Strategic management:
Introduction:
Statoil ASA was founded as The Norwegian State Owned Company In 1972 which is today a fully incorporated gas and oil company with significant and considerable global activity. The corporation was listed on the Oslo and New York stock exchanges back In June 2001. The corporations also became privatized and the state presently holds 67 percent of the shares through the Norwegian Ministry of Petroleum and Energy. The corporation is duly represented in 35 locations worldwide with its head offices being housed in Stavanger, Norway and has a current capacity of 25000 employees. It should be noted that as an incorporated company Statoil manages the whole of its value chain mainly; from the discovery and improvement of the industry’s reserves to the activities of the manufacturing platforms and selling of crude oil derivatives products. Due to the corporation mainly focusing on revival and discovery, most of its profits are basically derived from the corporation upstream activities. It has been noted that the company has been very profitable over the recent years due to the rise in prices of the gas and oil prices. For instance the company experienced a profit of 40.6 billion NOK in the year 2006 in comparison to 30.7 billion in 2005(Ellefsen and Ane 2007).
The Reason Behind the Company’s Evaluation:
As the world’s largest offshore operator and the second largest gas exporter to Europe, the company’s aim is to nurture and facilitate value through its technology-driven upstream approach, tactical midstream positioning and downstream positioning together with low carbon and reneawable power expertise. The corporation plans to achieve this through invigorating the Norwegian the Norwegian continental shelf, creating its intended value from a better gas position, nurturing a leading position as a world exploration corporation, constructing material positions in new offshore clusters, investing new and better technology and the continuous management of its portfolio.
The Corporation’s management system has three major objectives that helps in strategic analysis of the company as a whole. The company’s management has vowed to fully engage and contribute to reliable, safe and efficient operations that will dully enable the company to comply with the internal and external requirements. Again the company’s management is designed in a manner that will help the corporation as a whole integrate its core values, people and its leadership principles in everything that it does. Lastly the management system of the company enhances the business performance through better quality decision making, precise and fast execution, and the projected continuous learning. Thus the dedication and fulfillment of the management system approaches are always a priority and requirement in Statoil Corporation. Hence the system acts as a set of guidelines, rules and regulations, requirements and processes that supports the organization in achieving its goals and objectives (Ellefsen and Ane 2007). .
The use of PESTLE to rank factors in order of importance:
The PESTLE framework is a model that divides the macro-environmental forces into major six strategic analysis categories that include; political, social, technological, economic, legal and environmental forces. The framework is a tool that is used to evaluate how these external environmental forces affect an organization. Moreover the framework extensively helps an organization in determining the most striking markets and the suitable entry techniques. Hence companies are therefore often compared along the scope that is identified in the PESTLE framework before any specific industry condition is evaluated. It is henceforth significant to put in mind the key drivers of transformation and the very impact they have on certain particular corporation, markets and industries.
It should be noted that the key drivers of transformation may be different with respect to the various different industries and may also vary from country to country. Thus the framework should be used to analyze the future and the current effect of the environmental factors, which again may vary from their last effect. Furthermore when it is deemed difficult to simply evaluate future changes in the environment, the consideration of evaluating different scenarios may be a significant and useful approach. It should be noted that at times it can be hard to distinguish from which group a force belongs, hence strategic experts should emphasize mainly on the forces that are precisely drivers of change and those that seem to severe and extensive effect on a company’s external environment (Ellefsen and Ane 2007).
Political Environment (Most Important):
Again the political atmosphere from where a company carries out its activities is considered to have an absolute effect on the company’s operations, growth and profitability, which is largely contributed by high political forces either within the organization or the country. These political forces extensively refer to the political risks, political trends, and government policies and interventions. Hence the corporation’s opportunities in regard to investment and growth choices largely depend on the political environment. It is duly noted that through these forces that the company determines its ability to access resources and institute convenient relationship with the running government together with NOCs (Porter Michael 1980).
Again it should be clearly noted that the control of energy is highly becoming political. This is heavily dependant on the large profits that are associated with the field forcing most of the nations assume control over their own resources. Thus most of the nations holding resources have naturalized their oil fields extensively and are thus becoming powerful eventually day by day. It is through such kind of empowerment that the rules of the game in the oil industry are changing. Distribution of licenses and operator ships lie with the specific governments making it difficult for the international oil companies to get access to resources as governments tend to favor their own national oil companies.
Again the political situations that affect the profitability and the security of organizations such as Statoil are said to be political risks. It should be noted that the key significant political risks in the oil and gas industry often emanate from the decisions and policies of host governments or equally, the lack authority intervention or effective regulation (Porter Michael 1980).
