Factors Determining the Peaceful Rise of China

Business Studies Essay on Oil Company

Oil Company

Industry Analysis

The oil industry is characterized with many companies that engage with the search and production of oil. They produce different products from petroleum after mining and refining crude oil. Additionally, they sell the merchandise to many clients in industrial and retail departments. Exxon Mobil Corp, PLC, Chevron, British Petroleum and PetroChina are some of the leading oil producing companies (Dublin, 2013).

However, oil industry is affected by a number of factors including economic, social, political and technical factors among others. For example, economic factors affect the industry because of inflation and recession. In the event of a recession in country like it was in 2008, product manufactures decrease based on the fact that few people will manage to drive to work, conduct their business activities or take a vacation etc.

Therefore, such factors lead to less energy usage. Thus, the best time to invest in any oil business is when a country’s economic condition flourishes to the profitability of gas and oil companies. Oil prices in the early 21st century experienced an upwelling but the demand for the product was curbed during the global financial crisis in 2008.

Even so, oil production capacity has been at risk since then. It is a fact that led to the loss of oil of up to 7.6million oil barrels on daily basis. As a result, cash flows and oil projects were highly restricted and limited (Economy Watch, 2013). On the other hand, unfavorable legislations, regulations, political instability and tax rates affected the oil industry (Forbes.com, 2013).

Political uncertainty for example in the Middle East and many parts of Africa is adversely impacting oil and gas industry because they create major markets and oil industry supplies. Similarly, sanctions on Iran and Syria, major markets for oil industries and oil products has immense ability to cut down on generation of oil industry as well as manufacturers.

Environmental legislations also, especially in developed countries including Europe and North America are significantly affecting oil products market. In these countries, stringent legislations are more likely to affect oil products end user’s decisions. Oil and gas industry regulation also aims at reducing air pollution through smog and smoke emissions. This can be achieved by designing low gas emission valves and actuators.

Additionally, technological advancements in the industry including research and development aimed at enhancement efficient and green use of traditional fossil fuels (Dublin, 2013). Therefore, energy producers in oil industry are aware of the need to ensure energy conservation as well as the significance of technological innovations and application. The companies for this reason promote energy saving strategies and seek the creation of green technology in oil industry.

They also promote and increase efforts directed at natural gas development with a purpose to enhance clean energy proportion for supply and consumption purposes.  As a result, many oil companies have employed growth and commercial optimization strategies to ensure energy efficiency.

Companies in the oil industry have also directed more energy towards the development of new energy forms to ensure diversified energy supply. The new energy forms are equally a vital strategy used in solving energy and environmental challenges. For instance, development and discovery of coalbed methane is an incredible achievement in the oil industry.

Focus is however on development and oil sands exploration, tight gas as well as more experiments on industrialization and resource assessment. Such trends require that PetroChina and other oil companies across the globe should manage their operations efficiently and effectively.

They should also be more aggressive when it comes to meeting the needs of clients who are also becoming increasingly sophisticated. The ability to respond to such challenges will play a crucial role in determining their development and success (O’Connor, 2004).

There is also increasing awareness on the need to fully optimize effective management operations on issues such as control, planning and improvement to remain competitive. More emphasis is therefore directed at sound management and more specifically quality management, client satisfaction, capacity and demand management (Evans, 2005).

Company Background

PetroChina is one of the largest oil companies. It deals with the production, distribution and supply of gas and oil in China’s economy. The limited company has the highest sales revenue in the country and is a leading oil company across the globe. PetroChina Company was established through joint with limited liabilities under special China National Petroleum Corporation regulations and Company Law. The company which was established in 1999 is additionally publicly traded and listed on the Joint Stock Limited Companies.

PetroChina since its foundation has grown and enhanced its standard corporate as well as governance structure in upholding set laws and regulations including Company Law and other Mandatory Provisions in China. Many stakeholders including Board of Directors, Shareholders and different company committees are very independent in their operations hence, very effective. This piece is provided for in the Articles of Association.

