Analysis of Profile of the Organization the Abu Dhabi National Oil Company - Case Study Example

Profile of the organization Customer Inserts His/Her Name Customer Inserts Grade Course Customer Inserts Tutor’s Name 22, 09, 2010 Table of Contents Table of Contents 1 Profile of the Organization 2 The company’s Vision Theme for 2010-12 3 The company’s Mission Theme for 2010-12: 3 The Company’s Strategy for 2010-12 is dubbed “Operational Excellence” 3 ADNOC’s Strategic Business Goals & Targets for 2010-12 4 Goals 4 Targets 4 Importance Using Business Strategies in a Business 7 Business Strategies Used in the Organization 8 Strategy School Used in the Organization 9 SWOT Analysis for the Organization 10 Changes in the Industry 11 External Environment Scanning: 12 Market Share Analysis: 13 Competitive Strategy 13 List of Bibliography 15 Profile of the Organization The Abu Dhabi National Oil Company (abbreviated as ADNOC is an oil company in the UAE that is considered to be the fourth largest oil company in the Arabic League. The company has access to the country’s gas and oil reserves that it uses as its goods of trade and this access makes it among the largest company by oil reserves (D'Aveni 2006). ADNOC is a state-owned company in the oil and gas industry where it was founded in 1971 and restructured in 1988 to meet the growing global gas demands of the 21st century. ADNOC is headquartered in Abu Dhabi in the UAE mainly deals in oil products such as crude oil among other oil products like fuels and lubricants and natural gas (LPG and LNG etc) as well as petrochemicals. The company is run under the management of key business gurus like the chairman of the Supreme Petroleum Council, Sheikh Khaliga bin Zayed and Yousef Omair bin Yousef who is the CEO (Feffer 2003). ADNOC is the largest oil reserve in the region having over 137 billion barrels which is an equivalent of 21.8 x 109 m3 of oil and this was as per June of 2009. Being such a big company, ADNOC operates two different oil refineries called Umm Al Nar and Ruwais and also has 14 additional subsidiary companies that are situated both downstream and upstream (Feffer 2003). As part of its expansion program, ADNOC has been engaged in developing both offshore and onshore gas fields to better supply its products of merchandise. These products (oil) are exported in the form of Liquefied Natural Gas (LNG) as well as Liquefied Petroleum Gas (LPG) and these forms of the oil are supplied for the production of local electricity and utilities of water to other companies/industries that include petrochemical plants (Gupta & Gorindarajan 2003). The company is an employer to thousands of workers (over 12 000), both skilled and unskilled and has a research facility that ensures that constant research is undertaken to improve on the current items of merchandise. The sales and marketing departments have the task of looking for markets for the company’s products both locally and internationally. In the global world where all companies are looking for markets everywhere on the globe, the only way to survive is to make sure the company stays at the top with its innovative designs and rigorous marketing and sales strategies. In this regard therefore, in preparation for a brighter economic and business future for ADNOC, it has put in place specific measures for 2010 to 2012 to guide its operations. These measures are discussed below. The company’s Vision Theme for 2010-12 To be a reliable Retail Fuel distributor & vehicle care provider in the region. The company’s Mission Theme for 2010-12: A preferred, reliable retail fueling distributor & vehicle care provider for road vehicles in the region. The Company’s Strategy for 2010-12 is dubbed “Operational Excellence” The strategy statement devised is to optimize operation cost; improve productivity & efficiency while sustaining quality of deliverables to the customer to position each service station as a reliable retail fuel distributor and vehicle care provider for the all road vehicles. Also, efficiently implement & manage Allied Services strategies for non-fuel business and promote cross selling. ADNOC’s Strategic Business Goals & Targets for 2010-12 Goals The following are the goals that have been set for this period by ADNOC: Systematically diagnose every cost head & work processes of Retail Fuel operations and develop cost reduction & productivity improvement plans to achieve regional cost benchmark levels. Introduce and institutionalize risk management & Business Continuity Plans for commercially safe and continued business operations. Create a Talent pipe line Reduce turnover rate of filling station staff Improve cross selling and customer satisfaction level to develop loyalty Enhance coordination between Retail fuel, Logistics, Maintenance, IT and HSE Successfully operate NGV service Targets The following are the targets that are intended by ADNOC: a. In Retail Fuel operations achieve cumulative 3% reduction in direct cost or 3% productivity improvement during 2010-13. i. Direct cost metric – Fils / IG ii. Productivity Metric – IG / Staff b. Own and drive risk assessment for the Retail Fuels Business as per company’s target dates (2010-2012) and successfully implement companies Risk Management as per plan. i. Develop and put in operations the Business Continuity Plans (2010-13) ii. Ensure alignment with the organization Risk Management Program. c. Talent Management: i. Focused development for each sales manager, a) Business skills b) Communication Skills and Inter-personal skills c) IT skills d) Inventory Management e) Budgeting ii. Review and revamping of Fillers & frontline staff training program & process (use