This Slideshare presentation is a partial preview of the full business document. To view and download the full document, please go here:
http://flevy.com/browse/business-document/industry-reportsaudi-arabia-energy-industry-548
Globalization has become the essence of international trade and has been the primary reason why companies have gone beyond their national boundaries and setup production centers in different countries. As a consequence, consumers today are getting high quality, low priced and technologically enhanced products and services all over the world. Some commodities that have been widely affected by globalization are oil & gas, our primary sources of energy. World energy sector has been booming as giant corporations go to different countries in the search of new sources of energy. Saudi Arabia since its inception and the discovery of oil has been the center of the world oil trade and politics. It plays a major role in the supply of oil and keeping the prices in balance. So, it naturally attracted the major oil exploration and production giants from all over the world to extract the biggest source of energy. This paper gives an overview of the multinationals operating in the Saudi Arabian energy sector and how they have impacted the growth of the sector.
This dissertation through use of secondary resources and qualitative analysis intends to add value to the existing literature by bringing out a new perspective in the international business research. Literature Review forms the base of the dissertation and is essentially divided into three parts. The first part explores the existing theories relating to Multinational companies and Internationalization. It explains the evolution of the theories and presents counter views on the internationalization of companies. The second part talks about the macroeconomic environment of Saudi Arabia using the PESTLE framework and describes the factors any company should consider before investing in Saudi Arabia. The third and the last part of the Literature review we discuss the energy sector of Saudi Arabia and the major companies operating in it. It uses the well known Porter?s Five Forces model to understand the competitive structure of the Saudi Arabia energy sector.
The next section of the dissertation is key findings where the information received from the previous section is analyzed. The impact on the energy sector is discussed followed by the gaps in the existing studies and the future prospects of the Saudi Arabian energy sector. The dissertation concludes by summarizing the key findings obtained from the various studies and paves way for further research on this topic.
Read this Sample Assignment on Business Strategy of an Organization written by an expert writer of Instant Assignment Help. We offer assignment samples on various subjects to the students without charging any cost. Our sample helps the scholars in improving their assignment writing skills. If you are facing any assignment related problem then contact us for the best assignment help and score top grades. We are the leading assignment writing service provider which caters the academic requirements of the students. Place your order now and avail our exciting offers and discounts.
Read this Sample Assignment on Business Strategy of an Organization written by an expert writer of Instant Assignment Help. We offer assignment samples on various subjects to the students without charging any cost. Our sample helps the scholars in improving their assignment writing skills. If you are facing any assignment related problem then contact us for the best assignment help and score top grades. We are the leading assignment writing service provider which caters the academic requirements of the students. Place your order now and avail our exciting offers and discounts.
the actual mean of this presentation was about check the effects of privatization of SO E's and results after privatization either it was successful or not.
K-Electric was a success story of privatization like PTCL and other SO E's.
K-Electric also a trend setter in Power sector to use new technology and customer care services.
Financial Ratio Analysis of Samsung for the year 2013-2014Prinson Rodrigues
Financial Ratio Analysis of Samsung For the year 2013-2014
Current ratio
Quick ratio
Debt equity ratio
Capital turnover ratio
Fixed Assets Turnover ratio
Working capital turnover ratio
Stock turnover ratio
inventory conversion period
Debtors turnover ratio
Gross profit ratio
net profit ratio
etc
This is a project of Ratio Analysis uploaded for MBA 2nd Semester students. This is of Fatima Fertilizer, Pakistan. Hope will help you a lot. If any question feel free to mail me. Tk all.
Impacts of Unconventional Oil & Gas on IOC and NOC Relationships presented at...Energy Intelligence
At the 2012 Oil & Money Conference, energy experts heard from Qatar Petroleum International's CEO, Nasser Al-Jaidah discuss his opinions on the impacts of unconventional oil and gas on IOCs and NOCs relationships.
This presentation explores how unconventional oil and gas can have an impact on IOCs and NOCs as well as the benefits to these relationships.
the actual mean of this presentation was about check the effects of privatization of SO E's and results after privatization either it was successful or not.
K-Electric was a success story of privatization like PTCL and other SO E's.
