International Expansion Strategies of Imperial Oil: A Case Study

This research paper examines the international expansion strategies of Imperial Oil, a leading Canadian petroleum company. It analyzes the company's competitive strategy, organizational structure, entry strategies, operational control, human resource management, and key issues and opportunities. The paper concludes with recommendations for improvement.

Research Paper 2: Group assignment
1

Contents
Executive summary.....................................................................................................................................3
Introduction.................................................................................................................................................4
Overview of the company............................................................................................................................5
Review of company’s international competitive strategy............................................................................6
Existing organizational design structure and control issues.........................................................................7
Entry strategies used to enter other regions/countries..................................................................................8
Operational control, production and distribution/supply chain management...............................................9
Management of Human Resources across borders....................................................................................11
Identify key issues or opportunities for management................................................................................13
Recommendations to management for improvement.................................................................................15
Conclusion.................................................................................................................................................16
References.................................................................................................................................................17
2

Executive summary
The report aims to investigate and gain deep knowledge and insight into the strategies and
problems faced by the modern companies in order to expand their business operations in the
international market. The report has used the case study of Imperial Oil, A Canadian Petroleum
Company in order to gain pertinent knowledge and understanding about international or foreign
expansion. Foreign expansion refers to the process of expanding the business into a new market
from the domestic market for numerous reasons. For an instance, the companies expand their
operations into the new market in order to avail maximum profit, attain high competitive
advantage, to expand the size of the company etc. It is learned from the report that internalization
helps the Imperial Oil Limited to gain competitive advantage and to make their products
accessible to the customers at any location. Imperial Oil has adopted different strategies for this
such as direct exporting and joint ventures which will be critically explained in the report.
Managing the human resources across the borders is not easy for the company that involves the
number of control issues and problems which are effectively considered in the report. These
problems and issues affect the overall growth and development of the organization and harm its
position in the global market.
3

Introduction
The objective of the assignment is to critically analyze and evaluate a company which has
expanded its operations into the international borders in order to earn a maximum profit and
avails high competitive advantage. In the modern competitive and dynamic business
environment, the business organizations are continuously expanding their business operations
into the foreign market in order to improve the performance and productivity in long run. For the
purpose, Imperial Oil Limited, one of the top petroleum companies in Canada has been taken
into consideration and the detail description of the company's international expansion and
operations will be provided in the report. The report will critically investigate and examine the
international competitive strategies, control issues, entry strategies used by the company for
entering into the new market, operational control, management of the human resources, and key
issues and opportunities for the management. In the end, recommendations will be provided to
the management in order to implement the changes and actions for improvement.
4

Overview of the company
Imperial Oil Limited is a renowned and reputed oil company in Canada which is the second
largest integrated oil company. The company is a significant producer of the oil products like
crude oil, natural gas, and diluted bitumen. It is the major refiner of petroleum, prime
petrochemical producer, and national marketer. The company is headquartered in Alberta,
Canada founded 138 years ago. It is also known for its major holdings in the Alberta oil sands
and also in a venture oil sands mining operation with the ExxonMobil Corporation. The majority
of the imperial production is from the natural resources in the Alberta oil sands.
The objective of the company is to do the business in an environmentally, ethically and socially
responsible manner by delivering superior value products and services to its customers
worldwide. The company believes that they have affordable and effective energy and a clean
environment that leads to the production of the quality and valuable products. Imperial Oil is the
largest refiner of the petroleum products in Canada and refines raw hydrocarbons into the
petroleum products which are essential to the customers and businesses like gasoline, diesel,
heating oil and chemicals which are used for the production of the plastics. Imperial oil not only
supplies the petroleum products to the customers in Canada but also exports it to the
international and foreign markets. The company is adhering to the government legislation and
regulations in order to uphold the responsible development of the business in the domestic as
well as international market. The company aims to attract and retain quality and committed
people and support their success with the creation of the development opportunities and
supportive work environment (Imperial, 2017)
5

