Formation of Strategies in Oman Oil Company - Case Study Example

? Oman Oil Company Contents Contents 2 Introduction 3 Formation of Strategies in the Company 4 Competitive Advantages due to the Strategies 5 Application of Strategies using Resources 8 Challenges Faced by the Organization 8 Conclusion 9 Reference List 11 Introduction In the current epoch, the business firms are exposed to cut-throat competition with each other. It is found that without the essence of competitive advantages, it is not possible for firms to expand and lead in the market. Especially after the emergence of globalization, the firms in the domestic market face more complications in business in forms of operational segments. At this juncture, strategic management is the only way in which a company can grow in the long run in this competitive field. The decisions should be undertaken by the firms only after analyzing the changes and conditions in the external business environment. It is true that without the help of efficient strategies, the firms cannot frame ways for further business development (Johnson and Scholes, 1993). This paper will explain the ways in which adoption of new strategies in the business of Oman Oil Company can help in mobilizing new resources and augmenting the overall level of its performance in the market. New strategies adopted in a firm would help it to improve its resource allocations, thereby reducing its cost of operations. It would facilitate the enhancement of the brand value of the company and improve its relations with its stakeholders. New innovations and creativities providing competitive advantages to the firm can also be introduced through implementation of new business strategies. All of these advantages would help to forecast directions and also, increase the scope of business for an organization (Oxford Business Group, 2008). Formation of Strategies in the Company The business strategies of the company have helped in generating competitive advantages in the market. However, it should be considered that these business strategies of the company are generated by merging the internal capabilities of the firm and its external business environment. Figure 1: Strategic Planning (Source: Weihrich, n.d.) The above flow chart explains the strategic management adopted by the Oman Oil Company after combining its internal capabilities and business external environment. The mid-year rises in the prices of oil have significantly helped in the economic growth of Oman from 1999. The country had associated with the World Trade Organization in 2000 and since then, it has been promoting privatization in the economy. The Oman Oil Company has taken his opportunity to increase its business revenue and utilize the accumulated finances in various types of new private investment projects (making equity investments in new private companies). When the demand for oil in the world market had been increasing, the company had actively augmented its resources in business and expanded its scale of operations. The country of Oman also has plenty of natural oil reserves, thereby making extracting and producing oil more convenient. Any company engaging in the production of oil would not need to outsource it from any other economy. Thus, considering the external environment, the company has correctly selected its business investment segment. Competitive Advantages due to the Strategies The competitive advantages gained by the company are the special features of its business that makes it unique in the whole market. Oman Oil Company with its effective business strategies has become successful in providing a greater value to the customers in the market. It is true that the price of different forms of energy manufactured by the company is high as their levels are regulated by the free forces of the market equilibrium (Porter, 1998). However, the higher prices are justified when the different beneficial services of the company are recognized (Hitt, Ireland and Hoskisson, 2009). Figure 2: Investments made by the Company (Source: Oman-Oil, 2012) With its effective business strategies, the company has made many investments in the recent years in many companies in Oman, involved in the business of different forms of energy. For the economic progress of a nation, energy is the most crucial determinant. The company has hugely helped in stimulating the level of economic development of the country. Figure 3: Segments Improved with the Competitive Advantages (Source: Ernst & Young, 2011) By gaining competitive advantages, the company has improved its cost and also, initiated more differentiation in its services. As an instrument of its strategies, the company has invested in new innovations in the energy extraction machineries. The use of these advanced techniques has helped in stimulating the aggregate productivity and facilitated the reduction of its cost of production. Higher production has enabled the company in achieving economies of scale in production along with augmenting its revenue (Janczak, 2005). The higher level of revenue has helped the firm in making new investments in differentiated energy segments like, natural gas. Thus, on the whole, the new business strategies of the firm have helped in enhancing the firm’s brand value in the market by reducing its production cost and further differentiating its services. Application of Strategies using Resources Without the availability of adequate resources, the business manufacturing process can never succeed in the long run. However, the business strategies of an organization help it to accumulate the important resources required for its business. Some of these resources are