K-Electric also a trend setter in Power sector to use new technology and customer care services.
Financial Ratio Analysis of Samsung for the year 2013-2014Prinson Rodrigues
Financial Ratio Analysis of Samsung For the year 2013-2014
Current ratio
Quick ratio
Debt equity ratio
Capital turnover ratio
Fixed Assets Turnover ratio
Working capital turnover ratio
Stock turnover ratio
inventory conversion period
Debtors turnover ratio
Gross profit ratio
net profit ratio
etc
This is a project of Ratio Analysis uploaded for MBA 2nd Semester students. This is of Fatima Fertilizer, Pakistan. Hope will help you a lot. If any question feel free to mail me. Tk all.
Impacts of Unconventional Oil & Gas on IOC and NOC Relationships presented at...Energy Intelligence
At the 2012 Oil & Money Conference, energy experts heard from Qatar Petroleum International's CEO, Nasser Al-Jaidah discuss his opinions on the impacts of unconventional oil and gas on IOCs and NOCs relationships.
This presentation explores how unconventional oil and gas can have an impact on IOCs and NOCs as well as the benefits to these relationships.
Glass Fibers: Fiberglass/Glass Wool and Glass Fiber Reinforcements – A Global...Industry Experts
Market for Glass Fiber product segments analyzed in this study includes Fiberglass/Glass Wool and Glass Fiber Reinforcements. The report analyses the market in terms of volume consumptions in metric tons as well as value consumption in US$ dollars. The report also includes the end-use application analysis for Fiberglass/Glass Wool – Residential Construction, Commercial & Industrial Construction, Industrial & HVAC Applications and Appliances & Other; and Glass Fiber Reinforcements – Automotive & Transportation, Marine, Wind Energy, Pipe, Tank & Other Corrosion Resistant Equipment, Building & Construction, Electrical & Electronics, Consumer Goods, Aerospace & Defense and Others.
The Best way to do PEST Analysis
This slideshow provides a brief tutorial on a new diagrammatic method, developed at the world famous Henley Business School in the UK.
The new method overcomes some of the major weaknesses of traditional PEST /‘PESTLE (Political, Economic, Social, Technological, Legal, Environmental) analysis. Traditional PESTLE tends to generate a random list of unrelated facts – not very useful for understanding your business, developing strategy or convincing other business leaders.
We show how you can use the PESTLEWeb method to tell a clear and compelling ‘story’ that leads from key issues to business threats and opportunities.
PESTLEWeb is supported by a new tool at www.PESTLEWeb.com. The new web-based tool helps you create great graphics and enables the automatic generation of outline reports and tabulated data to support your paper or presentation.
Pestle analysis for doing business in australia. it talks about different env...Tushar Sadhye
Pestle analysis for doing business in australia. it talks about different environments that affect your business in good ways or bad ways depending on how you use it.
Saudi Arabia Presentation, Saudi Culture, Saudi Women rights, Saudi Food, Sau...Sas Sas
I was preparing a macro analysis presentation for Saudi Arabia and after reviewed presentations at the web site I found a lot of incorrect info so I decided to upload the presentation on the website to show people how want to know about Saudi Arabia or need some info to prepare a presentation some real data about Saudi Culture, Saudi Women rights, Saudi Food, Saudi Economy, Saudi Society, what is the real Saudi Arabia Video
The countries of the Gulf Cooperation Council (GCC) are situated in one of the most energy-rich
regions in the world. Home to nearly a third of world oil and more than a fifth of global gas reserves –
most of which are concentrated between Saudi Arabia, the UAE, Kuwait, and Qatar – they remain one
of the world’s key centres of conventional oil and gas supply.1 Oil and natural gas resources have
also fuelled the region’s socio-economic development, having turned the GCC states within a mere
few decades into some of the wealthiest nations (in per capita terms) in the world.2 The GCC states’
unparalleled economic growth and industrial expansion, together with their rapidly rising living
standards, have meanwhile left their mark on the region’s domestic energy needs. Regional GCC
energy consumption has risen by nearly six times since the 1980s – faster than in any other part of
the world.3
It is this surge in domestic energy demand which, in the foreseeable future, is likely to pose one of the
greatest policy challenges yet seen in the GCC. This is because domestic demand is intrinsically
linked to the region’s most important export product, hydrocarbon energy resources; these resources
