Energy industry in UK is expanding to supply electricity and other energy related products to both the domestic and global economy (Hitt, Ireland and Hoskisson 2012). This paper focuses on the strategic management of Energy Company in UK, while entering into a joint venture agreement (Orionenergy.com 2017). Joint venture of Orion Energy (UK) and Pakistan Petroleum Limited (PPL) has been taken as the case study for the study. This joint venture was signed between two companies during 2013 to develop offshore oil and gas potential of Pakistan. Orion Energy Plc is an oil and gas company, which extracts crude petroleum (ppl.com.pk 2017).
As stated by Cartwright and Cooper (2012), joint venture is an agreement between two or more companies to work collaboratively on a project. Joint venture has been considered as one of the effective market entry strategy in recent time (Holburn and Vanden Bergh 2014). There are many leading business organizations that have adopted this strategy to put a strong foot print in the foreign market. There are several benefits of joint venture such as access of new market and sharing of risks and cost of a project. A company can use resources of other country through joint venture. However, joint venture with foreign partner has some risks such as different interests, different level of expertise, and differences in business culture. Cultural differences may hamper attitude of cooperation. Therefore, benefits, challenges of this joint venture taken as case study are described in this paper. Motivation for the joint venture between UK and Pakistani firm is explained in this paper.
Motivation between joint venture
In this competitive era, every business organizations are incorporating new and effective strategies to survive in the competition. Expansion of business in the global market is another effective strategy that has been implemented by the organizational leaders of several business organizations (Lasserre 2012). It helps them to battle against their rival companies and set an example in the global context. Globalization has provided a wide opportunity to the business organizations to reach to their target consumers from every corner of the world. It has opened a new path to the business leaders to set a new milestone in the in the industry. There are several types of market entry strategy that is being used by the business organizations, such as: franchising, exporting and buying an existing company and so on (Gomes et al. 2013). Joint venture is one of the key market entry strategies of that is used by various business organizations to extend their wings in the foreign market. In this scenario, the oil companies of United Kingdom has expanded their wings in the Pakistan market by associating with the Pakistan Petroleum Limited, as they want to control the Pakistani market and set an example in the Pakistani oil industry. In order to control the oil and gas industry of the world, Orion Energy has taken this notable initiative. They are seeking wide opportunities that will be beneficial for them to earn the long-term goal. Orion Energy wants to expand their trade and investment opportunities by this joint venture with Pakistani Petroleum Limited (Marks and Mirvis 2015). As Pakistani Petroleum Limited has covered a wide area in the Pakistani oil industry, it will provide Orion Energy a good control over the oil industry. It has led Orion Energy to choose joint venture as their foreign market entry strategy among other strategies. They aim at providing quality service to Pakistani as well as global consumers by this foreign strategy.
Evaluation of challenges and benefits
There are some challenges and benefits that can be obtained by the Pakistani Petroleum Limited and Orion Energy. This strategy will put significant impact on both the countries.
By adopting joint venture strategy, Orion Energy will be able to earn market share in the Pakistani oil industry, as Pakistani Petroleum Limited has some existing market share in the industry which can be covered by Orion Energy. Thus, it will be beneficial for the Orion Energy (Bauer and Matzler 2014).
Joint venture strategy will be helpful for the Orion Energy to maintain a healthy relation with the Pakistani Government. The 70% of the market shares of Pakistani Petroleum Limited is owned by Pakistan government (Kouser, Bano and Azeem 2012). Thus, it can be stated that joint venture with PPL will be helpful for the Orion Energy to strengthen their relation with the local government of Pakistan which will help them to earn their desired position in the Pakistan.
Sharing of Risk:
Joint venture decreases the scope of risks and crises, as both parties share their risk and costs. In case, if joint venture faces any kind of failure or crises, both parties will bear the cost and risks. Thus, it is another benefit of joint venture that can be obtained by Orion Energy and PPL (Barbopoulos et al. 2014).
