Corporate Strategy Failure in the Downturn of 2014: An Analysis

Effective Corporate Strategy in Dealing with Downturn

y.
Strategic Management

Table of Contents
INTRODUCTION ..........................................................................................................................1
LO....................................................................................................................................................1
Analysis of the internal and external factors which have influence upon the corporate
objectives and strategies..............................................................................................................1
Critical evaluation of the flexibility needs in the strategic management and practical limits of
the quantifying corporate strategy...............................................................................................4
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Strategic management can be defined as a continuous process organization plans,
monitors, analyze and assesses all the factors which impacts it. Strategic management consists of
the analysis of all the internal and external factors which are closely associated with the
organization (Hill, Jones and Schilling, 2014). It enables organization to achieve success in the
dynamic business environment. This project report is based upon NUOG NU-oil and gas plc
which is one the major junior oil and gas company of UK. The revenue of this organization is
less than to £100 million as per the case scenario and it is listed on the London stock exchange
(NUOG NU-OIL and GAS PLC ORD, 2015). The present report will discuss the internal and
external factors which have influence upon the corporate objectives and strategies of an
organization. Besides this, it also depicts the critical evaluation of the flexibility needs which
requires in the decision making aspects. Further, it states the practical limits of the quantifying
corporate strategy.
LO
Analysis of the internal and external factors which have influence upon the corporate objectives
and strategies
Price fluctuations in the oil prices are one the major cause due to which companies who
operates in oil and gas industry had faced difficulty in 2014. It is one of the main aspect which
closely affects the objectives and policies of oil corporation. Besides this, there are several
internal and external factors which also have high level of influence upon the corporate
objectives and strategies. Internal factors are termed as micro factors which includes customers,
suppliers, competitors, employees and management of an organization (Rosenzweig and et.al.,
2014). Where as external factors includes political, economical, social, technological, legal and
environmental factors. These factors closely impacts the functioning of an organization. Thus,
organization needs to be taken into considerations all these factors while formulating the policies
of an organization which are enumerated below:
Internal factors
 Management: Management of an organization plays a vital role in achieving success in
the competitive business environment. In 2014, revenue of NUOG NU-oil and gas plc
records heavy fall in their performances. Besides this, profit after tax of the company is
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also shows negative trend in the performance of them. This aspect clearly states that
management of NUOG NU-oil and gas plc is not sound. Thus, company requires to
revise their business policies and strategies. Through this, they are able to improve
financial position and aspects.
 Employees: Success of the organization is highly depends upon the skills and efficiency
of the employees. Competent employees are able to cope with the each condition which
arise in the economy. In the period of oil price fluctuations NUOG NU-oil and gas plc
faced difficulty in surviving the strategic business arena. Thus, organization requires to
conduct the training and development session which helps them in getting expertise in
this field. It enables organization to improve their image within the industry.
 Suppliers: Large number of junior oil and gas companies import the oil and gas to meet
their needs. On the basis of this aspect, NUOG NU-oil and gas plc requires to build
effective relationship with the suppliers who imports oil and gas to them. This aspect
facilitates smooth operations and functions within an organization (Seyal and Rahman,
2014).
 Customers: Usually there are two types of customers to which organization deals consists
of business to business and business to customers. They are the king of market which
closely impacts the pricing and the other related policies of an organization. Customers
are mostly price sensitive so NUOG NU-oil and gas plc so organization needs toapproch
the lower price supplier. Through this, organization become able to offer the oil and gas
at the very cost effective rates.
 Competitors: Competition level is very high in the oil and gas industry. Each company
make efforts to assess the alternative ways to produce or acquire the oil from the different
sources (Camisón and Forés, 2015). Each organization make their best efforts to develop
the monopoly situation and there wishes to charge high prices from the competitors.
BACIT, BLOOMSBURY, CHESNARA, DEVRO, Energy assets etc junior oil
companies affects the productivity and profitability aspects of NUOG NU-oil and gas plc.
Price and product differentiation take place in competitors protection have high impact
up;on the brand image and survival of an organization.
External factors
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 Political factors: Political factors are one of the main aspect which closely impacts the
policies and strategies of the oil and gas companies. In oil and gas industry, large number
of firms import the oil and gas which ensures smooth functioning of the business as well
other functions and operations of the concerned country. NUOG NU-oil and gas plc also
import the oil and gases from the other countries. Thus, organization requires to build and
maintain healthy relationship with the other countries who imports oil and gases to them.
In addition to this, stability of the government also have high level of influence upon the
strategies adopted by an organization (Tarí, Heras-Saizarbitoria and Dick, 2014).
 Economical factors: Economical conditions such as recession and inflation also place
impact upon the organizational policies. In 2014-15 most of the companies faced the
problem of continuous price fluctuations in the oil prices. Thus, such kind of situations
have major impact upon the strategies framed by an organization. It is one of the reason
due to which the revenue of NUOG NU-oil and gas plc falls up to £.05. This kind of
price fluctuation proves to more disastrous for the organization. It have also created
difficulty in front of the organization in terms of their survival. In this period the financial
position and performance is worst. In addition to this, high transportation cost and
vulnerable changes in the prices of the oil have also impact upon the policies of an
organization.
 Social and cultural factors: There are several social and cultural factors which all the oil
and gas industries needs to consider while framing their strategies and policies. High
prices of the oil and gas develops negative image in the mind of the customers. Besides
this, usually oils are used in vehicles, plants and machines and there by pollute the air
(Özcan, 2014). Thus, oil and gas corporations requires to make efforts to identify the
alternative energy sources which prevents the air pollution. Further, in most of the
companies energy is produced by the unskilled and inefficient workers. Along with it, it
