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Organization Values and Vision

Discuss about the Managing Next Generation Competition.

The Saudi Aramco Company is officially known as the Saudi Arabian Oil Company and is an Oil and natural gas supplying Company based in Dhahran in the oil rich nation. The company is the largest oil company of the world (saudiaramco.com 2018).  The company was established in the year 1933 under the name of California-Arabian Standard Oil Company and changed its name in the year 1988 to Saudi Oil Company.  The company has annual revenue of more than US$ 300 billion. The company is totally owned by the Saudi Arabian government and has employee strength of more than 60,000. The company has extensive operations in the mentioned Country and owns a number of large oil and gas fields which includes the World’s largest natural gas reserve. The operations of the company are spread across the world and exports oil and natural gas to different countries of the globe. As mentioned earlier the company carries on its administrative operations from the Dhahran office that includes exploration, production, refining and other necessary tasks involved in the production of oil and natural gas. The activities are closely monitored by the ministry of petroleum and mineral resources along with the proper coordination of the council for Minerals and Petroleum.

Apart from the main products in the form of Oil and Natural gas the company produces and exports other secondary oil products like Gasoline, Sulfur, Crude Oil, Petroleum, LPG, Kerosene, Sales Gas, Fuel oil, Aviation oil and many other different oil and gas related products. The management of the organization has a planned and strategic approach to serve all their customers in a proper and fair manner. The containers and crude ships owned by the organization deliver the products to different parts of the world.

Before discussing the values and mission of the company it is important to have an idea on the reasons behind the existence of the company and its responsibility towards the society. The first and foremost reason for the existence of the organization is the need for oil and natural gas. Oil and Natural gas are the most crucial fuels that run the world, without which the world will come to a standstill and the economic growth of the countries will come to a standstill. Therefore apart from making money and profits the company is dedicated and focused to provide the main source of energy to the world. The management of the company has decided on the vision of the company for 2020 (saudiaramco.com 2018). It aims to be the World’s largest leading integrated energy and Chemicals Company and will focus extensively on maximizing the income of the organization by ensuring a sustainable and diversified expansion of the economy of the Kingdom. According to the management this will help the organization to be a globally competitive energy producing organization. The Company has to provide tremendous hard work and energy along with large scale investment to achieve the main goals of the organization for the coming years. This includes;

  1. Reinforcing the leading position in oil and gas production and also new oil fields exploration
  2. Integrating the hydrocarbon value chain within the business
  3. Enabling the green and sustainable development of the organization.
  4. Be an able employer with proper strategy

CSR Initiatives of Saudi Aramco

The company has recently announced the multilayered drive to increase the capacity of oil production to 12 million barrels per day. This will help the company to meet the excess demands of the future and ensure the sustainability of the organization. The mission of the company is to ensure the economic progression of the Kingdom and also ensure the profitability in the hydrocarbon operations of the state.

The mentioned oil company has a dedicated CSR initiative that helps them to serve the society in a better way. The company being a global leader in oil is committed towards providing the best CSR initiative for the organization. Since the establishment of Aramco Asia’s priority list the management of the company constantly pushes itself to be among the leaders in CSR activities. The following business aims to promote a sustainable, social, environmental and knowledgeable development in the areas where it operates its business (Porter and Kramer 2019). The company believes that innovation connects people, ideas and energy and helps to realize the full potential of the available resources. The full utilization of the resources helps the organization to use all the benefits of such types of resources. However the company recently faced problems in implementing the CSR strategies because of the new OPEC agreement. The company recently had to cut down the investments in specific markets but hopes to regain the lost market share by the implementation of a fresh strategy. According to the management of the organization the company can cope up with the problems because of the large scale and reliable consumer base for the products and services of the organization.  The main areas where the company aims to focus are;

  1. Safety measures for the workers who works in oil drills
  2. The company must cut down emissions to help achieve green sustainability
  3. Energy efficiency
  4. Promote knowledge and ensure employee satisfaction