The PetroChina oil company is highly committed to becoming a leader in international energy business with an economic benefit, major oil producer and distributor of different petroleum products across the globe (Forbes, 2013). The company engages in a wide range of activities including production, exploration, development as well as sale of oil merchandise.

The company also engages in oil refining, transportation, storage and marketing crude oil. Under the leadership of scientific development concept, the company is highly committed to implementing different techniques of marketing, resources as well as industrialization. It also focuses on speeding up transformation of economic soundness, environmental protection, and energy conservation, improving innovation and creating a highly efficient mechanism.

The main shareholder and sponsor of PetroChina is the China National Petroleum Corporation. What’s more, a large group of petrochemical and petroleum corporations was created in 1998.

Petroleum or Opportunity Identification

Rapid growth is one of the major challenge facing Research Institute of Petroleum Exploration and Development (RIPED). RIPED just like many companies is returning to its profitability level slowly as recession comes to its end. Recovery in many economies is also picking up gradually. Even so, for RIPED and many other companies, growth is still extremely slow.

For any company and entrepreneur sustained growth especially those that have witnessed rapid increase continually is always a desire. However, this is accompanied by problems and many risks. They have ability to cause more harm to a company compared to financial crisis or a recession, something that is very evident in RIPED Company.

Many business people or management teams have a tendency of assuming that large organizations generate revenue much better and faster. On the contrary, company’s growth results generate a lot of pressure on all aspects of a business by creating an environment characterized with constant change. RIPED in this case, being a large organization is experiencing many challenges of constant changes thus straining resources in production form, employment cultures as well as information technology. The problem in the given areas has therefore led to RIPED company setback especially in low season or in a limited growth period.

What’s more, many industries and resources are located far from potential markets. This generates more pressure for RIPED’s profitability especially in natural gas development. Onshore resources of natural gas for example are located in central and western regions. Recoverable natural gas reserve residues in the four and only main gas sites leads to 1,470 billion m3, thus contributing to 70% of global amount.

Similarly, growth potential in research potential for RIPED lies in crude oil availability in western and central regions of China. Client markets for the products on the same note are located in eastern region. Long transmission distance also leads to high transmission cost in the end. The cost of transmission and the cost of long pipes lead to low upstream gas prices because of restrictions that are acceptable in gas and oil market prices.

In the end, it affects the company’s economic growth and creates higher requirements for exploration and natural gas development and technological advancement. The problem facing RIPED Company generally is because of its size. Company managers thought everything us running well because of high revenue generation. However, they failed to realize that close attention was needed especially in areas that could create tension.

Company’s growth in itself is no bad but effective management is very crucial. There are many factors that could be adopted to ensure progressive profitability. These include realizing the right expansion time, preparedness level to implement new changes and the capability of making the changes. The decision to grow also entails changes in all business operation areas. Failure to keep up with vital changes in such crucial areas easily leads to failure or breakage of different business aspects.

Problem/Opportunity Measurement

For more than 50years, the oil industry has been growing tremendously. Today, it is entering a new age characterized with immense growth and development. Companies like RIPED in the industry witnessed a lot of breakthrough in the exploration and development of natural gas since 1990.

Natural gas reserves also experienced immense growth and a steady trend in exploration and development of natural gas in western and eastern regions including Sichuan Basin. Three natural gas areas were also identified and as a result, an increase in gas production of about 31.57billion m3 by 2002 was realized. By the end of the same year, recoverable natural gas reserves was about 1,860billion m3, and it serves as a great oil foundation in China as far as further growth is concerned.

The demand for oil merchandise however was however curbed in 2008, because of global final crisis. The production capacity has remained low since then and it has had a significant impact leading to loss of 7.6million oil barrels on daily basis. Cash flows and projects were limited and restricted. The manufacturers of oil merchandise decreased in 2008 based on the fact that few people were taking vacations, conducting business operations or even driving to work.

Such factors led to decreased energy usage. What’s more, a recession in the global economy was induced by the 2008 global recession and it reduced oil industry in China and across the globe. The prices of oil merchandise across global markets also fluctuated and the cost of processing oil skyrocketed. There was also intense competition in international and home markets leading to even high fluctuations as well as uncertainties in the industry.