are primarily in the form of oil but in some cases (such as Qatar) of natural gas as well. With low-cost
oil and natural gas accounting for virtually 100 per cent of the GCC states’ domestic energy mix, their
domestic energy demand is expected to continue rising at rates which are among the world’s fastest
over at least the next decade
Analysis of the Potential of Solar Energy Development inSaudi Arabia IJERA Editor
Saudi Arabia has been exploring the potential of renewable energy for many years. Saudi authorities, scientists, and researchers view the generation of renewable energy as a viable long-term energy strategy. Despite this, because Saudi Arabia is one of the leading oil producing nations and relies heavily on it as a form of energy and source of income, solar energy has not been given much serious consideration. However, it has become more and more evident that for the continuing prosperity of the nation and the inevitable gradual decline in long-term oil production, it is essential to explore and invest in alternative energy sources. The main objectives of this research are: i) to establish the potential of solar energy generation as a suitable, cost-effective alternative to petroleum products. ii) to establish the potential for maximizing renewable power generation to support the supply grid. This paper presents an examination of various economic and technological aspects of generating solar energy in Saudi Arabia. Using some existing data on the amount of solar radiation, a seasonal multiple linear forecasting method is used to generate forecasts for electric energy generation potential for 32 cities. Results of this research demonstrate the desirability and economic feasibility of installing solar panel farms and constructing distribution lines
Greetings,
Attached FYI ( NewBase Special 02 November 2015 ) , from Hawk Energy Services Dubai . Daily energy news covering the MENA area and related worldwide energy news. In todays’ issue you will find news about:-
• UAE’s Masdar sees renewable energy opportunities in MENA region
• Saudi SABIC, KSU in partnership to support KSA’s economic plans
• Saudi Consumers Are Still Spending Like the Oil Slump Never Happened
• Nigeria moves to split up delayed oil industry bill
• US: Oil Producers Curb Megaproject Ambitions to Focus on U.S Shale
• Oil prices drop on China demand worries, but stable
• Want to See Who's Happy About Low Oil Prices? Look at Refiners
• Vehicle standards around the world aim to improve fuel economy and reduce emissions
• Harsh realitiea finally push US champions of shale oil into retreat
we would appreciate your actions to send to all interested parties that you may wish. Also note that if you or your organization wish to include your own article or advert in our circulations, please send it to :-
khdmohd@hotmail.com or khdmohd@hawkenergy.net
Best Regards.
Khaled Al Awadi
Energy Consultant & NewBase Chairman - Senior Chief Editor
MS & BS Mechanical Engineering (HON), USA
Emarat member since 1990
ASME meme since 1995
Hawk Energy since 2010
The role of Saudi Arabia in Global Energy MarketsEdouardLotz
Saudi Arabia always played a major role in global oil supplies during the 20th century, as well for the 21st century. This report aims at analysing the energy profile of the country, its market structure, its energy strategy for the future and also its foreign relations having regard to its oil dominance.
New base energy news 09 november 2020 issue no-1386 by senior editor khal...Khaled Al Awadi
NewBase Energy News 09 November 2020 - Issue No-1386 by Senior Editor Khaled Al Awadi .docxNewBase Energy News 09 November 2020 - Issue No-1386 by Senior Editor Khaled Al Awadi .docx
Entrepreneurship in the Middle East energy sectorfrancisduque
A nation’s transition from one technological path to another is the underlying feature to understanding the transformation to an innovation-led system. The process of change and factors that favour the adoption of certain types of technologies over others enables to examine the role of different innovation mechanisms and actors that drive an economic and industrial transformation.
Fortune 500 companies and other leading organizations frequently seek the expertise of global consulting firms, such as McKinsey, BCG, Bain, Deloitte, and Accenture, as well as specialized boutique firms. These firms are valued for their ability to dissect complex business scenarios, offering strategic recommendations that are informed by a vast repository of consulting frameworks, subject matter expertise, benchmark data, best practices, and rich insights gleaned from a history of diverse client engagements.
