Strategic Management and Planning for LNG Limited - Example

STRATEGIC MANAGEMENT AND PLANNING FOR LNG LIMITED Name Course Title Institution Name Course Instructor Date Strategic Management and Planning For LNG Limited 1. Executive Summary The mining industry is one of the highly competitive industries in the world. LNG Limited is a mining company dealing mainly in liquefied natural gas. The company’s success and corresponding growth is derived from the basis upon the establishment of the company is based. The future of the mining industry in this respect is deeply rooted in the competencies that players in the industry will put forth as their specific and individual line of strategies. The future of LNG Limited is based on the strategies that the company has to put in place to ensure its success. A business strategy is built upon a company’s wish and or future projection. An effective strategy is majorly evaluated based on how it elevates a company in comparison to other players in a specific industry. These strategies can also be based on some of the critical areas existing both in the internal and external environments. LNG Limited has some critical areas in both its internal and external environments, which, when improved upon, might see the company emerge among the best and successful mining companies all over the world. This is because effective business strategic planning leads to competitive advantage, which, on the other hand, is what most businesses strive for to grow especially in highly competitive industries. An effective business strategy is also subject to effective and appropriate implementation. OUTLINE 1. Executive Summary 2. Introduction 3. Vision Statement 4. Mission Statement 5. Value Statement 6. SWOT Analysis 6.1. Strengths 6.2. Weaknesses 6.3. Opportunities 6.4. Threats 7. PEST Analysis 7.1. Political Environment 7.2. Economic Environment 7.3. Social Environment 7.4. Technological Environment 8. Strategies of LNG Ltd. 9. Conclusion 10. Work Cited 2. Introduction LNG Limited is one of the players in the worlds mining industry. Based in Perth, Western Australia, the company operates a number of mining sites (Company Profile). Majorly, the company deals in liquefied natural gas. This is also includes coal seam gas. The company is owned by a single stakeholder. The company has established several gas fields and has an extensive network of gas pipelines all over the Western front of Australia (Company Profile). The company’s CEO is known as Fletcher, M. Brand (Company Profile). The company has several processing trains stationed in different gas fields. These trains process close to 15million tones per year. Mining requires heavy investment and skilled manpower. Part of its strategy is to remain in the forefront in the LNG processing industry (The Energy Link). Currently the mining industry is developing and growing at a very high rate. This has prompted players in the mining industry to develop and implement different strategies to keep them in the game. Besides, in developing these strategies, a company needs to re-evaluate both its internal and external business environments to help determine some of the critical areas that require intervention (Atkinson, pg 1450, 2006). This paper aims at performing strategic planning for LNG Limited. This will be done by first examining both the internal and external business environments of the company using the SWOT and PESTEL business analysis tools respectively. Later, in light to the business environments, effective business strategies of the plant will be crafted. To arrive at the conclusions, statistical analysis was carried out in relation to the topic of discussion. 3. Vision Statement of the Company The company’s vision statement is: A universally recognized and competent mining company characterized with high levels of integrity, consumer satisfaction and accountability to the society. In the corporate world, companies fight for consumer satisfactions, competitive advantage and working within the corporate rules (Atkinson, pg 1450, 2006). LNG Limited has taken this into consideration and it can effectively be seen in their vision statement. Being competent and universally recognized implies that that the company maintains its competitive advantage over other companies in the mining industry. Consumer satisfaction and contentment ensures consumer loyalty and fidelity to a business. This is one way of guaranteeing high sales and indispensable profit margins. Lastly, each company should always have Corporate Social Responsibility towards the environment. This is articulated in the fact that there is need for high levels of integrity and accountability to the society because the mining world is one in which there is a direct effect on the environment and its inhabitants. 4. Mission Statement of the Company The company’s mission statement is: To provide affordable, quality and consumable Liquefied Natural Gas and Coal Seam Gas to different consumers in Australia and the earth’s community at large in a pleasant, clean and hygienic environment while maintaining our fiscal responsibilities. It is important that service companies remain accountable to their consumers. In order to establish and maintain consumer loyalty, the company has to provide services that satisfy consumers especially with respect to the context within which they are offered. No matter how quality a product or service is, a consumer will not be contented if the context within which the same is offered is, say, dirty, unpleasant obnoxious (Johnson & Scholes, pg 45 2011). In this respect, the mission statement is appropriate in detail and presents not just what the company wants to achieve in the long run, but, also presents the line of strategy by implying that everything is done while maintaining ‘our fiscal responsibilities’. The appropriateness of a mission statement should thus, not be viewed in how complex the details are, rather, the dynamics of how the details are going to be achieved should be the major concern. 