MBA: Strategic Management - Strategic Plan for Sapura Energy Berhad

This report provides a strategic plan for Sapura Energy Berhad (SEB), analyzing the company's mission, vision, and objectives using Focus, Clear, and Motivation criteria. It includes a macro-environmental analysis using the PESTEL model and a micro-industry analysis using Porter's 5 Forces. The internal capabilities of SEB are evaluated via the Value Chain model. The report proposes solutions to SEB's current challenges using the TOWS and Ansoff matrix, and the suggested strategies are evaluated using the Suitability, Acceptability, and Feasibility model. Industry Key Performance Indicators are examined by benchmarking SEB against Dialog Group Berhad. The analysis covers SEB's revenue decline, strategic challenges, and potential strategies for market penetration and development.

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Strategic Plan for Sapura
Energy Berhad
2019

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Contents
1.0 Introduction ................................................................................................................................ 4
1.1 Main objectives of report ....................................................................................................... 4
1.2 Background information SEB .................................................................................................. 4
1.3 Current strategic challenge in SEB .......................................................................................... 5
1.4 The vision, mission and objectives statements of SEB ........................................................... 5
1.5 Effect of vision/mission statement on SEB’s objectives ......................................................... 6
1.6 Focus, Clear and motivating analysis ...................................................................................... 6
2.0 PESTEL analysis............................................................................................................................ 8
3.0 Porter’s 5 forces of Malaysia energy sector ............................................................................. 10
4.0 Capability analysis ..................................................................................................................... 13
4.1 Value chain – Primary activities of SEB ................................................................................. 13
4.2 Resource audit ...................................................................................................................... 16
4.3 VRIO and value chain analysis ............................................................................................... 17
4.4 Key performance indicators .................................................................................................. 17
5.0 Strategies .................................................................................................................................. 18
5.1 SWOT..................................................................................................................................... 18
5.2 TOWS..................................................................................................................................... 20
5.3 Ideal strategies ...................................................................................................................... 22
5.3.1 Market penetration ....................................................................................................... 22

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5.3.2 Market development .................................................................................................... 24
6.0 Strategy evaluation – Conclusions ............................................................................................ 25
References ............................................................................................................................................ 28

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1.0 Introduction
1.1 Main objectives of report
This report is a strategic plan for Sapura Energy Berhad (SEB). The mission, vision
and objectives statements of the organisation will be analysed using the three criteria
Focus, Clear and Motivation. Macro environmental analysis will be conducted using
the PESTEL model while micro industry analysis will be conducted using Porter’s 5
forces model. Internal capability of Sapura Energy Berhad will be analysed with aid
of Value Chain model. Solutions to current issues facing Sapura Energy Berhad will
be proposed using the TOWS and Ansoff matrix. Evaluation of the proposed
strategies will be analysed using the Suitability Acceptability and Feasibility model.
Industry Key Performance Indicators analysis will be examined by benchmarking
Sapura Energy Berhad versus Dialog Group Berhad – a close competitor.
1.2 Background information SEB
Sapura Energy Berhad (SEB) is a leading global integrated oil and gas services and
solutions provider operating across the entire upstream value chain
(https://sapuraenergy.com/, 2019). The company’s spectrum of capabilities covers
the exploration, development, production, rejuvenation, as well as decommissioning
and abandonment stages of the value chain. With a highly skilled and technically
capable multinational workforce, strategic world-class assets, and strong project
management capabilities, the company today has a global presence in over 20
countries (https://sapuraenergy.com/, 2019). SEB made the prestigious Forbes
Asia’s Fabulous 50 listing for the second successive year, demonstrating its
commitment to excellence in all aspects of its business. The company was also
voted Asia’s Overall best managed company in Natural Resources for 2014 in a poll
conducted by the international financial publication, Finance Asia
(https://sapuraenergy.com/, 2019).

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1.3 Current strategic challenge in SEB
As shown on figure 1.0 below, SEB witnessed a significant decline in revenue in the
last 3 years from 2016 to 2018. Between FYE 2016 and 2017 revenue declined by
25% while it was 23% decline between FYE 2017 and 2018. This has led to loss
before tax and impairments of RM191 million in the FYE 2018 as well as Rm2.5
billion loss after tax (https://sapuraenergy.com/ , 2019).
Figure 1.0 Current strategic challenge of SEB: Source: (https://sapuraenergy.com/ , 2019).
1.4 The vision, mission and objectives statements of SEB
Vision, mission statement of SEB is “to be the best entrepreneurially led
technically competent and most trusted global Oil and Gas Company in the eyes of
our customers, shareholders and most importantly, our empowered people.”
(https://sapuraenergy.com/, 2019).
Core Values statement of SEB – “We will be guided by our honesty, trust and
respect for all. We will achieve our business objectives by being safe, agile and
professional to continuously strive to meet all of our stakeholders’ expectations.”
(https://sapuraenergy.com/, 2019).

