Entrepreneurial Opportunity Analysis: ADMA-OPCO - Assignment Example

Entrepreneurial Opportunity Analysis: ADMA-OPCO Student’s Name Institutional Affiliation Company Description The Abu Dhabi Marine Operating Company or rather the ADMA-OPCO deals in the production of oil and gases from offshore areas that exist within the larger Emirate of Abu Dhabi. The firm has continued with exploration and generation of oil and gas products for the past 50 years hence perceived as being one of the most notable pioneers of this activity (ADMA-OPCO, 2015). For most of its production activities, two areas: Umm Shif and Lower Zakum remain to be the most productive as crude resource generated is later transferred to Das Island for processing, storage and export purposes. ADMA-OPCO has over the years engaged in intensive exploration of new areas within the Emirate as most of its resources are directed towards exploiting such new fields as Satah Al Razboot (SARB) and Umm Lulu fields (ADMA-OPCO, 2015). It is important to note that the company has over the years, engaged in a rigorous process of change that has seen most of the activities improve over time. In essence, notable improvements continues to be perceived in such areas a commitment to attaining long-term projects programme especially in covering facilities expansion prospects, production growth and development as well as in the new installations-based activities. The focus of this case is on examining probable issues and opportunistic areas within the larger procurement department of the firm that can be scrutinized to access how they can be fairly-utilised to affect future possible growth and development. Problem Statement & Definition Stage 1: Team Activity Section There are major problems that can be linked to the procurement department of this giant producer of oil and gas. Some of the probable issues that might emanate from this department and need immediate address include; the supply planning where there might exist challenges in inaccurate or omitted information, the budget cycle timing postulating a mismatch on the overall funding cycle; in the course of submitting procurement requisitions and specifications, a problem might arise in the form these requisitions not being submitted on time, probable missing or inadequate level of specifications and a possibility of altering the specifications that have been adopted immediately after the purchasing procedures have been implemented. Another major problem witnessed in the company’s main procurement section rests with limited or inadequate access to funds. Within the overall procurement department and specifically the commercial division section, access to funds needed for the execution of the entire process was deemed a challenge altogether. Subsequently, series of problems could be witnessed in relation to contract performance activities so that the processess concerned with order placement as well as the production of oil and gases experienced distributor challenges as well as inefficiency in delivering or rather shipping these crude products to Das Islands for purposes of processing, storage and export. However, for this case analysis; the paper focuses on the issue of limited access to funds needed for ensuring faster shipping processess and curtailing future possible issues with the major distributors dealing with the firm on direct and indirect terms. Stage 2: Problem Definition Phase It is important to understand the fact that the problem attributed to limited access to funds within the firm is not directly related to the ineffective revenue practices or the firm making losses; rather the root causes involves inadequate transparency within the overall budgeting and funding processess as well as an immediate hindrance in regards to communication process that delayed the funds much needed. In fact, it can be noted that ADMA-OPCO operates one of the most complex bureaucratic process as well as unfathomable line of communication between the different departments including the finance section, which in fact is directly linked with releasing these funds needed for extensive procurement processess. The limited access to finance is more felt in the middle of a given operational period especially because the implemented budgets are already consumed while the department’s need for more financial help is put in jeopardy due to endless related activities like implementation of a competitive bidding process. The result of this impediment compels the department to liaise with the accounting& finance section in order to come up with a complementary budget, which sometimes takes longer period before they can be approved and implemented prompting a dire lack of funds to continue with major procurement-based projects. For this matter; it is important for the firm to engage in competitive bidding processess for major procurement projects, without any form of hindrances, so that the overall functional unit is made aware of the positive outcomes and status of competitive pricing for resources needed at any given moment. The pre-existing access-to-funds policies set in place by the company continues to result to a great level of rollback challenges. In the event that the hindrance is ignored; there will be a future need to utilise more resources to engage in the process of competitive bidding process, which might also result to missing important operational deadlines hence loss in overall revenues as well as a possible damage to ADMA-OPCO’s quality reputation model it enjoys currently. Thus, the procurement department will adopt an introspection approach in evaluating the manner for which limited access to funds can be eliminated in order to ensure future improvements in the overall bidding processess as well as other procurement functions. Problem Statement: “ADMA-OPCO’s procurement department consistently halts major operational projects because of limited access to funds due to the complexities within the overall bureaucratic organizational structure, this result to future loss of revenues as more resources are needed to complete the same project at a future date due to time value for money”. Stage 3: Generation of Solutions In light of the limited access to much needed funds needed for commencing projects at hand and those in the future of a period, the following solutions are probable; First, it will be easier to allow the overall procurement department to formulate, evaluate and approve their own operational budgets, with the help of a distinctive e-budget system application model, without involving any personnel or department for that matter. Second, the entire procurement processess can be outsourced to other external companies that already have financial base, and payment for the service paid after all has been achieved within the operational year. Third, the accounting & finance department should allow the procurement direct access to funds whenever they seek to complete major projects; only limiting the access to major projects existing within underlying operational period. Fourth, the procurement department can be integrated with the accounting & finance section so that access to funds is made easier and especially because, a single departmental manger will be