Paper Example on Strategic Analysis of Oman Oil Company

Executive Summary

Efficient and Effective Corporation modeling requires in-depth evaluation and analysis Company conditions that may have consequences on its performance in both the domestic and international market. The strategic analysis, therefore, must be objective-oriented and very informing by evaluating the prospect of organization forecast and various growth strategies besides analyzing the position of the organization through the incorporation of current strategies, strength, and opportunities. A growth and expansion-oriented organization must be capable of incorporating and taking into consideration such facets as SWOT analysis and Porter's five forces analysis. After that, a framework for enhancing growth should be on course. Oman Oil Company is a multinational corporation accompanied by a variety of circumstances that may stand on its way hence being an obstacle for achieving its growth and expansion objective, such as penetrating the global market. Consequently, the organization has got a series of opportunities of which it can take advantage of to steer its growth in the energy industry.

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Introduction

The growth and expansion of every corporation lies in its successful formulation and implementation of long-term strategies. Notably, the creation of an effective strategy must heed and conform to various environmental forces that affect the corporation both positively and negatively (Coulter and Coulter 2002, 77). This report examines Oman Oil Company significant changes in the strategic position, its response to internal and external markets, the basis of sustainability and various strategic options that are available to the organization. The organization operates in the oil and energy industry and therefore the company strategies entail long term focus and associated economies competitiveness. Over the past financial years, the company has been experiencing rapid growth in sales and profitability in the domestic market.

The current strategies are focused on various developments and research to enable the organization boost its international market share index (Pridham, 1986, p. 67). Notably, the competition in the energy industry is so stiff, and therefore the corporation must maintain an excellent customer-organization relationship. Besides, the industry is characterized by high fixed cost and a small operation margin. Thus Oman Oil Company has to sell more oil products to be at the break-even point. Therefore, it is evident that profitability depends on the level of competitive advantage and long-term sustainability. Hence the report is aimed at critical analysis of the key factors and opportunities available to the company and at the same time recommending the organization to capitalize on the critical issues in order of their essence to enable it achieve its growth and expansion into the global market.Industrial Analysis and the FirmCompany profileOman Oil Company is a commercial corporation that is wholly owned by the government of Sultanate of Oman. Having been incorporated in 1996, the primary corporation's objective was to pursue investments opportunities in the energy industry both locally and internationally. The corporation is engaged in such activities as exploration, refining, and transportation of oil and energy-related products, thereby playing a vital role in shaping the economic sustainability of the Omani economy. Undeniable, the competition in the energy industry is so intense; comprising such multinational companies as ExxonMobil, Saudi Aramco, Gazprom, National Iranian Oil Company (NIOC) and PetroChina, hence, Oman Oil Company must incorporate an adequate growth and expansion strategy that capitalizes on the available opportunities. This will enable the corporation to continue in existence for the foreseeable future, without any intention to liquidate the company (Retrieved from company website. https://www.oman-oil.com/ ) Industrial AnalysisOman Oil Company operates in the oil and energy industry. The industry plays an integral role in shaping economic development in the world economy, particularly during such circumstances of imbalance between demand and supply. As the concept of market globalization began to emerge, more companies across, Europe, Asia, Russia, and the Middle East entered the energy industry as a result of increased oil discovery around the world (Patin, 1999, p. 132). This subsequently reduced the United States dominance of the energy industry since the Middle East corporations such as Oman Oil Company could collectively explore approximately 503 million barrels of crude oil per day which represent about 23 % of the total global production (Patin, 1999, p. 132).