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1.5 Effect of vision/mission statement on SEB’s objectives
An organization’s “credo”, “philosophy”, “core values”, “reason for being”, “image
creator”, or “a distinctive factor” are frequently used concepts that describe the
importance and the value of a mission statement for an organisation (Dermol and
Breznik, 2012). The vision/mission statement of SEB is reflected in its objective of
maintaining high standards in Health, Safety and Environment (“HSE”) in its
operations including that of subsidiaries. The company stated that it is committed to
its Group’s vision of being safe, agile and professional, which includes responsibly
managing risks within all operations. The company execute its work with integrity,
honesty and in partnership with all stakeholders; focusing on the health and safety of
its employees and the protection of the environment in which it operates from
(https://sapuraenergy.com/, 2019).
1.6 Focus, Clear and motivating analysis
Three principles are helpful in creating meaningful vision, mission and values
statements (Johnson et al., 2016). Focus – statements should focus attention and
help guide real decisions. What is included and excluded in the company’s strategy
should be defined (Johnson et al., 2016). The mission, mission statement of SEB
is relatively focused as it stresses its global market; industry as well as all important
stakeholders - customers, shareholders and most importantly, employees. Mission
statement represents a communicational tool through which management beliefs,
perspectives, and approaches are passed to employees and other stakeholders
(Hirota et al., 2010). The mission’s role is to answer two questions: what is the
company’s business and what it should be (Dermol and Breznik, 2012).
Motivational – statements should motivate employees to do their best. The
statement should be distinctive and authentic. To motivate vision, mission and
values statements should stretch organisational performance to higher levels and set
credible targets (Johnson et al., 2016). The mission, mission statement of SEB
can be said to be motivational as it emphasises the “to be the best entrepreneurially
led technically competent and most trusted global Oil and Gas Company”. It also
emphasise the importance of its workforce in delivering its goals. Studies have

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shown that the mission statement spells out the underlying motivation for being in
business in the first place – the contribution to society that the firm aspires to make
Khalifa, (2011). Clear – in order to motivate employees in their day-to-day work,
vision, mission and values statements should be easy to communicate, understand
and remember (Johnson et al., 2016). David and David (2003, p. 11) define mission
statements as: “Enduring statements of purpose that distinguish one organization
from other similar enterprises.” The vision, mission and objective statement of
SEB is relatively easy to communicate and understand while distinguishing the
company from other competitor.
Vision, mission and objective statement of
SEB is “to be the best entrepreneurially led
technically competent and most trusted
global Oil and Gas Company in the eyes of
our customers, shareholders and most
importantly, our empowered people.”
(https://sapuraenergy.com/, 2019).
SEB’s objective is absolutely specific in
terms what the company is looking to
achieve i.e. “to be the best entrepreneurially
led technically competent and most trusted
global Oil and Gas Company in the eyes of
our customers, shareholders and most
importantly, our empowered people”
Measurable - The focus is on “how much”
change is expected. Objectives should
quantify the amount of change expected
(Shahin and Mahbodm, 2017). To be the
best can be interpreted to mean to be
number one in their industry which can be
measured by the market share.
Given the current position on SEB in the
market, becoming the best entrepreneurially
led technically competent and most trusted
global Oil and Gas Company still appears
like a dream. Revenue has been declining
since 2016 and the company recorded in
2016 and 2018 (https://sapuraenergy.com/,
2019).
In terms of current capacity and position, it
should realistically possible to become the
best. The group currently has 2 Major

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Fabrication Yards, 6 Derrick Lay Vessels, 42
Remotely Operated Vehicles etc
(https://sapuraenergy.com/, 2019).
Timed - Objectives should provide a time
frame indicating when the objective will be
measured or a time by which the objective
will be met (Shahin and Mahbodm, 2017).
The Vision, mission and objective statement
of SEB does not appear to be time bound.
Table 1.0: SMART objective
2.0 PESTEL analysis
Political/legal The win for Malaysian opposition part in the 2018 general elections has
uttered the political climate in the country and this has had a significant
impact on the energy sector including a fast growth of renewable
generation and the promotion of green technologies Golingai, 2019). 20%
increase in the royalties to oil-producing states has also been muted.
Other changes impacting the industry include subsidizing and “stabilizing”
petrol prices etc All this has created an opportunity for this sector (Ling,
2018). However, the political instability in Malaysia is a threat to energy
sector. Political stability index in Malaysia is closer to weak than strong in
2017 (-2.5 weak; 2.5 strong) (Kana, 2018).