Economic Environment (The Second Most Important):
It is clear enough that the macroeconomic drift duly influences the oil and gas industry and is also bound to affect market situations of Statoil Corporation. Experts have analyzed that the most important and significant economic force that is bound to influence the company consist of the oil price level that is determined by supply and demand, and manufacturing costs that include the inflation, taxes and interests rates. It is through these economic factors that the profit latent of the company and its prospective market is determined. Influence on the prices of gas and oil is an international issue that the management system in Statoil Corporation should focus on diligently. Prices of the said oil and gas often fluctuate due to supply and demand as it likely happens with every other commodity. Statoil Corporation should put in mind that since the Iran-Iraq war of the 1980s, the market is still potentially volatile and has resulted to the global growth of the oil and gas market. Currently the rise of the gas and oil prices is deemed to be the result of the demand exceeding supply. Thus again consequently the consumption pattern is significantly across all over the world.
Despite oil prices rising higher in the previous years, most of the incorporated companies have been noted to be struggling with poor and declining profits. Though the industry has netted significant earnings; the rising costs of inflation have been noted to offset most of the earnings. Initial capital coats that are required to develop the oil fields are becoming extremely high with manufacturing becoming technically demanding, the cost are predicted to be rising even more. Analysts have noted an increase in project costs due to shortage in skilled labor and that has resulted in higher wages (Ellefsen and Ane 2007).
The Technological Environment (The Third Most Important):
There is no doubt that technology and infrastructure have a great impact on the oil and gas industries. Hence as the global oil companies are being challenged to new locations to find oil and gas reserves, the knowledge on how to exploit those same reserves is becoming extensively significant. It is thus very important for the companies to develop and implement new emerging technologies and effectively learn how to use them for the purposes constantly rising the exploration rates, increase oil recovery rates and lessen the costs of the same oil and gas companies. Again with the rising demand of oil and gas markets globally, it calls for the development and implementation of the infrastructure for the purposes of serving the global consumers comfortably. Company’s including Statoil Corporation should effectively note that technological development is an important step to undertake in a company as it extensively improves the safety and security of oil and gas capital resources. It is thus clear that new technology is very much needed to provide the most cost effective solutions during the oil and gas exploration operations (Porter Michael 1980).
The Environmental Environment (The Fourth Most Important):
These are the issues that usually concern the environment in a broad perspective. It should be noted that key significant elements of the oil companies is to simply lessen the release of green house gases and to implement renewable power. The exploration of the oil and gas can have significant environmental damage. Furthermore the rising energy consumption has led to increased larger green house emissions that have further resulted to global warming. Hence there has been a global keen concern in the safety of the entire environment, with the oil and gas companies being under massive pressure to be extremely environmentally committed. Various stakeholders for instance the environmental and human activists are on the front line trying to save the environment from such acts. Carbon emissions poses as the most challenging threat to the environment mainly emanates from manufacturing, solid and other wastes, water discharges, and the contamination of the ground and land water.
The Legal Environment (The Fifth Most Important):
The legal environment mainly refers to the government policies and regulations that are largely imposed in the energy industry. The legal environment can hence forth range from the barriers to trade or the global rules and regulations that relate to the protection of the human rights and the ecological standards. It should be clear enough for the Statoil Corporation to note that, it is within its mandate to actively to the local competition laws that govern the way it operates with the licensing rules being inclusive. Again it should be noted that formally, the control of the resource discovery has been the mandate of the local governments and global standards and treaties have overwhelmingly changed. Hence the best operating norms, guidelines and standards implemented and developed by the oil industry organizations and the intergovernmental and nongovernmental organizations embraces the main efforts to accomplish the same standards and operating norms across the world. It is thus clear that due to lack of imposed and adequate ecological laws in the various upcoming economies, there are very strong pressures from all the angles for the oil and gas industries to dully acquire and adapt ‘best practices’. Moreover it is upon the governments to extensively execute better environmental friendly practices that will lead to developmental approval, even if these practices are not facilitated by the law (Porter Michael 1980).
Social Environment (The Last Most Important):
This is the environment where changes in the society influence the operations of a company. Hence it has been noted that the most significant social forces that affect the oil and gas industry are the demographic changes. These changes include; income distribution between individuals, levels of education, standards of living and a rising concern for the environment. It should be noted that the rising number in relation to the ageing employed population will heavily affect the oil industry more so the oil companies. A significant number of the population will be retiring leaving a gap which that affects the operations of the said company. Currently there is a war of trying to secure skilled human capital as most companies are deemed to be unethical and greedy. Again the growing demand of gas and oil due to the growing number of population in the world is a threat to the existing companies as it demands a strong growing demand for both oil and gas and advocates for new technologies in the emerging markets (Ellefsen and Ane 2007).