customer survey reports) a) Identify any old Service Station or a new facility (as appropriate) and convert to a training center where all Service Station Staff can be trained live. This would ensure that the employee is ready for the job from day one – May 2011. b) Training needs analysis to be carried c) Training with live equipments d) Training on IT e) Comprehensive HSE training iii. Identify critical positions, develop talent sourcing and development plan, and review half yearly progress. iv. On top priority, fill all the vacancies by Dec. 2010 d. Successfully implement service station (Frontline Staff) incentive scheme during 2010. Reward staff who are exemplary in their behavior with customers, develop and deploy a reward and recognition program for the service station staff – Sept. 2010 e. Promote cross selling (Subject to budget being sanctioned) i. Develop forecourt cross selling schemes ii. Improve customer satisfaction level - develop annual plan for improvements based on customer surveys and customer complains, review performance quarterly at sales manager level – July 2011 f. Enhance coordination between Fuel Sales, Logistics, Maintenance, IT and HSE by having the following, i. Cross functional review of SLA’s on a monthly basis (Have some members of each of the Divisions / departments participate in the reviews) g. NGV operations i. Ensure seamless integration of NGV business with fuel business ii. Ensure business transactions system in place iii. Ensure staffs trained and well informed to act as co-promoter of NGV iv. Program for Sales Managers to promote NGV to the regular fuel customers. v. Provide necessary support to Conversion Centre operators h. Integration plan of S/S & C-Stores by June 2010 and implementation during July-Dec 2010, with net sustainable saving in Opex around 7% (final target to be set in Feb 2010) during the period Jul20108- Dec. 2010. Importance Using Business Strategies in a Business Using a business strategy in a business is very instrumental in the survival of the business. The long-term goals of the company are addressed in the business. The running of a business like oil products is no easy challenge (Gupta & Gorindarajan 2003). Daily, new challenges are discovered and with a business strategy, the threats can be dealt with in a manner that ensures the continuity of the business as well as the profit making. For an organization like ADNOC, developing a business strategy is very important for them to survive in this competitive world (Dyer 2001). This is an international company, thus some of their products are sold to the outside markets. In the business, also ADNOC will have many challenges like competition from rival oil products producers and rapid introduction of new technology in the market. Oil business is a very versatile industry that requires the condition for survival to be the company with the most technologically advanced electronics and cheapest in price (D'Aveni 2006). Therefore, for ADNOC to survive and expand in the market they need strategies that will ensure that they will produce the cheapest product in the market. This is to be achieved using modern manufacturing techniques and reducing on the total companies operation cost. The company will also need to establish customer loyalty through establishing of superior products that are of standard. Finally, to curb against competition they will have to involve themselves in rigorous advertising and selling techniques to popularize their products within the populace (Porter 1995). Business Strategies Used in the Organization ADNOC has adapted several strategies to ensure that the organization remains afloat amidst all the market pressures available. The first strategy is the increase of sales. This strategy can be difficult to realize given the numerous market forces like competition and globalization that affect the organization (Dyer 2001). The plan the company uses is the introduction of nationwide advertising campaign to popularize their products. Another strategy the company employs is the creation of new markets. This it does by sending out regional sales persons to areas the organization has no foothold. Additionally, it seeks to set regional and local sell points to reach the consumers in the grassroots. The presence of sales personnel and outlets in the regions makes it easier for implementation of after sales services as well as handling complaints. By increasing the area of market, the organization is able to increase its market share of the products (Feffer 2003). By having a larger market share it has the growth of the business as retailers seek to stock the company’s products promote it (Dyer 2001). After all, if the organization’s brands itself is the leading company then it can conduct its advertising with confidence (Dyer 2001). This is because all consumers always want to associate themselves with the leader. It is also an indicator that the organization is enjoying higher growth than its competitors which is good news to the stakeholders of the company. Growth is another strategy that the organization has. Growth is measured in terms of sales and the market share the organization has. Larger organizations are less likely to have takeovers and are able to have benefits of having economies of scale. Growth also automatically translates to organization achieving the full potential it has the capability of achieving. This means that the managers and other workers are able to enjoy higher salaries among other material benefits. Growth can also be achieved by acquisition of other companies. This strategy is currently being employed by ADNOC on a wide scale. Finally, to achieved