Global Strategy and Competitiveness: Abu Dhabi Gas Industries Ltd - Case Study Example

Global Strategy and Competitiveness Customer Inserts His/Her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name 11, 09, 2010 Abu Dhabi Gas Industries Ltd (GASCO) Company Profile As an operating company, Abu Dhabi Gas Industries Ltd (GASCO) is charged with the responsibility of processing natural gas plus associated naturally occurring gases from on land oil operations within the Abu Dhabi Emirates. In 1978, the company was incorporated and launched as a joint venture. Among the ventures were Abu Dhabi National Oil Company (ADNOC), Shell and Total; and Partex with a 68 percent, 15 percent and 2 percent shareholding respectively. GASCO’s establishment was as a result of the His Highness Sheikh Zayed bin Sultan Al Nayan’s directive while he was president of the UAE and Ruler of Abu Dhabi. The purpose of its formation was the utilization of the vast gas resources which had previously increased in the process of oil operations before its formation. Currently, the associated gas gets transformed into a wide variety of high demand products which are used both locally and internationaly. In the early months of 2001, ATHEER, which was fully owned by ADNOC got fully integrated with GASCO. As a result, GASCO gained the status of one of the most prominent industrial concerns in the United Arab Emirates as well as one of the leading gas processing firms in the world. It is said to have a daily processing capacity well over 5300 million of standard cubic feet of gas. It also produces condensate in excess of 230,000 barrels, 4700 in tons of sulphur as well as a daily production of over 20,000 tons Natural Gas Liquids (NGL). There are four desert plants from where the processing of gas and natural liquid gas extraction activities takes place. These are Bab, Habshan, Asab and Bu Hasa. After processing, the natural gas liquid is transferred to Ruwais Fractionation plant owned by GASCO while Condensate and sulphur are taken to places such as TAKREER. Raw ethane which is also produced is taken to Ruwais. The gas produced is taken to industrial buyers including those in Abu Dhabi. This is done through a network of well-spread pipelines numbering 48 and whose total length is above 2300 kilometers. The four desert processing plants owned by GASCO deal with the processing and delivery of a wide range of gas and gas-related products into the United Arab Emirates’ network of gas distribution, as well as the plant at Ruwais. The products consist of methane, propane, ethane, paraffinic naphtha, butane together with liquid sulphur plus condensate. Sulphur comes out as a by-product during the manufacture of acid gas the GASCO produces in the sweetening action of gas. Like any responsible major player in the business arena, Abu Dhabi Gas Industries Ltd has continued to participate in activities that enhance the lives of people. It has actively participated in programmes aimed at alleviating the effects of global warming, environmental management and conservation. It has also participated in humanitarian activities by donating food and drugs to people in distress, contributed to the welfare of man by contributing towards the construction and equipment of medical and educational facilities as well as providing scholarships to students. Importance of Appropriate strategies GASCO for a competitive Business World It is an undeniable fact that Abu Dhabi Gas Industries Ltd is in business because it wants to make profits. In the competitive business world, profits do not just come, but they must be sought for. Looking for profits is a skill that calls for appropriate strategies. Abu Dhabi Gas Industries Ltd has discovered that strategy is important if it has to remain competitive in the competitive global business arena. Through strategy, the company has been able create and sustain a competitive edge over its rivals. While trying as much as possible not to copy the strategies rivals are using, Abu Dhabi Gas Industries Ltd has not shied away from taking ideas that have worked elsewhere and customized them to suit its unique situation. Appropriate strategies have helped Abu Dhabi Gas Industries Ltd define its scope of operations, appropriately allocate its resources, and identify areas in which it can operate competitively as well as create synergy (Feffer 2003). The company has used appropriate strategy to identify the countries and regions where it could compete effectively. Different countries and regions present different advantages and disadvantages. Rather than move into each region that other players say are profitable, GASCO has sought to curve its niche market and concentrated on them in such a way that it has blocked any serious competitor. One of its most treasured regions has been in the Middle East itself. Appropriate strategy has also been important to Abu Dhabi Gas Industries Ltd as far as the allocation of scarce resources is concerned. Managers have tried to identify markets which offer optimal opportunities for growth and profitability. Expensive business destinations have for example been avoided so as to rcut down on the cost of business operations and scale up profitability. Abu Dhabi Gas Industries Ltd used appropriate strategy for purposes of resource allocation. Resources are allocated in areas where the company feels it stands the chance to perform better. The strategic importance of departments, divisions, regions and functions has always been used to make resources allocation decisions. Departments that perform core functions, regions with lots of untapped potential and profitable product lines could for example receive more allocations. When the market parameters shift, the company also shifts its resource allocation criteria. Appropriate global strategies have been used to create synergy its operations and functions. This way, operations, functions and regions are able to benefit from each other. Profitable segments could be used to sustain the nonprofit ones, but which the company is unwilling to kill because of their strategic importance Abu Dhabi Gas Industries Ltd Business Strategy: Global Strategy Abu Dhabi Gas Industries Ltd has been billed as one of the most successful global business players in the Middle East. The company has embraced the global strategy (Feffer 2003) in its conduct of global business. A number of factors have made this possible. In the first place, the products that it deals in and the customers of the product are relatively homogeneous. The kind of industrial gas needed by Kenyan is the same as that needed by the Americans. The markets demand for standardization because of the similar purpose to which the products serve. Similarly, most of the customers that the company serves are other businesses. The industrial gas is usually bought by other industrial entities which use it to facilitate their own production processes. In most of the countries where it deals, there are well coordinated channels of distribution. The strategy has also been able to work because of the possibility of transferable marketing, where the same