Chance of Success:
As PPL is one of the renowned names in the Pakistani oil industry, it will provide a wide opportunity to the Orion Energy to enter into the Pakistani oil market via joint venture strategy. This will increase the chance of success for the Orion Energy. It will be highly beneficial for the Orion Energy to earn the faith of internal and external stakeholders which is responsible for the success of every organization. Moreover, the existing clients of PPL will become the permanent client of new business organization. Thus, it can be stated that it will increase the chance of success for organizations (Zamir, Sahar and Zafar 2014).
The joint venture will be beneficial for financial infrastructure of both United Kingdom and Pakistan. UK will be able to earn huge profit by expanding their business in the foreign market. On the other hand, Pakistan will also earn huge profit by new venture. It will strengthen the financial infrastructure of the country. By carrying out a new business venture, Orion Energy will be able to reach out to a large number of consumers. Thus, they can earn huge profit by providing quality service to the large number of global consumers. By earning huge foreign currency, the organization can support the economic growth of the native country (Shah 2014).
By sharing production and marketing cost, both organizations can save money. Both organizations will bear the cost which will be helpful for the growth of new business venture. Eventually, financial growth of both countries will be influenced (Sun and Lee 2013).
Understanding of Foreign Market:
By adopting joint venture strategy, the organizational management of Orion Energy can gain an insight of the Pakistan market. As the PPL is operating in the Pakistani oil market since long time, the organizational management has a great knowledge about the current market trend, the requirement and preference of the consumers, competitive nature if the market. Thus, it will help the organizational management of Orion Energy to understand the market trend and nature of the Pakistani Oil industry (Choi and Beamish 2013).
Being one of the leading names in the Pakistani oil field, Pakistani Petroleum Limited has many expert and skilled staff in their organization. At the same time, it possesses huge resources that can be utilized in the production process of the organization. Thus, such assets can be used by the Orion Energy leaders for putting a remarkable foot print in the Pakistan as well as in the global market. The skilled and experienced staff members of the petroleum plant will work as a weapon for the Orion Energy and give their bets performance which will help organization to establish a better future for the organization (Meschi and Wassmer 2013).
Revolution in the Oil and Gas Industry:
The competitive nature in the oil and gas industry is growing high day by day. By collaborating with the Pakistani Petroleum Limited, the organizational management of Orion Energy has opened a new path for both organizations to battle against the rival companies and survive in the market and earn desired position in the market (Verbik 2015).
Whenever the organizational management of both companies, such as: Pakistani Petroleum Limited and Orion Energy will identify any issue in the joint venture; they can sell their market share to any other companies. Joint venture is flexible in nature. Member companies can change their decision to end the collaboration at any time. The life span of the companies can be short and long as well. There is no limitation of time for the companies that adopt joint venture strategy (Peppard and Ward 2016).
As the two companies belong to two different countries, there is a high scope of miscommunication that may lead the new business venture to meet an awful consequence. Due to lack of communication, the objective of the venture may be hardly communicated between the organizational leaders of two companies. This will lead the joint venture to face deadly conclusion. Thus, the organizational management of Orion Energy and PPL must consider this factor while designing their organizational strategy. It is important to interact with each of the member that are involved in the process about the objective and strategies of the joint venture to establish a strong and flawless joint venture. Otherwise joint venture may ends up into massive failure (Wheelen and Hunger 2017).
Although, there are some researchers claim that it is easy to exit from the joint venture, on the contradictory there are some people that claim that it is not easy to exit from the joint venture, as both companies will maintain a contractual agreement, so if any of the member finds it difficult to continue the venture, it cannot exit from the venture instantly (Slack 2015).
Different Business Environment:
As two companies belong to two different countries and two different business environments, the organizational pattern and way of business is also different from each other. It will be harmful for the joint venture. Thus, the organizational management of PPL and Orion Energy must be aware of such risks and design their organizational strategy and structure accordingly to avoid future risk (Rothaermel 2015).
Imbalance of Resource:
As the resources in the business organizations come from different sources and different countries, imbalance of resources, employees and assets may occur. Thus, it will harm the production process of the company. Resource is the key element of every production process. The success of business venture is highly depends on the balance of the resource supply. Thus, before making any decision regarding joint venture, the organizational management must consider these factors (Goetsch and Davis 2014).