Growth and development of oil industry following recession has since been slow. However, the demand for the product has increased tremendously with oil companies becoming slow in taking up large space opportunities for development purposes. Growth for the companies was a challenge. China’s transmission system has also grown rapidly. Many pipelines have also been laid down and oil transmission capacity and natural gas has also been enhanced.

Companies like RIPED generally enjoy good reputation in the industry. Unfortunately, it is experiencing development challenges making it essential to employ ideal strategies and countermeasure to enhance development. The best season for investing in the business is therefore when the country is enjoying enhanced profitability in gas and oil industry or companies.

Research Question

The main purpose of this report is to identify problems faced by the company and to advise it on the best ways to cut costs related to its performance, strategic management and best practices. The paper is also interested in creating an ideal long term investment strategy and to ensure the company enjoys increased profitability over a long haul.

This can be achieved by a single company designing a strategy that will enable it to invest in modern day to reap huge profits in the future. The company should also set its goals and objectives as well as its investment plans for it to benefit from the strategy. One of the objectives of having such a strategy is to enable the company to be a zero debt, to ensure it doesn’t experience any financial problems in the future.

The research will also develop and implement a budget. The budget can be annual and it should be directed at saving 10percent of the company’s revenue on the lower side for future investments. The report will also outlay a clear plan and source backup funding. Another crucial area that the research study will handle is efficiency because it enhances the company’s profitability.

An ideal market is the one that operates based on the forces of demand and supply. This means that external forces interfering with market operations should be eliminated. From this report most importantly, the company should be in a position to diversify its portfolio to minimize risks of loss because of market forces. This will help to ensure losses are reduced significantly and more profitability returns are generated due to diversification.

Research Design: Sources and Methods

Literature reviews is the focal point of starting any research project. The critical literature of reputable and relevant sources published in relevance to the research topic offers the basis of extensive research (Holliday, 2007). Literature search could by systematic, thematic or follow a specific format and it is considered a crucial and significant research project mechanism for setting up its pace.

The background, bets practices, industry formation and other parts of this report for this reason, will be carried out from secondary data sources in different libraries including Dalhousie Libraries, company websites, NAICS and other online resources.  Sharp and Aveyard consider critical analysis process, (2009) as an essential requirement for an extensive and informative literature review.

The prerequisite is a decision making process that determines a research study’s credibility and whether it needs further research or exploration. It can also highlight weaknesses of given evidence base. To cite Hammond et al. ‘‘Any piece of good quality research should be seen in the context of a continuum which has two major essential components, the literature search, with its attendant processes of critical analysis, as well as the actual writing of the review’’(Hammond et al. 2005 pg 21).

For the literature review, to contribute positively towards evidence base, it needs careful appraisal of literature as well as very clear critical analysis of content of all located articles. This should therefore be regarded as a central process of the review writing. In this report, the presented literature review will be very crucial discussion and in the most representative papers from literature that is peer reviewed as it creates awareness on the evidence base in this capacity.

8.2.7 SWOT Analysis

There have been many mixed changes in the economic wellbeing of oil industry. Government freezing of petroleum products affects oil companies despite steady increase of crude oil prices across the global market. The government of China fortunately employed different initiatives towards promotion of oil industry including reduction of excise duty and rise in oil prices.

Additionally, the government has always utilized duty cuts in an effort to enhance oil industry. SWOT analysis for this reason on oil industry and more specifically RIPED is essential.

Oil industry is characterized with many economic and physical growth complexities. Client expectations in the modern day are also growing higher by the day. Increase in client expectations ignites a desire for an average person to live a fulfilling life with higher conditions. This also leads to increased demand for energy, food, water, resources and technological developments. As a result, there is an intense pressure in the industry across the globe.

As a common person therefore, it is easy to find someone searching for a company’s SWOT analysis. Mark you, the demand for petroleum merchandise increase continually similarly to the world’s population. This means the increased demand can be attributed to increasing population. Oil companies’ quick analysis is as follows

Common processes in oil industry include refining, exploitation and supply of oil merchandise. The processes call for adequate and efficient equipment for each stage. In the end, there is increased demand from different oil companies.  The supply of oil, uranium, coal, petroleum and natural gas presently is in their zeniths. Global warming specialists also put more pressure on oil provision and supply of oil merchandise to humans.