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Economic In 2018, Malaysia economic growth declined to 4.7% due to government’s
declining expenditure as well as lower public and private investments and
this have led the IMF and World Bank to cut low growth estimates to 4.6%
for 2019 and 4.8% for 2020 (Eng, 2019). This is a threat for energy, Oil
and Gas sector. However, boost in oil prices and the government’s
previous measures to reduce expenditures, by cutting subsidies led to
reduction in the fiscal deficit to 2.7% in 2018 and are projected to remain
at 2.5% for 2019 and 2020. The weakening of the Malaysian currency
coupled with decline Gross Domestic Product (GDP) had a negative
impact on energy sector but inflation fell to 1.0%-1.5% in 2018 (from
3.8% in 2017) (The Staronline, 2019).
Social Population changes, income distribution, lifestyle changes and
consumerism have all had significant impact on Malaysia Oil and Gas
sector. According to a Household expenditure survey conducted in 2018,
energy accounts for 38.4% of total monthly household spending (Lee,
2018). The fluctuation in the Brent oil price over the past three years

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affected the transport group which accounts for about 15% of the CIP
weight. A rise in energy prices, including crude oil, also causes prices of
other goods and services to increase as it affects the cost of production
(Murdipi and Law, 2016).
Technology In Malaysia in Oil and Gas sector, technological advances such as
horizontal drilling and hydraulic fracturing, which are unlocking shale
resources and playing an important role in creating the oversupply
responsible for persistently low crude prices (Dudley, 2018). Other
factors, such as the growing interest in electric vehicles, are affecting
demand. The impact of these forces, combined with the potential
disruption of digitalization, can be felt within Oil and Gas and adjacent
industries (Zakariah, 2018).
Environmental Over the last ten years, the energy industry has been affected by two
important factors: the growth of unconventional oil and gas (O&G)
production and renewable sources of energy. Currently, only 2% of
Malaysia's electricity is generated by renewable energy sources, as the
nation's energy generation is still highly dependent on limited fossil fuel
resources such as oil, coal or natural gas (Chu, 2019). Environmental
factors create a threat in Malaysia energy sector due to oil pollution, oil
spillage and global warming (The Staronline, 2019).
Table 1.0 PESTEL analysis
3.0 Porter’s 5 forces of Malaysia energy sector
Rivalry among firms There are so many companies in the energy/Oil and
Gas industry in Malaysia including the state owned

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PETRONAS (Zainul, 2019). This has led to forceful
completion in Malaysia energy sector due to existence
of competitors who are aggressive in seeking
leadership many of whom are of similar sizes. High
fixed costs and high exit barriers in the industry due to
outlay on expensive drilling machinery and other
equipment has led to intense competition (Tan, 2019).
Companies competing for the same consumers
include SEB, BAM and DGB (Ying, 2019). This is a
threat to profit maximization and market share
sustainability, however, liberalisation of the sector is
expected to promote healthier competition in the gas
supply industry and eliminate inefficiency (Zainul,
2019).
Threat of new entrants Barriers to entry in Malaysia energy sector are quite
high thereby creating a low threat. Barriers include
government restrictions (e.g. licensing), differentiation
and market penetration costs, access to supply and
distribution channels etc. licences in this industry
include re-gasification licence, shipping licence,
transportation licence, private gas licence, retail
licence etc. (Michael and Zen, 2019). High barriers to
entry create opportunity for existing companies. Bumi
Armada, for instance kicked off financial year 2019
(FY19) with a 28.5% increase in net profit (Say, 2019).
Threat of substitute services Solar energy is a substitute in this industry and
Malaysia in recent years has become one of the
largest solar PV manufacturers in the world. The entire
solar power industry in Malaysia is currently producing
67% of the 270MW of renewable energy (Chu, 2019).
However, it poses little threat as major players
embark on biodegradable products (Michael and Zen,
2019).
Bargaining power of consumers Power of consumers is insignificant in this industry as
the prices of products and services are regulated by

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the government. Switching costs play no part in this
industry. Oil and gas regulations in Malaysia include
development of oil and natural gas, import/export of
natural gas, LNG import/export, transportation,
transmission and distribution of foreign investments
(Tan, 2019).
Bargaining power of suppliers Suppliers are those who supply what organisations
need to produce the product or service. Powerful
suppliers/contractors can eat into an organisation’s
profits. Suppliers include SGS Bhd (Ying, 2019). The
suppliers in Malaysia energy sector may not be
powerful enough to exert influence on big players in
the industry thereby creating opportunity for profit
sustenance. The energy industry is multi-faceted and
diverse, comprising a wide range of disciplines and
processes (Michael and Zen, 2019).
Table 3.0 Porter’s 5 forces