Your task is to produce a management report providing Strategic Solutions for an issue or Strategic issue or issues that you have identified in your own organisation or Strategic Business Unit.
The solution(s) should be based on thorough analysis and should involve critical evaluation of a range of potential solutions. The emphasis must be aiming to achieve competitive advantage. The choice of the final strategic decision should be justified. The solutions must not be descriptive of what the organisation is actually doing but analytical and proposing what it could and should do. This may be different to the actual decisions made by your organisation. It may however be a justification of what is actually proposed by the organisation but must justify it in the light of other options and through analysis. Which approach you take depends on the circumstances of your organisation.
Choosing the Strategic Issue. Below are some examples of the sorts of issues that might be investigated. Please note that this is not a complete list and that different ones may be relevant. (Generally you would only focus on one but there may be more that you could consider). The emphasis on the options that are considered should be on achieving competitive advantage:
Non-Profit or Government Agencies. Despite the fact that some of these may be quite inflexible you should not let this restrict your thinking. You should be prepared to think about the following types of issues:
This should be based on extensive study and use of data. The analysis must appear in your appendices. It is not necessary to do this in full report form but should be in the form of a series of annexes which will contain your notes. These must identifiably be your own work and will also be examined through Turnitin. The analysis and appendices must be referred to in your report as evidence and justification for your options and decisions.
1. Demonstrate in-depth knowledge of the tools and frameworks of strategy in order to select the appropriate ones with which to perform meaningful analysis to generate coherent strategic options and choice. 1
2. Select and apply a range of strategy tools, concepts and frameworks to analyse unstructured problems based on the issues presented by the external and internal business environment and use the analysis to evaluate and design appropriate strategies.
Mission statement
The key objective of this study is to provide the strategic solution for a strategic issue facing by an organization. The analysis is done based on the strategic challenge or issue facing by a petroleum service company named MB Petroleum services. In order to solve the strategic issues, the report provides new strategic directions to stay viable, competitive and profitable in future. For the analysis and discussion, famous petroleum company MB Petroleum service is selected. MB Petroleum service is the multinational corporation which provide cost-effective quality drilling and integrated services in all over the world (Analoui & Karami, 2009). Along with the assurance of quality and reliability, the company is providing values to its stakeholders. MB Petroleum service is the subsidiary of MB Holding company which is the most successful and largest oilfield service provider company in all over Middle East region. The company started its operations in 1982 and within few years, MB Petroleum started to grow and became the largest oilfield service company in the Middle East. In current time, the company is operating in 15 countries including Oman, Germany, Australia, New Zealand, India, Hungary, China, Qatar, Russia and Saudi Arabia (MB Petroleum Services LLC, 2011).
Mission statement of MB Petroleum service is to provide best value services along with safer and smarter process to its clients in mutually respectful commercial framework.
For MB Petroleum service, vision statements of the company are as follows:
- For the employees of MB Petroleum service, company is aim to work with the safety and security,
- For the suppliers, company wants to provide efficient, safe, profitable and innovative services to target the regional markets,
- Company wants to be preferred as a well service company for the working in the regional market.
There are various strategic challenges faced by the Petroleum Company while operating with the effective business strategies. The key challenge for MB Petroleum service in the industry is reserve replacement. There is small faction of oil resources available for exploitation by MB Petroleum and their production is in the mature region. As MB Petroleum is most competent in terms of managing large scale production projects and that is the reason, company is getting locked out in these aspects and reducing its competitiveness in the industry. Based on study of Jonathan Stern of Oxford Institute for energy studies, key value proposition of MB Petroleum is its capacity to handle large projects, technological capabilities and large financial resources. but this value proposition of the company is called to question today as there are various companies in the industry that are technological capable and have sufficient financial resources to complete the projects at big level. So, the main challenge for MB Petroleum is in reserves. MB Petroleum has a mature reserve portfolio that is declining and the company is not able to add new reserves. Along with this, there is the problem in the supply chain process with accessing the resources for the exploration and development (Braun & Latham, 2014).
