Schlumberger: Strategic Analysis of External and Internal Factors

This report offers a comprehensive strategic analysis of Schlumberger, the world's largest oilfield services company. It begins with an introduction to Schlumberger, followed by an in-depth examination of its external environment, including an industry overview, PESTEL analysis, Porter's Five Forces analysis, and an Ansoff Matrix to understand market penetration and development strategies. The internal environment is then assessed using SWOT and VRIO analyses, and a value chain analysis to identify core competencies and areas for improvement. The report also examines Schlumberger's key strategies. Finally, it concludes with strategic recommendations to enhance Schlumberger's competitive advantage, drawing data from secondary sources. The report aims to provide a thorough understanding of Schlumberger's position in the oilfield services and equipment industry.

Running head: STRATEGIC ANALYSIS OF SCHLUMBERGER
Strategic Analysis of Schlumberger
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1STRATEGIC ANALYSIS OF SCHLUMBERGER
Table of Contents
1. Introduction..................................................................................................................................3
2. External Environment analysis of Schlumberger........................................................................3
2.1 Industry overview and analysis..............................................................................................3
2.2 PESTEL analysis of oilfield services and equipment industry..............................................4
2.3 Porter’s Five Forces analysis.................................................................................................7
2.4 Ansoff Matrix.........................................................................................................................9
3. Internal environment of Schlumberger......................................................................................10
3.1 SWOT Analysis...................................................................................................................10
3.2 VRIO Model........................................................................................................................12
3.2 Value Chain Analysis...........................................................................................................14
3.4 Company Key Strategies......................................................................................................16
4. Strategic Recommendations......................................................................................................17
Reference List................................................................................................................................19
Appendices....................................................................................................................................22

2STRATEGIC ANALYSIS OF SCHLUMBERGER
1. Introduction
Schlumberger Limited is the globally acclaimed and world's largest company in oilfield
services. Schlumberger is a public limited company and it is in the industry of oilfield services
and equipment. Schlumberger was established in the year 1926 in France and it has four
executive offices in Paris, Texas, London and in The Hague. It serves in worldwide basis as it
has its single entity services in more than 85 countries. Schlumberger employs more than
100,000 employees and the employees are from more than 140 countries (Slb.com 2018).
Schlumberger Limited supplies services and equipment to petroleum industry such as seismic
acquisition, well testing, formation evaluation. Directional drilling, artificial lift, software and
information, well cementing and flow assurance. Schlumberger makes itself involved in the
groundwater extraction and industry like carbon capture and storage. Schlumberger started its
expansion in the year 1960 and till now the organisation has been taking the same process of
acquisition and merging to expand the business.
In this study, external and internal environment analysis of Schlumberger is done to
provide the range of potential solution. The emphasis is given on to achieve the competitive
advantage of Schlumberger and the choice of final strategic decision is given at the end. All the
data has been taken from the secondary sources to recommend with justification to grab
competitive advantage to Schlumberger.

3STRATEGIC ANALYSIS OF SCHLUMBERGER
2. External Environment analysis of Schlumberger
2.1 Industry overview and analysis
Schlumberger is an oilfield service and equipment industry is typically made up of the
companies that are depended on mainly drilling expenditure of natural gas and oil producers. The
demand for the fuels fluctuates in the economy; therefore the oilfield services stocks can be
considered cyclical (Epmag.com 2018). Companies in oilfield industry consist of two main
categories; one type provides various services that required evaluating, maintain and constructing
in oil and gas wells; another one rents the drilling rigs to the companies. The prices of oil and
gases are the key indicators for the performance within the industry. The prices of oil and gas
industry affect mainly determination of the population growth, general business conditions and
economic development (Hantschel and Kauerauf 2016). OPEC (Organisation of Petroleum
Exporting Countries) plays the main role in setting the prices of the oil and gas, production cost
and exploration of the oil and gas. There were almost 2,500 active rigs in the year 2010
worldwide and oil-drilling had the international focus. In North America, the natural gas drilling
was important. Technological advancement came into existence and total rig reached the figure
of 5,000 hit (Epmag.com 2018). Oilfield service organisations tend to be value-based and rig
companies share are worth the market value of the equipment. Cash flow is used to value the
stock and earning is essential. Revenue of Schlumberger was US$ 27.80 billion the year 2016
and operating was US$ 3.28 billion in 2016 (Slb.com 2018). Schlumberger named itself in
Fortune 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 risk
in working oil and gas services and equipment industry. Schlumberger is a large organisation and

4STRATEGIC ANALYSIS OF SCHLUMBERGER
it has to work in more than 85 countries. Therefore, political stability will provide an importance
towards doing the business as single entities in different countries. Corruption is another factor
of doing the business and less corruption will bring the best business and fresh employees. Each
of 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 to
do the business. Controlling hydrocarbon reserves permits the governments to sell rebate to
various 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 the
upstream 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 the
climate change issue. Kyoto protocol established the legal commitment for the countries to
decrease the emission of greenhouse gas.
Economic: Schlumberger works in the global arena and the macro environmental factors
are associated with the saving rate, inflation rate, foreign exchange rate, savings rate and
economic cycle. Schlumberger needs to assess the type of economic system in which the
organisation operates and government intervention in the free market can also be assessed by the
organisation. As opined by Hammami et al. (2018), exchange rate and stability of the host
country needs to judge in order to operate in the global arena. In addition, GDP growth of the
country and the oil companies' infrastructure quality can help the business to grow. The global
economy is dependent on the continual supply of the oil and gas at reasonable prices. The
demand for the oil is depended on the economic growth of the country. When the demand for the
oil and natural gas grows, the demands of the oilfield services and equipment eventually grow.

