Strategy Execution and Implementation: A Case Study of Gazprom, Russia

This case study explores the strategy execution and implementation of Gazprom, a Russian company in the oil and gas industry. It discusses the company's mission, strategic goals, current scenario, and various strategies implemented in areas such as oil and gas exploration, gas transmission and storage, and gas marketing. The obstacles to strategy execution and how the company aligns its actions with its strategy are also evaluated.

Running head: MANAGEMENT
Strategy execution and implementation: A case study of Gazprom, Russia
Name of the student:
Name of the university:
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Executive summary
One of an important role of the management is strategy formulation and implementation,
which the assignment projects through the example of Gazprom. Strategic approach in the
business is assistance for the company in serving quality oil, natural gas and other energy
resources to the clients and the customers. Consultative management style is beneficial in
terms of generating teamwork, necessary for upgrading the standards and quality of the
supply chain network. Involving the Board panel helps in conducting the audits and reviews
for Quality Assurance and Control. Assessment of the resources and capabilities is fruitful for
developing the key performance indicators in order to reach the benchmark level of
performance. Continuous improvement strategy is implemented with the consideration of
technological support, indicating the upgradation of standards and quality of business.
Logical and rationality in this approach is an agent for Gazprom for achieving large scale
customer satisfaction in the competitive ambience of the market.

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Table of contents
Introduction................................................................................................................................3
Company profile.........................................................................................................................3
Mission statement...................................................................................................................4
Strategic goal..........................................................................................................................4
Current scenario.....................................................................................................................4
Description of the current strategy.............................................................................................4
Oil and gas exploration and production.................................................................................4
Reserves buildup strategy..................................................................................................4
Oil business development strategy.....................................................................................5
Gas transmission and storage.................................................................................................5
Gas transmission system development...............................................................................5
Underground gas storage....................................................................................................6
Oil and gas processing development..................................................................................6
Gas marketing........................................................................................................................6
Domestic market strategy...................................................................................................6
Export strategy...................................................................................................................7
Power Industry.......................................................................................................................7
Innovation..............................................................................................................................7
A diagnosis of the obstacles to strategy execution.....................................................................8
Translating its strategy into action.............................................................................................9
Evaluation of how action is being aligned with strategy.........................................................10
An assessment of how organisational designs and systems are aligned to support the strategy
..................................................................................................................................................11
An evaluation of the management style...................................................................................12
Recommendations....................................................................................................................13
References................................................................................................................................14
Bibliography.............................................................................................................................15

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Introduction
Strategies act as a central doctrine for the companies and organizations in terms of
adding value to the business operations. Adhering to integrated structures is beneficial for
formulating and implementing the strategies in accordance to the organizational
requirements. Planning is an essential aspect, which helps in the implementation of the
formulated strategies (Lee and Puranam 2016). This planning involves the collaborative
approach of the departmental units towards constructing the strategies for undertaking the
decisions for the betterment of the companies and organizations. This assignment attempts to
shed light on the current strategies implemented by Gazprom, Australia. The main focus of
the assignment is on the mapping the impact of the strategies on the organizational
effectiveness.
Company profile
Founded in 1989, Gazprom has achieved accolades and glory by emerging as a large
Russian company dealing in extraction, production, transport and natural gas. The company
is a public one, operating under the oil and gas industry. The company is mainly known for
the gas pipeline transportation services. According to the annual report of 2017, the annual
revenue of the company was $112 billion (Gazprom.com 2019). The operating income was
$14.9 billion and net income was $13.1 billion. The total assets for the company were
generated as $313 billion. In case of the equity, the value was $206 billion. Russian
government supervises the operations of the company, claiming 50.23% of the shares. Hard
efforts of 469,900 employees suffice the efficient execution of the operations, especially
strategy implementation and formulation.