Review of company’s international competitive strategy
Imperial Oil is the largest energy company in Canada that tries the most of the chances to be one
of the best businesses in the world. The company uses the cost leadership strategy in order to
avail competitive advantage in the international market against the competitors. The cost
leadership strategy enables the companies to avail the competitive advantage over the
competitors by adopting the low cost of the operations. The strategy is often enforced by the
factors like company efficiency, size, scale and cumulative experience. The strategy has focused
on the enhancement of the oil production of the company by half in the coming years at
minimum costs. The strategy was helpful for the company in bringing back from the worst
performance during the times of depression. In addition to this strategy, the company has also
focused on the premium markets. With this focus, the company has availed the effective
margins. The company is also not neglecting the reduction of the costs in the costly areas but it
clearly and systematically catching the equal costs in accordance with some of the lower cost
projects. Overall it can be said that the company's strategy has led to the remarkable profitability
and also a high rate of dividend growth over the last years. Currently, the company has a current
cap of C$37 billion plus the long-term debt of C$9 billion in the year ended 2016 (Imperial Oil,
2016).
6

Existing organizational design structure and control issues
The organizational structure of imperial oil was consist of the Chief executive officer who was
also the chairperson for the board of directors of the company and followed by the middle
management and lower management but this model of corporate structure does not fit the present
pitch of corporate structures. There is a number of problems arise with this type of corporate
structure where the opinion is that boards chaired by the company senior management might not
offer enough insight into the decisions implemented by the executives. It is very interesting to
learn that Imperial oil is listed in one of the very few companies where the CEO and president of
the company also serve as the chairman of the oil industry. Also, the existing organizational
structure of the company created problems in the decision-making process where the decisions
being made by the top level of the management might not be relevant for the middle or lower
level of management. Also, the CEO was acting as Chairperson of the board of directors; they
could not be able to make the account of the frontline factors which are also important to be
considered. It leads to the enormous wastage of the time in the decision making the process that
inhibits the ability of the organization to respond to the issues in a timely fashion (Campbell,
2013).
7

Entry strategies used to enter other regions/countries
There are a number of alternatives and options available to the business organizations and
companies when it comes to international business expansion. In order to expand the business in
the North American countries, Imperial Oil has adopted the strategy of direct exporting which is
one of the most common strategies for entering the new market. In addition to the direct
exporting strategy, the company has also used the venturing approach to sell its products in the
international market (Frank, 2018).
The direct exporting strategy of the company involves the direct exporting of the petroleum
products to the interested customers in the international market directly. It is done with the
proper and systematic implementation of the activities like market research, foreign distribution,
logistics of the shipment and invoicing. With direct exporting, the company has avoided the costs
and confusion of the middleman and also has proper control over the sales and direct interaction
with the clients. With this technique, the company has better protection of its trademarks,
patents, and copyrights. Also, the company has employed joint ventures strategy with the
ExxonMobil Corporation in order expands the business in the new market and split the business
accordingly. Joint venturing is basically a partnership between the two businesses or companies
where they link up and invests in the projects together for common profit. Imperial Oil, Canada
had joint venturing with the Mackenzie gas project which was started in 2000 that has entirely
changed the natural gas market of North America. But later on, the venturing was terminated by
the Mackenzie due to the integration of the multiple factors such as high project costs and the
consistent growth of the low-cost unconventional gas supplies in North America (Imperial Oil,
2016).
8

Operational control, production and distribution/supply chain management
Operational control, production and distribution/supply chain management
Imperial Oil Limited is Canada’s largest producer in the oil field that produces crude oil and a
leading producer in the gas supply it produces natural gas. Its share of 69% is by the US
Corporation Exxon, they are the largest refiner in the petroleum industries of US. By 1893 the
company imperial oil had 23 branches spread in US. Imperial oil made the good supply chain
market in demands and makes a good job development. Imperial lacked their money that creates
the problem for the consumers support but after the World War II (Monczka, et. al., 2015).
Imperial Oil Company was getting the great decline in convection in the supply of oil production
mainly in crude oil context. For the future, a long research is compulsory by the company on the
extraction of the heavy oil from the land which is very expensive to get out from the land. And
the operation of the company for the natural gas is currently broadened through some years. The
imperial oil company is controlling many operations in the context of the large petroleum
industry in Canada (Jacobs, et. al., 2014).
The area in which the imperial company making efforts in the business are listed below:-
Cold lake in situ, Kearl mining, Syncrude mining, Strathcona refinery, Nanticoke refinery,
Sarnia refinery, chemicals and fuels and lubricant refinery these are the main area of operation of
the Imperial corporation (Monczka, et. al., 2015). To control their operations the company
follows some systems to make their products effective and smooth and chances of issues should
be minimum. These systems and standards are as follows:-
• Human rights – the company doesn’t tolerate violence in the context of human rights in
any operation in its business. They provide a framework for the responsibilities of operations and
that intends on the Canadian character of rights and freedom and follows the rules and
regulations according to the United Nations – Universal declaration of human rights.
• Controls system – it is basically applied to the Canadian operation of our country. It
defines the basic principles that define the management of standards, concept, and standards that
control the business (Rushton, et. al., 2014).
9