Vision statement
It is observed that various national oil companies are also the part of challenge to the future business prospect of MB Petroleum service. The business newspaper Financial Times argues that the emergence of new class petroleum companies is dominating the industry and this is the big challenge for MB Petroleum in the operation areas. All the companies are not same in terms of resources and capabilities. In fact, some companies are unable to operate without the support of another established company. So, they need to do partnership with other companies in the industry. In such condition, there are no opportunities for MB Petroleum to do partnership with other companies. Along with this, other petroleum service companies are restricting the opportunities for MB Petroleum in the home countries. Further, they push oil services higher and create geopolitical barriers and challenges for MB Petroleum. These situations create barriers for the company MB Petroleum to operate in the industry in the effective manner (Liu, 2013).
Apart from this, new entrants are entering in the industry with innovative managerial and technological expertise in the exploration area. The company MB Petroleum has to face the issue related to the lack of new technical and managerial expertise as this is an old company in this industry. There is the requirement of high degree of managerial and technical expertise which are partly available in the company.
There are various factors that affect the performance of MB Petroleum service in the business operations. As this report focuses on the strategic actions to deal with the issues and challenges in the company. So, it is important to understand about different variables affecting the business of MB Petroleum in the industry. The oil prices basically do not impact on the performance of the company as it is an external factor. The oil prices, as an external factor, hardly have direct impact on the performance of the company. The performance of the company can be measured based on the value created by the company in the operating market (Bingham & Eisenhardt, 2011). The valuation of the company MB Petroleum can be measured at the shareholder returns for short-term basis. But for the long-term profitability of the company, there is the need of re-investment in the business by capital expenditure on the R&D activities and renewable energy development.
It is well known that the petroleum and oil industry is a technical complex industry and the level technology in the company can be the source of competitive advantage in the industry. In the oil industry, technology is becoming important factor for the growth and development of the company. In the past, MB Petroleum has benefited from being sole entities which is capable in terms of technology to extract oil and the countries rely on the expertise of the company to develop natural resources. Today, it is observed that MB Petroleum no longer have monopoly in terms of technology, and the technology has become commoditized so significant competitive advantage cannot be achieved for long term (Shakhshir, 2014). There are two trends which are playing a major part in this process. The first trend is that competitors in the industry are more capable, prominent and competitive in the business. Along with this, second trend is that oil companies are closing the technology gap and now becoming more capable in performing various tasks like MB Petroleum. As the result of these trends, MB Petroleum today does not have competitive advantage derived from technological capabilities in the extraction of petroleum oil because new technologies are needed for this process.
Strategic Challenges and issues
Sometimes MB Petroleum service has to deal with the issue of supply chain process and logistics services. The logistics network in the petroleum industry is highly flexible which depends upon the production capabilities of crude oil suppliers, limitations of modes of transportations, and long transportations lead time. At every point if the supply chain network, there are some major challenges which have to face by the company MB Petroleum. Company is operating in many countries and long distance between supply chain partners and slow modes of transportation are the cause of high transportation costs and inventory. So, MB Petroleum Company has to deal with these unnecessary costs. There are transitions in the transportation modes in this industry. Because of inflexibility involved in the industry, company has to maintain service-levels which are the major challenge in the industry (Naspetti et al, 2011).
To operate in the competitive market at the global level, it is crucial for the company to understand the concept of strategy in the business activities. By the implementation of effective business strategies, the company MB Petroleum will be able to deal with above discussed strategic issues. Having a clear and focused strategy is actually important for the growth and success of any company at the global level. Without a well-defined strategy, company will not be able to compete with the competitors in the operating market. MB Petroleum has to adopt strategic operations so that business can be more productive, focused and more profitable. It is observed that in the petroleum industry, MB Petroleum has to face more than one challenge. After analyzing the strategic issues, it is important for the company to address these issues as soon as possible. This report provides the strategic solutions for the company MB Petroleum so that it can deal with these issues and make the business profitable in the market. Report provides strategic plan for MB Petroleum to deal with the strategic issues in the business (Hoskisson, 2009).
