Strategic Management Report: Oman Oil Company's Outsourcing Strategies

This report offers a comprehensive strategic analysis of the Oman Oil Company, examining its current operations, internal and external environments, and competitive advantages. It delves into the company's strengths, weaknesses, opportunities, and threats (SWOT) and evaluates its strategic position using the Bowman Strategy Clock. The report highlights potential outsourcing opportunities, particularly in process planning and manufacturing engineering services, to enhance cost-effectiveness and resilience to market changes. It explores various strategic choices, including integration and diversification, and provides recommendations to improve profitability and maintain a competitive edge in the oil and gas industry. The analysis considers the macro and micro environments, value chain, and the impact of global market dynamics on the company's performance. This report provides a detailed overview of the company's challenges, and strategic options for future growth.

Running Head: STRATEGIC MANAGEMENT 1
Strategic Management

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Executive Summary
The present report is focused on the Oman Oil Company and its strategic operations. The
company is currently serving the local markets of Oman as well as a few foreign companies. The
external environment of organization is ideal for the company to outsource its operations to
foreign countries. The outsourcing is the process of tendering the non-core activities of the
organization to other companies. It is a part of the cost-containment strategy of the organization.
The Bowman Strategy Clock has evaluated the strategic position of the company. It has been
evaluated that the Oman Oil is one of the premier organization in the oil industry; however, it
needs to adopt different strategies to reduce its overall cost.

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Table of Contents
Introduction......................................................................................................................................4
Strategic Choices.............................................................................................................................5
Macro and Micro Environment Analysis........................................................................................6
Microenvironment.......................................................................................................................7
Macro Environment.....................................................................................................................8
Internal Environment Analysis........................................................................................................9
Sustainable Competitive Advantage............................................................................................9
7s framework.............................................................................................................................11
Porter’s Generic Strategies............................................................................................................13
Cost leadership structure............................................................................................................13
Product differentiation strategy.................................................................................................14
Focus Strategy...........................................................................................................................14
Bowman’s Strategy Clock.............................................................................................................14
Integration......................................................................................................................................15

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Diversification...............................................................................................................................17
Strategic Choice.............................................................................................................................18
Conclusion.....................................................................................................................................18
References......................................................................................................................................20
Appendices....................................................................................................................................23

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Introduction
Oman Oil Marketing Company was established in 2003 and the company worked as a leader in
the country’s energy sector. It is providing superior customer service in accordance to the
international standards. There are several of the core business activities of the organization, such
as marketing and distribution of the fuel and the lubricant product, direct selling to the public and
the private sector, aviation refueling and storage and distribution of the product. It has the
highest number of human resources in the country and has developed several long-term
objectives. Several business units have been developed which supports the overall strategy and
the long-term business objectives of the organization.
In the present times, the organization is facing several challenges due to the changes in the
marketplace. The major rivals of the company are Shell Marketing and Al Maha petroleum
which provides similar services and product offering. However, with the decline in the
international oil prices, the profitability of the government has also reduced. It has resulted in
decline in the company’s income. The company is actively seeking different cost reduction
methods to maintain the profitability of the organization. A strategic decision has been proposed
to outsource some of the activities of the organization, so that the overall profitability of the
company can be maintained. The activities conducted in house are outsourced so that the fixed
cost of the organization can be transformed into variable cost. The outsourcing decision is the
strategic issue of the organization as the company needs to determine which activities will be
outsourced from the organization.

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Strategic Choices
The focus of the present report is to identify the best organizational activities which can be
outsourced to external organization. The primary aim of outsourcing is to make the organization
more resilient to the economic changes. There are several services which can be outsourced to
different companies. It includes energy trading and risk management (ETRM), supply chain
management, enterprise asset management, IT infrastructure and the retail automatic solutions.
Other than that, there are also several secondary activities such as finance, accounting and human
resources which can be outsources to the foreign companies. The company can avail the benefits
of cost containment by two services, namely, outsourcing manufacturing engineering services or
outsourcing the activities related to the data center.
In the oil and petroleum industry, the manufacturing process planning is a significant step in the
success of the manufacturing process of the company. It is the process of selecting and
sequencing different processes so that the manufacturing process can achieve the goals of the
organization and satisfy the demand constraints. In this regard, a process plan document is
designed which contains the information regarding sequencing of operations, work centers, cycle
times and the production resource tools. It is mandatory that these routers are generated
irrespective of the work load, quantity and the scheduling constraints. It provides timing of
different operations and cost estimation of different components. It is also important in matching
the operations, selecting the most suitable machines and determining the optimal time for the
product quality requirements.