• Operating integrity management system – This program has been placing in the company
since 1992. That addresses the safety, health, and security in the company. It is for day to day
work
The operational control system of company is very effective and efficient in order to manage the
various resources and activities of the company. At the time of expansion also, the company is
planning to make effective operational control so that it can reach to maximum production and
reach economies of scale. Also, the company is trying to integrate with various other suppliers
and contractors in order to make effective supply chain management. Furthermore, the
distribution of company’s products and services has aimed to be smooth so that no miss-
communication can be caused by the purchase decision (Rushton, et. al., 2014).
10

Management of Human Resources across borders
According to the views and thoughts of Binder (2016), it is believed that management of human
resources across boundaries is very difficult to manage and sustain due to the varied employee
background and aesthetic values. The increasing need for effective management helps in
enhancing the performance and productivity of employees to work in any situation and
circumstances. Human resource is a key part of a business organization which is needed to be
handled with due care and intelligence. In addition to this, it is observed that the human resource
of the domestic market is different from that of the international market and there arises a
situation of challenges and problems within the human resource. It is mainly due to the changes
in political, cultural, socio-economic and other factors that lead to miss-management of
employee's performance and productivity (Binder, 2016).
In case of the respective business organization i.e. Imperial Oil which is engaged in dealing with
petroleum products has distinctive cultural and organizational norms. As most of the human
resource working belongs to the lower-level workers who are generally rigid and secured with
the policies and regulation. In case of expansion and growth of business in another economy, the
issue of cultural integration and communication is majorly observed within the human resource
that leads to creating conflicts and miss-management. In order to face and reduce the key issue of
cultural integration, a model of Hofstede’s Cultural Dimensions has been proposed by Hofstede
for managing culture across borders.
11

Hofstede’s Cultural Dimensions
Figure: Hofstede’s Cultural Dimensions
Source: (Eroğlu, 2014)
The above model of cultural dimensions helps in understanding the different cultural and
aesthetic values of human resource across borders. The Imperial Oil has been developing such
model into real-life business practices so that the growth and expansion of business operations
can effectively and efficiently take place across the nation.
12

Identify key issues or opportunities for management
When any business organization is planning to go for mergers and acquisition there are certain
key opportunities as well as issues faced by the management of the company. The Imperial Oil is
also surrounded with many issues and opportunities that are required for effective and efficient
management (Pinto, 2010). The key opportunities for management are as follows:
Key Opportunities
• Consumer segmentation – At the time of expansion and cross-border expansion the
company has a benefit of increased demand as a large number of customer segment can be
catered. The company has an opportunity to understand the customer's needs and demand
depending on their attitudes, beliefs, lifestyle, purchase motive and others.
• Competitive Advantage – The expansion and growth help in leading towards gaining of
competitive advantage as the company are new to other economic and with the help of
customer's need and want analysis it is easy to produce those products and services which
potential customers are seeking for. The company has an opportunity to gain the strategic
advantage in the marketplace in order to remain competitive (Pinto, 2010).
Key Issues
• Direct Competition – In case of expansion and growth of business in another economy
there are increased chances of competition. It is observed that local as well as national players
are the once who affect the company to a greater extent. There is a stiff and cut-throat
competition is been observed that impacts on the growth and profitability of the business.
However, in case of the petroleum industry, there are less of competition is been observed as it
requires an investment of huge funds and resources (Carroll and Shabana, 2010).
• Loss of funds and investment – There are high chances of business failure when moving
across borders. This is so because of employee resistant and another is due to the cultural
integration. In the petroleum industry there is a requirement of huge capital and funds for the
business to set-up and start significantly. With the failure to operate in another economy it can
lead to heavy loss of funds and capital amount.
13