5STRATEGIC ANALYSIS OF SCHLUMBERGER
Oil producers are exposed to the change in the exchange rate and it provides greater stability for
the profitability of the organisations.
Social: Attitudes of the people and shared beliefs can impact on the business of
Schlumberger. This organisation mainly depends on the employees and the skills of the
employees to use the technology. Demographics and skill level of the employees is an important
factor along with class structure, power structure and hierarchy. The organisation has various
single entities, therefore, workplace culture needs to evaluate with social conventions. The share
of oil and the total energy consumption drastically dropped in last decades. The clients of the
organisation are mainly business entities and the common people start showing interest in
alternative energies like solar, hydro and biofuel energy. Schlumberger takes initiative to do the
social responsibilities for the betterment of the society. Therefore, the most of the big oil
companies claim the supporting role in the development of the society.
Technological: In the oilfield sector, technology is very important as the industry is
technology-driven. Technology is the key factor from the exploration of the oil to the refinement
of the oil. Innovation and improvement of the technologies help the companies to upstream the
process to extract a large amount of crude oil (Mittal and Groening 2016). Schlumberger uses the
Wireline technologies as it needs to have the information to evaluate the subsurface information
of the fluids and rocks. The organisations use the directional drilling to measure the rocks and
wells. 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-term
sustainability.

6STRATEGIC ANALYSIS OF SCHLUMBERGER
Environmental: In oil and gas sector, the environmental factor is important as the large
exploration of the oil and gas eventually reduce the level of oil and gas underneath of soil.
Extraction of the oil and gas leads to the oil spill and it harms the community and society. The
emission of natural gas and the oil spilling in the oil platforms can harm the brand image of the
oil companies and oilfields. Companies spend their shares to bring profit from the environmental
refineries and restoration. Schlumberger makes the inactive sites as the gas processing sites,
terminals and disposal of wastes and service stations. Safety and quality of the transportation are
needed as transportation of hydrocarbon has inherent risks.
Legal: Oil industry and oilfield equipment industry is subjected to the legal restriction
that ranges from specific drilling obligation, environmental and safety protection, employee
rights and control over development and decommissioning of the field. Employment laws, data
protection laws and consumer protection laws; all need to follow the company. Legal factors
related to the large upfront concession fees, taxes and special royalties all should be followed by
the company (Gupta and Grossman 2017). Recently, there are many laws like fuel specifications,
emission control and climate change should be followed.
2.3 Porter’s Five Forces analysis
Industry rivalry: Industry rivalry in the industry is not high as the global presence of
Schlumberger makes the organisation solo player in the market. Under the umbrella of OPEC,
many of the organisations play an important role to improve the technologies. Major players in
the market are Larsen & Turbo, Nalco Champion, Baker Hughes and Halliburton. This force is
medium. This force can be higher through big producers and other competitors are doing merger
and acquisitions to increase competitive strength.

7STRATEGIC ANALYSIS OF SCHLUMBERGER
The threat of substitutes: Threat of substitute in the market is limited as there are not
many equipments and service providers that can manage the drilling, well measurement and
extraction of oil. The technologies provided by Schlumberger are dominant are prevailing; still,
the technologies are not irreplaceable easily (Yu et al. 2017). Drilling and exploration
technologies are getting more sophisticated and competitors in the market are trying to improve
the technologies. This force is low.
The threat of new entrants: Threat of new entrants in the oilfield industry can impact
on the potential competition. The threat of new entrant in the oil and gas sector is important
despite the potential attractiveness of the industry. In oilfield service industry, barriers to entry
are high as there is a huge capital requirement in order to make a new organisation in this sector.
In oilfield service and equipment industry, the organisation needs to have high human and
technological resources so that it can vertically position itself in the industry. The new
organisation needs to have enormous up-front investment for the development of the company.
The cost does not associate only with an exploration of the oil-field; but also the drilling service,
labour, scientific research and materials and energy. Unit costs are high as economies of scale
are high in this sector. Therefore, small and new companies cannot manage to handle a large
amount of money. This force is low.
Bargaining power of customers: Customers can impact on the profitability of the
industry as they can bid down the price in the industry and the customers can demand the high
quality. The customers of Schlumberger are the oil and gas companies and oil is traded over the
counters between two parties. Schlumberger has opportunities to do the business with the oil and
gas companies. The customers do not have many options to choose other companies as
Schlumberger is the largest equipment service providers in the industry (Ji et al. 2017). Among

