Write a report on business policy and strategy.
The Northern Drilling Inc. is subsidiary of the InterDrilling Corporation and world’s third largest exploration drilling contractor, headquartered in Europe. The organization has begun operation in 2006 and Peter Bremner was hired to build the division from the ground up. Following the internal issues and opportunities for the organization according to the SWOT analysis:
Table 1: SWOT analysis
· Offering the full spectrum services
· Superior technical capabilities
· Using the high safety standards
· Good working environment
· Good revenue generation
· Lack of decision making
· Lack of market analysis
· Issues in management of operations
· Lack of audit of internal functions
· New bid and contracting opportunities
· Improvement in the international market condition
· Can make contract at higher margin
· High demand of diamonds
· Improvement in competition level
· Expensive investment (Hox et al., 2017)
· High risk in long term contracting
· Increasing cost of tools and technologies
According to analysis, the organization is having capabilities to capitalize the market conditions but management needs to work on the weakness and threats. The high demand for services and higher margin for services can be beneficial for Northern Drilling Inc. to maintain the business and gain a competitive advantage (Steyerberg, and Harrell, 2016). Apart from that management needs to focus on the level of competition in the local and international market as many other companies are looking for a big contract and offering the good services to the clients. The association with new clients and analysis of the market situation can be beneficial for the organization to overcome the issues and encourage the business.
The external analysis of Northern Drilling Inc. will be done using the Porte’s five force model. This model is useful for understanding the competitiveness of the business environment and the identification of the potential strategy for maintaining profitability (Dobbs, 2014). The external analysis of Northern Drilling Inc. using Porter’s model is as follows:
Figure 1: Porter's factors
Competitive rivalry: According to given case scenario of the Northern Drilling Inc., there are various other organizations in the industry that offering tough competition to Northern Drilling Inc. such as Bonrt Longvear, Major Drilling Group international and Orbit Garant Drilling Inc. These organizations are offering high quality and low-cost services for drilling in the industry which has a negative impact on the business opportunities of Northern Drilling Inc (Mathooko, and Ogutu, 2015). For example, Boart is the world’s oldest and largest organization in these filed and providing professional services in drilling. The other two organizations are also operating a business at the global level and having a significant impact on the business of Northern Drilling Inc.
Supplier power: In the drilling industry, there is a higher demand for technical assistance and offering of equipment for safety and managing the operations. According to analysis, the buying power of supplier is high for offering the services as drilling functions involve many risks that affect the tools and requires 24*7 assistance for managing operations (Jarzabkowski, and Kaplan, 2015). Apart from that, the growing organizations are also hiring these suppliers for encouraging their business which influencing the price of the suppliers in this industry. Hence, increasing the buying power of supplier is affecting the investment of Northern Drilling Inc.
Buying power of buyers: The buying power of customers in this industry is moderate as the limited options are there for choosing the drilling services provider. The Northern Drilling Inc. is having a good reputation and market image that helps to attract the customers. Moreover, for the big contract, the bid process is used that also overcome the issues related to the buying power of customers.
Threat of substitution: The drilling industry is having the threat of substitute products such as utilization of robotics in the drilling operations. The use of robotics is influencing the business of Northern Drilling Inc. as it requires less human involvement and eliminates the risk of manmade disasters (Kemp, and Owen, 2018). For example, the uses of robots in the drilling eliminate the manual function that minimizes the time and cost of the operations as well as improve the follow up of the required standards. In addition to this, the lack of technical tools and mapping technology is creating the threat for Northern Drilling Inc. in maintaining the business against the substitute.
Threat of new entry: According to the analysis of the business environment of the drilling industry of Canada, the threat of new entry is low. The drilling operations for diamond require the high investment for planning the operations, human resources, technical assistance and safety of the workers. The lack of funding and business opportunities is also creating barriers for new organizations to start the business in this filed (Mayton et al., 2018). Therefore, the new entry in the market is not threatening the business of Northern Drilling Inc. The organization can plan business according to own culture but they need to focus on the existing competitors.