The company has been consistent towards its development over the years and has never lacked the quality or intent to achieve growth. The consistency of the organization has helped to be the largest oil producing company of the world. The company has provided utmost value to the employees. The five major corporate values of the organization are excellence, safety, integrity, accountability and citizenship. All these different values help the organization to ensure the value of the employees and ensure the utmost productivity for the organization. The company has a strong senior leadership. A strong senior leadership helps the organization to be at its very best and perform accordingly. The presence of such a strong leadership at the helms of the organization helped the Company to cope up with the cyber attack crisis in the year 2012. The leaders are way forward than the present times and thus the policies and programs of the organizations are way ahead of their competitors which in turn helps them to attain the strategic competitive advantage in the organizations.  Hamel and Prahalad (2005) describes that strategic intent sets out the target of the Company that deserves personal effort and high level of commitment. The CEO’s in most of the companies express their strategic intent in terms of the wealth acquired by the stakeholders of the organization. The strategic intent of the following oil company can be measured by the willingness of the central management to expand the business globally. The process of strategic planning and that of strategic intent is way different from each other. Strategic planning aims to make the company sustainable whereas strategic intent of Saudi Aramco is to stay profitable all the time and remain the best in the market (Hamel and Prahalad 2005). The following company has taken different steps to establish the supremacy of the organization which includes, providing employees with the required skills that are needed to work effectively, provide enough challenge to the organization to take care of one challenge at a time and also establish transparent milestones and review them accordingly.

The neoclassical economics and different management theories assume that the mentioned organization has the objective to maximize the profit. The key agent in such different kind of models is the shareholder which acts as the ultimate residual claimant and provides the different financial resources for the operations of the mentioned organization. The last 5 to 10 years has seen a rapid strategic change in the organization (Reeves and Ventura 2012). The integration of social and environmental issues in the business models and daily operations of the organization have made it one of the best in the business. In the present times most of the companies have sustainability programs. Saudi Aramco is one of these few organizations that have a perfect sustainability program to address the interests of stakeholders, investors, employees, customers and the governments at large. The company has increased the shareholder value as well as increased the performance of the firm on the environmental and social basis. The management of the company does not launch programs with the hope that they may be financially profitable but with the hope of improving their ESG performances (Kourdi 2015). The management of Saudi Aramco has the objective to create the trade offs and frameworks for creating the sustainable strategies that boost up both the financial as well as the ESG performance of the organization.

ESG Performance of Saudi Aramco

Chan Kim and Renee Mauborgne (2004) in their research on blue ocean strategy have discussed the blue ocean strategy which is adapted by most of the companies like Saudi Armco. The blue Ocean Strategy is quite different from the Red Ocean strategy in their approach as because it creates uncontested space in the market, creates new demand for the products and the services in the market and also makes the completion from the other companies totally irrelevant. The creation of the business values helps the organization to attain superiority in the market by removing any tradeoffs between the cost of the products and their values.

The ESG issues of the companies are well addressed by the management as because avoidance of such issues can lead to destruction. The absence of a proper working condition for the employees of the organization along with the absence of a friendly workplace can create havoc as it will invite the press and will lead to a fall in the market shares of the company. The following issue was faced by the management of Apple in China where deplorable working conditions in the manufacturing unit was highlighted by the media. It led to a massive reduction in the sales of the company products and thus the company was forced to change such terrible working conditions (Fakhimi et al. 2017). Saudi Aramco being an oil company has various risks in the workplace. The employees are vulnerable to large scale fire, oil spills, gas contamination, leakage of harmful gas and many other similar incidents that can lead to fatal incidents and even serious issues related to health. The company has thus prioritized the ESG performance more than the financial performance as because a successful ESG performance helps the organization to improve their financial performance. The mentioned oil company thus fulfills the ESG criteria to avoid any such complications in the workplace.  The management of the company has identified working conditions of the employees to be their main ESG issue in the business. Such an issue can adversely affect their financial performance as loss of labor will lead to less production. The company has implemented a number of different steps with the implementation of the latest technologies to ease the works of the labor and increase their security (Collis and Rukstad 2008). The shareholders of the company will certainly be benefitted once the labors or the employees are happy and can increase the turnover of the organization. The management of the organization has implemented the use of incentives for better performance to utilize the resources of the employees. Thus such steps clearly show the strategic intent of Aramco to be at the top. Some of the main steps the management of Aramco takes to implement ESG strategies are;