8STRATEGIC ANALYSIS OF SCHLUMBERGER
the customers; international companies, marketers, traders and distributors. The customers do not
have much power to switch the company as customers do not face switching cost as the
equipment and oilfield service is very important for the customers. This force is medium.
Bargaining power of suppliers: Suppliers can erode the future potentiality of the
organisation as they can raise the prices (Rumelt 2012). The suppliers of Schlumberger are
various as the organisation has many entities around the world. The organisation has a global
presence and suppliers' business relation must be good. The suppliers of the Schlumberger are
equipment makers and the technology service providers. The Suppliers business relation with
Schlumberger is based on reliability, trust, cooperation and communication. Schlumberger
procures products through manufacturer and suppliers that expresses high quality and standards
for the exceptional level of quality and services, solid delivery performance and competitive
pricing and effective after-sale services. In this regard, in oilfield service industry, suppliers have
a good role in providing the business competitive advantage through adding value through
quality and support of the services and products (Moldown et al. 2015). The organisations use
technologies that permit effective access to information and seek new technologies and local
manufacturing. The switching cost of the supplier is high and suppliers have built up IT
infrastructure with e-business transaction. This force is high in the market.
(Refer to Appendix 1 for Five Forces Table)
2.4 Ansoff Matrix
Market development: The industry of the oilfield service cannot be increased as the
natural resources are limited. Most of the energy producing companies are putting stress to make
renewable energies. Schlumberger is operating in such a sector where the no such scope is there

9STRATEGIC ANALYSIS OF SCHLUMBERGER
to develop the scope of the business. The market is saturated. Schlumberger can find a new
market to start its operation apart from 85 countries. The organisation can make a partnership
with large oil and gas companies to give assistance in their exploration work in new countries
and new geographical areas. New geographical areas are included in African regions and the new
areas where no other companies penetrate.
Diversification: Schlumberger provides services of equipment through giving the supply
to petroleum and natural gas industry such as processing and acquisition, seismic work, well
testing, directional drilling, stimulation and cementing. Diversification strategy works in
developing a new market with a new set of services and products (Barney 2014). In each aspect
of oil and gas industry; Schlumberger has its entities. Schlumberger can start its work process
apart from the oil and gas; they can start its journey in non-renewable energy resources. In case
of non-renewable energy, the companies have to shift one of its centres in producing the
alternative energy resources apart from oil and gas. Oil and gas resources have been depleting
with time, therefore, the organisation needs to shift its target customers. The new market will be
Europe where they will target the non-renewable energy market.
3. The internal environment of Schlumberger
3.1 SWOT Analysis
Strengths:
 Schlumberger has quality Research and Development unit and this unit works intensely
in order develop new technologies and equipment to make the work process easier to
extract and explore oil field and natural gas.

10STRATEGIC ANALYSIS OF SCHLUMBERGER
 Schlumberger has always got the favour of the political parties in which countries it goes.
Political support makes the organisation bigger with time.
 The strength of the organisation is the global presence as it already has its entities in more
than 85 countries. In addition, the organisation has employed more than 120,000
employees from 140 different nationalities of the people (Slb.com 2018).
 Schlumberger has the largest market share in its industry as it is the largest oilfield
service provider and the equipment service providers. The communication within
organisation works well and the communication leads to better bonding with the
employees.
 The staffs of the organisation are motivated and they are highly trained to get the work
process done in less period of time. Schlumberger has a good set of technologies and it
has technical capabilities to work for good.
 Most importantly, Schlumberger uses the merger and acquisition technologies in order to
develop the market share. Schlumberger started its acquisition from acquiring Dow
Chemical and in the year 1987, Schlumberger purchased Neptune and Schlumberger
acquired software organisation GeoQuest system in the year 1992 (Reuters.com 2018).
Weaknesses
 Schlumberger has the weaknesses of legal issues as the organisation has been facing the
legal issues from many of the countries. In addition, Schlumberger legal proceeding to
combat with these issues is not strong.
 Schlumberger faces the issue of an oil spill in many of the countries and leaking of oil
can contaminate the water. In addition, radioactive sources can cause the issue in the
society. Therefore, Schlumberger faces the weaknesses in environmental issue.

11STRATEGIC ANALYSIS OF SCHLUMBERGER
 In recent time, the revenues of the organisation are declining and it declined by 2% in
2016 than 2015. In the North American section, revenue slumped 33% and earning is also
declined (Epmag.com 2018).
Opportunities
 Schlumberger believes in merger and acquisition of the business. Therefore, the
organisation can make acquisition of any of the renewable energy company in order to
spread the business in the non-renewable sector.
 Increasing demand for oil and natural gas is another plus point for Schlumberger as in
global market; the demand for oil and natural gas is high.
 Schlumberger can deploy commodity plan by improving the technology. In addition,
supplier development needs to improve through making activities in different sections.
Threats
 In the global market, oil price fluctuates and therefore, the demand for oilfield services
and decrease with time.
 In the market, there are environmental laws in different countries. The governments in
different countries set different rules and regulations; therefore; Schlumberger needs to
follow these rules.
 In some of the countries, economic stability is not good; therefore, Schlumberger may
face the issue of low economic development.
3.2 VRIO Model
Resources of Schlumberger