also places bad impact upon the health of the workers. Thus, organization also requires to
make effective policies which neglects the exploitation of human resources.
 Technological factors: Technological advancement also have major impact upon the
other firms who operates in the oil and gas industry. It is one of the major cause due to
which the monopoly situations are arises in the oil and gas industry. In the present era, all
the countries makes efforts to find out the alternatives in order to produce to energy. In
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addition to this, organizations also undertakes the research program which helps them in
assessing the alternative of energy. Thus, it is also the major factors which impacts the
strategies of an organization.
 Legal factors: Legal laws and restrictions also affects the corporate objectives and
policies of an organization. For instance: restrictions imposed by the government in
relation to the oil extraction from the various sources also affects the the business policies
of an organization.
 Environmental factors: Oil and gas industries have high level of influence upon the
environmental aspects such as greenhouse effect, global warming and oil spills. Fossil
fuels which are used by the country negatively affects the greenhouse project. Along with
it, accidents are also one of the major cause oil spills (Kleinbaum and Stuart, 2014). As
large quantity of oil are transported through the pipe lines so there is high probability of
the accidents. It is one of the major aspect due to which oil and gas companies requires to
make focus upon the the reducing their dependency on oil (Changing patterns of energy
consumption, 2015).
All the above mentioned factors have vital impact upon the business operations and
functions of oil and gas companies. Thus, NUOG NU-oil and gas plc requires to consider each
and every which helps them in improving their financial health and performance. By undertaking
effective strategic management organization become able to frame the suitable policies and
strategies which makes contribution in the achievement of organizational goals and objectives.
Besides this, by assessing the internal and external factors management of NUOG NU-oil and
gas plc is able to make appropriate decisions. It also provides deeper insight to an organization
about the availability of the resources which helps them in executing the plan in the right
direction. All these aspects helps company in build and sustain competitive advantage over their
rivals.
Critical evaluation of the flexibility needs in the strategic management and practical limits of the
quantifying corporate strategy
Strategic flexibility consists of the capability and competencies of an organization in
order to make changes in their policies and strategies as per the external business conditions.
Flexibility in the business operations and activities provides assistance to the organization in
cooping up with the ever changing business environment. Through this, organization who
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operates in the oil and gas industry can build and sustain competitive advantage as compared to
others. Strategic flexibility refers to the firm's ability to identify the changes which take places
in the business environment. By identifying the changes organization can allocate their resources
in the various plans more effectively. Such aspects helps organization in cope with the changing
economic conditions or aspects (McCambridge, Hawkins and Holden, 2014). However, it is to
be critically that not all organization have the effective decision making ability. It is one the main
cause due to which NUOG NU-oil and gas plc faces problem in the business arena. During the
period of 2014 NUOG NU-oil and gas plc fails to make effectual strategies and policies which
helps them in fighting against such condition in an effective manner. Due to the lack of the
flexibility revenue of NUOG NU-oil and gas plc is highly decreased as compared to their rival
firms.
This aspect clearly states that management of NUOG NU-oil and gas plc have no
capability to assess the changes which are going to take place in the business environment. Due
to this, NUOG NU-oil and gas plc fails to make optimum utilization of the available resources. It
is one of the main reason due to which sales revenue of an organization is heavily falls. Thus,
NUOG NU-oil and gas plc needs to hire the competent employees in the management team who
is able to make effective decision as per the changing conditions of the economy. In the present
era, oil and gas companies faces major problem in terms of the price fluctuation. Besides this,
transportation cost is also one of the factor which had created the major issue in front of the oil
and gas corporation. Thus, they requires to develop the capability among them in relation to the
identification of the factors due to which business organization is highly impacted. In addition to
this, it also facilitates the effective as well as optimum allocation and utilization of the resources.
Further, corporate strategy of the organization should be achievable on the basis of each
and every aspect. This terms states that organization requires to set realistic objectives which
helps them in getting success the strategic business organization. As nature of the oil and gas
industry is very dynamic which closely influence the business operations of an organization
(Dutt and Vidal, 2015). If objective which are set by an organization is not realistic then it place
negative impact upon the employees of an organization. Corporate strategy of NUOG NU-oil
and gas plc is not clear to their employees.
For the effective implementation of the strategy organization requires to clear each and
every aspect to their employees. This aspect helps human resources of an organization in making
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their best efforts in the suitable direction. In 2014, situation of the company is very disastrous
which clearly reflects that corporate strategy of NUOG NU-oil and gas plc is not sound. This
aspect shows that they are not able to frame the competent strategies which helps them in coping
up with the uncertainties. It is one of the major issue due to which financial position and
performance of NUOG NU-oil and gas plc was very poor in 2014-15. As downturn or changes
which arouse in 2014 had made impact upon all the major junior oil and gas companies.
Nevertheless, as compared to the competitors sales revenue of an organization was very down.
There are several aspects which limits the quantification of the corporate strategy. In the
oil and gas industry corporations are not able to assess the health and safety aspects in the
numeric terms or values (Huo and Hung, 2015). Besides this, organization is also unable to
quantify the emotions of the human resource of an organization. Further, in the oil and gas
industry NUOG NU-oil and gas plc requires to build relationship with the suppliers who imports
oil to them. Nevertheless. Company cannot quantify all these aspects which are also the major
part of the corporate strategy.
CONCLUSION
From this project report it has been concluded that both internal and external closely
influence the corporate objectives and policies of NUOG NU-oil and gas plc. Thus, organization
needs to be taken into consideration all the factors which impact the growth and functioning of it.
Besides this, it can be concluded that NUOG NU-oil and gas plc needs to make efforts to evolve
the flexibility in the strategic decision making aspect of an organization. It can be inferred that
organization fails to make effective corporate strategy in order to cope up with the downturn
which arouse in 2014.
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