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Mission statement
The mission statement of Gazprom relates to the supply of reliable efficient and
balanced supply of natural gas and other energy resources for fulfilling the needs, demands
and requirements of the customers (Gazprom.com 2019).
Strategic goal
 To emerge as a leader in the global energy companies through market diversification
and reliable supplies through operational efficiency
Current scenario
Gazprom accumulates world’s largest natural gas reserves. The global and the local
market share values are 17 and 72% respectively in terms of the gas reserves. In terms of the
national gas, the percentage accounts for 12 and 68% respectively. At the current stage, the
company is busy implementing large scale gas development projects in the threshold of
Yamal Peninsula, Arctic shelf, Eastern Siberia and Russia Far East. Along with this, a
number of hydrocarbon exploration and production projects are lined up (Gazprom.com
2019).
Description of the current strategy
Oil and gas exploration and production
Reserves build-up strategy
Since 2005, Gazprom has incorporated geographical exploration for expanding the
annual production volumes. The parameters covered in this are minerals and raw material
base in the threshold of Yamal, continental shelf, Eastern Siberia and Far East. Strategic
approach is exposed in renewing the license of the miners for conducting exploration in the
areas of Nadym-Pur-Taz region, Yamin Peninsula, Pechora and Kara Seas. The strategy of
product diversification helps in enhancing the global presence in the oil and gas market. This
diversification enables the company to participate in hydrocarbon exploration, production,
transportation and marketing projects in the third world countries through competitions

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(Gazprom.com 2019). The strategies also include bidding procedures and asset swap deals.
By 2020, the company is planning to produce 640 to 660 billion cubic meters of natural gas
per year. This is through the consideration of the demands for solvent gas in the domestic
markets (Russia) and favourable conditions in the foreign markets.
Accumulation of 70% of the total Russian reserves, Yamal Nenets Autonomous
would be the key gas producing region of the country till the duration of the contract ends.
Within this, the long term development targets include Yamal Peninsula and Russian
Northern Seas.
Oil business development strategy
The oil business development strategy includes the estimates that the annual
production would reach 100 million tons of oil, equivalent to the refining capacities, which
can grow up to 70 million tons by 2020 (Gazprom.com 2019). Therefore, the strategy for this
stands as follows: results of the stage wise development from the field survey, expansion of
the resource base through integration of the commissioning of the oil fields, as an acquisition
of the new licenses.
Gas transmission and storage
Gas transmission system development
In this case, the strategy pertains to the creation of new transmission capacities for
supplying the natural gas from new production regions. This includes expanding the scope
and arena of the gas transmission corridors and diversification of the gas transmission routes.
Mention can be made of the strategic goals for increasing the volumes of the Liquefied
Natural Gas (LNG). The strategy of product diversification is apt in terms of enhancing the
scope and arena of the export activities (Gazprom.com 2019).

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Underground gas storage
Long term plans in this case includes the development of the networks in Russia and
abroad. The strategic goal pertains to the development of Russian UGC capacities for
fulfilling the daily withdrawal capacities 1 billion cubic meters. To achieve this goal, the
following plans are constructed:
 Reconstruction of the UGC facilities
 Establishment and enhancement of the peak load storage capacities in rock salt
deposits
 Creation of new UGS facilities in the regions with considerable gas consumption
(Gazprom.com 2019)
Oil and gas processing development
Strategies in this case relates to an increase in the oil refining volumes through the
simultaneous increase in the refining capacities in the local as well as abroad. In this,
compliance to the technical regulations raises the processing efficiency to 90%, where the
recovery is estimated to be 77% of the light petroleum products. Regulatory requirements in
the technologies suffice the need of ensuring environmental safety concerns.
Gas marketing
Domestic market strategy
The primary goal is securing the gas supplies to the country through the maintenance
of efficiency in the sales operations. Mention can be made of the natural gas, which is
produced by the company and is supplied to the clients at the prices affirmed by the Federal
and State government. The Russian government claims that the prices of the gas attain equal
profitability in the domestic and the foreign markets (Gazprom.com 2019). In this, the
strategy is to establish contacts with the trade union members for effective handling of the

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financial instabilities like inflation, high exchange rates and high prices of the raw materials.
Along with this, upgraded technologies are used for uplifting the standards and quality of the
supply chain network. This approach is fruitful in terms of enhancing the corporate social
responsibility. As per the current trends, Gazprom has made arrangements in exchange trade
offs for increasing the shares in the domestic market.
Export strategy
Export strategy comprises of the long term contract system, based on the take or pay
principle. The contractual gas price is exercised according to the industry benchmark levels,
exercised according to the planning in terms of normal investment cycle (Gazprom.com
2019).
Power Industry
The strategic goals in the power industry are as follows:
 Diversification in the tariff regulation risks
 Diversification in the fuel balance
 Construction of new capabilities
 Improvising on operational efficiencies
For accomplishing the goals, Gazprom emphasizes on building new capabilities and
generating capacities through increasing the power and the heat output.
Innovation
Innovation for the company includes the preparation of prospective plans, sustainable
development programs of the domestic fuel and energy complex, expansion of feedstock base
and creation of the new technologies for enhancing the efficiency in operations. In this,
strategic approach is reflected through management of the intellectual properties
(Gazprom.com 2019). This is with the consideration of national level strategies for enhancing
the standards and quality of the economic growth and development.