The major issues that influence the work of Northern Drilling Inc. involve the lack of consideration of market situation and analysis of factors that might affect the current reputation of the organization. According to the given case scenario, the competition level within drilling industry of Canada is increasing as many other organizations are applying for biding and contracting of the new proposals. The contracting with Mond will be beneficial for Northern Drilling Inc. to maintain the business position (De Silva et al., 2017). The clients are very price sensitive which also affecting the gross margin of the organization as well as changes in the technological functions for drilling also influencing the decisions of the skilled workers to shift the job.
The top management person of the company like Peter needs to evaluate the job conditions and working environment to meet the satisfaction level of employees and retain them for a longer period of time. The organization has to bid for the Mond proposal by developing the contract of drilling as it is a good and big project that will be helpful for generating long-term profit (Wang et al., 2018). However, there are some factors like cost and investment for the supporting equipment. In addition to this, the changes in the overhead amount and geographical conditions were poor that are having a negative impact on the decision making for bidding.
Peter needs to keep in mind that, there are many other organizations which looking for this opportunity to bid for the Mond and get the contract for future development. The lack of market analysis and the competition level is affecting the business of the Northern Drilling Inc (Vickers, and Lyon, 2014). The client base of the company is also declining and organization is struggling to maintain the good run for the services in the industry.
Critical issues, alternative and possible solution
For the new bid contracting proposal, there are various alternatives are available that can be analyzed and chosen by the Northern Drilling Inc. The key alternatives for Peter are no-bid, bid on a portion and bid for the whole contract. The criteria for making the decision for choosing an alternative for this proposal would be potential of return, competitor initiatives and target of Northern Drilling Inc. for encouraging the business. The manager needs to make a decision for maintaining the reputation by winning the contract (Kowalkowski et al., 2015). The relationship Northern Drilling Inc. has built with the organization has to be considered for the decision making. According to capabilities and technical resources that Northern Drilling Inc. has, it can be suggested to bid for the whole contract. For example, Northern Drilling Inc. is considered as most technically competent drilling contractors and if they bid for the whole contract there are possibilities for winning it. The manager needs to think about job functions and get the chance for re-establishing the organization as a leading contractor in the area.
Apart from that, the strategies that the organization could use for expanding and encouraging their business will involve the consideration of market positioning and growth strategy for the whole project (Daines, Clark, and Lenton, 2014). As per the analysis of strength and weakness of the organization, the consideration of these alternatives will be beneficial for managing the business operations according to the reputation. The high demand for services and higher margin for services can be beneficial for Northern Drilling Inc. to maintain the business and gain a competitive advantage. Peter needs to look into these alternatives for making the decisions quickly to develop the plan for bid.
According to analysis, there are various options are available for Peter to make the decisions for bidding and contracting the big project like Mond. The company and completion analysis will help Peter to make the decision for choosing one better option for bidding the contract. By considering the internal and external condition of the organization, the best possible solution for Peter would be the go for the whole project (Choi, 2015). By bidding the whole project will be helpful for managing the relationship with the Mond and increasing the possibilities in the future. The strategy that organization could choose for managing the business operation will involve the market penetration. According to this strategy, the organization focuses on the existing market which is Canada diamond mining sector for Northern Drilling Inc.
The selection of this strategy will help to increase the relationship with the existing contractors and improve the market share. For the implementation of the strategy, the manager Peter needs to be price sensitive as well as requires increasing the promotion and distribution support to overcome the issues of competition (Yeh, Hsieh, and Lin, 2018). In addition to this, the strategic growth plan for Peter will be the improvement in the capacity of the human resources, tools, and strength of the company. Moreover, market penetration will also help to encourage business of organization outside of Canadian market. The forecasting and relationship with the existing customer will be beneficial for boosting the business of Northern Drilling Inc.
The learning from the case study of Northern Drilling Inc. involves that market and internal analysis is essential for the organization to understand the issues and strengths which is helpful for decision making. I have learned to utilize Porter’s five force model and implementation of the growth strategy that can be useful for future planning and assessment of business functions. Moreover, I have gained the knowledge about issues that a big organization faces due to lack of support from the top management. Apart from that, critical analysis of the company’s approach towards the project will also help in further decision making for own business.
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