Strategic Analysis of Schlumberger: Challenges, Benefits, and Choices

This report provides a comprehensive analysis of Schlumberger's strategic management, focusing on the period between 2014 and 2017. It begins with a brief history of the company, highlighting its evolution and key milestones. The report then delves into the rationale for selecting Schlumberger and the specific challenges faced by the company during the chosen period, including falling oil prices, government pressures, and the need to attract investments. It also explores the benefits Schlumberger provides, such as economic contributions and job creation. The report examines the strategic choices made by Schlumberger during this time, offering recommendations. The report uses information from the period 2014-2017 to give a clear picture of the company's performance in the oil and gas sector.

Running head: Strategic management
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stratagic management
Schlumberger

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Table of Contents
Introduction......................................................................................................................................2
Brief History of Schlumberger........................................................................................................3
Reason behind choosing Schumberger............................................................................................4
Challenges at the Hand of Schlumberger........................................................................................5
Benefits of Schlumberger................................................................................................................6
Economic benefits........................................................................................................................7
Employment and Job creation......................................................................................................7
Other benefits...............................................................................................................................7
Strategic choices made by Schlumberger........................................................................................8
Recommendations............................................................................................................................8
Conclusion.......................................................................................................................................9
References......................................................................................................................................11

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Introduction
Schlumberger is one of the largest supplier of technology in reservoir characterization, drilling,
manufacture and handling to the oil and gas industry. The company employees more than one
lakh people who represent over hundred and forty nationalities and has it wings in over 85
countries. Schlumberger is known in the industry for its widespread range of product and
services starting from exploration through production and integrated pore to pipeline solution for
hydrocarbon recovery that enhance reservoir enactment. Schlumberger is sitting on a huge pile of
money and made approximately $ 27.81 Bn from its continuing operations in FY 16.
Schlumberger has a rich experience of Eighty years in pioneering technology and innovation,
service and global expertise (Slb.com, 2017).
In the following sections, Schlumberger’s strategic choices will be shown during the period
2014-17, it will also be interesting to look at those strategic choices with a lens to analyze and
identify the reasoning behind them. It will also be interesting to see the benefits and the
challenges faced by Schlumberger during the period 2014-17, and also will mention some
recommendation for Schlumberger. The reason for choosing the period 2014-17 is simply
because , oil companies had to face a lot of trouble due to falling oil prices and the rising costs.
Hence, this period is definitely the most suited one, for analyzing the strategic choices made by
Oil and gas producer companies.

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Brief History of Schlumberger
Schlumberger is the leading producer of oil and gas in the world, with an experience of 80 plus
years in the industry, presence in 85 countries, a workforce of 100,000 people and workforce
diversity of 140 nationalities, the company has sure made its name in the market. Schlumberger
was a result of Schlumberger brothers, who opened their first office in the year 1920 at rue
Fabert in Paris. The Brothers then started with their geophysical surveys in Serbia, Canada,
Belgian Congo, The USA and Romania in the year 1923. In the year 1927, the first electrical
resistivity well log in Pechelbronn, France was recorded. The year 1930-36 was an era of
technological development for Schlumberger, with introducing continuous –recording hand
recorder to Spontaneous Potential (SP) log, Developing single-galvanometer automatic recorder
for logging in the field and finally to introduce the sample tracker tool in the 40’s. The company
headquarter was moved to Houston in the year 1940, owing to Geopolitical reasons. In the year
1946-47, the first ever offshore rig was deployed in Gulf of Mexico. The era of 50’s for
Schlumberger can be known as the era of new technology and strategic acquisitions. The
company has introduced Laterolog system to focus on currents into thin rock layers which is
beyond the borehole and at the same time launched its own magazine. The technical review. The
year 1952 saw Schlumberger buying 50% of Forex drilling Rig Company in order to boost its
drilling propositions. 1956 saw the company going for acquisition of a US testing and production
company to boost its R&D efforts. The era of 60’s, 70’s and 80’s saw Schlumberger growth
exponentially, from reaching out from ocean depths to moon, exploiting the fruits of the
exploration boom in the 70’s, to conducting a global research drive looking for suitable places to
rig oil. It was the year 1990 when the company started building its revolutionary products. Some
of the popular ones were optimal fluid analyzer, modular formation dynamics tester, combinable
magnetic tool & ClearFRAC non polymer & damage free fracturing liquid. These products have
relevancy till date in the company and have proved extremely beneficial in the success and
growth of the company (Vallejo et al., 2015).
The era of 2000-2009 saw Schlumberger building on its core strength, it showed commitment of
the company towards its essential energy industry tools and services. This was evident by