It is therefore essential to bear in mind that every company in the petroleum industry aims at developing more environment friendly fuel and energy as it offers more benefits to the increasing problem of global warming today. After purchasing all essential equipment, there is also the duty of having stock markets and paying all employees. This can be problematic because of a large workforce to carry on and complete the duplicated equipment responsibilities.

The processes are also hazardous in their own way. They should be handled with a lot of care and paid for, justly. Petroleum merchandise as statistics reveal, are not a simple requirement. The demand for the product is complex because it is a nonrenewable source of energy and it can be extinct at any given time. About 40 percent of global source of fuel is petroleum according to the statistics.

The other components are widely used in making plastics, fertilizers and industry chemicals. This simple analysis as a result, of oil industry makes it very easy to realize the impact of high demand for petroleum merchandise. RIPED’s and other companies’ SWOT analysis for this reason is carried out below

Strengths

Developing growth: high demand for petroleum merchandise can be attributed to a country’s economic growth. China’s GDP is expected to grow even further in the long term and oil companies in the industry including RIPED will benefit. Diesel sales for example increased by about 12 percent while that of petroleum increased by about 9 percent.

The industry in China is expected to grow and beyond. This is highly beneficial to oil companies in the region including PetroChina and in the end, it becomes advantageous to RIPED.

Government incentives:  the decision to enable oil companies to increase the cost of the product by about ten percent and general increase in the price of oil is highly favorable to companies operating in the industry. This fact therefore reduces interference by government in the industry and it creates autonomy in oil industries as far as petroleum and diesel prices are concerned.

This has the impact of keeping profit margins secure. What’s more, duty cuts are more likely to cut down on expenses to petroleum product subsidies.

Weakness

Crude prices: China’s crude requirements of up to 70 percent are fulfilled by importations and this is expected to rise. China is an energy efficient country as far as its usage is concerned according to IEA. Profit margins are also affected by high price of crude oil.

Lack of freedom: despite autonomy provision to different oil companies to increase the prices of oil merchandise the prices of diesel and kerosene are still controlled fully by the government. Companies like RIPED are therefore forced to absorb accruing losses as a result of government subsidies.

Opportunity

Equity oil: Major oil companies including RIPED can consider upstream production, exploration and refining activities to secure crude oil supply. RIPED and PetroChina are even more likely to consider bids for oil fields. There is also a possibility of a backward amalgamation which is also more likely to provide an opportunity for the two companies among others to shelter their crude oil requirements.

Natural gas:  there is a likelihood that natural gas will be the fuel used in the future and its demand will surpass its supply. Scarcity of natural gas is no doubt an incredible opportunity for oil companies in the industry.

Threats

Competition: RIPED faces cut throat competition from many research companies in oil industry. Gaining entry to the industry is easy thus, increased competition between companies. Diesel and petrol prices have always been high as way of subsidizing LPG and Kerosene. PSU marketers as a result, are more likely to be affected severely by reduced output per opening.

Government interference:  oil companies through financial years are restricted from increasing the price of petroleum because of political reasons.

8.2.8 Description of Alternatives

Speedy growth is one of the main challenges facing Research Institute of Petroleum Exploration and Development (RIPED). RIPED just like many companies is returning to its productivity level slowly as recession comes to its end. Recovery in many economies is also picking up gradually. Even so, for RIPED and many other companies, growth is still extremely slow.

For any company and entrepreneur sustained growth especially those that have witnessed rapid increase continually is always a desire. However, this is accompanied by problems and many risks. They have ability to cause more harm to a company compared to financial crisis or a recession, something that is very evident in RIPED Company.

Many business people or management teams have a tendency of assuming that large organizations generate revenue much better and faster. On the contrary, company’s growth results generate a lot of pressure on all aspects of a business by creating an environment characterized with constant change. RIPED in this case, being a large organization is experiencing many challenges of constant changes thus straining resources in production form, employment cultures as well as information technology.