owned by the company and the others are available outside the organization, but they help in the achievement of competitive advantage in its business. In the present competitive market, a strategic alliance can help companies to augment its business resources. The Oman Oil Company has acquired the company of OXEA. OXEA is the leading global supplier of the Oxo chemicals in the market. By doing this, the company has augmented the level of resources in its business, especially in terms of business and technological knowhow. OXEA has a special chemical plant in Duqm special economic zone. It helps to enhance the knowledge of the Omani scientists. Thus, the new improved technological facility of the company that has helped to increase its revenue in the market is largely dedicated to this acquisition. The degree of urbanization in Oman is very high; most of the individuals of the country work in the tertiary sector. The company, instead of outsourcing the labour resource, have simply recruited individuals from its domestic economy (CIA, 2013). Challenges Faced by the Organization The company of Oman Oil is completely owned by the government of the country. It is a profit making commercial firm even though it is owned by the government. The company was founded in 1996 to primarily stimulate new investment opportunities in the energy sector in both outside and inside the country (Oman-Oil, 2012). The company plays a pivotal role in diversifying the economy of the country and promotes its thresholds of foreign private investments. Despite its beneficial activities, the company faces a lot of problems (that arises from the business environment of Oman) in its business operations (Davis, 2008). The living standards of the country’s citizens are found to be very high. This also reasons out the high degree of urbanization in the country. The aggregate demand for electricity is also high due to its heightened degree of urbanization. The company requires a lot of electricity for the exploration and production of oil and natural gas. Availability of adequate electricity is of high importance in regards to the business operations of the company (David, 1986). The aggregate demand for oil and petroleum in the world market has significantly increased. However, the overall availability of finances, to invest in new expensive and productive projects, has reduced after the onset of recession in the world economy. Thus, it becomes difficult for the company to get adequate finances from the central bank of the country to suffice the required energy demand in its domestic and foreign market. The country has a rich historic tradition and the traditional view point of the public and private entities of the country has generated obstacles for new business developments in the company. The religious beliefs of the individuals in the country are very rigid due to which the company often faces problems in the market, in case their business operational decisions are undertaken by a non-Islamic individual. The water shortage in the country makes it difficult for the company to acquire adequate water for its manufacturing plants. These are the few socio-economic challenges faced by the company in the course of its operations in Oman. Conclusion After globalization, the rate of industrialization in nations has significantly increased. The growth of industrial sector in most of the world nations has augmented the demand for oil in the market. Considering this situation, it can be commented that the economy of Oman is blessed with its natural oil reserves. It is the adequate energy reserves of the country which has instigated the public authorities to be so reluctant to adopt rigid policies. Therefore, being a company owned by the government itself has reduced many business challenges for the Oman Oil Company. However, it cannot be ignored that the growth of the company, in terms of its scale of operations, could not be achieved without the help of strategic management. At the end of the paper, it would be apt to conclude that in the contemporary world, growth through core competences can only be achieved by a company, provided it applies efficient business strategies by coalescing its internal and external business environment (Alkhafaji, 2003). Reference List Alkhafaji, A. F., 2003. Strategic Management: Formulation, Implementation, and Control in a Dynamic Environment. 21st ed. London: Routledge. CIA, 2013. The World Fact Book. [online] Available at: [Accessed 16 December 2013]. David, F. R., 1986. Fundamentals of Strategic Management. Columbus: Merrill Pub. Co. Davis, J. R., 2008. Does Environmental Scanning by Systems Integration Firms Improve Their Business Development Performance? Michigan: ProQuest. Ernst & Young, 2011. Doing Buisness in Oman. [pdf] VAE. Available at: [Accessed 16 December 2013]. Hitt, M. A., Ireland, R. D. and Hoskisson, R. E., 2009. Strategic Management: Competitiveness and Globalization: Cases. 8th ed. Connecticut: Cengage Learning. Janczak, S., 2005. The Strategic Decision-Making Process in Organizations. Problems and Perspectives in Management, 3 (2005), pp. 58-70. Johnson, G. and Scholes, K., 1993. Exploring Corporate Strategy. 3rd ed. New Jersey: Prentice-Hall. Oman-Oil, 2012. Welcome to Oman Oil Company S.A.O.C. [online] Available at: [Accessed 16 December 2013]. Oxford Business Group, 2008. The Report: Romania 2008. London: Oxford Business Group. Porter, M. E., 1998. Competitive Advantage: Creating and Sustaining Superior Performance. New York: Simon and Schuster. Weihrich, H., n.d. The TOWS Matrix --- A Tool for Situational Analysis. [pdf] USFCA. Available at: [Accessed 16 December 2013]. Read More