Strategic Analysis of Business Factors

This assignment delves into strategic business analysis by examining PEST factors, Porter's Five Forces, the paradox of marketing and resources, and the paradox of cooperation and competition. It analyzes how these factors influence organizational functioning and provides recommendations to improve market-level performance.

STRATEGIC ISSUES

Table of Contents
INTRODUCTION...........................................................................................................................1
a. Strategic analysis of Perenco...................................................................................................1
b. Key Strategic Paradoxes and their related tensions................................................................4
c. Strategic Recommendation and their Consequences...............................................................5
CONCLUSION................................................................................................................................8
REFERENCES................................................................................................................................9

INTRODUCTION
Every business successfully runs due to formulation of effective strategies. It facilitates in
providing growth and expansion to trade activities. Every firm competes with rivals on the basis
of effective planning done that includes several tactics (Abushova, Burova and Suloeva, 2016).
There are many issues, which arises due to several reasons. They are needed to be controlled and
eradicated in order to provide successful implementation of these strategies.
The following report includes the Strategic analysis of Perenco company and its related
strategic paradoxes as well as tensions. Also, recommendations have been provided to eliminate
these problems which are faced by company.
About Perenco
It is an independent oil and gas firm, which is operating in 13 countries around the world
and includes countries from Northern Europe to Africa as well as South America to South East
Asia. Its operation comprise of both off shore and onshore.
a. Strategic analysis of Perenco
Strategic analysis is defined as a method of conducting investigation of business
environment that influence functioning of an organisation. With this, company can formulate
strategies. It helps in achieving goals and objectives (Amaldoss, Desai and Shin, 2015). It
facilitates in determining the most appropriate path for effective planning.
Some of the Strategic tools, which will be used for determining drivers that affect
Perenco can be PEST or Porter's five forces model.
PEST Analysis
Political- It determines the impact, which are related to political structure on commercial
activities. There are many governmental policies that regulate the energy industry. Political
decisions can affect several areas of Perenco such as its employees, quality as well as health of a
nation.
There are numerous factors which considered as threats for its trade related to oil and gas,
discussed as below:11 Geopolitics- It can be defined as the effect of geographical conditions on politics and
associated international relations. It provides a study related to foreign policy for
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understanding, explaining or predicting the political behaviour of another nation on basis
of geographical variables. There are many conflicts among nations due to certain
geographical territories related to land or water that can create a scenario of tension and
can influence trade activities around the world. It leads to affect relations as well as trade
between countries.11 Political Instability- It leads to affect strategies related to expansion of a business as
there are several reasons, which impacts political stability of a country and it directly
influences the development of Perenco in that area. Also, there are several rules and
regulations, which are assigned by the government for effectively regulating the working
of oil and gas sector.11 Government Controlling- In oil producing territories, majority of oil reserves and global
production of oil is governed by legal authorities (Boeke and Schuurman, 2015). Apart
from this, the private firms, which are running same business has less share in the market
that affects their commercial trade in many ways.
Economic Factors- These factors are related to economy of a territory where company is
operating. High interest rates may lead to demoralize investors as their cost of raising funds can
increase. Strong Currency can make export activities to be costly due to rise in prices of foreign
market. During the time of inflation, it can result in demands of higher wages from workers that
tends to maximise cost related to production.
Apart from this, increase in growth of income facilitates increased demands of oil as well
as gas products. Also, some of the major factors that affect connection of this sector with
international economy can be global economic crisis, which can impact production of products
and its selling in different countries. Bankruptcy of several commercial banks can occur due to
investment in other risky products such as their derivatives. Along with that, many countries are
over debt that can be alarming situation for Perenco. Prices of oil and gas can be considered as
primary factor for deciding feasibility criteria of particular reserve.
Social Factors- It generally expresses features such as demographic criteria, culture,
income, migration as well as ideological perception regarding an issue. Also, every culture
supports this industry as it is the fuel provider for certain activities. World can consider it as a
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future of development and improved in standards of living. There is other aspects, which
Perenco is facing such as increase in awareness and preference of eco-friendly fuels and
reduction in usage of dirty fossil fuels, which includes oil sands, shale gas and coals.
