Case Study | Overview of Saudi Aramco

Saudi Aramco case study
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Table of Contents
Introduction......................................................................................................................................3
Overview of Saudi Aramco.............................................................................................................3
Micro and Macro environment........................................................................................................3
-SWOT.........................................................................................................................................3
-Porter’s Five Force.....................................................................................................................4
-PESTLE......................................................................................................................................6
-Resource Based Analysis...........................................................................................................7
Past Strategic Decisions...................................................................................................................9
Strategy 1: Acquisition of SABIC...............................................................................................9
Strategy 2: Global Chemicals Strategy........................................................................................9
Strategy 3: Shifting strategy in China........................................................................................10
Strategy 4: Downstream Shifting Strategy................................................................................10
Recommendations..........................................................................................................................11
Conclusion.....................................................................................................................................11
References......................................................................................................................................12
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Introduction
Strategy is considered as a coordinated plan of action and inaction that is constructed based on
the values, mission and vision. However, the strategic decisions are undertaken based on the
environmental changes, desire to outperform the competitors and to learn and improve
organisational capabilities (Whittington, 2014). In the context of undertaken strategic decisions,
it is important to stress the strategic management tools and analysis. In this paper, Saudi Aramco,
national petroleum and natural gas company in Saudi Arabia would be analysed based on two
ideas such as defining strategy and serving customers.
Overview of Saudi Aramco
Saudi Aramco is based in the Kingdom of Saudi Arabia and is thought of as a very large
integrated oil and gas companies (Saudi Arabian Oil Co., 2019). Apart from its home country,
the company also operates 20 international locations, and provides employment to around 75000
people (approx). In own words of the company it is a leader in the production of chemicals and
energy that helps to drive the global commerce (Saudi Arabian Oil Co., 2019). Currently the
vision of Saudi Aramco is to focus upon making the best usage of the income along with
enhancing the diversified and sustainable expanding of the Kingdom’s economy along with
making the Saudi energy sector more vibrant and competitive (Armaco Overseas Company,
2019). On the other hand, the overarching mission of the company is to “continue to deliver on
their core mission of reliably supplying energy to the Kingdom and the world, and continue to
progress towards becoming the world’s leading integrated energy and chemicals enterprise, a
top refiner and a creator of energy technologies” (Saudi Arabian Oil Co., 2019).
Micro and Macro environment
-SWOT
Strengths
 Strong financial backbone
 Positive relationship with the
Weaknesses
 Dependence on the sales of only one
commodity, i.e. crude oil
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government in its home country
 Usage of advanced technologies
 Lower cost of production
 Lack of transparency regarding
corporate governance
Opportunities
 High price of crude oil
 Sufficient capital to invest
 Increasing demand of crude oil across
the globe
Threats
 Constant emphasis on the renewable
and non- conventional energy sources
 Prospective slow down of crude oil
because of the recent increased price of
oil
One of the biggest strengths of Saudi Aramco is its strong financial backbone. In the first half of
2019, the company announced its net income which was around $ billion (in the 1st half of 2019)
(Saudi Arabian Oil Co., 2019). Beside this, the free flow of cash for the same period was $38
billion with a reduced capital expenditure at $14 billion. Apart from this, the company enjoys a
low cost production due to the greatest number of oil fields throughout the nation being free
flowing (EIA, 2019). This has lowered the cost of production to as low as $3.5 per barrel. Also,
the company used advanced technologies at each step of production process along with enjoying
operational autonomy. Despite all its strengths, it still has some weaknesses including its core
dependence on crude oil, which in a way can make it vulnerable to threats like facing loss if the
demand of non-conventional energy sources increases. On the other hand, the increasing the
current increasing oil price as well as demand can pose as great opportunities for Saudi Aramco.
Also, due to the current boost in cost of oil, Saudi Aramco has the prospective of getting enough
funds of their capital investment.
-Porter’s Five Force
The application of Porter’s Five Forces could prove to be effective in providing an overview of
the market condition and situation of Saudi Aramco in the O&G industry.
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