  1. Green Sales and Marketing- The improvement of the revenue through increased shares and price premiums by the marketing sustainability attributes.
  2. Regulatory Management- The lowering of the risks and capturing the opportunities to regulate the policies within the company
  3. Sustainable Operations- Reduction of the operational costs by way of improved management of the internal resources of the organization which includes water, waste, carbon, employee engagement
  4. Sustainable Value- The improvement of the resource management and reduction in the impact of the operations of the company on the environment. It also includes the improvement in the reduction of the costs and improvement in the value propositions.
  5. Risk Management- The risk Management process involves the management of the company to take care of the reputations of the organization and also control the operational risks of the organization and to develop strategies to fight the effects of climate change.
  6. Growth- The innovation of different new products and services is one of the main strategies of Aramco management that helps the organization to achieve growth as well as sustainability. It also helps in the identification of new markets and expand their services to different other parts of the world.

Blue Ocean Strategy of Saudi Aramco

The management of the oil and gas industry traditionally used to maximize the profitability of the firm on a short term basis in order to generate the cash flow and equity to speed up the long term sustainability in the market (Eccles et al. 2014). However the change in the modern market has led to a paradigm shift to the strategic approach of the organization. The change in the environmental performance along with the stress on ESG values is the key to the success of the business. Therefore the approach of the Aramco management is now more employees based than the traditional financial based approach. 

Most of the organizations in the modern days have a system in place for each and everything. This varies from the acquisition of customers to the management of the customer relationships by providing quality services and products to the customers of the organization. Saudi Aramco is the national oil company of Saudi Arabia and owns the largest reserves of oil in the world. The company has been able to maintain the leading position among the petroleum producing countries and the petroleum producing companies of the world. The company is accepted as one of the most powerful and influential among all the other oil producing companies of the world. The current strategy adapted by the organization is to regain the lost market share of the organization after the end of the OPEC led supply cut pact and has plans to push ahead with a dynamic expansion strategy (Bridge and Le Billon 2017). The company aims to move ahead of the refining and petrochemical sector and have started discussions and negotiations with a number of different Asian countries to expand. The managing director of the company has aims to reduce the allocations in a number of different countries in order to grab the market share after the end of the agreement. As mentioned in section 1 the company is confident of regaining the lost grounds because of the presence of a large customer base.  The management of the particular company has set aside a number of different strategies for the coming days which includes;

  1. Reinforcing our position in oil and gas exploration and production
  2. The integration of the business along the hydrocarbon chain to have the maximum impact
  3. Enabling the sustainable dev elopement of the organization and the country
  4. Technological development, proper research and innovation.

All these strategies are believed to be achieved within the next 10 years. Though there are lots of such different strategies the main concept behind such strategies is the overall development of the business in the best sustainable way.  The strategic scope of the organization is divided into customer offering, geographic location and many more such different features (Eccles and Serafeim 2013). The different dimensions have their own area of importance. However the management of Saudi Aramco has defined customer and geographical location to be the most important amongst the three of them (Benn Edwards and Williams 2014). Customers are the main assets of the business and thus Aramco adds great value to all their customers. On the other hand geographical location of the different facilities of the companies is utmost important to select the proper strategy of the business.