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A diagnosis of the obstacles to strategy execution
Gazprom encounters the following obstacles in the process of executing the activities
of strategy formulation and implementation:
 Interdependency of the execution and planning- Strategy formulation and
implementation are different. Going by the logical approach, implementation is the
outcome of the meetings regarding the formulation of the strategies regarding the
supply chain network for making the supplies. Viewing from the perspective of
Chang (2016), formulation and implementation are interdependent according to the
planning, executing and adapting. This interdependence consists of the possibility that
the planning and action might overlap, which helps in improvising on the probabilities
related to the enhancement of the efficiency.
 Execution is time consuming- Implementation of the strategies is more complicated
and time consuming for Gazprom. In this, the role of the managers is crucial in terms
of seeking effective ways and means for handling the situation in an effective manner.
Feedbacks and follow ups are crucial for averting the instances of delays.
 Execution involves many people- Presence of variable suggestions aggravates the
complexities in implementation of the strategies. On the other hand, Sull, Homkes and
Sull (2015) is of the view that organization support strategies are adopted in terms of
ensuring that limited number of personnel are presented in the implementation
activity.
 Presence of the managers from all hierarchical levels is also problematic, as they
believe that the implementation is below their designation. According to some of the
views, the managers perform half of the tasks and hand over the rest to the lower
levels for execution. This reflects contradiction for teamwork delaying the
implementation process.

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Translating its strategy into action
The ways in which Gazprom translated the strategies into actions are:
 Defining clear projects by focusing on the SMART goals
 Making specific action plans
For developing the action plans, short term goals are constructed, which helps in
detecting the strategic focus areas, which is, the channels/ networks through which the oil and
natural gas supplies can be conducted. This follows the anticipated outcomes, which is to
accumulate greater market share in the local and foreign countries. In this, Cândido and
Santos (2015) mentions that key metrics standardizes the progress. Reviews and follow ups
are crucial in terms of evaluating whether all of the parameters are covered for taking the
standards of the performance to that of the benchmark levels.
Corporate governance is one of essential units, which helps Gazprom in the
translation of the strategies into actions. The head is the Executive Committee, who is in
charge of conducting monthly meetings. They divide the personnel into teams, who are
allotted specific roles and responsibilities.
Fig 1: Corporate governance of Gazprom

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(Source: Gazprom.com 2019)
Evaluation of how action is being aligned with strategy
Gazprom takes the help of key performance indicators for aligning the performance
with the strategic goals. In this, the four key components are the people, customers, finance
and process. Technologies reduce the manual labour, digitalizing the supplies of the oil and
natural gas. This technological support, in turn, acts assistance in terms of enhancing the
standards and quality of the products and services, indicating the achievement of large scale
customer satisfaction. Mention can also be made of Blakeman (2018) who points out the
significance of resource allocation, which is done after the assessment of the risk analysis in
terms of the current scenario. In this, budgets are formed for gaining an insight into the liquid
and cash resources, which are being transferred through outsourcing. The role of the
management is crucial in this context in terms of aligning that the operations are according to
the standards levied in the legislations.
Configuration of the organizational structure is apt in terms of generating productive
labour. This includes revision of the policies and practices for the creation of a healthy
workplace culture. Typical reference can be cited of the Ethical Code of Conduct, which
helps in standardizing the organization behaviour (Hernaus, Bosilj and Indihar 2016). Along
with this, the supportive materials include performance management systems, that is,
dashboards for measuring the performance in terms of the key performance indicators.
Technological support is apt in terms of conducting the offshore marketing for gaining an
insight into the prospective clients, who would help in increasing the market share in Russia
and abroad. Stakeholder engagement is practiced in terms of executing the strategy
implementation effectively.