globalization the organization is introducing standardization of the oil products being produced. Standardization ensures that all the products produced by a given company can be sold anywhere in the world (Dyer 2001). The organization strives to introduce standard products because this leads to increased sale meaning increase in profits. Strategy School Used in the Organization An effective market strategy seeks to achieve the ends that are desired by the organization. The main aim of an effective strategy is to help to dislocate the source of market to its competitors. This mostly comes as a shock and due to the shock; the competitor will usually try to counter the strategies. As he does that, the organization is supposed to put all the focus to the point of weakness of the competitor (Porter 1995). Once this point is broken, then it allows the organization to have a market entry in an area they did not have before. The strategy school or the type of strategy ADNOC uses is the Envelopment strategy. The strategy involves the use of identification of the weak points within the competitors and then developing ways to gain entry into that segment. Once in, the organization is able to spread effectively enveloping the markets and gaining control of it. Usually ADNOC introduces one product in a certain market and tests to see how the product is received. After that, there is gradual introduction of other products and before long; the market is littered with its fuel products and related services. This strategy is used within ADNOC because of its desire to increase market share and for it to go global. For effective globalization, organizations have to see how consumers will receive the products in the other countries. Owing to the fact that in these countries there are industries producing the same products, the strategy is very useful in ensuring a slow takeover (D'Aveni 2006). The important thing about this strategy is that it does not require huge resources to implement and it can have quick results as long as the products being introduced are of high quality. With the use of this strategy, ADNOC has been successful in penetrating other related markets and in the process had the chance to increase its profits. SWOT Analysis for the Organization SWOT analysis is the tool that is important in the auditing of the position of the business in relating its environment. In involves evaluating the strengths, weaknesses, Opportunities, and threats that concern the business. The strengths in ADNOC include competitive pricing, having a good brand image as the leading electronics company in the region. Due to its expansion, it covers a very wide geographical area thus it enjoys a higher market share. Among the weaknesses that the company suffers are high operating costs due to the high costs of energy and high payment of salaries. Lack of research facilities is also a weakness the company has. This leads it to have a lack of technological edge among its competitors (Dyer 2001). The final weakness is due to the lack of incentives form the government. Among the opportunities that the organization enjoys are increasing level of communication awareness. The awareness leads to a higher sale of its fuel products among other oil products. Higher revenues due to increased sales are also an opportunity the organization enjoys. Finally, the organization enjoys an opportunity is the introduction of numerous regional outlets. This outlet leads to increase sales and closer services to the consumers by providing after sales services (Feffer 2003). Threats the organization is bound to suffer are the competition from the organizations that produce cheap petroleum and oil products. These products are low quality but due to their cheapness they are popular among the consumers who do not understand the standard of goods they are being offered. Some companies are also using the ADNOC’s name to produce imitations that are of low quality, the consumers are duped to think that they are buying the genuine ADNOC products. The table in appendix 1 gives this SWOT analysis in a summarized form. Changes in the Industry The oil industry is a rapidly changing industry that requires the introduction the new technologies to be able to survive. The oil industry that ADNOC is in also requires the organization to invest heavily in research. To be able to remain competitive, the organization has to ensure that it offers products that are on top of their markets. Another change sweeping the industry is the development of international trade due to globalization. International trade increases sales and serves as the avenue to be able to increase its geographical area of market (D'Aveni 2006). The effect of this international trade is that the organization is forced to introduce standard goods according to the level of standards allowed in the countries of sale .Overall; this will lead to increase of sales that result also in the increase of profits. Because of introduction of new technologies and effects of globalization, the organization has a bright future. It needs to invest in a good research facility to ensure that any change in the market is addressed. It also needs to have consumer satisfaction surveys that will ensure that will be proper feedback to the management of ADNOC. This will ensure that it remains a dominant firm in the market. External Environment Scanning: The business challenges that emerge due to the economic development for the Retail Fuel business mostly has to do with sustaining the community commitment of Retail fuel distribution with regulated price, while controlling overall cost despite of increase in consumption @ 6-11% in