Firms in the Gas and Oil Industry in UK: Petrofac Limited (Research Paper Sample)
You are required to choose a company (domestic or multinational) in the oil and gas industry. You
are expected to provide a critical evaluation of relevant theoretical concepts, external and internal
environmental considerations that applies to this firm as it expands from its domestic market into a
host country where it is not yet currently present.
Your evaluation should include the following:
1. Critical evaluation of the company in its domestic market
2. Critical evaluation of the selected host country’s business environments
3. Critical evaluation of the company’s internal business environment when expanding to
the selected host country
4. Critically evaluate the reasons for attractiveness of your selected host country
5. Critically evaluate the ethical issues that should be considered.
6. Critically evaluate relevant strategies that applies to this company as it expands to a new
CRITICAL EVALUATION OF FIRMS IN THE GAS AND OIL INDUSTRY IN UK
CASE OF: PETROFAC LIMITED
Petrofac Limited is a national company in the oil and gas industry based in London, UK. It is engaged in the production of gas and oil facilities, management of personnel, and pieces of training. The firm was founded in 1981 and is among the best firms in the UK. The firm has to hand great success in the domestic market and owing to its success in emirates, and it would venture into the Yemen market, which is part of the Middle-East countries. The firm would have to develop strategies to deal with the dynamics of the external and internal business environment. The eternal critical factors will include;
* Social factors.
While internally, the employees will have an enormous stake. Hence, the firm will make use of marketing, competitive pricing, and differentiation to enter the new market.
Table of Contents TOC \o "1-3" \h \z \u 1. Introduction PAGEREF _Toc38906647 \h 42. Literature Review PAGEREF _Toc38906648 \h 43.1: Critical evaluation of Petrofac limited in its domestic market PAGEREF _Toc38906649 \h 53.2: Critical evaluation of Yemen business environment PAGEREF _Toc38906650 \h 63.3: Petrofac limited internal environment and strategy PAGEREF _Toc38906651 \h 73.4: Reasons for Yemen attraction PAGEREF _Toc38906652 \h 83.5: Ethical issues considerations PAGEREF _Toc38906653 \h 83.6: Relevant strategies for Petrofac Limited To Yemen PAGEREF _Toc38906654 \h 84.0: Conclusion PAGEREF _Toc38906655 \h 9References PAGEREF _Toc38906656 \h 10
The oil and gas industry in the UK has been a lucrative sector with a worth of about £5.6 billion. Most firms operate at an international level, with some being multinationals. Therefore, the industry is highly concentrated. In the recent past, it has been faced with stiff competition (Sema et.al 2007). Thus most firms yearn to grow their domestic market as well as expand to other markets to deal with the competition. Petrofac Limited is an international provider of oil products. It ranked 5th and was founded in 1981 with its headquarters in London, UK. The company has had plans to become a global company as well as a leading firm within the UK (Angela and Rhona 2013). It has been successful in growing its domestic market, and thus it is yet to become a multinational company. One of the arts to becoming a multinational is an investment in other countries and thus needing an assessment of geographical locations that the firm would invest in (Mauro 2002). Therefore, the current essay will focus on making an assessment of the internal and external business environment for Petrofac limited investment into host countries; it is yet to invest in.
2. Literature Review
The essay will give critical attention to the PESTLE model, Porter's competitive advantage model, Hofstede's Cultural Dimensions Theory, and CSR model.
The PESTLE framework looks at the political, economic, social, technological, legal, and environmental factors that may influence setting a business in a host country. The model thus gives an analysis of the macro-environment that may affect the existence of a firm (Ihsan 2012). The framework has been a useful tool for the determination of markets and the sustainability of a business. It is essential to recognize that the factors differ in importance for different industries and countries.
Porter's five forces model determines the competitiveness of a firm. The model helps in the evaluation of competitive strategies a firm can make use of to be able to deal with its competitors, as well as be well-positioned in the market.
Hofstede's Cultural Dimensions Theory is an essential foundation for investment in countries. This is because they may be embracing a framework that is not adopted in the organization; thus, making choices are inevitable (Chyong et al. 2009). In practice, most managers have to gain an understanding of the multi-cultural systems existing in different countries to be able to ensure business growth.
