid list literaci literatur littl live local local/domestic locat lockout london lone long long-term longer look lose loss low ltd lujan lunch m m.b.a machin macmillan macro main mainland mainstay major make maker manag mani manufactur maracaibo march margin marilyn market market-driven market-ori marketplac marvin maxim maximum may may/june mccalli mcgill mcgraw mean medic medium medium-s mem member mentor mercer merica/venezuela/printable.htm metal method methodolog metric mexico [email protected] mic michael micro micro-firm microsoft mid mid-1990s militari millennium million mine miner minim ministri ml mn model modern money moni monitor montevideo mortal mortim mountain move mr much multi multi-polar multisector multitud mundo music must n nair name narrowli nation nationalist nativ natur navig necessari need negat negro neighbor new news newyork nickel nnpc non non-oil normal north notifi novemb number numer o observ occur octob odd offer offic offici officially-recogn offshor often ogl oil oil/gas one one-polar ongo open oper opportun opposit option order ore organ organica organiz organizacion orient origin orimuls orinoco other outdoor outflow outlook outsid outsourc overal overshadow overvalu overview overwhelm own owner ownership oxford p pa16 pact padgett pageant pain palast palgrav panagiotou paraguay pari pariti park part parti particip particular partner past path paul payment pdvsa peac penetr peopl peoplesoft per percent percentag perform perhap persian person perspect peru petit petrochem petroleo petroleum petrozuata pgs philosophi place plan planet plateau platform plot polar polici polit politica poor popul popular populist porter posit possess possibl potenti poverti power practic prasad predict prefer preferenti premium presenc present presid press pressur price primarili princip printable.htm prior privat probabl problem problemat process produc product profess profession professor profil program progress project promin promot propel properti propos prosper protest proven provid public publish pull purchas purpos push qatar qualit quantifi question quorum r r.e radic rahnama rainforest rais ranch rancher rang rank rapid rate rather reach real reason reassur rebel rebound recal receiv recent recess reci recid recogn record recov recoveri recruit redistribut reduc reduct refer referendum refin reflect reform refug regim region regul relat relationship reliabl relianc reliant remain repatri report repres republ requir research resembl reserv resolut resourc resource-bas respect rest result return revenu review reward rewritten reynold rich right risen risk rivalri road robert robin rock roland rout royalti rudimentari rule run s.a sa sabana safeti sale samavati sanction sand sap scan scarciti schendel school scienc scotland search second section sector secur see seek seem seen segreg select septemb serior servic sesquicentenni sever sharp sheet shield shore short short-liv short-run shortag shown shut shut-down side sight sigma sign signific similar simplest simpli sinc sincor situat six sixth sixti size skill slocum small smith social socialist sociolog softwar soil solut someon south southeast southern spain spanish specif speed spend sphere spirit squeez st stabil staff stage stanc stand start start-up state state-cent state-domin state-own static/doc9890.htm station statist stem step stifl still stilt stimson strain strateg strategi street strength strengthen stress strike strong strong-arm strongest structur struggl student studi sub sub-region subject subsequ subsid substanti substitut succeed success suffer suggest suitabl summar summari summer sun suppli supplier support sure suspend sustain swept swing swot system tabl take taken tale tallest tariff tax tcf technic technolog telenovela televis tennesse tension term territori texa theori third third-largest threat threaten three thrust thus tie tim time tn today ton took tool top tourism tourist toward trade tradeoff tradit transport travel treati trebilcock trend tri trillion tripl tropic true tv twenti two typic u.s u.s.a uisdean uk un uncertainti uncompetit understand undertak unemploy union unisi unit univers unop unrest unseat up upgrad upon uruguay us usa use util v valentin valu valuabl van varieti vendor venetian venez.html venezuela venezuelan venic ventur vespucci vestey via view viewswir vijayaraghavan visit vital vnew vol vol.16 volatil vote vow voyag vulner w wall wane wang washington watch waterfal wave way weak wealthi wednesday week weisbrot welch well wellestablish west western westport white whole whose wide widespread william win within without wonder work worker world worldguid worri would writer wrong wto www.embavenez-us.or www.embavenez-us.or/). www.lonelyplanet xiaomin year yes york young zhang zhongguancun zuckerman