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Eni Energy Business Strategy and Competitive Advantages
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Eni Energy Business Strategy and Competitive Advantages

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  • 1. Divya Mishra
    Susan Mojtahed
    BY
    GROUP B
    Okeroghene Gbagi
    Qian Yan
    Yuchuan Jin
    Linda Watterson
  • 2. Agenda
  • 3. General Information
    The history of Eni and its companies is a long one, and is closely related to the development of Italy
    Eni operates in the oil and gas, electricity generation and sale, petrochemicals, oilfield services construction and engineering industries. In these businesses it has a strong edge and leading international market position.
    Eni is active in 77 countries with a staff of about 78,400 employees.
    OPERATIONS AND STRATEGIES:
    Exploration & production
    Gas & power
    Refining & marketing
    Engineering & construction
    http://www.eni.com/en_IT/company/operations-strategies/exploration-production/exploration-production.shtml
  • 4. 1. What is Eni’s corporate strategy?
    Vertical integration strategy-exploration and production upstream and refining and distribution downstream.
    Other activities include:
    Building pipelines
    Expansion of other energy sources
    Emphasis on employee training and personnel activities.
  • 5. Vertical Integration
    Advantages:
    Reduce transportation costs
    Improve supply chain
    Opportunities to differentiate
    Capture upstream or downstream profits
    Increase entry barriers
    Gain access to downstream distribution channels
    Invest in specialized assets lead to expansion of core competencies
  • 6. Vertical Integration
    Disadvantages:
    Capacity balancing issues
    Higher costs due to low efficiencies
    Decreased flexibility
    Developing new core competencies may comprise existing competencies
    Increased bureaucratic costs.
  • 7. Eni’s Vertical Integration Strategy
    Eni’s advantage:
    Gas supply from many different countries
    Good leverage power
    Attractive structures and terms
    Access to large set of transportation and storage sets
    Flexibility to vary the gas they produce and sell
    The CEO of Eni regarded the vertical integration strategy as its key competitive advantage in the European gas market.
  • 8. 2. How well aligned is Eni’s strategy with the characteristics, requirements, resources and capabilities of its industry environment
  • 9. 3. Looking ahead over Eni’s next 4‐year planning period (2010‐3), what are the main issues that face the company?
    What is the direction for the future ?
    VIDEO
    http://eni.iwebcasting.it/2010-2013-strategy/
  • 10. What are the problem we have to face?
    A. It most immediate problem was the global recession that had reduce the demand for oil, gas and power and had resulted I sharp reductions in energy prices.
    B. The greatest uncertainties related to Eni’s future over the long term. Oil and gas reserves were becoming increasingly difficult to find.
    C. The threats to Eni’s vertically integrated natural gas strategy were not all that the upstream level.
    D. The growing problem of global warming was an emerging threat to the oil and gas industry.
  • 11. How should Eni allocate its resources across its different businesses and between different geographical areas?
    Should Eni divest its chemicals business? What about its engineering, construction and oilfield services subsidiaries?
    • Focus
    Should Eni seek to establish itself as a major supplier of electrical power? Should it invest in renewable energy sources (e.g. wind power)?
    • Vertical integration
    What should Eni’s international strategy be—especially in relation to its downstream businesses (Refining and Marketing; Gas and Power)?
    • Expanding
  • 4. Should Scaroni initiate organizational changes with regard to organizational structure, management systems, and corporate culture?
    Organizational structure
    Eni is in many different divisions and subsidiaries. The structure is called a matrix.
    All companies that hold multiple products, functions, and locations must coordinate across all three dimensions. Organizational structures that formalized coordination and control across multiple dimensions are called matrix structures.
    The management system
    Eni has a subsidiary that manages orientation, recruitment, selection, and training of employees. The investment in the employees ensure a closer alignment of the strategy with the skills of the managers implementing them.
    The corporate culture
    Eni is one of the first European companies to adapt a code of ethics. They are very concerned with preserving the environment.
  • 12. 4. Should Scaroni initiate organizational changes with regard to organizational structure, management systems, and corporate culture?
    No, Scaroni vowed to follow the same strategy set in motion by the previous CEO, Mincato.
    In order to continue the growth achieved by Eni in the last 5 years, Scaroni realizes he needs to draws upon Eni’s unique strengths such as doing business with countries viewed as unstable.
    Eni needs to portray a stable ally. He is quoted as saying,
    “At Eni the strategy is solid and good. If it isn’t broken, don’t fix it.”
    Eni is hiring more foreign officers and employees, also adapt more cultural awareness. Communication in the company also is vertical as is their strategy.
    http://www.eni.com/en_IT/company/our-people/our-people.shtml
  • 13. 5. Bridge or relate what you learnt in class to the reality
    Do you agree with what the firm’s current conduct?
    Is it consistent with your analysis?
    Any recommendation for the firm’s top managers?
  • 14. 6. Summarize what you leant from this case in one paragraph.
    • The alignment of the firm’s goals, business strategy, underlying resources and capabilities, competitive advantage, and industry key success factors.
    Industry Characteristic
    &
    Requirements
    Competitive Advantage
    Business Strategy
    External Environment
    Resources
    & capabilities
  • 15.
    • What other competitive advantages the firm could possess given the observed resources and capabilities.
    • 16. Eni seek to establish itself as a major supplier of electrical power.
    • 17. Invest in renewable energy sources (e.g. wind power).
    • 18. Eni divest its chemicals business.
    • 19. The companies going global should look into there organizational structure.
    • 20. Adapt more cultural awareness.
    • 21. Cultural diversification to understand the trends in different countries.
    • 22. Communications at all the level is important.
    • 23. Initiate organizational changes with regard to organizational structure,
    management systems, and corporate culture ,only when needed.
    • “If it isn’t broken, don’t fix it.”
  • QUESTIONS
    ?
  • 24. THANKS