Business Environment and Society - Case Study Example

Introduction Under the conditions when world economy is developing with oil and gas as its lifeblood, there is a concrete data of how population uses these resources (Quora, 2013). If include natural gas, oil is 1/3d of humanity’s primary energy supply. In addition, 100 % of all transportation is powered by oil and gas and it is obvious that modern people would collapse if oil stopped flowing. Despite the bigger consumption of energy, oil and gas remain the needy type of energy and this energy should be produced. The development of oil and gas resources constitutes oil and gas field services, which are provided by contract drilling companies, such as Maersk Drilling. Source: Quora (2013). With the growing demand for oil and gas resources, oil companies are being pushed to offshore drilling, which are operated by small and large companies, such as Maersk Drilling, Nabors, Petrobras and Oil and Natural Gas Corporation (Kaiser & Snyder, 2013). In the era of globalization, economic instability and competitive environment only well-trained human force is able to give companies opportunity to achieve competitive edge. The following report will make an analysis of the market in which Maersk Drilling operates, will examine Maersk’s approach to its internal stakeholders and will offer recommendations for action by the Maersk HR team based on the market analysis and assessment of its employees, owners and investors. Analysis of the market According to Chua (2012), Denmark’s largest company, Maersk planned to spend up to $6 billion on new platforms, which make the company more serious player in the market. While market predicts oil production to be declining rapidly, there is still demand for this resource and there is a lot of oil need to be produced. Operating twenty-six platforms and ten drilling rigs, Maersk strives to have more deepwater rigs despite high price for the rigs. Assisted by Samsung Heavy Industries Co. the company will adopt more of deepwater drillships. There is however risk in the rig industry to face collapse due to the world economy and plunging oil prices. Besides, there can be bigger challenge for the industry, connected with the replace the skilled personnel need to operate modern platforms. Here the company understands that people can retire or need education. As Chua (2012) reported, oil drilling gives s great career opportunity in the safe place. Despite the demand in the resources, new hunt for oil and gas has intensified, according to Kilhof (2014). There is a considerable suffering of the drilling industry as a result of economic contraction, however, the demand for advanced drilling is high and oil and gas is harder to find. That calls for rigs to be deeper, which is a challenge for the environment. Despite the need to drill deeper, there only few companies that are able to drill at the unprecedented depths. Thus, according to Kilhof (2014), Maersk is allowed to drill in the US offshore oil fields. Here the company is a pioneer in the technology it uses, whose rigs exceeded the new safety regulations in the area. The company has won position of bigger player in the recent years and now establishes itself as the main player. Source: Kilhof (2014) Despite the modern technologies that the company uses and requirements it adheres, the UK which controls some fields in the North Sea consider such drilling harmful for the environment, doubling inspection. However, Maersk Drilling uses the new era ultra deepwater drillships and XLE jack-ups. The market of drilling was also pointed by Keppel Corporation and SembCorp Marine, which built four jack-up rigs and developed a series of prospects. In the market of jack-up rigs, Singaporean companies account seventy per cent of the production, which makes Maersk continue to innovate to be achievement-oriented. Maersk’s approach to its internal stakeholders If to consider the globalization in the HRM context, it is no longer a procedure, as companies are free to enter the foreign market without having domestic sales activities. These companies instead recognize opportunities for additional resources which are able to provide them competitive advantage. The whole world is the market for such multinational companies (Poor, n.d.). However, in terms of managing human resources abroad, companies should understand the differences between the local HRM and International HRM, which involves expatriates, more HR activities, more insight into the employees’ private life, risks of employment and specific influence of the external environment. Despite that, companies are good at finding responses to globalization, such as improving market share, quality and performance and profitability of their activities, as well as establishing best-practices HR (Chen, 2009). If to analyse all the differences, International HRM is appears to be more complex and needs to consider more factors, such as different places and legal and cultural peculiarities. Such functions of HRM as planning and job analysis are the same; however, such activities as requirements to international operations need to be extended. International HRM gives companies more opportunities to develop HR operations in terms of work performance, communication and induction of the new employees. As multinational and the company which operates globally, Maersk perceives its people as the most important asset, providing them with the good working place, supporting