The issue in the mentioned areas has therefore led to RIPED company impediment especially in low season or in a limited growth period. For this reason, there are three alternatives as explained below for RIPED to reduce costs.

  1. Transformational leadership

Transformation leader needs to adopt transformation attributes to the organization to address the above mentioned trends. Transformational leadership as opposed to other forms of leadership focuses on inspiring its followers to achieve much more beyond their expectations. It also focuses on achieving full commitment as well as the engagement of followers through different actions such as involvement of a leader in the workplace.

All the characteristics of transformational leader include inspiration motivator, individualized consideration, idealized influence and intellectual stimulator. Transformational leaders must also set the right brand image to give them an opportunity to develop and grow. Finally, the ability to maintain the right employee size in an organization is imperative for its growth compared to technologies, products and good markets.

Transformational leaders are therefore needed to focus more on empowerment of female employees, offer feedback and increase dependence on the scorecard. Additionally, a transformational leader will effect change from the past, how it is carried out and who heads the workplace (Gregory, 2006).

The second reason as to why transformational leadership is essential is because of an ever changing economic environment. To remain vibrant and active, leaders have to embrace change. Resistance to change is a broad and easy road to crippling of organizations and individuals. Client needs on the other hand are increasing and rapidly changing.

Failure to supply will definitely lead to replacement by other competitors in the market. Therefore, companies need to adopt transformational leadership to address the ever changing needs of clients (Molly, 2010).

  1. Adopting an on strategic planning

Developing a strategic plan is not a compound or complex element for RIPED. It is in fact related to planning a vacation for the family. Each member of the family makes a contribution when planning a vacation right from inputs to choosing an ideal destination. The plan will be used by the family to reach its destination.

Besides the destination, there are other underlying factors that need to be considered besides planning. They include lodging arrangements, fuel costs as well as other planning essentials to ensure a successful vacation. Having a strategic plan is also very crucial for RIPED Organization because it will enable the company to realize its objectives and goals and to provide quality services.

A formal strategic plan that is drafted and agreed upon by concerned parties with a multi-page document offers clear essential procedures needed by a company to achieve its objectives. The strategic plan will also provide a road map that the companies need to adhere to achieve its goals and mission.

III. Use of SWOT analysis

RIPED should take advantage of its opportunities and strengths to grow its client base and maximize its profits. It should also to away with its threats and weaknesses as much as possible. The company should also consider regular market research to be informed with the ever changing tastes and preferences of clients and fluctuating price levels. RIPED through this research should also be able to capitalize on its opportunities and strengths while minimizing weaknesses and threat effects.

Oil industry is also characterized with complexities in its physical and economic growth.  Client expectations in the modern world are also growing by the day. Increase in client expectations also generates desire for an average person to live a better life with sophisticated conditions. This leads to increased demand of technological advancements, food resources, energy and water.

Therefore, pressure on oil industry is witnessed across the globe. A common person may also find himself or herself looking for a company in the industry SWOT analysis. Utilizing and performing SWOT analysis for this reason can be beneficial for RIPED.

8.2.9 Comparison of Alternatives

Maintenance requirement, the ease and cost of implementation criterion is often used to determine the economic viability of a strategy and it is used to determine if the technique is economically viable or not. The advantage of employing the criteria in strategy or alternatives evaluation is the fact that the method has precise decision making process.

In project or alternative evaluation, if the final ranking is positive, the project should be accepted by the management because the project or product would be beneficial to the company (Bastable, 1995). If the value is negative, the product or project should then be rejected. If the value is zero, the management would relax because any decision employed would not harm the profitability of a company (Barton, 1999, 234).

Should RIPED’s management decide to consider the proposed strategy, it will not be costly for the company because it will accrue profits based on reduced costs associated with the strategy. The best thing would also lead to the alternative’s acceptance. The costs associated with the product are however making it difficult for RIPED to make profits (Bastable, 1995, 133).