Based on the discussion of strategic issues in the company, it is clear that MB Petroleum is an established company in the petroleum industry. Now, company has to deal with some challenges due to strong competition and emergence of new technology. It is not necessary that the strategies used by the company in the local market would be effective in the global market. In such manner, MB Petroleum need to take some strategic initiatives to build strong brand recognition in the international market. First of all, it is important for the company to understand the market where the company is operating. To accomplish organizational goals and objectives, the market analysis for strategic initiatives is described below (Biggadike, 2010).
Reserve replacement
Oil extraction companies always impact on the economy of each country. Oil and gas industry is massive industry and there are various operations performed by the petroleum service providing companies under the ground to meet the demands of the clients in the industry. it is expected that the demand of petroleum oil will grow in upcoming year. Petroleum is sold as the fuel oil and liquefied petroleum gas. The demand for petroleum is basically driven by auto and truck use along with home heating. Customers in the oil industry are needed as the business drivers. The behaviors of the customers affect the convenience and prices of the oil in the industry. It is obvious that the customers are demanding for fuels which affect the prices of the oils. With the hike in the price, there are customers who will fill their cars when the prices of petroleum fuels are less. There is the evidence that the prices of petroleum hiked at an average rate of 11% per year till 2016 but in 2017, overall average dropped to 8%. So demand of petrol and other oils are increasing with the low prices.
MB Petroleum Company is seeking for the business expansion in all over the world with the aim of string brand image in the market. Because of some strategic issues in the business, company is not able to operate the business effectively. Objective of the company is to provide effective petroleum services to the clients in various countries. This strategic plan or strategic initiatives would be helpful for the company to achieve the business goals and objectives with the effective manner. Under the strategic initiatives, MB Petroleum would focus on dealing with the competitors by implementing new and innovative technologies in the business. Along with this, company would focus on minimizing the unnecessary cost incurred in the business operations. For the effective distribution of the petroleum fuels, MB Petroleum has to focus on effective supply chain management activities (Schnaars, 2010).
After setting the strategic initiatives, it is crucial for MB Petroleum to analyze the market environment in which it is operating. MB Petroleum is operating in 15 countries and taking the projects related to extraction of petroleum fuel. For this report, Oman is considered as the operating country of MB Petroleum. In terms of suitability of strategic initiatives, the strategic initiatives, it is important to understand the market environment and opportunities on the country. The analysis of market can be done by the environmental analysis of Oman. The environmental analysis of Oman market can be done in two parts i.e. Macro analysis and Micro analysis (Ghoshal, 2009).
Strong competition in industry
It is well known that petroleum industry impact on the growth and development of the economy of every country. There are fields of political, ecological, economic, social, technological and legal which are important for the growth of petroleum Service Company. Oman is considered as the most profitable place in the world along with the strongest powers. The legal system of the country is improving continuously and there are many companies of oil extraction expanding the business in Oman because of low-cost of labor, market size and its growth potential (Jansson, 2011).
It can be analyzed by the macro-environmental analysis that the external market conditions of the country are ideal for the organization. It can be analyzed from the appendix that Oman is supportive for the oil and gas industry. The government of the country is supportive for the oil industry as the growth of the economy of Oman depends upon this industry. Further, economic conditions of the country are good and GDP rate in the country is on its highest level. People in the country are using petroleum and other oil products at very high rate. Along with this, income level of people in Oman is very high and they consume the energy products on daily basis which is beneficial for the company (Marcer, 2012).
Next, technological infrastructure is developed in the country. Because of the oil and gas industry, profitability and gross income of the country is very high. Government of Oman has invested huge amount in the technological infrastructure which is also very beneficial for MB Petroleum in the industry. Due to large presence of the oil extraction companies, infrastructure of Oman has been developed. So, MB Petroleum can perform its actions in the efficient manner in the industry.