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noticing the company moved its headquarters from Houston to New York in the year 2006, in
order to consolidate the presence of company in the civic that was contributory in the
development. It also reinforced its seismic offering, Geco-Prakla was combined with western
geophysical in 2000 to create westernGeco, owned jointly by Schlumberger and Baker Hughes.
Acquisitions like Sema PLC, a UK based IT consultancy, Phoenix, a Scottish based submersible
pump technologies company and Sensa fiber optic temperature sensing solution was also
acquired by Schlumberger. Hence, it is evident that the company was focused on doing its
horizontal and vertical integration (Yusuf et al., 2014). They were also serious about the
expansion and getting a strong hold position in the oil and gas industry. The reason for choosing
Schlumberger is its rich background history and its persistent efforts in reaching to the top and
making a mark for itself.
Reason behind choosing Schumberger
The outlook here (2014-17) shows the specialty of the company and what has been happening in
all these years and how the company has been performing in the challenging oil field industry
and lastly these are the reasons behind choosing this industry for the assignment.
 Sharp fall in oil & gas prices- after rapidly falling by over 50% , oil prices remain volatile
in the $50 per barrel range, LNG prices also fell due to weak demand and rising supplies.
 Oil demand response is limiting stock builds-Global oil demands have picked up
significantly in recent months- with Asia and the US becoming strong markets. Stocks
were still building but not as it was expected to rise.
 Oil and gas producers responding to lower prices- Prices of US rig numbers have fallen,
despite producer hedging, with even some of the best shale players testing breakeven.
Prices still below the levels needed to justify investments in many parts of the world.
 Slowdown of Non-OPEC supplies- US output, is always the first to respond to falling
prices, but it hasn’t been in a position to react since a long time. Record investments

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which are driven by high prices temporarily reversed the declines across non-OPEC
supplies outside the US (Shuen, 2014).
 Two –tier OPEC not in a mood to cut its output
 Lower prices adding to the existing geopolitical issues- Lower revenues fuel the political
and security issue that are already disrupting the output in countries like Libya. A large
number of militant groups are also spreading across various regions, limiting energy
investments (Sharma et al., 2017).
 China’s increase in demand for petroleum is draining the economy and further forcing the
prices to be volatile.
 Asia Pacific is well known for its demand growth. In between 2012 and 2035, Asia
Pacific has world’s demand growth in liquids and it is expected to be about 72%.
 The European Union with an intention to increase their share of alternative fuels in
energy supply portfolio which ultimately meet the severe emission targets.
 In East the consumption is on rise, mainly in China & India, and this increase in
consumption lead to attract imports and oil supplies.
It can be easily said that the oil and gas industry has taken quite an international approach in its
behavior and attitude, and the years ahead suggests to do the almost the same, which is going to
generate the high levels of inter-dependence and connectivity. Leading the world to be a safe
place for it (Martin, 2014).
Challenges at the Hand of Schlumberger
 Dealing with the 3D effect-It is a known fact that existing wells are drying up rapidly,
and the demand for the oil is increasing, hence meeting this demand supply gap is one of
the biggest challenge at the hand of Schlumberger. Businesses these days are finding new
sources but at the same time the sources are proving to be extremely hard to access and
requires deep underground cutting tools and a very rich manpower (Peppard, 2016). All
this comes at an additional cost. With the problem happening at the time when the
demand of oil and gas is at the highest is putting too much pressure on Schlumberger.
Hence, SchlumbergerSema is also in talks with some rival firms, to leverage their

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technology and forming a joint venture, which until now seems difficult owing to its
workforce diversity and cultural conflicts (Johnson et al., 2013).
 Handling Government Pressure-Increasing carbon footprint is a source of big concern,
hence government all over the world is trying hard to reduce the carbon footprint and
curb down the greenhouse emissions, and this is putting businesses under a lot of
pressure. Recently Schlumberger has to shut down two if its refinery owing to excessive
emission of carbon. It has also been seen in reports that oil and gas has now overtaken
transportation as leading producer of greenhouse houses (Kits, 2017).
 Attracting Investments- After the slump in productivity in the year 2011, the sector has
not yet fully recovered, this has made investors rethink before investing money and hence
comes a cash crunch. Schlumberger is facing big issues in attracting investment, as it is
under pressure to show consistent performance, which they have not entirely lived up to
the expectations of its shareholders in the recent past (Hill et al., 2014).
 Improving Safety Standards- Oil being the most important natural resource and probably
one of the costliest and also with the highest hazard causing capacity. Hence it’s
extremely important to work towards the safety standards. In the year 2013, EU has asked
the companies to maintain the highest safety standards. A lot of oil spills in the Gulf
Ocean etc., have made it mandatory for all oil firms to keep their workforce and the
environment safe. This puts additional pressure on Schlumberger, as they have to rework
on all its plan according to the new standard of safety (Olajire, 2014).
Benefits of Schlumberger
Schlumberger quantified the benefits to the activities they are involved in and gave multiple
effects in instance with benefits to the economy and raise GDP by their gains. Total benefits of
Schlumberger as oil industry in relation to economy are being estimated $1.2 trillion in gross
product every year. In terms of employment, company has more than 9.3 million permanent jobs
in the United States (Halsey, 2016). Both ways the activity in oil service providing represents
nearly 7% of the United States economy. The benefits of the industry has been doubled in the
past 10 years. The contribution of the company cannot be exaggerated much as it does to overall
economy. By providing hundreds of thousands jobs to the workforce in their industry which
revives the manufacturing industry in United States. It also provides or supports many indirect