• Technology – The development of nation and economy also play a major role at the time
of globalization because the technology adopted by one economy may not be the same for
another economy. Also, the human resource may not be familiar with the technology used by the
business organization in particular country (Carroll and Shabana, 2010).
14

Recommendations to management for improvement
The recommendations suggested help in improving the business functions of the company in an
effective and efficient manner. There are some set of suggestions been recommended to Imperial
Oil for encouraging smooth functioning of business operations (Truss, et. al., 2013).
• The company must adopt of Hofstede cultural dimension so that they do not face the
issue of cultural integration. This model is very helpful in integrating various cultural norms and
believes of employees.
• Ensuring open communication – It is necessary that there must be clear and open
communication in between the management and its employees so that there is a transparency
with the goals and objectives of the company. The employees should be motivated to feel free
with presenting their views and thoughts.
• Evolving employees in making a decision – The employees who are well experienced
and is valuable for the company must seek for presenting ideas and thoughts for operating in new
ways. It is evidenced that brainstorming is considered to be the most effective element and tool
when it comes to expansion and growth of the business organization (Truss, et. al., 2013).
15

Conclusion
On the basis of overall report study, it has been concluded that the study of internal and external
factors is very crucial for the respective business organization in order to expand and grow in
another economy. Also, it is analyzed that Canada is fast emerging economies which have a
growth opportunity for various businesses. In addition to this, it is also assessed that study of
business's international growth strategy has helped in identifying the key issues as well as
opportunities which are faced by the company. The report has critically investigated the
strategies used by the company in order to enter the new market. The discussion on the
management of the human resources has also been defined in the report in order to avail better
and clear understanding of the management problems and issues. Moreover, the
recommendations provided are very useful for successful expansion.
16

References
 Binder, J., 2016. Global project management: communication, collaboration, and
management across borders. Routledge.
 Campbell, D., 2013. Is Imperial Oil’s corporate structure outdated?. Alberta Oil.
Available at https://www.albertaoilmagazine.com/2013/09/is-imperial-oils-corporate-
structure-outdated/.
 Carroll, A.B. and Shabana, K.M., 2010. The business case for corporate social
responsibility: A review of concepts, research, and practice. International journal of
management reviews, 12(1), pp.85-105.
 Eroğlu, O., 2014. International Human Resource Management And National Cultural
Challenges. Pamukkale University Journal of Social Sciences Institute/Pamukkale
Üniversitesi Sosyal Bilimler Enstitüsü Dergisi, (19).
 Frank, T., 2018. Reasons for International Business Expansion. Study.Com. Available at
https://study.com/academy/lesson/reasons-for-international-business-expansion.html.
 Imperial Oil, 2016. How Imperial Oil Makes Money. Seeking Alpha. Available at
https://seekingalpha.com/article/3941756-imperial-oil-makes-money.
 Imperial, 2017. Mackenzie gas project participants end joint. Imperial. Available at
http://www.imperialoil.ca/en-ca/company/media/news-releases/171222-mackenzie-gas-
project-participants-end-joint-venture.
 Jacobs, F.R., Chase, R.B. and Lummus, R.R., 2014. Operations and supply chain
management (pp. 533-535). New York, NY: McGraw-Hill/Irwin.
 Monczka, R.M., Handfield, R.B., Giunipero, L.C. and Patterson, J.L., 2015. Purchasing
and supply chain management. Cengage Learning.
 Pinto, J., 2010. Achieving Competitive Advantage. Prentice-Hall, Upper Saddle River,
NJ.
 Rushton, A., Croucher, P. and Baker, P., 2014. The handbook of logistics and distribution
management: Understanding the supply chain. Kogan Page Publishers.
 Truss, C., Shantz, A., Soane, E., Alves, K. and Delbridge, R., 2013. Employee
engagement, organizational performance, and individual well-being: exploring the
evidence, developing the theory.
17