For the micro environmental analysis of MB Petroleum, SWOT analysis framework is used. SWOT analysis is basically helpful to evaluating the internal strengths and weakness and external opportunities and threats of MB Petroleum service.
The strength of MB Petroleum is that the company has leading position in the oil industry of Oman. Because of the strategic choices, company is getting benefit to lead the local as well as international market including export markets. The oil refinery has largest production capacities including refining around 10 million tons of crude oil every year. MB Petroleum is basically associated with the downstream oil activities and offering services to its clients based on the international standards (Seshadri, 2009).
Lack of fund
The key weakness of MB Petroleum is that there is decrement in the financial position of the company. The income of MB Petroleum Company is decreasing continuously at the global level. Despite of such losses, the company is not taking initiatives to reduce this challenge. Along with this, the strong competition in the market and competitors are reducing the profit level of the company.
The company MB Petroleum has opportunity to invest more in the business in order to expand its business in more countries. Along with this, MB Petroleum also has an opportunity to enhance its position in the new energy market. Company has opportunity to improve its efficiency in terms of refinery of diesel and fuel yields (Gruca & Rego, 2009).
Key threat for MB Petroleum is decreasing demand of the oil products in the market. Since last few years, because of the increased environmental awareness and clean energy sources, the demand of the fuel and other oils is decreasing. Along with this, high level of operational cost in the refining sector is also a big threat for MB Petroleum. Competitors are using innovative strategies to enhance the productivity and profit in the business. Low profit margin is one of the major threats for the Company MB Petroleum.
Internal business environment can be controlled by the company. The internal environment analysis is focused on the development of effective business strategies so that long-term business growth of the company can be ensured. The internal environment analysis of the company MB Petroleum is described below:
The sustainable competitive advantage of the company focuses on the assets, abilities and attributes which is not easy to exceed or duplicate. Competitive advantage is helpful for the company to achieve an effective long-term position in the competitive market. Along with this, it is helpful in dealing with the competitors in the market. In case of MB Petroleum, the company is providing quality and unique services to its customers. Major rival of the company are Oman Oil Company and Shell Oil Company but MB Petroleum Company has large number of market share in the industry. Because of the large market share, the company has strong brand recognition in the market. Company is already focusing on the quality services to retain the clients for long term business. The sustainable competitive advantage of MB Petroleum includes production and distribution team which is helpful for the company to maintain the business operations (Dess & Lumpkin, 2009).
Commoditizing
It is well known that oil and gas industry is very complex industry. For the growth of economy, oil is becoming important product and essential for all the energy requirements. Petroleum oil is in high demand in the retail, commerce, and domestic purpose. The value chain analysis of MB Petroleum is divided into two parts i.e. primary activities and secondary activities.
For MB Petroleum Company, primary activities of the company are its core business activities. In the inbound activities, there are activities related to distribution and storage of oil products. MB Petroleum Company exports the petroleum oil in various countries. These activities are helpful for the company in the production of oil. The company is focused on turning the raw material into finished products. In the primary activities, MB Petroleum Company refines the oil by various production processes. Further, outbound logistics activities of the company include providing final products to the end users. By the supply chain management and distribution network, company is able to manage the outbound logistics. Along with this, in the process of marketing and selling the oil, company is providing low cost products to the customers. Company is also focusing on building loyalty of customers by providing high level of customer services. MB Petroleum is providing quality services to the customers so that the existing customers can be retained for long term growth (Drummond, Ensor & Ashford, 2012).
These activities are also called support activities including the infrastructure of business i.e. management, legal and finance etc. MB Petroleum company is well established in the oil industry including effective production process. In this manner, company is focused on providing quality services and effective infrastructure to the employees. In the HR services, the workforce of the company is committed towards the success and growth of the business in the market. HR department of the company is focused on providing effective training to the employees for the retention of the employees. MB Petroleum Company need to make the employees aware for new technology not only for production purpose but also for effective customer services. In the procurement process, company is extracting oil by the refinery process. Basically, support activities of the company are outsourced to the foreign company (Jeannet & Hennessey, 2010).