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There are several challenges in designing the process planning routers in the oil and gas industry,
such as an increase in the competitive pressures, statutory regulations and the dwindling order
sizes. These challenges require that there is close collaboration between the input providers and
the customers. The document should be able to develop the core competency of the organization
and develop its core competency in all of its future endeavors. The planning process is essential
in optimizing the cost and delivery time of the product. Outsourcing the Process Planning
Routers can make the manufacturing process cost-effective and efficient. It can increase the
technical capabilities of the manufacturing process. The companies are using the orthodox
approaches wherein the entire process planning team is working nearby the manufacturing site.
This task could be handled efficiently in the remote location which can provide high cost-benefit
analysis through the outsourcing of the services. The process map ensures high productivity
without any sacrifice in the product quality.
Macro and Micro Environment Analysis
In the business environment, there are different types of factors includes which can create an
impact on business. The micro and macro environment of business are related to the external
environment of the company. The Microenvironment is related to the internal and macro
environment is related to the external environment of the company (Chen, Kim, and Yamaguchi,
2014). Following are the Micro and Macro environment of Oman Oil Company.

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Microenvironment
In the microenvironments of the company, SWOT analysis framework is used. The SWOT
analysis helps to evaluate internal strengths and weakness of Oman Oil Company.
Strengths
The strengths of the oil company is that it is a leader in Oman oil industry. Due to its strategic
choices, the company is getting an advantage to lead in domestic market and access the attractive
export markets. The oil refinery has one of the largest production capacities, with a total oil
refining capacity of approximately 10 million tons of crude oil per year. The company is mainly
associated with downstream oil activities and provides service to customers according to
international standards (Bohari, Hin and Fuad, 2017).
Weakness
The main weakness of the company is the decrease in the financial position of the company.
Oman Oil Company’s income is continuously decreased in the global market. Despite net losses,
its long-term liabilities have shown no signs of reducing and as such, they are causing worry to
the company. The competition from the foreign companies is also reducing the profitability of
the organization.
Opportunities
The strategic plan of the company’s investment helps the company to expand its business in the
global market. The company also has an opportunity to take advantage to increase its position in

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the new energy market and to establish a Hydrocracker to improve the refinery’s diesel and jet
fuel yields (Chen, Kim and Yamaguchi, 2014).
Threats
The main threat is the decrease in demand for oil products. In the last few years, due to increase
in environmental awareness and the use of clean energy sources has resulted in decrease in
demand for oil. In addition, rising cost in the refinery sector can also increase the operation costs.
The foreign and the local competitors are using new strategies to increase their productivity and
increase the profits of the organization. The declining profit margins is another threat for the
business organizations.
Macro Environment
It can be deduced from the macro-environmental analysis that the external market conditions are
ideal for the organization. It can be analyzed from the appendix that the country is supportive of
the oil and the gas industry. The government supports the oil and gas industry as economy of the
country relies on the oil and gas industry. The economic conditions of Oman are fairly good and
the GDP of the country is one of the highest. As such, the people consumes petroleum and the oil
industry products at a very high rate. As the income level of the people is very high; people
consumes the energy products which is beneficial for the organization.
The technical infrastructure and the technology in the country is fairly developed. Due to oil and
the gas industry, the gross income and the profitability of the country is very high. The
government has invested in developing the infrastructure which will be beneficial for the

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companies in the oil and gas industry. With the wide prevalence of the oil companies in the
industry, the infrastructure of the country has been developed. The company can perform its
actions with ease and efficiency in the presence of this infrastructure.
Internal Environment Analysis
The internal business environment is in control of the company (Liu, 2013). The internal
environment emphasize on developing effective business strategies so the company can ensure
long-term business growth. Following are the internal environment framework which defines the
internal environment of Oman Oil Company.
Sustainable Competitive Advantage
It refers to company assets, attributes or abilities which is difficult to duplicate or exceed. It
provides a superior or favorable long-term position over a competitor. The sustainable
competitive advantage helps the business in creating a sustainable advantage over its
competitor's. The main competitive advantage of the company is to provide unique and quality
products to its customers. The major rivals of the company are Shell Marketing and Al Maha
petroleum, but the Oman oil company have a large share in the market. Due to its larger share
market, the company is able to maintain its profit (Vanpoucke, Vereecke and Wetzels, 2014).The
products which are offered by the company are also different and unique. The company focuses
more on quality; therefore it can retain customers for the long term.

