Strategic Analysis of Oman International Petrochemical Industries Co (OMPET) (Research Paper Sample)

Strategic Analysis of Oman International Petrochemical Industries Co (OMPET)
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EXECUTIVE SUMMARY
The Middle East petrochemical industry is becoming increasingly competitive, with newly nationalised companies taking advantage of the subsidised feedstock to grow. As a young company, OMPET faces significant tasks as it seeks to move from the protected home market of Oman into other markets. To attain its strategic objective, OMPET must first consider different growth alternatives if it is to enhance its global competitiveness. By conducting SWOT, PESTEL, and Porter Five Forces analyses, the company can clearly see the existing market opportunities, threats, and the level of competitiveness within the industry. Consequently, a low-cost differentiation strategy characterised by an aggressive market penetration plan has been suggested for OMPET.
1 INTRODUCTION
Strategic management encompasses the planning and implementing specific actions that will assist the company in attaining its long-term objectives, such as enhanced profitability and sustainable competitive advantage in the industry (Barney and Hesterly, 2012, p. 7). This paper focuses on the activities, processes and practices of Oman International Petrochemical Industries Company (OMPET) and how it intends to realise its goal of being a major player in the Gulf region’s petrochemical industry. In this regard, the paper applied various strategic tools to determine the current position of OMPET and how the company can move forward more successfully and competitively.
1 Organisation Profile
OMPET was formed in the last quarter of 2013 as Oman International Petrochemical Industries Company L.L.C (OMPET). The company is headquartered in Sohar, Sultanate of Oman. The mission of OMPET is to build a world-class PTA plant within the established cost, timeline, and quality and become a cost leader in the production of PTA in the Gulf region (OMPET, 2018).
2 Company Origin
OMPET was formed as a joint venture between Oman Oil Company (50%), LG International Inc (30%), and Takamul Investment Company (20%) (Oman Oil Company, 2018). The primary objective of this joint venture was to facilitate the efficient production of petrochemical products in Oman. OMPET also entered into Project Management Consultancy (PMC) Services agreement with Worley Parsons Oman Engineering Ltd (WPOE) so that the two companies can work together to realise their varying objectives.
3 Line of Business
OMPET's main activity is the development of a large scale (1100KTA) PTA (Purified Terephthalic Acid) located 250 Km North of Muscat in the Sohar Port Industrial Zone (“Sohar”), in the Sultanate of Oman. The facility is expected to operational by 2020 (OMPET, 2018).
4 Scale and Scope
Apart from the production of Purified Terephthalic Acid (PTA), OMPET will also engage in the operations of various utilities and off-site facilities, which will support the main PTA processes (OMPET, 2018).
5 Industry Position
The company will be the industry leader in PTA production in Oman.
6 Ownership
The company is owned by Oman Oil Co. (OOC), Koreas LG International (LGI), and Takamul Investment Co. (TIC) (a subsidiary of OOC), which have undertaken to build a petrochemical complex in Oman (Oman Oil Company, 2018).
7 Current Strategy
Currently, OMPET uses Para-xylene, which is supplied by the Orpic Aromatics Plant as the main raw materials. Other raw materials, such as Acetic Acid, are purchased from the open market.
2 STRATEGIC ANALYSIS
8 Macro Environment (PESTEL Analysis)
The macro-environment of a company has a significant influence on the manner it operates as well as its long-term strategies. Through environmental analysis, the company management will be able to identify various opportunities and threats within its industry thus effectively plan how to leverage these environmental issues (Lynch, 2015, p. 56). Hence, OMPET’s macro-environment consists of political, economic, social, technological, ecological, and legal factors as highlighted below:
* Political Factors
OMPET’s strategic goal is not only to become a leading producer of PTA in Oman but also throughout the Middle East. In this regard, OMPET operations will be impacted considerably with both regional and local political factors. For instance, political stability in the Gulf region ensures that the company’s supply and distribution can operate smoothly (Al-Sharrah and Elkamel, 2015, p. 4). In addition, OMPET is vulnerable to changing regulations as well as bureaucracies and interferences in the oil and gas market by the government. Other political factors that may impact OMPET operations include pricing and wage regulations, intellectual property protections, product labelling requirements in the oil and gas industry and high taxation in Oman.