advertisement could for example be used globally without hindrance. The source of resources used in production by Abu Dhabi Gas Industries Ltd is strategically located within the region. Different countries have different prices for the product because of their unique domestic situations. The gas produced by the company is suitable for bulk transportation, making economical sense in global marketing. The gas ands fuel industry has many global competitors, making the use of global strategy more appropriate. There are almost uniform regulations such as trade policies, technical standards and other regulations that govern trading in industrial gas, making the business environment almost similar globally. Global is used by Abu Dhabi Gas Industries Ltd because of the similarity of demand and use of its products in all over the world. The company has, in most of the countries where it operates, chosen to make use of the local dealers to sell its products. Consequently, it exercises centralized control because decisions are passed at the headquarters and then communicated downwards for implementation. This strategy has helped the company with cost reduction, coordination of activities and decision-making and faster product development. Departmental Strategy The human resources department in which I work practices a departmental or functional strategy (D'Aveni 2006). These strategies deals with the development and coordination of resources for effective and efficient functioning execution of business unit level strategies. Strategies at this level provide the unit and corporate level with input. The functional level strategies will for example provide the corporate level with proposals on how staffing should be done. If the corporate level feels this should be implanted, they pass it back to the functional level for actual implementation. Successful implementation by the functional level will translate into success of the organization. This has been the situation at Abu Dhabi Gas Industries Ltd. Strategy School Used at Abu Dhabi Gas Industries Ltd Abu Dhabi Gas Industries Ltd presently uses the transnational strategy school (Digman 2007). This creates a fusion of the global and the multidomestic strategy. This school operates on a number of implementation strategies. There is standardized mass production of gas which meets the needs of the entire world. Resources are found within the region, helping in the reduction of expenditure on materials. The spread enjoyed by the company allows it to gather intelligence and information from global resources. It has standard expectations for customer service whose needs must be satisfied. Trading with other companies has give Abu Dhabi Gas Industries Ltd to opportunity to build many global alliances. A SWOT Analysis of the Multidimensional Strategy at Al Khaleej Sugar Company The strategy used by Abu Dhabi Gas Industries Ltd can be subjected to a SWOT analysis (Porter 1985). Its strengths include the ability to use the sane machinery to produce in bulk hence giving it economies of scale. The company is also able to exercise good financial control. The company is also able to use its own endowments such as superior technology, skilled labour, developed knowledge base, culture and government support to gain a competitive advantage. Among the weaknesses is the company’s lack of the opportunity to innovate to suit varied demands in other markets. Dependence on one product could prove problematic in case of shifts in market demand. The company has the opportunity to diversify in other areas and regions and make use of superior resources not found within its immediate environment. Among the threats is the likely change in the demand for gas as innovation makes it possible for companies to shift from gas to electrify in their operations. The Effect of Changes in the gas and fuel Industry on Abu Dhabi Gas Industries Ltd The Abu Dhabi Gas Industries Ltd could be affected by a variety of changes taking place in the fuel industry. One of them is the demand that companies make their operations in a manner that is not detrimental to the environment. The company will therefore have to invest heavily to meet this demand. The world is also developing at a fats rate and with this development, comes a shift in resource utilization. Many companies might shift to alternative fuel sources. Even though, the coma pony’s strategy might work well for it because the kind of products it deals in is on demand, and it is not likely that the demand will fall substantially. The industry is also becoming more technological developed hence reducing the costs of operations while increasing production. Cultural Challenges Abu Dhabi Gas Industries Ltd in Global business Cultural challenges are unavoidable for any company that conducts global business, and Abu Dhabi Gas Industries Ltd not an exception. The markets that GASCO operates in have varied local cultures which could affect the way the company operates. Some of the destinations might allow women to perform skilled jobs and even occupy managerial offices, which might not fit in with the company’s culture because of the dominant Islamic culture in which it operates. Though the company is able to standardize its operations and products, it might not easily standardize some functions such as advertising because the images used in advertisement might not have a universal appeal. Some cultures might consider some words, symbols and images offensive. Another cultural challenge comes from the use of child labour. Abu Dhabi Gas Industries Ltd discourages the use of child labour, yet some of its market destinations use it. The domestic culture of the company might also be challenging especially if the company has to get skilled labour from outside the UAE whose culture is different. Investing in destinations where value is held in high esteem would make the company’s operations easier because employees will want to operate in a manner that brings value to the company. The Future of Abu Dhabi Gas Industries Ltd Abu Dhabi Gas Industries Ltd faces a bright future in global business. In the first place, the world is becoming more industrialized with companies being formed each day. Most of the industries rely on heavy industrial gas which the company produces. Indeed, the trend since the company was formed has been upwards, a sign of increasing demand each year. The world is also evolving the culture of regional trading blocs which are sure to create more markets for the company. It will be possible to serve many countries within a particular region from a central place and consequently, reduce the cost of doing business. Many opportunities for entering joint ventures globally exist for the company because of its reputation. References D'Aveni, Richard A 2006 "Corporate Spheres of Influence." MIT Sloan Management Review, vol 45, no. 7, pp.38–46. Digman, L 1997, Strategic Management, Dame, Houston. Feffer, J 2003, Power Trip: U.S. Unilateralism and Global Strategy after September 1, Seven Stories Press, New York. Porter, M 1995, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, New York. Read More