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In addition, Oman Oil Company’s competitive advantage also includes experts in the production
and distribution team which helps the company in maintaining its supply chain management.
Value Chain
The oil and gas industry is a highly complex business. In the today’s economy, oil has become
essential products and it essential in all the energy requirements. These products are in high
demand in industry, commerce, retail, and commercial/domestic purposes. The value chain of the
oil company is divided into two parts primary activities and secondary activities.
Primary activities
The primary activities of the company include its core activities. The inbound activities of the
company include storage and distribution of oil products. Oman Oil Company exports its oil
products in the many countries. The inbound activities help the company in oil production. In the
operation, the company turns raw-material into the finished goods. At this stage, the company
refines and process oil through the different production process. The outbound logistics of the
company is associated with selling final products to consumers. Through the effective supply
chain management and distribution network, the company manages its outbound logistics. The
marketing and sales activities of the organization are done through the distribution channel and
effective sales techniques (Olson, 2014). For selling and marketing oil, company offer low-cost
products to its targeted customers. In the services, the company makes focus on building
customer’s loyalty through a high level of customers services. The oil company provides quality
products and services to its customers so they can retain customers for the long terms.

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Support Activities
In the support activities, the first step includes infrastructure. This includes management, finance
and legal etc. Oman Oil Company has well designed an efficient production process. In this, the
company offer quality services and also offer effective infrastructure to its employees. In HR, the
organization’s workforce committed towards growth and success. The HR of Oil Company is
providing training to employees so they can keep control on employee’s turnover. The Oman oil
company is well aware of the technology not only in the production process but also in the
provide customers services (de Souza and Márcio de Almeida, 2013). In the procurement, the
company extracts oil through its refinery. Mainly the support activities are outsourced to the
foreign company.
7s framework
The 7s framework of Oman oil company is as follows.
Structure
Business needs to be organized in a specific way. The structure of the Oman oil company is
hierarchical with several divisions. All the decisions are moved from top to bottom and each task
is performed by specific department (Singh, 2013).
Systems

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The system of the company is associated with the strategy and internal process. This system
assists in building day to day strategy and operations. In the Oman oil company, bureaucratic-
style process model are followed where all decision are taken by the top management.
Skills
It applied in the all 6s process. For designing the internal environment of the company more
successful the Oman Oil Company has led innovative ideas in the system and shared values with
staff members. The skills of the company is based on providing quality products to end users and
increasing efficiency in the production process (Szeto, 2017).
Style
The style of the company is to emphasize the organization culture. Each business firms has its
own culture of complete its tasks and responsibility with that culture. The Oman oil company
provide an open, innovative and friendly environment. The company follows hierarchical
structure; therefore, it also has a high chain of command so it can establish high ethical standards
within the workplace.
Staff
For the human resources, the company hires best employees and workforce. It is the central
position of strategy (Gyepi-Garbrah and Binfor, 2013). The Oman oil company is providing
extraordinary emphasis to the training and development program so they can take advantage of
the competitive business environment.

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Shared Values
All members of the organization share some common fundamental ideas or guiding concepts
upon which the business is established. The shared value of Oil Company is to focus on
providing excellent services and products to customers.
Strategy
It refers to the plan of action which prepares a company to respond its external environment. The
strategy of the company is to focus on developing long term tactics and outsourcing (Mwangi,
Nyamori and Maina, 2015). Through the outsourcing, the business can control over its cost of
products and services.
Porter’s Generic Strategies
Each business organization has different market segment and according to these segments,
strategies are developed. Following are the porter generic strategies.
Cost leadership structure
The cost leadership structure is based on providing low-cost products to the customers. When the
company has large scale of business and large production then it can increase the market share
use this strategy (Tanwar, 2013). In this strategy, the company offers low cost budget products to
customers so they can retain them for the long term. In the present situation, cost containment
strategy is important as the profitability of the organization has declined.