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An assessment of how organisational designs and
systems are aligned to support the strategy
Following a strategic direction helps Gazprom in terms of enhancing the
organizational structure. In this, the main focus is on executing the allocated duties and
responsibilities through the judicious use of the resources. Minimizing hand-offs in case of
the customer experience is an attempt towards improvising on the standards and quality of the
business. According to Sabourin (2015), functional structure is followed for completing the
projects according to the requirements. High degree of coordination in terms of technological
support digitalizes the supply chain network. Social media marketing is a best way to identify
the target customers. Provision of technological training to the employees reflects the
resource allocation, which indicates teamwork, needed for completing the tasks within the
stipulated time.
Facilitation of the cross cultural business is done through the means of group
discussions, involving the stakeholders. As per the arguments of Serra and Kunc (2015), this
approach is apt in terms of enhancing the cultural diversity. In this process, Gazprom
implements the ethical code of conduct for reducing the conflicts, discriminations and
harassments. The main focus is on business diversification for which market penetration
strategy is adopted. This is through the means of market research, which enhances the
awareness about the markets, in which Gazprom can venture for expanding the scope and
arena of the business.
An evaluation of the management style
Gazprom practices consultative management style. Taking assistance from the
Russian Government, Quality management system was adopted by the end of 2015. The
board provided approval for the reporting on quality assurance tests by Gazprom Group.
Adherence to the legislative requirements is assistance in terms of averting the illegal

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instances. Mention can be made of ISO 9001:2015, which is incorporated in making strategic
decisions for attaining sustainable development (Gazprom.com 2019). Quality Assurance
Policy was approved on September 2017. Vitaly Markelove, Deputy Chairman of
Management Committee, indulges in collaboration with the subsidiary companies for
deciding on executing the operations. In this, emails are used for communicating with the
departmental heads. Follow ups and feedbacks enhance the stability in the professional
relationships.
Fig 2: Gazprom’s Quality Management System flow chart
(Source: Gazprom.com 2019)
Quality Assurance Council is involved in the audits and reviews for assessing the
external challenges and the strategic plans for overcoming them. In this, effective
coordination is generated with structural units, acting as an agent in mapping the capabilities
for enhancing the organizational effectiveness. The Quality Management Unit is entrusted
with the duties of enhancing the standards and quality of the operations through the
implementation of policies. Other functions of the management include internal audits,

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measuring the performance through key performance indicators and others. The top level
management is involved in the decision making for improvising on the main product lines
through the technological support. This approach reflects the consideration of continuous
improvement strategies (Gazprom.com 2019).
Recommendations
 Meetings are crucial in terms of gaining an insight into the approaches of the
employees of Gazprom. This is in terms of enhancing the coordination between the
personnel for enhancing the organizational effectiveness. Interactive sessions in the
meetings would be fruitful in terms of reducing the doubts regarding mitigating the
risks.
 Technological training is beneficial for Gazprom in terms of acquainting the
employees with the latest market trends.
 Ethical Code of Conduct and Data Protection Act (1998) would be crucial for
practising strategic decision-making, which are fair and free of bias and ethical
dilemmas. Logical and rational approach in this aspect would suffice the need of
enhancing the cultural diversity.

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References
Blakeman, R., 2018. Integrated marketing communication: creative strategy from idea to
implementation. Rowman & Littlefield.
Cândido, C.J. and Santos, S.P., 2015. Strategy implementation: What is the failure
rate? Journal of Management & Organization, 21(2), pp.237-262.
Chang, J.F., 2016. Business process management systems: strategy and implementation.
Auerbach Publications.
Gazprom.com2019. About us. Available at: http://www.gazprom.com/about/ [Accessed on
11th May 2019]
Hernaus, T., Bosilj Vuksic, V. and Indihar Štemberger, M., 2016. How to go from strategy to
results? Institutionalising BPM governance within organisations. Business Process
Management Journal, 22(1), pp.173-195.
Lee, E. and Puranam, P., 2016. The implementation imperative: Why one should implement
even imperfect strategies perfectly. Strategic Management Journal, 37(8), pp.1529-1546.
Sabourin, V., 2015. Strategy execution: five drivers of performance. Journal of Strategy and
Management, 8(2), pp.127-138.
Serra, C.E.M. and Kunc, M., 2015. Benefits realisation management and its influence on
project success and on the execution of business strategies. International Journal of Project
Management, 33(1), pp.53-66.
Sull, D., Homkes, R. and Sull, C., 2015. Why strategy execution unravels—and what to do
about it. Harvard Business Review, 93(3), pp.57-66.
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