Notably, at the beginning of the 19th century, the energy industry was undeniably dominated by what was commonly referred to as the "7 sisters' companies" comprising Exxon, Standard Oil of the New Jersey, the standard oil of California, Mobil, Shell, Gulf, Texaco, and the British Petroleum (Arour and Rault, 2012, p. 243). However the massive discoveries of oil fields in the Middle East, Kuwait and Persia have seized the domination. According to the report issued by Energy Intelligence (2011), the major oil and gas companies across the globe are:

• 1 Saudi Aramco Saudi Arabia 100
• 2 National Iranian Oil Company Iran 100
• 3 Exxon Mobil United States N/A
• 4 Petroleos De Venezuela Venezuela 100
• 5 China National China 100
• 6 British Petroleum(BP) United Kingdom 100
• 7 Royal Dutch Shell Netherlands N/A
• 8 ConocoPhillips United States N/A
• 9 Standard Oil (California) United States N/A
• 10 Total France N/A

It is evident that, from the above data, Oman Oil Company does not appear among the top ten, despite being a large corporation in Oman. Therefore, due to the stiff competition, Oman Oil Company must incorporate suitable growth strategies to be among the top ten leading oil and gas corporations (Garbie, 2011, p. 203). Thus, through the incorporation of Porter's five forces, the energy industry is worth an analysis since it will provide an unambiguous outlook of the current industry operation and trends among the globe major oil companies like Oman Oil Company, ExxonMobil among others Industry Competitive AnalysisPorter five forces framework stipulates that the nature of industrial competition depends on such competitive forces as rivalry among firms, threats of entrant and substitutes, power of buyers and power of suppliers (Porter, 2008, p. 25). However, the success of a company is tied to the structure of the industry and how the corporation is related to the industry. Therefore, Oman Oil Company should asses the structure of the energy industry to foster heightened competition to maximize the profitability of the firm.Threats of Potential EntrantPorter asserts that the new entrants in an industry will no doubt create pressure on cost and prices as new firms come with the desire to capture and control significant market share (Porter, 2008, p. 25). Therefore, the threat to new entrants will depend on such factors as the imposed entry barriers and the existing company's reaction to the new entrants in the market (Baker, 2010, p. 47). Notably, the major barriers to entry in the energy include; economies of scale, product differentiation, patent, regulations, and large capital requirement. Therefore, Oman Oil Company being an already existing corporation should initiate various growth and strategies to overcome the threat of new entrants. Threats of SubstitutesSubstitutes affect the oil industry by limiting the accumulation of maximum revenue. Therefore, due to advance technology, corporations in the Oil industry are adopting alternative sources of fuels to act as a possible substitute. For instance, in 2009, Total in partnership with Gove a Unite State-based company developed biofuel products. Therefore, Oman Oil Corporation is not an exemption; it should develop alternative sources of energy to curb the threat of substitutes (Porter, 2011, p. 342).Power of SuppliersPowerful suppliers are capable of dictating market prices by charging a high price, thereby limiting production in the industry. Therefore any strategy by a firm in the industry to influence prices would be countered other firms changing strategy. For instance, in 1959, the move by ExxonMobil to influence energy prices in the Middle East was followed by the development of OPEC whose decisions have remained to influence energy prices until today (Pearce, et. al, 2000, p. 56).Power of Buyer and Rivalry among FirmsInfluential buyers have the power to reduce prices, demand better services, and better quality products. This will in turn increase cost thus affecting the oil industry profitability. And for this reason, some oil firms have opted to amalgamate to curb the threat of buyers. On the other hands, heightened rivalry among firms in the industry can reduce overall profitability (Pearce, et. al, 2000, p. 56). Notably, major oil corporations are relatively equal in capabilities, size, and power. Therefore, this will result in price wars if a competitor tries to influence prices.

Summary of Porters Five Forces

Internal and External Analysis

Internal and external analysis of Oman Oil Company is essential for the long terms survival of the firm besides, acting as a basis of long term sustainability in the energy industry. Therefore, SWOT analysis was incorporated to measure Oman Oil Company competitive strength that could enable it to capitalize on the available opportunities to expand adequately across the globe. StrengthAs mentioned earlier the Corporation enjoys 100% state ownership thereby providing it will enough capital for investment. Besides, the corporation is the main local leader of energy production and reserve in Omani economy (Dietl, 2004, p. 273). Therefore, the organization should take advantage of these key strengths to expand its scope of operation to achieve its objective of becoming among the world top ten oil companies.