internationally and recognizing labour standards and human rights. Despite many challenges that offshore drilling calls, there are always professional people ready to face such challenges, but never compromise on health and safety concerns. While many oil and gas companies grow, they demand for more skilled employees and Maersk agrees that it is people who make the difference for their company (Our employees, n.d.). The growth of global financial networks, production systems and markets has created favourable conditions for international migration and interconnectedness between the labour markets (Wilton, 2010). These changes are reflected in the developing of international division of labor with regions and nations to specialize in the certain industrial activity. Thus, offshoring of business activities has increased the functions of HRM. The real practices refer to the companies’ ability to employ global workforce and rely on overseas labour forces. Economic context within the employment has altered the demand and supply of labour, where capitalist economies argue about the post-industrialism and the development of knowledge-intensive economy instead (Smith, 2000). This knowledge need has changes the requirement for skilled workers and increased the job complexity and the requirement for employees. Schuler and MacMillan (1984) state that the primary understanding of HRM practices impact on the companies’ performance can be gained through discussing of strategic targets and thrusts. The competitive targets are customers, distributors and suppliers. In addition, the company can increase the efficiency of production through HRM practices, which will help these groups of stakeholders to ensure in a competitiveness of their company. In addition, cost efficient thrust is reflected by HRM practices to improve effectiveness of production as well. Moreover, Porter’s five forces model enables the whole industries to drive competition and profitability despite the fact of the business maturity or whether it is high regulated or unregulated. Thus, according to Hokroh (2014), the strongest competitive force predisposes profitability of the industry. Applied toward Maersk Drilling company, the threat of entry is high for this company, as despite the decline in the economy and the price on oil, there are other corporations that are ready to enter the industry of drilling and deepwater drilling as well. However, these entrants may be from other markets, thus they can leverage existing capabilities of Maersk. The barriers of entry are the advantages for new entrants; however, Maersk has a long history of business performance that is why such component of Porter’s forces cannot be fully applied. For the whole oil industry there are barriers to enter the new market in the ways of patent need, large capital requirements, and economies of scale and governments regulations. Power of suppliers means a lot for Maersk performance, as these are the suppliers of labour and can squeeze profitability of the company. Suppliers constitute 57% of cash outflow distributed by stakeholder group and thus their role for the company is great (Sustainability report, 2013). The power of buyers causes the price sensitivity, however, little effect on the product of Maersk. Source: Hokroh (2014). However, due to the ability of the industry to offer products of other companies, buyers tend to play one vendor against the other. The threat of substitutes means that within the industry among different companies there can appear the price performance trade-off or cost switching to become lower. To Maersk it is a disadvantage, but to all similar companies performance of Maersk is also a threat to activities. Maersk is not as powerful as many of its competitors; hence, the rivalry among the existing companies is high. However, developing the high technology in its performance, Maersk is at favourable condition. In the context of government policy and regulation, HRM implications come from the outsourcing, where there legal issues about the in-house activity. There many issues with the control of subcontractors, hence, companies should understand how to regulate these issues especially when they outsource (Farnham, 2010), in searching the ways to adhere regulations, organizational principles should be put into practice through HRM. These regulations are the Equal Employment Opportunity (Equal Employment Opportunity, n.d.), which prohibit discrimination of race, age, gender in certain workplaces. Another regulation that ensures employer protection of the certain group of stakeholders is the Affirmation action, which includes taking special actions to decrease the effects of past discrimination. In Maersk, there is a belief that all individuals are entitled to equal employment conditions and Maersk is committed to be the work environment free of any form of discrimination (Maersk media publication, 2014). In terms of demographics and social trends within the HRM, there is a consideration that in the years 2025-2030 there will be additionally twelve millions of workforce per year, which will be the biggest threat to the countries with aging problems such as Japan, Italy and India (Mendryk & Dylon, 2013). Along with the forecasted decrease in the number of people, there are considerations that people in post-productive age in total number will decrease by 2035. Such demographic changes can lead to the workforce shortage, while organizations will face problem