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jobs too in the field of engineering, accounting, communications, and safety and most
importantly the environmental management. There are businesses namely vehicle leasing,
electronic manufacturing etc. and their success depend upon then the oil industry activity and the
communities around. It can be said that Schlumberger benefitting employment, economy and
other businesses (Hawdon, 2017).
Economic benefits
The economic benefits provided by Schlumberger to the nation’s economy is far outstrip its
earning. It has created spur in the economy by providing thousands of jobs in the years of its
growth. In the past year this industry has delivered, if roughly estimated equivalent to 60 percent
of the government package to the US economy. The benefits in taxes and royalties has also seen
a rise, company pays billions of dollars as taxes to government of US and by another way collect
royalties which benefits financially to the economy (Munasib, 2015). These taxes and royalties
paid by the company to government help in paying the services provided by government named
as health care, education and infrastructure which ultimately benefit people living in US. The
investment made in this industry by way of mutual funds and other funds results into higher
profits and also it supports other businesses and job in the economy (Dholakia et al., 2015).
Employment and Job creation
Schlumberger represents more than one lakh employees in over hundred and forty nationalities.
It operates in more than Eighty five countries all over which generates $27.81 billion revenue
from their continuing operations. Employees work directly for the industry from coast to coast
and helped bringing energy to the consumers. The fields where company provides employments
are direct and indirect, as Schlumberger is one of the technological innovators who provide oil
operators upgraded technology in order to help them increase their production and recovery from
the resources which are nonrenewable by working efficiently with a less impact on environment
(Colgan, 2017). So the requirement of engineers are on a high scale but other fields including
accounting, law, and communication. It has created a base for many fields in the economy
(Noreng, 2016).

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Other benefits
Schlumberger has given benefits to other industries as well they are petroleum based industries,
vehicle leasing industries and electronic based industries. Though environmentalists claim that
solar and wind energy are best to save environment but they lack in producing power as required
24 hours a day. Whereas oil can produce power which goes to home all day long, additionally
the mature technology has been developed which gives a higher reliability to the source. Being a
top most oil service provider Schlumberger, has been competitive in years and provide oil
services to not only in the home country but international that ultimately increases the exports of
the country. The exportation has decreased the reliability for oil needs on foreign countries and
saves a lot for the US economy (Bergh et al., 2014).
Strategic choices made by Schlumberger
To enhance the competitive advantage at an international level, a company needs to form
strategic options to execute the same in order to achieve goals. Schlumberger which is known to
be a leading supplier and trader of oil and plays a major role in the complex supply chain of oil
to all over the world in an effective and efficient manner (Frynas, 2015). They are striving to
bring together the optimization of products and the supply flows in and out of the company’s
assets. The activities which are associated with the risk management are also merged into one
single function. The supply entails and the trading activities which encompasses oil and oil
products thus creating a clear division between the company and the competitors by considering
the whole structure and scale of the company (Alizadeh et al., 2016). Another choice made by
the company is market penetration, the growth strategy in which they focus on sale of their
existing products in the existing market. They mainly focus on the maintenance of the existing
products and operations to increase their market share by combining the strategies of pricing,
advertising and the sales promotion. They believe in securing the growth and dominate the
market by doing so. The restructuring of mature market by applying few aggressive campaigns
of promotion with an intention to eliminate the competitors. The diversification, product
development and market development are other strategies adopted by Schlumberger to mark
their success and improves economy too (Analoui, 2015).

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Recommendations
Though company has all the processes, up-to-date technology and an expertise in project
management which is necessary for E and P well construction. Schlumberger can provide
benefits to their operators simply by managing project in the coordination of its products and
services for a single or multiple-rig projects. There are high degree of scope in coordination and
project management. The coordination in services will help company to take overall
responsibility for operations they deal in. An another recommendation can be given to the
company in order to improve their strategic direction would be integration of their services
management, drilling services and projects and deliver the integrated multidiscipline services.
This step of integration will lead to improve operational efficiency of projects by managing and
coordinating company’s and third party products and services.
Conclusion
A leading provider of technology, oil and gas services, Schlumberger who supplies varied range
of products and services and represents over 140 nationalities in more than Eighty five countries
by employing approximately one lakh people who work for the exploration by producing and
integrating pore-to-pipeline solutions. The challenges faced by the industry in US and all over
the world where they use to export are mentioned and how they deal with the same. The benefits
they have given to the economy are numerous. The strategies they have adopted in relation to
increase their growth prospects and market share.

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References
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