* Economic Factors
Macro environment factors, such as savings rate, inflation, foreign exchange rates, and economic growth rates, have a considerable impact on the operations of a company. OMPET can leverage Oman’s good economic environment such relative price stability, high growth rates, and consumer spending to expand its operations in the country (Al-Sharrah and Elkamel, 2015, p. 6). However, the company must be aware of the potential government interference in the free market and exchange rates. In addition, OMPET’s operations will also be adversely affected by the low skill levels in the petrochemical industry among the Omanis.
* Social Factors
For any business to be successful, it must act in a manner that respects the local cultures and values. For instance, Oman is an Islamic Arab country; therefore, OMPET employees and management must uphold Islamic/Arab cultural values to succeed (Budde, Gunther, and Shah, 2014, p. 14). Apart from the national cultural values, Oman also has a relatively young population that is looking for new employment opportunities. Furthermore, more Omanis are now getting higher education in local and international universities thus improving the quality of the local workforce. Nevertheless, Oman is still a conservative patriarchal society when it comes to gender roles and other social conventions in society. OMPET must, therefore, understand these aspects of the local culture so as not to upset its employees and customers.
* Technological Factors
Technology is a pervasive factor across many industries leading to both disruptions and improvements. The petrochemical industry has been blessed with more efficient tools and production facilities in the recent past. Furthermore, the potential of applications in artificial intelligence and robotics in manufacturing is huge. In addition, management applications, such as customer relationship management systems and material requirement planning systems, are now being used in most large and medium organisations (BP, 2018). These technological applications have been found to enhance operational efficiency and effectiveness of management in many organisations. However, OMPET must also acknowledge that there are disruptive technologies that have led to questions regarding privacy and data protection issues. The application of these disruptive technologies could adversely impact the company's competitiveness.
* Ecological Factors
Different countries or regions have grapple with unique environmental and climatic issues, which could have varying impacts on a commercial entity. Due to these unique environmental and climatic issues, the countries have different norms and environmental standards that all companies and individuals are expected to adhere to. In the case of OMPET, the management must be aware of the need to efficiently use scarce water resources. Furthermore, the company must adhere to various air and water pollution regulations in the oil and gas industry. Moreover, new attitudes around the world towards the use of fossil fuels and support for renewable energy continue to threaten operations of petrochemical companies, such as OMPET (Budde, Gunther, and Shah, 2014, p. 19).
* Legal Factors
One of the main legal issues in Oman is the lack of robust laws to protect the intellectual property rights of an organisation. Firms operating in this market are, therefore, vulnerable to theft of their secrets, leading to a reduced competitive edge. Moreover, OMPET must follow laws on consumer protection, employment, data protection, and health and safety as has been enacted by the government of Oman (GPCA, 2018, 2).  
9 Micro Environment (Porter 5 Forces Analysis)
OMPET is using a state of the art PTA technology that is safe, environmentally friendly, energy efficient, and cost-effective. Though this new technology was expected to ensure a sustainable competitive edge for the company in the petrochemical industry, Porter 5 Forces analysis shows that several forces may hamper the ability of the company to stay competitive and profitable in the long run. Generally, Porter 5 Forces include competitive rivalry, the threat of new entrants, the threat of substitutes, bargaining power of suppliers, and the bargaining power of buyers (Magreta, 2012, p. 4). As OMPET expands its operations, it will be significantly exposed to the international market; thus, it is important to assess its attractiveness from a global perspective.
First, in the petrochemical industry, the intensity of competitive rivalry tends to be medium as the number of suppliers and market concentration is high. However, most of the petrochemical companies tend to be very s...