Consumption of fuel is increasing due to rise in population.
Technological Factors- It tends to represent technologies, techniques as well as methods
that can lead to impact several activities of the firm. There are new products, which can be
introduced in a better version that can eradicate many faults such as wastage of precious
resources such as crude oil (Breja, Banwet and Iyer, 2016). With the adoption of advanced
technology, one can reduce cost of production. There are certain aspects, which can affect the
functioning of task involved in producing products. These can be uncertainty over returns,
shortage of skills for particular role, cost related to development, insufficiency of funding,
uncertainty over prices of energy fuels and sometimes regional can be stringent.
Apart from this there are porter's five forces that affects the position of Perenco in the
industry of oil and gas industry.
Bargaining power of Customers
Considered to be weak threat as prices are
similar to every fuel producing firm and prices
are standards decided by the government
therefore it leads to make their bargaining
power to be less.
Bargaining power of Suppliers
Considered to be high threat as few suppliers
that are involved in supplying fuel across the
world that demands high prices from Perenco,
which are non-negotiable.
Threat of New Entrants
It is considered to be low threat as new entrants
has low base of customers and needs to survive
in competition.
Threat of Substitute
It is considered to be high threat as every other
company presented in the same industry is
producing similar products and it is hard to
differentiate these commodities with the
perspective of customers in a market.
Presence of Rivals
It is considered to be a strong threat as there are companies who are already established and
have a huge base of client countries and apart from this, majority of the firms owned by
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government that can affect the production.
b. Key Strategic Paradoxes and their related tensions.
The Paradox of markets and resources
Effective Market Theory has asserted a huge impact on the marketers, financial experts
and the regulators for thinking about particular investment in related inventories. There is a
paradox among markets as well as resources that provides suggestion for those firms which are
strategically challenged. For a company which is deep pocketed and has been backed for
accumulating funds from Middle East can successfully procure any resource. But it is important
to know whether restrictions in resources provides hindrance in the success of firm. As the crude
oil is the major input which is required for Perenco to produce product for its survival and is
considered to be rich in resources. One perspective assert that markets can have preference over
the resources , if a company follow this ideology then it follows strategies according to the
change in external surroundings (Jain and Li, 2018). It generally focuses on threat and
opportunities available in outside world. Plans are framed for defending against such factors.
There key variables concentrates on customers of market and performs in dynamic and fluid
market. These organisation generally reposition themselves for gaining attention of buyers.
They are more prone to loose distinctive competencies and become dependent upon individual
potential such as their strength for gaining competitive advantages On the other side firm
following resource perspective focusses on the internal potential of a firm. It provides an
opportunity to diversify in markets by producing several entities from it. Resources which are
newly procured does not guarantees in forming competency for organisation in market. Resource
approach does not assures a company for full success in market and apart from these an effective
marketing can lead to rise in sale but does not safeguards the base of customers. It is very
important for a company to build up competence adaptability because core competency provides
an improvement in the functioning as well as operation and makes the company internally strong
to defend all the factors that affects their business and its related strategies, As many companies
focuses on quality inventories and marketing for achieving success. This leads to skip the
efficiency and effectiveness of each task that are involved for producing the final product that is
regarded to be very essential (Morden, 2016). Therefore, core competencies helps to improve the
working structure of Perenco, that includes application of several strategies for improving the
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task performance criteria which would be beneficial for eliminating all the aspects which can
make their sustenance in market to be dangerous.
The Paradox of competition and cooperation
Competition and cooperation has an important interdependence which helps to formulate
strategic alliances. Every organisation requires to achieve certain sources that are essential for
competitive advantage that are required for building up essential relationship between customers,
suppliers, competitors and other institutions. Perenco has shifted its focus on strategies and has
started embracing competition as well as cooperative strategies. The cooperative strategy is used
for combining these strategies with positioning which would be useful for various purposes. It
can be considered as a complete counterpart in accordance to the pursuit of competitive benefits.
It can serve many advantages that can be used by companies who does not have particular
resource or competencies and can secure them possessing complementary skills as well as assets.