UAE. The following UAE development plans are likely to result in growth in retail fueling business (Porter 1995): a) Annual Population growth of 4.6% of UAE (Fast paced - 6%: Dubai & Sharjah; Mid Paced – 4.5%: Ajman & Fujairah) b) Vehicle & Retail Biz Growth: Annual Growth in no. of Vehicles is 14%; retail fueling business growth rate is 11% (with our market share of 44% in UAE, 2006): Challenge for the company is neutralization of losses due to market growth (higher volume, higher losses) and thus the option left is to increase productivity in retail business by 11- 15%. c) Lube market is fragmented, 69% market (62 players) with multiple players; 25% market share with ADNOC; Bulk reputed customer to be bagged. Market Share Analysis: Currently ADNOC has a market share of 44% in UAE, and a policy decision needs to be made, it is wished to increase the company’s market share in other emerging markets in Emirates. However, increase of retail fuel means increase in losses (Gupta & Gorindarajan 2003). The emerging markets may not generate enough profits from non-fuel sales as those are thinly populated with less affluent people (low disposable income). In the same breathe, there are a number of market challenges found in the UAE market and these can be summarized under the following points (Dyer 2001): Across the UAE challenge is to increase profit from non-fuel sales & services to off-set losses in fuel sales due to regulated price. In Abu Dhabi, Company has higher social responsibility for fuel, whereas in other Emirates we are competing with others therefore, it is critical and essential to increase non-fuel profit faster. Sustain high HSE among affluent customers (fire hazards due to cigarettes etc.). Concerning customer relationship management, there is need to sustain present levels of satisfaction among the customers and work towards improving the staff behavior; sustain focus on quality and systems through ISO certification/audits and incentive scheme (Porter 1995). Competitive Strategy A competitive strategy is marketing strategy that most firms use to increase their sales and popularity among its customers. It seeks to make the company achieve uniqueness in the market in the process helping it grow and move away from the position it hold currently. In ADNOC, the strategy can be used to post an online buying to the markets or places it has not yet reached (Gupta & Gorindarajan 2003). Using the internet, the organization can popularize its products in the areas it has not yet established physical presence. In these areas, they can allow the consumers to order online and the products can be arranged and shipped to them using courier services or other means available. To be able to achieve popularity the products should also have discounts. By using this strategy, the organization will have more sales, increased exposure to the market, and achieve globalization (Feffer 2003). List of Bibliography D'Aveni, R 2006, ‘Corporate Spheres of Influence’, MIT Sloan Management Review, vol. 45, no. 7, pp.38–46. Dyer, D 2001, Business Strategy for A2, Cambridge University Press Cambridge. Feffer, J 2003, Power Trip: U.S. Unilateralism and Global Strategy after September 1, Seven Stories Press, New York. Gupta, A, & Gorindarajan, V 2003, Global Strategy and the Organization, John Wiley & Sons Publishers, New York. Porter, M, 1995, Competitive Advantage: Creating and Sustaining Superior Performance, Free Press, New York. Appendix Summary of the SWOT Analysis (Internal & External - based on MR surveys -2008). Strengths 1. Strong, positive brand image ("Better than international standards") 2. Superior trustworthy company 3. Environment-conscious & concerned with society's welfare 4. Wide range of good quality products 5. Competitive pricing 6. Widest geographical coverage & infrastructure 7. Integrated/holistic service provider to motorists 8. Monopoly situation in Abu Dhabi Weaknesses 1. High operating cost 2. Price regulation by the government 3. High cost of goods - erodes profit 4. Lack of cross-sell/up-sell efforts 5. Inadequate depots especially in North Emirates 6. High turn-over rate of Filling station staff 7. Inadequate supply of petrol products at Service stations 8. Lack of seamless coordination between logistics & maintenance functions 9. Absence of Risk Management & Business Continuity plan 10. Absence of incentives for frontline staff 11. Inferior quality of interpersonal skills of staff in - refueling, lube change & carwash 12. Lack of housing and transportation for staff 13. Run out of products a. Logistics capability b. Storage capability 14. Timely maintenance of Service Stations Opportunities 1. Launch natural gas for vehicles – reinforce environment-friendly branding of ADNOC. 2. Loyalty points need to be introduced to encourage cross-selling of profitable products 3. Higher rental revenue due to quality infrastructure 4. Increase number of service stations in emerging industrial & residential zones in Abu Dhabi 5. With captive market for auto services - if govt. relocates the auto service shops from AD city to Mussafah industrial 6. Expansion into other GCC countries 7. Waiting room in Service stations need to be enhanced to attract auto service customers 8. Use of petrol stations as cost-efficient advertising venue for ADNOC-dist products & services 9. Fuelling services for marine (water taxis), metro, train etc to support Abu Dhabi 2030 10. Motels in service stations on the highways Threats 1. Lack of Talent 2. Possible entry of International oil companies in retail sector in response to WTO agreement 3. Opening up of the market a. Competitors advocacy on lifting pricing regulation Read More