The ease of application is also very important because it controls the amount of energy necessary for implementing the options. It would also be the major determinant for a financier before making any decision. However, the ease of application is determined by the project’s or company’s complexity level. A complex strategy is associated with implementation difficulties.

The three alternatives in the case of RIPED are very significant but complex. Therefore, they each attract a 0.10% as far as the application is concerned. Its maintenance is also essential and it is 0.30% each. The cost of strategy implementation on the other hand must also be given priority hence the 0.60% weight. The summary shown below is of the analysis

 CostEase of implementationMaintenanceTotal
Alternatives%Ranking%Ranking% Ranking 
Transformational leadership0.6030.1010.3012.5
SWOT analysis06010.1020.3031.7
Strategic Planning0.6020.1030.3021.8

 

 

8.3 Back Matter

The oil industry is highly influenced by social, economic, political and technological factors among others. For example, economic trends affecting the industry often recession and inflation. In many economies, recovery is picking up gradually. Even so, for companies including RIPED, growth is fearfully slow. Sustained growth specifically for those with rapid increase is the desire for any company’s top leadership or entrepreneur.

However, they are accompanied by with own sets or operations and risks. They also have ability to cause more harm to the company compared to financial crisis and recession, a problem that is witnessed in RIPED organization.

 

References

Aveyard H & P Sharp (2009) A beginners guide to evidence based practice in health and social

care professions. Maidenhead: McGraw-hill Open University Press.

Barton, A. D. (1999). A trusteeship theory of accounting for natural capital assets. Abacus 35(2): 207-222.

Bastable, C. W. (1995). A revised concept of inventories. The Accounting Review (January): 130-133.

DUBLIN, Dec. 19, 2013 /PRNewswire/ — Research and Markets (http://www.researchandmarkets.com/research.

EconomyWatch.co. Oil Industry Analysis. Retrieved on December 25, 2013.

http://www.economywatch.com/world-industries/oil/analysis.html.

Evans, N. Campbell, D. and Stonehouse, G. (2003) Strategic Management for Travel

and Tourism. Butterworth-Heinemann. Oxford. UK

Tari, J. (2005). Components of successful total quality management.

The TQM Magazine, p112-124

Hammond M, White C B, Fetters M D. (2005)  Opening cultural doors: providing

culturally sensitive healthcare to Arab American and American Muslim patients. Am J Obstet Gynecol. 193(4):1307-11.

Holliday A (2007) Doing and writing qualitative research. London; Sage Publications.

Forbes.com. PetroChina. Retrieved on 25th December, 2013.

http://www.forbes.com/companies/petrochina/

Gregory, A. (2006). Transformational Leadership: Association with Attitudes Toward

Evidence-Based Practice. Psychiatric Serv. Vol. 57(8), 1162-1169.

Molly, H. (2010). The Interaction of Transactional and Transformational Leadership.

Online Journal of Workforce Education and Development. Vol. 3(3). Retrieved October 17, 2013. http://opensiuc.lib.siu.edu/cgi/viewcontent.cgi?article=1078&context=ojwed

Posted by:

admin

Related articles

list of articles

Categories

RSS RSS FEEDS

  • Sample Essay on SWOT Analysis of The Home Depot January 20, 2016
    SWOT Analysis of The Home Depot SWOT analysis of The Home Depot is among the best tools used by the home improvement retailer to gauge its ability to stay afloat and profitable in the market. Although it is considered the largest home improvement retail chain in the world with an estimated revenue base on more […]
    admin

ARCHIVES

Latest News From Blog

Check out Our Blog's assignment samples and tips on how to Write Assigments
Essay sample on the Effects of Cold War on Soviet Union..

Effects of Cold War on Soviet Union The Soviet Union was one of the main participants in the Cold War. It was engaged in the war with the USA and - See more

Essay sample on Effects of Cold War on Asia

Effects of Cold War on Asia Tensions of the Cold War began shifting from Europe to Asia in 1949 when Mao Zeodong proclaimed the birth of the ...Read More

Sample Essay on United Kingdom Healthcare System

United Kingdom Healthcare System United Kingdom healthcare system, also known as the National Health Service was established...Read More

Back to Top