Every business organization has different market segments. Based on those segments, strategies for the business operations are developed. Porter generic strategies for the Company MB Petroleum are as follows:
In the cost leadership strategy, company provides low cost products to the potential customers. MB Petroleum has large scale of business and large production base, and then this strategy is helpful in increasing market share. Under this strategy, MB Petroleum provides fuel oils at the low cost to the clients so that the customers can be retained for the long term. In case of MB Petroleum, cost-leadership strategy is crucial as the profitability of the company is declining continuously (Glowik & Smyczek, 2011).
This strategy basically focuses on providing various products and services having unique characteristics as per the need of the customers. These types of the services are provided by the company while customers are not so much price sensitive and the company has effective resources and capabilities related to the target market. Differentiation strategy is key of achieving profitability in the industry while the added price of the products are more important than the added expenses to get the product and services (Luffman & Kenny, 2009).
This strategy is also considered as niche strategy. This strategy can be implemented based on the combination of above strategies. Under this segment, company focuses on providing low-cost products and services to the potential customers. This type of strategy is adopted by the company while it is focusing on few target market (Tanwar, 2013).
In case of MB Petroleum Company, it should follow the product differentiation strategy. The company should solely focused on providing quality of the products. So, the company has to focus on high quality oil extraction process for the retention of the customers (Kaplan & Norton, 2006).
This is very helpful strategy in creating competitive advantage of the business by diversifying the product portfolio. With the help of diversification, the companies can create new revenue streams, new capabilities and new solutions. In the Company MB Petroleum, the outsourcing process can also reduce the overall profitability of the organization. It is important in responding to new challenges and opportunities. Along with this, supply chain processes are also an issue for the company MB Petroleum as there are the issues of transportation services. In the oil and gas industry, Company MB Petroleum can reduce the risk and cost by focusing on the production process of the diversified approach and efficient work practices. The oil and gas commissioning, carbon capture and storage, offshore wind, nuclear decommissioning, energy storage, thermal generation is some of the diversification approaches of the oil and gas industry. Company MB Petroleum can invest in the outsourcing decisions and can reduce the unnecessary cost of the business operations. Along with this, MB Petroleum can also invest in various areas also like profitability enhancement and risk diversification.
For MB Petroleum Service can adopt SAF criteria in order to operate the business effectively. SAF criteria include suitability, accessibility and feasibility for the strategic development. The strategic options adopted by MB Petroleum are evaluated by the SAF criteria. The most suitable strategy for MB Petroleum can be investing in many other areas to reduce the unnecessary cost of the business. By this, company will be able to enhance its profit ratio in the business. Further, this is an accessible strategy because there are many companies in the market which are taking outsourcing and extraction projects. Along with this, they are also capable in completing them in the small time period. Along with this, the strategy is feasible also because it has capability to diversify the business operations of the company and will enhance the profitability of the company in the market (Lee, 2009).
Conclusion
Strategic management is the important concept to operate the business in the global market. From the above discussion in the report, it is observed that Company MB Petroleum service has good position in the international market. Further, there are some strategic issues faced by the company while operating in the oil and gas industry. It is observed that in the petroleum industry, MB Petroleum has to face more than one challenge. After analyzing the strategic issues, it is important for the company to address these issues as soon as possible. For this manner, report provides strategic plan for MB Petroleum to deal with the strategic issues in the business. In terms of strategic initiatives, MB Petroleum would focus on dealing with the competitors by implementing new and innovative technologies in the business. Based on the strategic analysis of MB Petroleum, it is observed that MB Petroleum has to focus on dealing with the competitors by implementing new and innovative technologies in the business. Along with this, company will use SAF criteria to analyze the strategic initiatives taken by the company. In conclusion, company needs to invest in new technologies to deal with the above discussed strategic issues and to deal with the competitors in the oil and gas industry.
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