CSR model helps in the assessment of stakeholders and their analysis. The firm can align stakeholders in relative benefit, necessary and type, consequently, playing each a critical value. It is also useful in ensuring a smooth flow of operations within a firm (Maria 2010).
3.1: Critical evaluation of Petrofac limited in its domestic market
Petrofac Limited has been performing well in its domestic market. This is evident from its share (22%) and its capitalization value (2.1 billion). It has been paying a high dividend and has been having a high share price, which has been attractive to investors (Ayman 2018).
Petrofac Limited is a service provider. The firm designs and builds oils and gas facilities; it is involved in the operation, education programs, training of employees, and management of personnel. It also maintains and upgrades oil systems. The firm has three major segments, including; Engineering & Construction, Engineering & Production Services, and Integrated Energy Services (IES) business. Apart from the engineering and construction segment, the other sectors are contained in the domestic market with no offshore services. Most of the company activities for the three sections are based in London, while most of the resources primarily related to gas production have been from the United States. The market has been faced with a significant challenge of heightened environmental regulations. The demands for environmental protection have been high, which has been a considerable challenge to the firm. As for Petrofac limited, it has been in the front line to the adoption of technology that a less costly, and that leads to less affluent to the water and air during gas and oil production. Most of its technologies for renewable energy are based in London (Ayman 2018).
The primary company market has been the international market. Petrofac limited products are majorly sold in Russia, the United Arab Emirates, USA, Europe, and other Middle-East countries. The United Arab Emirates is a lucrative market for Petrofac limited since its trade policies are quite favourable. Unlike China, which has had a slow growth as the government policies to moving green have been heightened. Similarly, there has been a decline in the US market as the government seeks for domestic production. The United Arab Emirates is has a high demand for gas and oil in its creation. Their environmental policies are favourable, and their economic trends have been well (Yahaya et al. 2013). The tax policies are desirable. Labour is cheap, there is a lot of government support for foreign investments, and the trade regulations are favourable, which favour the existence of Petrofac limited (Shana 2011). Political stability, attractive exchange rates, adoption of new technologies, pleasing legal systems, and the success of Petrofrac limited in the United Arab Emirates are the main drivers to expansion to other Middle East countries like Yemen.
3.2: Critical evaluation of Yemen business environment
The PESTLE model will be of the essence in the analysis of the Yemen market. Politically, Yemen has been in the fore line to attract foreign investors. This has been through its favourable government polices to entering strategic alliances and partnerships with international companies. The country has relaxed foreign trade policies, with fewer barriers to trade. Trade restrictions are maintained at minimal to enhance global trading with relaxed labor laws. Due to the stability of the Yemen economy and its protection for foreign investors, it has been engaging in contractual arrangements with other governments to attract foreign investment, which creates an excellent opportunity for Petrofac limited (Mostefa 2019). This attractiveness establishes a platform for growth and sustainability in the Yemen market for Petrofac limited.
Economically, Yemen has been experiencing high economic growth of about 6.9%. This has majorly been controlled by the service, manufacturing, and agricultural sectors. Most production in the country has a heavy reliance on energy; thus, gas and oil production form a fundamental component to running the Yemen economy. The interest rates have been maintained low by the government to attract borrowing and increase investment. There has been favourable disposable income for consumers and businesses. Thus, firms have been able to withstand the high inflation rate and have also been able to have high minimum wage rates. Therefore, opening a branch in Yemen would be of great importance to the firm. Yemen had in 2015 opened close to 56 natural gas and oil companies to enhance economic development.
Socially, Yemen is a country that has a high consciousness of health; it embraces multi- diversity in cultural trends and ensures the organizational image of firms is maintained high. For this, Yemen provides that there is a healthy competition among traders and especially between foreign companies and domestic competitors. Following the Hofstede's Cultural Dimensions Theory, Petrofac limited would perform well in Yemen. The scores for Yemen would be; power distance of 53, the individualism of 43, masculinity of 48, uncertainty avoidance of 69, long term orientation of 14, and indulgence of 38. Yemen is a multi-cultural nation and has high embracement for global diversity. Thus, this provides Petrofrac limited with a favorable environment (Mostefa 2019).
Environmentally, the country has strict rules concerning pollution and has been embracing green technologies in reducing ...
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