PESTLE Limitations:
The probability of the host government changing the fiscal agreements and terms of operation for any foreign oil company limits the visiting company operations hence the company experiences the major political risks in the same host country. Most governments tend to increase and raise their resources thus they will automatically tend to tighten their fiscal terms and raise the taxes that are mainly imposed on the foreign corporations. For instance, currently in Venezuela the major control and safeguarding of resources is being put under the observance of the national government limiting the foreign oil companies currently under operation in that same country(Ellefsen and Ane 2007).
Again the corporation’s future profitability is largely under threat due to the rising cost of inflation in international gas and oil markets. Most companies speculate that if the oil prices either rise or fall the rising costs will automatically put further stress on their margins. Again the fact the world and emerging economies require more energy, then the transportation and the distribution of the same will be required all the globe calling for very high technologies that will facilitate the operations of fulfilling the demand gap and supply. This will actually call for major investments in the manufacturing and distribution departments of the oil and gas companies and will in turn require emerging technologies hence the major uncalled and unplanned for investments (Peng, Mike 2006).
The fact there is a growing concern over the protection of the environment, affects the oil companies greatly during as it carries out its activities. Most of the people in the environment demand the use of products that will use less power in return to less green house emissions from these companies. Again the oil and gas companies’ freedom of operation is limited in the sense that most of them are under pressure from a range of stakeholders for instance the, host governments, NGOs and other communities interested in the industry. This has led to oil companies forcefully developing long-term relationships that will facilitate a positive contribution according to the local community’s development agenda. Limited international laws that govern the industry and lack of anti-trust authorities that aim to prevent extensive anti-competitive behavior are other limitations that the oil and gas companies face (Ellefsen and Ane 2007).
The Following Are The Major Three Key Points From The Analysis:
1=Emerging technologies:
Due to the rise in the global population and the rise in emerging economies, new technology development and implementation is an important issue that not only Statoil Corporation should concentrate on but other companies in the same related field. This emerging power has led to Companies undertaking a more realistic approach in renewable power by largely focusing and developing technologies that improve the company’s strengths. New technology will oversee the growth of gas and oil companies if very critical wise decisions are made about the same. Exploration of natural gas and oil will become easier and more discoveries will become eminent especially in places where it was considered difficult to explore.
2=Political Stability:
The political stability of a nation largely plays a very important role in the well being of any business, more so the oil and gas industry. The high political forces that are found within an organization or the host country of the organization deeply determine the level growth and profitability of that country. Statoil Corporation perceives that with a stable political environment, its business environment will become better demanding, unpredictable and
dynamic. The company will be able to minimize risk and fully respond in regard to opportunities or unexpected threats.
3=Legal Empowerment:
Laws are meant to be followed and not to be broken, hence a legal environment where the government policies and regulations imposed on the oil and gas industries are done properly, then it becomes easier for a company to fully adapt to competition laws and licensing laws that are a major concern in its operations. Composed and sober international laws are very vital for the growth of international trade between nations and thus should be development and implemented with no bias intention at all times. A better and clear legal environment will provide Statoil Corporation with a good strategic objective that will hence provide a clear guidance, business engagement, direction and motivation resulting to high performance and delivery.
Conclusion:
It is now clear enough that Oil and Gas are the two most vital entities of power around the globe in the world and will carry on being fundamental while performing major power roles even in decades to come or else the near future. Internationally nations are extremely prejudiced by the advancement in the energy markets both as producers and end users. Thus with the given significance of the oil and gas energy, relevant stakeholders including the investors, media, governments and more so the corporations should cosset mainly in achieving major strategic approaches that will help in the growth and development of corporations dealing with gas and oil.
Works cited:
BRYMAN, A. (2005) Social Research Methods. 2nded. Oxford: Oxford University Press.
PORTER, M. (1980) Competitive strategy: techniques for analyzing industries and competitors: with a new introduction. New York: Free Press.
DUNNING, J. (1980) Toward an eclectic theory of international production: Some empirical tests, International Business Studies: Spring – Summer.
LING, A. (2004) Our experience in Energy: Social & Environmental Issues Count. Goldman Sachs: Investment Research.
BARNEY, J. (1991) Firm Resources and Sustained Competitive Advantage: Journal of Management, Vol. 17.
BARNEY, J. (1997) Gaining and Sustaining Competitive Advantage: Strategic Management Journal, Vol. 15 131-148.
LIPMAN, and RUMELT, R. (1982) Uncertain Imitability: An Analysis of Interfirm Differences in Efficiency under Competition , The Bell Journal of Economics. Vol. 13
MOSAKOWSI, E. (1998) Entrepreneurial resources and organizational choices: Organization Science.
MORGAN, S. (2006) Oil & Gas, Statoil and Norsk Hydro propose merger. Morgan Stanley Research: Europe.
PENG, M. (2006) Global Strategy. International student edition: South-Western, Thomson Corporation.
Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.
[order_calculator]