5. Statement of Values The company’s value statement is: We embrace diversity manifested in cross-cultural differences, we uphold dignity and equity and we are open to new experiences. An appropriate value statement for a corporate entity should be derived from the spirit of inclusiveness and diversity. At LNG Limited the spirit of embracing diversity is upheld through the company’s value statement. Further, a sense of inclusiveness is created by acknowledging the cultural diversity that is needed in a company. Specifically, operations in the company should not be based on ‘who-comes-from-where’. In essence, it can be noted that this value statement is universal and is developed upon the grounds of diversity and the spirit of inclusiveness in the corporate world. 6. SWOT Analysis This involves analyzing the strengths, weaknesses, opportunities and threats facing a company. It specifically used in analyzing the internal business environment. 6.1. Strengths Business strengths refer to the advantages be it corporate or competitive that a business organization enjoys. These strengths are developed as a company’s sense of power and/or potency. First and foremost, the company owns one of the most profound LNG processing technologies referred to as OSMR (Company Profile). This is used in improving plant performance. This reduces technology acquisition costs and eventually presents a capital-saving scheme that other companies in the same industry may lack. Specifically, in the modern corporate world, one of the best ways of ensuring competitive advantage is staying at par with technological improvements (Palm, pg 5, 2007). On the other hand, the company also boasts of an improved LNG process which currently presents a plant efficiency of 30% which is outstanding in comparison to capital costs (Company Profile). Another significant area where LNG Limited has potential strength is on the fact that the company has developed two major projects in the USA and Australia (Company Profile). The company applies its technology in Magnolia LNG in the United States of America and FLLNG project in Australia. Basically, the company has a craving for both the international market and local markets. It should be noted that the best way in which businesses thrive is by covering the whole market scope both locally and internationally (The Energy Link). This is also one of the strengths that companies have in countering the competition from other companies. In essence, having operational centers both locally and internationally offers a competitive advantage and strength to LNG Limited. 6.2. Weakness LNG Limited has a number of weaknesses. First, in 2012 during the month of December, there was a negative cash flow. Given that the financing capital was nil (though investment financing was $1000), it can be noted that there were possible down-flops in the profit margins (Company Profile). One indicator of possible business downfall is a decline in sales and corresponding profit margins (The Energy Link). Besides, the company seems to have concentrated more on the local energy sector other than exploiting possible oil fields in overseas countries and investing there. This is one of the major weaknesses that most businesses have. There is a total disregard for the international market which, most of the times, forms a potential target market compared to the local markets. In comparison to the other companies’ market share, LNG Limited seems to control a small portion for the world’s natural gas market. Though this is done effectively, the company should put enough at stake to counter these weaknesses as part of its strategy to establish a large market share. 6.3. Opportunities This presents the main area where a business’ strategic planning should be based. First there has been a discovery of gas reserve-lands which have been proven positive containing gas. This chance can be one of the strategies of expanding operations and covering a wider area. The company can do this by developing other mid scale LNG plants. Secondly, there are quite a big number of potential gas buyers who are not being served although they are within the range of the pipeline network transporting gas (The Energy Link). It is significant that the company ensures that such niche target markets are exploited including any other energy markets (Palm, pg 3, 2007). Given that the company has the strength and capacity to expand, the targeting of its market should be expanded to cover more international energy markets especially in non-energy producing nations (Menguc & Auh, pg 23 2006). There is a great opportunity in doing this given the fact that the company has the necessary potential and capacity to initiate such a strategy (Atkinson, pg 1450, 2006). 6.4. Threats Threats to a business company are any forms of coercion and pressures that the company faces from both the external and internal environment. In regards to LNG Limited, there are areas of potential threats to the company’s existence. First and foremost, there are fast-growing companies that are competing LNG Limited. Horizon Oil and Paladin Energy are the fastest growing industry that LNG Limited has to counter their competitiveness (Company Profile). Besides, the energy world is faced with catastrophes and tragedies that happen accidentally but, are fatal. As one of the greatest threats, the company needs to put all it has at its disposal to counter this threats in light to the strengths and opportunities it has in order to develop an effective line of strategy ensure competitive advantage over the other players in the company. 7. PEST Analysis PEST analysis is used to analyze the external environment of a business. Specifically, it analyzes the Political, Economical, Social and Technological environments. 7.1. Political Environment One of the major external factors affecting businesses is politics. Politics refers to the affairs of the state or government in relation to the business. First, it should be noted that Australia has a long history of peace and tranquility. In other words, less can be said about political unrest in Australia. In fact, there are no major political situations that have ever affected LNG Limited as a company. Secondly, in relation to legal start up procedures, the energy industry is one of the most sensitive industries that require lengthy and complex start up procedures. This is especially when a country wants to establish remote processing centers overseas. Though LNG Limited has been a subject to this, the company has gone through the legal processes without much tussle (The Energy Link). 