Saudi Aramco's Dynamic Capabilities For Sustainable Value And Competitive Advantage Essay.

Concept of Dynamic Capabilities and Competitive Advantage in the Oil and Gas Industry

Questions:

1.Identify dynamic capabilities in. Use Teece, Pisano, and Shuen paper to justify why and how these capabilities are contributing to competitive advantage and outline how they differ from resources as identified by Barney?

2.Discuss how these capabilities can help to retain competitive advantage in the face of technological changes/disruptions?

The oil and gas sector is going through an insightful and major transformation. Saudi Aramco will be required focusing on limited number of distinguishing abilities that is the association of personal knowledge, abilities as well as behavioural aspects, methods, tools and systems that are allowing them in outcompeting their competitors. In addition, Saudi Aramco is also required reorienting their decisions relating to portfolio as well as investments in respect of these distinguishing capabilities. There is the need for having strategic flexibility for adapting to the changing aspects in the functioning environment. At present, the framework regarding dynamic capabilities is being utilised for capturing scopes as well as mitigating strategic risks in Saudi Aramco.

To identify as well as leverage mainstay dynamic capabilities does the establishment of a strategic foundation, but successful oil and gas companies such as Saudi Aramco will be requiring as well the flexibility as well as capability for managing uncertainties as well as responding to the unforeseen occurrences. To implement a dynamic strategic framework for complementing the capabilities-driven strategic aspects are comprising certain major elements such as,

1. Scenario development – A truly dynamic strategic aspect will be considering different sources of uncertainties as well as their influence on the current as well as future operational aspects. In the present landscape regarding oil and gas, circumstances might be considering factors that like future levels of production regarding unconventional hydrocarbon, developing the capital as well as operating costs, or the influence associated with stringent regulations relating to the emissions of carbon dioxide (Goetsch, 2014).
2. External sensing – Saudi Aramco is required having signposts with gauges for identifying changes in the market at the earliest. Efficient external sensing will be drawing on various sources of insight as well as data from across the company for identifying the indications relating to change. Saudi Aramco is often having significant experience relating to contingency planning at specific organizational levels like reallocating the aspect of exploring the budgets in reply to unforeseen outcomes. Contingency planning is insufficient in regard to the significant reservations and might be resulting in significant interruption as well as incompetence for responding to material changing scenarios relating to the viewpoints (Slack, 2015).
3. Integration and investment planning – Towards the establishment of capabilities relating to dynamic strategic aspects there is the requirement of full integration of the framework relating to investment planning as well as methods relating to the allocation of capital that will be determining the shape regarding the future portfolio. Organizational leaders of Saudi Aramco do the assessment of major trends as well as significant shifts in the operating environment at the start of the investment panning cycle. In addition, with the changing circumstances, Saudi Aramco having an integrated structure is having the ability for iterating the overall process, making sure that they are possessing the correct method of functioning in respect of specific circumstances (Stadler, 2013).

Ways by which dynamic capabilities are contributing to competitive advantage

The approach relating to dynamic capabilities will be providing a rational structure that will be integrating an existing conceptual as well as empirical knowledge and facilitating prescription.

• Coordination/integration – When the price system is supposedly coordinating the economical aspects, managers at Saudi Aramco are coordinating as well as integrating activities within the organization. Strategic advantage is having the requirement of integrating the external activities as well as technologies.
• Reconfiguration & transformation – In dynamic business environments, there is value in the capability towards sensing the requirements for reconfiguring the asset structure of the company as well as accomplishing the required internal as well as external changes. This is having continuous market surveillance as well as technological aspects and the eagerness towards adopting best practices. In this regard, benchmarking is considered being of significant worth to be a systematic method to achieve such means. Changing aspects are considered expensive as well as Saudi Aramco is required developing the methods for minimizing the reduced pay-off change (Teece, 1997).

Strong dynamic capabilities will be resulting in competitive advantage. There is the combination of strong dynamic capabilities as well as effective strategic aspects for sustaining competitive advantage in Saudi Aramco. The purpose of dynamic capabilities is to achieve resemblance with technological as well as business scopes and consumer requirements. The dynamic capabilities structure will be emphasizing the requirement for looking beyond making sure that a business is functioning in a smooth way. The capability for dynamically formulating as well as executing a strategic aspect, achieving market alignments as well as shaping them when a possibility occurs is considered being the significant need to durable organizational development as well as profitability (Wilden, 2013). Managers at different levels is required looking around as well as ahead for detecting as well as responding to the scopes and risks. Effective dynamic capabilities will be allowing Saudi Aramco for doing things correctly (Sakas, 2014).

The Reserve Replacement Ratio (RRR) judges the operating performance of Saudi Aramco. There are two alternatives that are open to oil and gas companies to increase their reserves such as increasing reserves through the strategies regarding acquisition as well as increasing reserves through organic strategic aspects that includes partnerships, which assist the continuous discovery of new resources (Wilden, 2015).

The capability for learning, adapting as well as reconfiguring assets as well as foundational capabilities will be creating sustainable value as well as competitive advantage. The management of the ecosystem is a dynamic capability that is important in respect of continuous success. The dynamic capability will be involving the work to develop and communicate strategic aspects as well as actualizing the alignment of strategies (Cummings, 2014). The management of ecosystems is focusing on various significant drivers of economic value that includes the formation of strategies, management of joint ventures, management of non-operated ventures, actualizing technical abilities as well as developing and deploying new technological aspects.

Conclusion

In a industry that is having volatile as well as uncertain circumstances, varied technological as well as functional circumstances and intensifying industry-specific lack of skills, Saudi Aramco will be required focusing on certain distinguishing abilities needed for winning in their selected operational areas. The capability for learning, adapting as well as reconfiguring assets as well as foundational capabilities will be creating sustainable value as well as competitive advantage. The management of the ecosystem is a dynamic capability that is important in respect of continuous success.

References

Cummings, T. G., & Worley, C. G. (2014). Organization development and change. Cengage learning.

Goetsch, D. L., & Davis, S. B. (2014). Quality management for organizational excellence. Upper Saddle River, NJ: pearson.          

Sakas, D., Vlachos, D., & Nasiopoulos, D. (2014). Modelling strategic management for the development of competitive advantage, based on technology. Journal of Systems and Information Technology, 16(3), 187-209.

Slack, N. (2015). Operations strategy. John Wiley & Sons, Ltd.

Stadler, C., Helfat, C. E., & Verona, G. (2013). The impact of dynamic capabilities on resource access and development. Organization science, 24(6), 1782-1804.

Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic management journal, 509-533.

Wilden, R., & Gudergan, S. P. (2015). The impact of dynamic capabilities on operational marketing and technological capabilities: investigating the role of environmental turbulence. Journal of the Academy of Marketing Science, 43(2), 181-199.

Wilden, R., Gudergan, S. P., Nielsen, B. B., & Lings, I. (2013). Dynamic capabilities and performance: strategy, structure and environment. Long Range Planning, 46(1), 72-96.