Business Strategy in Extractive Industries - Essay Example

The company must improve on its reserve replacement rate. Although, the company has a good price earnings ratio, still they need to work on their return on equity values. This is significant from the investors’ point of view. Overall the company has a ‘stable’ financial state. At the same time it has enough strength to strengthen its performance in the next years. Statoil is a leading European company engaged in natural oil and gas production. It is Norway based company and has expanded in most of the major oil and gas markets of the world.

It has been operating in this industry since the last 28 years and has acquired a lion’s share in the market. It is the biggest oil and gas company in Norway. The industrial structure of Norway is very competitive with high degree of governmental interference. Most of the oil and gas reserves in Norway are controlled by the government. Statoil has been no exception to it and Government holds nearly 70% of its total stake. However, now the government is looking forward to open the economy by liberalizing the market.

If the government is successful in its attempts, the competition in the energy industry will be intensified further. Statoil has become one of the major players in the energy industry as it has successfully acquired the competitive advantage over its competitors. In order to develop the competitive advantage, Statoil has maintained its resources and capabilities quite efficiently. Major resources of Statoil include its vast oil & gas reserves and its up-to-date technology & innovation. Apart from these, it has also acquired sufficient skilled manpower and financial resources.

These resources have enabled the company to gain an upper hand by adding value to its brand image. Overall financial position of Statoil is satisfactorily stable. The P/E and liquidity ratio and low-debt preference indicate the stabile condition of the company. However, according to