7.2. Economical Environment This refers to the state of affairs in the industry (Menguc & Auh, pg 23 2006). It relates to the industry trends, entries and exits by companies, downfalls, expansions, improvements etc. In this respect, the energy sector has seen a sustained rise in LNG processes in the period lasting 10 years (The Energy Link). Specifically, there has been a major improvement in the number of firms entering the industry. This has led to changes in industry trends. First, the industry prices seem to have taken a fluctuating trend with no projection of a rise or fall. For instance, LNG Limited’s price is currently at $3.770. This is a reduction from the previous price which stood at $3.890 (Company Profile). On the other hand, the previous price is also an improvement to its predecessor which stood at $3.870 (Company Profile). This basically shows that there are significant changes in the industry trends. Besides, the entry of more firms in the energy sector has led to the heightening of the competition level. This is in regards to the limited consumption of the natural energy. 7.3. Social Environment Social environment in this case refers to the societal context within which a business operates. It may be in respect to how the business relates to the people or what it does for the interests of the people (Johnson & Scholes, pg 45 2011). It was noted earlier that the energy sector is one in which there is potential impact to the environment. By maintaining dignity and environmental conservation LNG Limited ensures that it remains accountable to the community at large in its operations. Despite the fact that most of the plants are built away from human existence, the pipelines cross peoples’ backyards and enough should be put at stake to ensure that any accidental leakages are dealt with (or avoided) in order not to compromise the people living around (The Energy Link). As articulated in its mission and vision statements, the company remains accountable to the society on anything happening as a result of its operations and/or processes. 7.4. Technological Environment The energy sector is characterized by huge investments which are basically in form of the relevant technology needed to effectively conduct the processes. This has put the whole industry in a ‘technological hub’ form of corporate entity. LNG processes are currently performed by high-tech machines that are expensive to procure. In this respect, LNG Limited has its own technology used in the processes. This technology is referred to as OSMR technology (Company Profile). However, advancement in technology is what characterizes the industry. In order to stay in the game, the company needs to be at parity with these improvements to enhance production and the quality of output. 8. Strategies of LNG Ltd. regarding External and Internal Business Analysis First, the company needs to secure market leadership in the LNG sector (mid-scale). Controlling a huge market share is vital for any company which needs to maintain high sales and improve profit margins (Menguc & Auh, pg 23 2006). This is appropriate for the company given that currently it does not control a sizeable market. Secondly, the company needs to satisfy the needs of its customers on a reliable and competitive basis. This is appropriate because consumer satisfaction leads to consumer loyalty which in turn leads to increase in sales and sustained rise in profit margins. Another strategy for the company which will help it achieve its corporate objective is to contribute to the growth and development of the economy in the different countries that the company operates in and intends to operate in. This is achieved when, within the context of maintaining its fiscal responsibilities, the company remains accountable to the people (Solberg & Durrieu, pg 56, 2008). Additionally, the company needs to place a physically powerful emphasis on creating a safe working environment and generally protecting the environments in which it operates. This, apart from being Corporate Social Responsibility is one way of upholding safe working conditions to improve employee morale and increase productivity. Lastly, the company needs to participate tactically in natural gas resources which will in turn make available gas feedstock for use in the company’s LNG projects. 9. Conclusion In conclusion, from both the internal and external business analysis, it can be noted that LNG Ltd has potential areas of improvement. In line with this, the development of an effective strategy-line should be in proportion to the potential areas of improvement in which the company possess the capacity to exploit. Considering the strategies stated, one can easily note that their effective implementation and execution will ultimately lead to the accomplishment of the company’s corporate objectives. In other words, it is significant to note that competitive advantage is a function of a company’s ability and capacity to stay in the game by strategizing effectively. When competitive advantage is achieved, a company can correspondingly enjoy high sales and a sustained profits margin. 10. Work Cited Atkinson, H. 2006. Strategy Implementation: A Role for the Balanced Scorecard? Management Decision, Vol. 44, No. 10. Johnson G. & Scholes K., 2011. Exploring Strategy (Text and Cases), 9thed. New York: FT Prentice Hall Liquefied Natural Gas Limited: Company Profile. [Online]. Available at www.au.investsmart.com.au/shares/asx/Liquefied-natural-LNG.asp [Accessed on 11th November, 2014]. Menguc, B., & Auh, S. 2006. Creating a Firm-Level Dynamic Capability through Capitalizing On Market Orientation and Innovativeness. Academy of Marketing Science. Palm, C. L., 2007. International Business: Competing In the Global Marketplace, 6th Ed. Boston: McGraw-Hill Solberg, C. A., & Durrieu, F., 2008, “Strategy Development in International Markets: A Two Tier Approach”, International Marketing Review, Vol. 25, No. 5, The Energy Link: Who is LNG Ltd? [Online]. Available at [Accessed on 11th November, 2014]. Read More