A company that follows the perspective of competition then it focuses on every threat as well as
tries to build up internal capabilities which can lead to provide advantage over that. Apart from
this, according to the paradoxical nature, it concentrates on multi paradigm approaches that
initiates cooperation and a sense of competitiveness in a company (O'Brien and Hipel, 2016). It
provides advanced methodology and provides perception of both. Cooperation with other firms
can led to provide them certain benefits such as increase in the base of customers and the share
of profitability with the firm who is already established. It tends to reduce the competition in the
market which can be beneficial for the company in various ways. Apart from this, companies
that follows the perspective of competitive tends to formulate strategies for gaining leading
position in market which maximises their profitability and improves their position in market.
Also, all the external factors is needed to be analysed in order to estimate potential threats and
opportunities that can be used for providing an effective position in market. Competition has
many sides such as it pushes the company for a better result and on the other hand stagnate them
on various aspects. These organisation are highly motivated and focuses on many factors such as
introducing innovative concepts in particular industry that will tend to attract customers for
various reasons. But focusing on the competitiveness does not allows the company to grow.
There must be focus on the development of inner capabilities which would lead to serve the
companies on certain aspects and are needed to be improvised.
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c. Strategic Recommendation and their Consequences
For providing any recommendation of Perenco it is important to conduct internal analysis
for analysing its strength, weakness , opportunities and threats.
Strength
 Strong Market position
 Vertical Integration
 Effective Exploration Capability
 Strong Investigation and development.
Weakness
 Strict Legal Rules
 Growth of Debt
 Geopolitics Issues
Opportunities
 Advancement in LPG natural gas
technology
 Maximisation in demand for energy
Potential of Merging with other
companies
 Effective expansion
Threats
 Dynamic Climatic Changes
 Political Volatility
Following are the recommendations which has been provided for grabbing the
opportunity for gaining advantages in Perenco.
Effective Strategic Objectives-As the economy of Oil and gas market faces many
downturn in prices which provides an urgency for developing many plans fir effective
maintenance of profitability in various scenarios of different prices. It is regarded as the major
key for a strong survival in oil and gas industry, production growth as well as reserves required
for expansion (Philpot, Hipel and Johnson, 2016). The firm should concentrate on increasing
the efficiency in cost as well as profitability that will lead to make the financial stability of the
firm to be strong which can lead to defend the company from several scenarios which can be
very beneficial. There are several advantages which are associated with effective strategic
objectives such as establishment of an appropriate direction. It facilitates in making apt decisions
for business. With certain strategies there are more chances of increase in profitability as well as
market share. It has a poitential to avoid competitive convergence.
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Focus on differentiated Capabilities- This sector can be characterised by diverse range
of several operating surroundings. There are various challenges which is faced by company
through various forces in the surrounding. Every firm has their own kind of capabilities which
makes them differentiated from other rivals present in same industry. It is needed to make the
potential different to create a competitive advantage in market It provides a sense of positioning
among customers in market which is required for acquiring attention. Being alike from other
companies makes product varied that tends to get highlighted in market due to differential
features which might engage many potential customers. There are many benefits which are
associated with differential capabilities are it leads to strategical development which supports the
growth and expansion of the industry (Philpot, Hipel and Johnson, 2016). Apart from this, it
focuses on the innovation part which serves the introduction of creativity in performing the task
for producing particular products. It provides a successful identification of core competencies of
the firm that can be used for effective performance of the organisation.
Development of new Business Model- Evolution of oil and gas industry is initiated by
large and generalist companies which tends to feature a particular specialist for successful
operations of the surrounding that needs firms to search new ways for collaborating that
increases particular set of skills required in Perenco. The business model determines the type of
operations which are needed to be followed for developing as well as discovering various fields
on particular sector. Apart from this, it leads to serve the strategies which can be used for
building up business in to more effective form which will be beneficial for futuristics purposes.
There is need to establish new theories and principles in order to develop new and effective
model that focusses on every aspect which is related to modifying every operations. It offers
various business related advantages such as it eliminates redundancy of processes that are
involved in producing effective image of firm in the market that leads to attract client countries
(Walker and et.al., 2014). Apart from this, efficient and effective accomplishment of task tends
to eliminate wastage and provides optimisation of resources. It leads to serve a impelling plan for
fostering growth of Perenco.