The company enjoys a strategic advantage in the kingdom of Saudi Arabia because of the involvement of the government and also because of the sheer size of the business and the large scale presence of the organization in almost everywhere in the world. Apart from such an advantage the management of the company has provided a great value for the employees of the organization. The employees are able to work in a friendly environment and enjoy lots of benefits (Bae and Heo 2018). The providence of such benefits helps the organization to increase their efficiency. The management of the company provides training to the existing as well as the new employees to help them adapt with the organizational functioning and sharpen their skills. Thus such strategies of the organization help the organization to move towards the strategic goals.

The mentioned oil company has reportedly adapted the Acceleration Transformational Program which is used to implement change within the organization. This particular program involves the different functions of the management which involves planning, organizing and leading. The planning involves the identification of the different goals and objectives of the organization. Organizing is one of the most key aspects of the organization as because it involves the workforce of the company and the way in which the work is done within the organization. Last but not the least leading refers to motivating, educating and helping the employees of the organization in distress (Banerjee 2017). Controlling is also considered too be a factor which refers to the leadership qualities of the higher management and the careful observation for achieving the objectives set by the management. The mentioned program strives to solve the potential of the employees by not just completing the task assigned to them but also by ensuring a professional approach.

Saudi Aramco is already an established company in the oil and Natural gas segment and recently it is slowly increasing its production and also shifting itself towards the production of other items in the petrochemical segment. Such a shift will result in more profit for the organization in the coming days and also ensure its sustainability. Therefore the adaption of the new strategy and the change in the production lines of the business will ensure the stronghold of the organization in the oil and natural gas segment and help in the rise of the economic prowess of the country.

References

Bae, J.Y. and Heo, E., 2018. Armed conflicts in the Middle East and international oil company returns. Energy Sources, Part B: Economics, Planning, and Policy, 13(1), pp.21-27.

Banerjee, S.B., 2017. Corporate environmentalism and the greening of strategic marketing: Implications for marketing theory and practice. In Greener Marketing (pp. 16-40). Routledge.

Benn, S., Edwards, M. and Williams, T., 2014. Organizational change for corporate sustainability. Routledge.

Bridge, G. and Le Billon, P., 2017. Oil. John Wiley & Sons.

Collis, D.J. and Rukstad, M.G., 2008. Can you say what your strategy is?. harvard business review, 86(4), pp.82-90.

Eccles, R.G. and Serafeim, G., 2013. The performance frontier. Harvard business review, 91(5), pp.50-60.

Eccles, R.G., Ioannou, I. and Serafeim, G., 2014. The impact of corporate sustainability on organizational processes and performance. Management Science, 60(11), pp.2835-2857.

Fakhimi, A., Majrouhi Sardrood, J., Mazroi, A., Ghoreishi, S.R. and Azhar, S., 2017. Influences of building information modeling (BIM) on oil, gas, and petrochemical firms. Science and Technology for the Built Environment, 23(6), pp.1063-1077.

Hamel, G. and Prahalad, C.K., 2005. Strategic intent. Harvard business review, 83(7), pp.148-161.

Kourdi, J., 2015. Business strategy: a guide to effective decision-making. The Economist.

Meckling, J., 2015. Oppose, support, or hedge? Distributional effects, regulatory pressure, and business strategy in environmental politics. Global Environmental Politics, 15(2), pp.19-37.

Porter, M.E. and Kramer, M.R., 2019. Creating shared value. In Managing Sustainable Business (pp. 327-350). Springer, Dordrecht.

Post, C., Rahman, N. and McQuillen, C., 2015. From board composition to corporate environmental performance through sustainability-themed alliances. Journal of Business Ethics, 130(2), pp.423-435.

Reeves, D.B. and Ventura, S., 2012. i Leadership. AGENDA.

Saudi Aramco. (2018). Saudi Aramco – where energy is opportunity. [online] Available at: https://www.saudiaramco.com [Accessed 27 Mar. 2018].

Shuen, A., Feiler, P.F. and Teece, D.J., 2014. Dynamic capabilities in the upstream oil and gas sector: Managing next generation competition. Energy Strategy Reviews, 3, pp.5-13.

Stevens, P., 2016. International Oil Companies. Chatham House.

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