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Product differentiation strategy
The generic strategy focuses to provide different types of products and services which are totally
unique as per the need of customers. Such type of services are offered by the company when
customers are not price sensitive and firms have unique resources and capabilities regarding the
target market (Wicker, Soebbing, Feiler and Breuer, 2015). Differentiation drives profitability
when the added price of the product outweighs the added expense to acquire the product or
service.
Focus Strategy
It refers to the niche strategy. The focus strategy is based on a combination of above strategy. In
this segment, the company offers low-cost products and services to customers. Such type of
strategies are adopted by the company when it wants to target few market.
Oman Oil Company follows the products differentiation strategy. The company is solely focused
to offer quality of products (Brenes, , Montoy and Ciravegna, 2014). Thus, the company focuses
on high-quality products and services to consumers.
Bowman’s Strategy Clock
The Bowman’s strategy clock model analyzes the current market requirements. This strategy
focuses to offer low-cost products and services as compared to its competitors. Bowman’s
strategy is used to analyze the competitive position of the organization in the market. It explores
the relationship between the customer value and the price. From the above appendix, the best

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position for the company is to offer products and services which are differentiated and unique. In
this segment, the company maintained its profit and also it can offer high-value service to its
buyers so they can enjoy a large share in the market.
Integration
The oil and the gas industry is unique and different from other industries. The companies
in the petroleum industry are heavily regulated, requires intensive investment and highly
proficient workforce. In the recent years, several companies in the public and the private sector
have emerged which has intensified the competition in the industry. Several actions such as
selling the marginal reserves, cutting back the operating and the overhead cost, reducing the
return on investment have been applied by the business organizations; however, these strategies
have been insufficient in increasing the competitive advantage of the organization. The strategy
of backward integration in an appropriate method to enhance the competitive advantage of the
organization. It can increase its focus on the oil exploration and production methods to increase
the core competency. In the present, the manufacturing process planning will be outsourced to
the foreign organizations. This process can be conducted at foreign locations; therefore, it can be
used to reduce the overall cost to the organization.
The backwards integration strategy is the strategy of vertical integration in which the company
merges with the suppliers in the supply chain. In this method, the companies merges with the
suppliers. The backward integration strategy is adopted to increase the efficiency and the cost
saving of the organization. It can reduce the transportation cost, increase the profit margins and

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increase the core competency of the organization. The supply chain is the sequence of
organizations, suppliers, resources, activities and technology which can increase the
manufacturing and the sales of the product. The supply chain begins with the accumulation of the
raw products and ends with the sale of the manufactured products. However, there are several
challenges in the vertical integration of the supply chain (Hill, Schiling & Jones, 2016). Several
times, the vertical integration is not beneficial as it does not make the supply chain more efficient
and cost-effective. If the supply chain could not achieve high economy of scale and provide input
at low cost, then the backward integration is not appropriate.
In such situations, the process of outsourcing can be used to reduce the overall cost to the
organization. The outsourcing process entails the process of transferring the process-intensive
and capital-demanding operations of the organization. Several functions which can be handled
from distant locations can be transferred to the different companies who specializes in such
operations. These functions are payroll designing, customer care, research and development and
licensing.
In the oil industry, vertical integration refers to the ownership or management of two or more
stages in the supply chain of the business organizations. In the oil industry, the various states of
the supply chain can be categorized as oil and gas exploration and production, processing crude
oil and sale of the refined products (Sadler, 2003). Other than that, the oil industry production
can be categorized as upstream, midstream and downstream production. The upstream operations
refers to the oil and gas exploration process which includes drilling. Other than that, the
midstream level refers to the processing of the oil at the production point which refers to the

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removal of gases, crude oil storage and transportation of oil to the refinery. The downstream
operation process refers to the process of oil refining, storing refined products and transporting
the products to the retail outlets.
With outsourcing, the business organization will focus on the exploration of the oil in the
country. Oman is an oil rich country and the exploration in the oil with advanced techniques can
enhance the oil production of the organization. The organization should focus on the
development of the techniques of oil exploration such that it can enhance business or establish
competitive advantage.
Diversification
The diversification is the strategy of creating a competitive advantage of the business by
diversifying the product portfolio. With the help of diversification, the companies can create new
revenue streams, new capabilities and new solutions. The outsourcing process can also reduce
the overall profitability of the organization. It is important in responding to new challenges and
opportunities. The supply chain can address the challenges of other sector if they are not well-
established. The oil and gas industry can reduce the risk and cost associated with the production
with the help of adopting a diversified approach and efficient work practices. The oil and gas
commissioning, carbon capture and storage, offshore wind, nuclear decommissioning, energy
storage, thermal generation are some of the diversification approaches of the oil and gas industry
(Scottish Enterprise, 2010). When the company invests in outsourcing decisions, it can reduce