responsible for the operation of the two-merged departments. Stage 4: Creative Idea Synthesis As discussed in the previous stage, there might a wider number of solutions that can be adopted to tackle the problem at hand, however; the most viable one rests with allowing total flexibility of the procurement department so that they can formulate, evaluate and approve their own budgets off course with the help of a distinctive e-budget system application model. As much as external approval is deemed necessary, the flexibility of the process should be exercised at all costs. In fact, the two departmental managers: procurement and accounting & finance managers should liaise with each other in the course of the budget formulation so that necessary audits are made prior to implementation. If need be, other major projects can be outsourced to external procurement companies at a much cheaper rate. Stage 5: Judging Best Solution A mark of + is awarded when it is deemed the criteria offers an advantage while minus (-) mark is awarded in case it offers a disadvantage Criteria Proposed Solution 1 Proposed Solution 2 Proposed Solution 3 Proposed Solution 4 Viability/Relevance to current operational environment + + + - Cost Effectiveness + + _ + Possibility of less implementation-based barriers + - _ _ From the table above, it can be noted that the issue at hand can be solved using a number of ways however; the Proposed Solution1, which focuses on allowing the overall procurement department to formulate, evaluate and approve their own operational budgets, with the help of a distinctive e-budget system application model, without involving any personnel or department, is deemed to be ideal as it is perceived to be relevant, embraces cost effective functionalities and, also it does not have major potential implementation-based barriers in comparison to the others. Stage 6: Implementation of the Solution The proposed solution focused on allowing the entire procurement department to formulate, evaluate and approve their own operational budgets, with the help of a distinctive e-budget system application model, without involving any personnel or department is, in fact, effective as it promotes flexibility and incorporates the experiences gained by the different personnel within the department in regards to sufficient levels of funds needed for smooth operations within any particular operational period. The plan is to lobby support of the major management team to allow for the flexibility of the proposed solution. The intentions is to ensure that the support is accorded on the initial stages of formulation till the end; implementation phase. However, this cannot be achieved without any form of hindrance especially because the management might be compelled to now limit the budget to certain amounts. While it will be possible for the procurement department to formulate, evaluate and implement their own budgets without any form of hindrance, they will be limited to certain amount of funds. For this case, the existing problems will still persist. Apart from the management team, resistance might also emanate from other departments as they would also like to enjoy the proposed autonomy. Other departments will perceive this as a way of cutting down their access to funds at the expense of procurement processess. Proposed Mini-Case Background: having issues pertaining to limited access to funds within its procurement department, ADMA-OPCO is engaged in finding an entrepreneurial based proposed solution to this impediment hence accomplish most of its objectives. Protection: of this proposed solution for ADMA-OPCO procurement processess and procedures is set to maintain high levels of security. It is important therefore to ascertain, whether or not the e-budget system would be designed in a way that would only allow the procurement manager to formulate, analyze and implement the budgets. The idea cannot be replicated elsewhere owing to the fact that is institutional-specific and thus, it only serves the purpose of a firm engaged in intensive production of oil and gases meaning it will be based on important features that only affects the firm. Since the e-budget system needed for the procedure is specific in nature; it will incur substantial expenses but within a period of 3-4 years, the company expects the material costs will break-even with subsequent years the firm enjoying the fruits of implementation. Value Proposition: ADMA-OPCO is currently on top of the value chain given that it produces oil and gas before sending it to Das Island for further processing, storage and export. The idea of increase access to funds within its procurement phase will ensure that it enjoys a competitive advantage due to effective shipping and thus, timely delivery of the aforementioned crude products to different world markets. Team; involved with the challenge at hand mainly revolves around the procurement and finance section, however; ADMA-OPCO’s human resource section could be incorporated because sufficient staffing personnel are needed to ensure that the overall procurement process is accomplished on time. Training and development for this team is deemed necessary especially because of the adoption of the e-budget system. Sources of Finance; currently, the firm enjoys lots of finances due to the numerous partners that have come together to ensure its operations. Some of the notable partners include BP, Total, and JODCO while the Abu Dhabi National Oil Company is deemed the highest shareholder. In addition to this level of finance, the firm can opt for other forms of funds like bank loans and also through stock markets through placement of shares. While engaging in choosing the most viable form of finance, the management should first come up with a definitive list of major projects under consideration and arrange them in term of their priorities. The firm is also set out to identify whether to adopt such other sources as venture capital funds as well as subsidies. Stakeholder Analysis: ADMA-OPCO operates under a definitive set of stakeholders that mainly involves the different major oil companies that each enjoys a significant portion of the overall ownership. The current ownership situation at the company rests with four strategic partners coming together to conduct a single viable business. For most business cases, stakeholders are only interested on whether the company makes enough revenues that can be translated to dividends while at the same management making efforts to minimize the level of operational costs. Thus, at the current situation, we should ask ourselves whether ADMA-OPCO posts enough or not. Subsequently, investors need to know whether the adoption e-budgets system application within the procurement department will amount to future growth or will result to substantial level of losses. They are also likely to know whether the 3-4 years needed for break-even is indeed manageable or not. And thus, the overall question remains to be whether embracing the proposed solution will help the company prevent possible future loss of resources by utilization of timely procurement procedures. References ADMA-OPCO (2015). About ADMA-OPCO. Retrieved on November 19, 2015 from http://www.adma-opco.com Read More