Saudi Aramco - GE Hitachi Joint Venture in Saudi Arabia - Essay Example

Saudi Aramco Analysis Affiliation Saudi Aramco Analysis Saudi Aramco is a company in Saudi Arabia and owned by the government and the largest in the world that deals with oil production with most of it exported to Japan. The company influences the worlds oil industry and is very powerful holding the top position in the Petroleum Intelligence Weekly company rankings in the world. To understand the success of the companys success, an analysis of its strengths, weaknesses, opportunities, and threats (SWOT) and other strategies is important.

Saudi Aramco Company has the worlds largest oil reserves in the world, and high technology adopted by the former Aramco Company in Saudi Arabia. The cost of production is very low and uses high technology in its oil production. The company’s top decision-makers are well organized, and its decision-making criteria are efficient for carrying out important tasks for the company. The employees are highly motivated and dedicated for the good of the company with the aim of maintaining its top position in the oil industry.

The cost of production of its oil is quite low (about 3$ per barrel) since the production does not require a pumping mechanism as oil flows freely under the reservoir pressure (Obayashi, 2007). The company has a good relationship with the government with clear responsibilities defined for the company management and the government. The company has always met the governments demands and targets and, therefore, enjoys a good level of operation autonomy. The company’s weakness is that its oil contains large amounts of sulfur, which might affect its future oil demand as many countries are opting for oil with low sulfur content.

The prices of such oil are also very low. The other weakness is the companys dependence on just one commodity leads to the countrys unstable income especially when the prices go down. The other weakness is holding a long position in the upstream capacity as compared to the downstream capacity. The company has many opportunities in the oil industry, as oil is the worlds energy supply, therefore, no worry for its products. The company has other investments opportunities in projects such as exploration, refining, and building of ships in addition to good market prices.

The company belongs to the World Trade Organization (WTO), which allowed it to sell the gas at low prices compared to the international gas prices (Obayashi, 2007). The main threat to the company is from the high demand for the natural gas which can result in its shortage and upset to the tight balance maintained by the gas supply in the country. Since the firm is the major supply of gas products for domestic uses, it faces a lot of pressure in trying to maintain the supply. The company offers stiff competition to many chemical producers due to its low costs of production and the favorable geographical positioning that enables its oil to flows without the necessity of pumping.

The integration of the refinery and gas processing with the production of petrochemicals, the company has a completive advantage offer the others. The company sells most of its chemical products to China and does not face threatening competition from other oil and gas majors such as the US. The only competitors are the producers of oil with low sulfur contents such as the US. Saudi Aramco Company has a global petroleum enterprise in the exploration, refining, distribution, and marketing of oil.

The company exports petroleum products and refines the oil to produce petrochemical products for export. There is an increase in the consumption of oil in the markets of China, India, and other Asian countries. Developed countries such as the US, Japan, India, and China are going to alternative sources of energy affecting the market of Saudi Aramco Company. India and China demand are likely to be the worlds most powerful economies in the future. The company conducts teamwork in sales and marketing to assist in the distribution and shipping of the oil products that it exports to developing countries.

The market is large as its products have lower prices compared to other oil producing countries such as the US. Aramco has collaborated with foreign countries such as France Total Jubail project and major ConocoPhilips in U.S for a project in Yanbu as Obayashi (2007) asserts. The refineries are for producing high-quality specifications especially in developing countries. The joint ventures are for creating new markets and reducing competition in the oil producing countries. The target market for Saudi Aramco is in the developing countries since they do not produce oil on their on and depend on the importation of crude oil.

The US provides market, but it still produces its oil therefore not very reliable. Aramco Crude Production (Eia.gov, 2015) Saudi Aramco prices (Eia.gov, 2015) For industrial expansion, the company has started construction of a refinery in Seosa, South Korea to aid in the exportation of the oil products in China. Another project is at the Fujian refinery in China in partnership with the US ExxonMobil to help in creating more market. Saudi Aramco has a joint venture with Motiva for the production of more oil products (Obayashi, 2007).

Other companies in collaboration with the Saudi Aramco Company are the Saudi-Chinese in Quindao, in China to enable refinery of more oil and expand the industry. The expansion of the Saudi Aramco Company through collaborations and joint ventures is aimed at reducing competition from oil producing companies. Saudi Aramco is a big company with a large market all over the world due to their low prices for their oil products, which reduces competition from the other producer. The good terms between the company and the government are due to the effective management that avoids unnecessary political intervention.

The company enjoys a large market for its oil products due to its low cost of production. References Eia.gov,. (2015). Saudi Arabia - Analysis - U.S. Energy Information Administration (EIA). Retrieved 4 May 2015, from http://www.eia.gov/countries/cab.cfm?fips=sa Obayashi, Y. (2007). Corporate Strategies of Saudi Aramco. Retrieved 4 May 2015, from https://bakerinstitute.org/media/files/page/98a641f6/noc_kobayashi_saramco.pdf