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the overall cost to the organizations. As such, Oman oil can invest in other areas for risk
diversification and profitability enhancement.
Strategic Choice
The SAF criteria refers to the criteria of suitability, accessibility, feasibility of the
strategic operations. In the present, the strategic option of outsourcing is proposed. This strategic
option is evaluated with the help SAF criteria.
The strategy is suitable as the company is currently can increase its profit ratios with this
strategy. Other than that, the organization can also invest in other areas as it will reduce the
overall cost to the organization.
It is an accessible strategy as there are several companies which take outsourcing projects and
can complete hem in a small time (Kenny, 2009).
The strategy is feasible as it will diversify the operations of the organization and will increase the
profitability of the organization.
Conclusion
Conclusively, it can be stated that Oman oil is a leading business organization in oil and
petroleum industry. The company has several competitors and is one of the largest organization
in Oman. It has been identified that the company has ideal internal and external conditions and

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should invest in outsourcing to reduce its expenditure. The decision is evaluated under SAF
criteria. It is examined that the decision is appropriate for the organization.

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Appendices
PESTLE Analysis
In order to make an analysis of macro environment, PESTLE framework can be used. The
framework explains external environment, threats and factors which can affect business and its
performance (Anton, 2015).
Political factor
The political environment of Oman is highly stable. The political parties of the country
establishes long-term business relationship with other countries. Its policies also support the
investment and business in the country (Song, Sun and Jin, 2017). This helps Oman Oil
Company to expand its business at international level and also maintain its steady growth. Oman
has cordial business relations with other companies
Economical Factor
The economic factor includes the economics condition of the national and international market.
Different types of taxes are applicable to the oil and gas industry. Other than that, the demand
and supply gap for product and other economic policies related to currency impacts on the
operations of the organization. The economic factors are in favor of the company. The economic
and investment policies of country leads to benefit for the country. On the other hand, decline in
oil demand in international market can decrease in profits.

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Social factor
The social factor includes the demographic forces such as customers’ age, education level,
culture and the household lifestyle. Due to increase in the social awareness regarding the
environment, customers demand clean energy based products so that there is less negative impact
on the environment. It can create a negative impact on Oman Oil Company (Reinhardt,
Domingo, García and Christodoulou, 2017).
Technological Factor
For the Oman Oil Company, it is essential to adopt new technology which is related to the oil
production and its mining. There are few technological changes which appear in the oil and gas
industry. Therefore, the company needs to adopt such technology which can provide clean and
green products.
Environmental factor
Due to the excessive use of oil products, the environment has started getting polluted. Oman Oil
Company mainly export oil products, because of environmental awareness people demand
renewable energy. So the company needs to develop more renewable energy products so they
can smoothly run its business operations (Schuetz and Schrefl, 2017).
Legal factor
In each country there are different types of laws and regulations. At the international level,
several laws and obligations are applied to the oil and gas natural industry. The Oman oil

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company needs to consider such laws and regulations. It helps to make business operations more
successful and effective.
Bowman’s Strategy Clock
Value Low price Medium High price
High added value Hybrid
The company believes
to offer low-cost
products with some
product
differentiation. It aims
to offer high-value
products to customers
Differentiation
This strategy focuses
on offering high-value
products to customers
with who have less
approach to the
product (Shakhshir,
2014).
Focused
This strategy aims to
offer a high level of
products at high price.
It is considered luxury
products for
customers.
Mediocre value Cost leader
In this, the company
offers low-cost
products. In this, the
company keep profit
margin low and try to
increase high profit.
Raise price
This strategy focuses
to charge high price
and offer nothing
extra in term of
values.
Low added value Low price and low
value-added This is
bargain basement
strategy where the
products are not
differentiated and
company offers cheap
products
(Haselwanter,
SMuskat and Zehrer,
2016).
Increased price and low value
This strategy is more suitable for the company
when there is a monopoly in the market. The
company offers high priced products and value
of products is very low (Metzger, 2014).