Strategic Analysis of Schlumberger
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Added on 2021-06-15
Strategic Analysis of Schlumberger
Added on 2021-06-15
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Running head: STRATEGIC ANALYSIS OF SCHLUMBERGERStrategic Analysis of SchlumbergerStudent’s name: Name of the university: Author’s note:
1STRATEGIC ANALYSIS OF SCHLUMBERGERTable of Contents1. Introduction..................................................................................................................................32. External Environment analysis of Schlumberger........................................................................32.1 Industry overview and analysis..............................................................................................32.2 PESTEL analysis of oilfield services and equipment industry..............................................42.3 Porter’s Five Forces analysis.................................................................................................72.4 Ansoff Matrix.........................................................................................................................93. Internal environment of Schlumberger......................................................................................103.1 SWOT Analysis...................................................................................................................103.2 VRIO Model........................................................................................................................123.2 Value Chain Analysis...........................................................................................................143.4 Company Key Strategies......................................................................................................164. Strategic Recommendations......................................................................................................17Reference List................................................................................................................................19Appendices....................................................................................................................................22
2STRATEGIC ANALYSIS OF SCHLUMBERGER1. Introduction Schlumberger Limited is the globally acclaimed and world's largest company in oilfieldservices. Schlumberger is a public limited company and it is in the industry of oilfield servicesand equipment. Schlumberger was established in the year 1926 in France and it has fourexecutive offices in Paris, Texas, London and in The Hague. It serves in worldwide basis as ithas its single entity services in more than 85 countries. Schlumberger employs more than100,000 employees and the employees are from more than 140 countries (Slb.com 2018).Schlumberger Limited supplies services and equipment to petroleum industry such as seismicacquisition, well testing, formation evaluation. Directional drilling, artificial lift, software andinformation, well cementing and flow assurance. Schlumberger makes itself involved in thegroundwater extraction and industry like carbon capture and storage. Schlumberger started itsexpansion in the year 1960 and till now the organisation has been taking the same process ofacquisition and merging to expand the business. In this study, external and internal environment analysis of Schlumberger is done toprovide the range of potential solution. The emphasis is given on to achieve the competitiveadvantage of Schlumberger and the choice of final strategic decision is given at the end. All thedata has been taken from the secondary sources to recommend with justification to grabcompetitive advantage to Schlumberger.
3STRATEGIC ANALYSIS OF SCHLUMBERGER2. External Environment analysis of Schlumberger2.1 Industry overview and analysis Schlumberger is an oilfield service and equipment industry is typically made up of thecompanies that are depended on mainly drilling expenditure of natural gas and oil producers. Thedemand for the fuels fluctuates in the economy; therefore the oilfield services stocks can beconsidered cyclical (Epmag.com 2018). Companies in oilfield industry consist of two maincategories; one type provides various services that required evaluating, maintain and constructingin oil and gas wells; another one rents the drilling rigs to the companies. The prices of oil andgases are the key indicators for the performance within the industry. The prices of oil and gasindustry affect mainly determination of the population growth, general business conditions andeconomic development (Hantschel and Kauerauf 2016). OPEC (Organisation of PetroleumExporting Countries) plays the main role in setting the prices of the oil and gas, production costand exploration of the oil and gas. There were almost 2,500 active rigs in the year 2010worldwide and oil-drilling had the international focus. In North America, the natural gas drillingwas important. Technological advancement came into existence and total rig reached the figureof 5,000 hit (Epmag.com 2018). Oilfield service organisations tend to be value-based and rigcompanies share are worth the market value of the equipment. Cash flow is used to value thestock and earning is essential. Revenue of Schlumberger was US$ 27.80 billion the year 2016and operating was US$ 3.28 billion in 2016 (Slb.com 2018). Schlumberger named itself inFortune Global 500 Company as it was ranked 297 in the year 2016. 2.2 PESTEL analysis of oilfield services and equipment industry Political: Political factors play a significant role in determining the profitability and riskin working oil and gas services and equipment industry. Schlumberger is a large organisation and
4STRATEGIC ANALYSIS OF SCHLUMBERGERit has to work in more than 85 countries. Therefore, political stability will provide an importancetowards doing the business as single entities in different countries. Corruption is another factorof doing the business and less corruption will bring the best business and fresh employees. Eachof the countries has a different legal framework and different intellectual property protections.Therefore, Schlumberger has to follow the trading partners and taxation policies of the country todo the business. Controlling hydrocarbon reserves permits the governments to sell rebate tovarious companies that grant exclusive rights for the production of oil and exploration of the oil.OPEC has the control 75% of the world's oil resources and internal politics can hold back theupstream investment in many of the countries. According to Hantschel and Kauerauf (2016),political decisions of the world leaders can stimulate the use of cleaner sources of energy for theclimate change issue. Kyoto protocol established the legal commitment for the countries todecrease the emission of greenhouse gas. Economic: Schlumberger works in the global arena and the macro environmental factorsare associated with the saving rate, inflation rate, foreign exchange rate, savings rate andeconomic cycle. Schlumberger needs to assess the type of economic system in which theorganisation operates and government intervention in the free market can also be assessed by theorganisation. As opined by Hammami et al. (2018), exchange rate and stability of the hostcountry needs to judge in order to operate in the global arena. In addition, GDP growth of thecountry and the oil companies' infrastructure quality can help the business to grow. The globaleconomy is dependent on the continual supply of the oil and gas at reasonable prices. Thedemand for the oil is depended on the economic growth of the country. When the demand for theoil and natural gas grows, the demands of the oilfield services and equipment eventually grow.
5STRATEGIC ANALYSIS OF SCHLUMBERGEROil producers are exposed to the change in the exchange rate and it provides greater stability forthe profitability of the organisations.Social: Attitudes of the people and shared beliefs can impact on the business ofSchlumberger. This organisation mainly depends on the employees and the skills of theemployees to use the technology. Demographics and skill level of the employees is an importantfactor along with class structure, power structure and hierarchy. The organisation has varioussingle entities, therefore, workplace culture needs to evaluate with social conventions. The shareof oil and the total energy consumption drastically dropped in last decades. The clients of theorganisation are mainly business entities and the common people start showing interest inalternative energies like solar, hydro and biofuel energy. Schlumberger takes initiative to do thesocial responsibilities for the betterment of the society. Therefore, the most of the big oilcompanies claim the supporting role in the development of the society. Technological: In the oilfield sector, technology is very important as the industry istechnology-driven. Technology is the key factor from the exploration of the oil to the refinementof the oil. Innovation and improvement of the technologies help the companies to upstream theprocess to extract a large amount of crude oil (Mittal and Groening 2016). Schlumberger uses theWireline technologies as it needs to have the information to evaluate the subsurface informationof the fluids and rocks. The organisations use the directional drilling to measure the rocks andwells. In addition, Schlumberger uses the technologies for well-services and testing services.Technologies help the companies to do the exploration work in ultra-deep-water reservoirs.Technology provides help in ultra-deep oil transportation and it provides help in long-termsustainability.
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