Review of Portfolio- It is very essential to evaluate the portfolio which is provided by
firm in order to observe the loop holes in manufacturing or features of the product which might
lead to dissatisfy customers in various ways. It is better opportunity for restructuring business in
several ways that can lead to provide many benefits. It is the responsibility of company to
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analysed every commodity which they are producing for the market. It should fulfil every aspect
that can make it successful and more preferable among other existing similar products in market.
It can act as an opportunity for conditioning future and ensuring successful accomplishment of
firm's goals and objectives on specific time period. There are certain departments of research and
development appointed by the company to investigate on every information which is available in
order to provide certain analysis of all the data which can be beneficial for effective product
development that would met needs and demands of the customers.
Advanced Technology Deployment- Technology is an important aspect for improving
the efficiency and the quality of product. With the aspect of automation company tends to reduce
manual work which serves certain benefits that are associated with the accomplishment of task
involved in producing certain products. With the globalisation, every method has became more
advanced that leads to decrease the human labour and has provided the work on time with less
errors which were tended to occur earlier. Part from this, there are certain aspects which are
required to be focused for providing technologically advanced productivity through providing
trainings to employees that will support the whole process (2017 Oil and Gas Trends, 2017).
The goods which will be produced will be of satisfactory quality with less wastage of inputs
required for it. Artificial intelligence, cloud computing, big data analysis can be used for
increasing the advancement in providing several new services to company in order to provide
timely completion of task and handling of enormous data at the same time. It will lead to serve
many benefits as company will be effectively handling every challenges that can come on the
path of successful accomplishment of goals as well as objectives of the firm.
CONCLUSION
From the above report it has been concluded that Strategic analysis is very important
aspect to judge all the factors that can facilitates business through various aspects and apart from
this, there are several tools which can be used for analysing those factors which are PEST
analysis and the porter's five forces that leads to serve an analysis of several factors that tends to
affect functioning of organisation. Apart from this Paradox of Marketing and Resources has been
done that focuses on the contradiction for this theory which is regarded to be true. Also, paradox
of cooperation and competition has been depicted which provides description related to several
authorities that is required to be provided for increasing their core competencies. Also,
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recommendations has been provided to improve the performance of the company at market level
which is very important.
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REFERENCES
Books and Journals
Abushova, E., Burova, E. and Suloeva, S., 2016. Strategic analysis in telecommunication project
management system. In Internet of Things, Smart Spaces, and Next Generation Networks
and Systems (pp. 76-84). Springer, Cham.
Amaldoss, W., Desai, P. S. and Shin, W., 2015. Keyword search advertising and first-page bid
estimates: A strategic analysis. Management Science. 61(3). pp.507-519.
Boeke, S. and Schuurman, B., 2015. Operation ‘Serval’: A strategic analysis of the French
intervention in Mali, 2013–2014. Journal of strategic studies. 38(6). pp.801-825.
Breja, S. K., Banwet, D. K. and Iyer, K. C., 2016. Towards sustainable excellence: strategic
analysis of Deming Prize winning companies. The TQM Journal. 28(3). pp.390-410.
Jain, S. and Li, K. J., 2018. Pricing and Product Design for Vice Goods: A Strategic Analysis.
Marketing Science.
Morden, T., 2016. Principles of strategic management. Routledge.
O'Brien, N. L. and Hipel, K. W., 2016. A strategic analysis of the New Brunswick, Canada
fracking controversy. Energy Economics. 55. pp.69-78.
Philpot, S., Hipel, K. and Johnson, P., 2016. Strategic analysis of a water rights conflict in the
south western United States. Journal of environmental management. 180. pp.247-256.
Walker, R. V. and et.al., 2014. The energy-water-food nexus: Strategic analysis of technologies
for transforming the urban metabolism. Journal of environmental management. 141.
pp.104-115.
Online
2017 Oil and Gas Trends. 2017. [online]. Available through
<https://www.strategyand.pwc.com/trend/2017-oil-and-gas-trends>
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