Partners of joint collaboration may have different vision and opinion over an issue and different goals which is not suitable for the joint venture. It may lead the members to face various obstacles in coming future. The organizational management of PPL and Orion Energy needs to communicate about the organizational goal and strategy in an appropriate manner to avoid any kind to miscommunication and misunderstanding. It will provide a vivid idea about the vision and mission of the partner which will be helpful for the future operations (Morschett, Schramm-Klein and Zentes 2015).
Lack of Experience:
Due to lack of experience, both organizations may face various obstacles while carrying out new business venture. The organizational management of PPL and Orion Energy needs to conduct market research and gather more knowledge about joint venture to take further steps. It will help the organizational management to take effective and efficient decision (Chen, Delmas and Lieberman 2015).
Instable political environment of the country can put negative impact on the business venture. Political environment plays significant role in the growth of the business organizations. It is often evident, due to political turmoil and occurrence of terrorism, many business organizations face various difficulties and meet awful consequence. Thus, before collaboration the organizational management of Orion Energy needs to conduct research on the country they want to expand their business (Nahavandi 2016). It will help business organizations to identify the challenges that can be faced by the organizational leaders while operating in the foreign market. It will help them to adopt best strategies which will help the organization to earn desired position in the foreign market. Otherwise, the business organization may needs to face many future risks due to political issues (Trigeorgis and Reuer 2017).
The organizational management of Orion Energy must conduct several market researches to observe the market trend of Pakistan before entering in any kind of joint venture. At the same time, they must research about the background of the Pakistan Petroleum Limited to avoid any kind of future risks that can be harmful for the future of the organization.
The organizational management of both PPL and Orion Energy needs to maintain healthy and transparent relation with each other. They must maintain a communicative relation with each other to avoid any kind of miscommunication. They can use modern and scientific communication tools, such as internet, blog and so on. They must meet often to discuss about the organizational strategy and organizational objective. The leaders must make sure that all the members involved in the joint venture have clear idea about the objective of the joint venture and aware of their role and responsibilities to achieve the common goal.
The organizational management of Orion Energy needs to concentrate on the economic aspect of Pakistan before entering in the market. They can depend on the primary and secondary sources for the purpose. It will provide a vivid idea to the business organization about the cost benefit of this joint venture. Eventually they will be able to take efficient steps regarding the joint venture.
The organizational leaders of both companies need to maintain contractual agreement to avoid any kind of future misunderstanding. They must make sure that both organizational leaders are aware of all terms and conditions of the agreement. It will strengthen the collaboration.
The organizational management of both PPL and Orion Energy needs to maintain a strong supply chain to continue the flow of the resource supply. It is highly mandatory to provide quality and flawless service to the consumers. The organizational management must realise that their primary objective is to provide high quality and uninterrupted service to their potential consumers, to accomplish this target they needs to maintain the balance of resource supply.
The organizational management of Orion Energy needs to maintain healthy relation with the local government of Pakistan. It is important for every business organization to maintain a healthy and interactive relation with the government of foreign country to expand their business in that particular country. It will be helpful for the business organization to earn the long term goal.
By communicating with the partner, the organizational management of both organizations needs to adopt all the modern strategies and techniques that can stimulate the growth of the new business venture.
As per the previous discussion, it can be concluded that Joint venture is one of the most effective process to make strong impression in the foreign country. It is often adopted by various leading business organization. Orion Energy, UK and Pakistan Petroleum Limited are collaborating to expand their business and earn huge profit by providing quality service at a large scale. There are number of benefits and risks that can be faced by both business organizations, such as: political turmoil, costs savings, miscommunication and so on. The organizational leaders of both organizations need to consider these factors while constructing their organizational structure. In order to avoid future risks, the organizational management of PPL and Orion Energy needs to follow some effective strategies, such as: maintaining effective communicative relation, maintaining transparency, adopt all the modern strategies and so on. It will influence the growth of the joint venture.
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