of poor labour market. Even now there are observations that most organizations are not ready for changes in HRM and discrimination on the age sense will occur more often. In addition to many challenges connected with the demographics, organizations meet a number of critical trends which affect the employment relationship. In Maersk, the company follows the trend of positive impact of technology on its performance. These are the tools, machinery and equipment as well as employee knowledge and skills that help technology to produce something for the open marketplace. According to the official website, Maersk rigs fleets are the youngest and most advanced in the industry, which enable the company operate with the largest harsh environment jack-up rigs in the world and make ultra deepwater drillships and deepwater semi-subsersible rigs (Drilling rigs, n.d.). Another aspect of modern trends applied in HRM is the diversity of employees. Due to globalization and open labour markets, it became possible to diversify workforce and search for unique skills and abilities overseas. Maersk has a lot of opportunities for the people of all nationalities who wish to work offshore. Maersk values people with experience and all types of trade and mechanical engineering qualifications (Helping tips for getting hired offshore, 2015). Much of the researches indicated the relationship between the measures of HR practices and business strategy and companies’ profitability (Mitsakis, 2014). HR practices within certain organization are directly connected with the business mission, its goals and objectives. Moreover, HR is examined as a strategic business partner, which gives an organization possibility to fully open business vision. As business partners, HR professionals are aimed at developing collaborative relationship in order to increase company’s image and credibility. As its strategy, Maersk business strategy is directed toward being the significant contributor to the Maersk Group with the higher profit in a few years and free operations. The company builds its service with the help of high skilled employees and committed workforce (Our strategy, n.d.). Hence, its business strategy and HRM is intrerchanged as no operations would be effective and thus strategy will not be reached if employees were not directed in the certain similar way. However, it is stated (Harfield, n.d.) that strategic decisions are made to differentiate a company from the competitors. These decisions differ from those needed for operational effectiveness. That is why it is important to define what the strategy is and how it relates to HRM. From classical approach to strategy, it is based in the tradition of rigid hierarchy and has great confidence in the managers’ ability to adopt profitability of companies through planning. Processual approach sees strategy as gradual adjusting to routines. Evolutionary approach to strategy analyses context and resources and establishes connection to company goals and mission implementing by this strategy. One can considered that Maersk business strategy comes from the evolutionary approach as it uses resources in employees and puts them for strategy implementation. Quality control is the important and the integral part of strategy of any oil drilling company. Maersk commitment to sustainability starts with the key performance indicators, where quality control is among the major. Since the offshore work environment is a complex and potentially risky activity, the majority of concerns are connected with the scenario when a company can lose control over the quality of services it provides. For that reason the company goes far beyond its objectives of a profitable business and involves management system that contains all the processes and procedures that are compliant with the ISO 9001 standard (Governance and management, n.d.). Thus, the objective of Sirius ensures company employees to have access to the safe and efficient work place and processes with the good quality and according to all legal requirements. Conclusions and recommendations The drilling industry is balanced being in the area of severe competition. In addition, technology and innovation make this competition more difficult as companies strive to obtain their competitive edge. For that purpose drilling companies should search for more ways how to obtain such advantage over rivals. However, being the first in technological advancement does not mean to be able to secure safe workplace for employees. The history knows several negative consequences of how drilling companies are not caring about safety rules. This cannot be said about Maersk, because its strategy and HR policies are aimed and directed toward not only leading the company to be the best in its industry, but it also to ensure the most favourable working place for its employees which will bring the company its desired significant contribution. However, in terms of market presentation, the company should implement new strategies toward preserving the environment of the water it operates in. In terms of HR in the context of numerous areas, there is a reason to follow social trends and be more customer-centric. References Chen, W. 2009. Business Risks, Business Strategies, HRM and De-Globalization, Asian Social Science, [online] Available at: http://ccsenet.org/journal/index.php/ass/article/viewFile/498/451 [Accessed on July 1, 2015]. Chua, B. 2012. 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