The case studies presented in this book are a distillation of such professional wisdom and experience. Each case study delves into the specific challenges and competitive situations faced by a variety of organizations across different industries. The analyses are crafted from the viewpoint of consulting teams as they navigate the unique set of questions, uncertainties, strengths, weaknesses, and dynamic conditions particular to each organization.
What you can gain from this whitepaper:
Real-World Challenges, Practical Strategies: Each case study presents real-world business challenges and the strategic maneuvers used to navigate them successfully.
Expert Perspectives: Crafted from the viewpoint of top-tier consultants, you get an insider's look into professional methodologies and decision-making processes.
Diverse Industry Insights: Whether it's finance, tech, retail, manufacturing, or healthcare, gain insights into a variety of sectors and understand how top firms tackle critical issues.
Enhance Your Strategic Acumen: This collection is designed to sharpen your strategic thinking, providing you with tools and frameworks used by the best in the business.
Whether you're at the helm of a corporation or on your path to becoming a consulting expert, "100 Case Studies on Strategy & Transformation" is your essential guide to navigating the complex world of business strategy.
More Information:
https://flevy.com/browse/marketplace/project-management-for-mba-in-french-5722
BENEFITS OF DOCUMENT
Project management adapted to the needs of participants in MBA programs
Course built on the basis of the project management process: Initiating - Planning - Executing - Controlling - Closing.
Course presenting in detail not only the Waterfall approach but also the Agile & Hybrid development approaches.
DOCUMENT DESCRIPTION
This course is a presentation of over 220 pages specially edited to cover the needs of participants in Master of Business Administration - MBA programs.
This course is based on the standard PMBOK edition 6 of the Project Management Institute, it also follows the project management methodology offered by Rita Mulcahy's PMP Exam Prep 10th Edition.
This course refers to case studies chosen among those existing in the book Project Management: A Systems Approach to Planning, Scheduling, and Controlling, Author: Harold Kerzner.
This course contains exercises as well as a practical case of an open space development project.
Below is the table of contents:
• Introduction to project management,
• Pre-Project,
• Project environment,
• Project Management Process,
• Initiating,
• Planning,
• Executing,
• Controlling,
• Closing.
• Introduction to Agility,
• Role of the Project Manager.
Got a question about this presentation? Email us at support@flevy.com.
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https://flevy.com/browse/flevypro/4-stages-of-disruption-5265
Organizations are constantly trying to innovate and, likewise, all industries will eventually be disrupted, as new products, businesses, and industries emerge.
No industry is safe from Disruption. In a 2017 PwC survey of 1,379 CEOs around the world, 60% said their market has already changed or completely reshaped in the past 5 years and over 75% anticipate they would by 2022.
This presentation discusses the 4 Stages of Disruption. Research has found Innovation that eventually leads to Disruption follows a 4-stage evolution:
1. Disruption of Incumbent
2. Rapid and Linear Evolution
3. Appealing Convergence
4. Complete Reimagination
Understanding this 4-stage model will help us understand what design choices to prioritize and when. At any given time, different products and organizations are likely to be at different stages relative to local “end point†of Innovation.
Additional topics discussed include Disruptive vs. Incumbent Dynamics, the Consumer Adoption Curve, Endgame Niche Strategies, among others.
This deck also includes slide templates for you to use in your own business presentations.
Got a question about the product? Email us at flevypro@flevy.com.
More Information:
https://flevy.com/browse/flevypro/customer-centric-culture-3831
The use of Internet and other online tools have turned consumers to be more empowered and are now shopping differently. Customers are becoming more demanding and accustomed to getting what they want. With greater access to reviews and online rating, customers are better equipped to switch to new products and services. Consumers now want to buy products and services when, where, and however they like. They expect companies to interact with them seamlessly, in an easy, integrated fashion with very little friction across channels.
As customer expectation continue to evolve – accelerated by the amplifying forces of interconnectivity and technology – markets are becoming increasingly fragmented with demand for greater product variety, more price points, and numerous purchasing and distribution channels.
Companies should be able to adapt to these increasingly disparate demands quickly and at scale. Staying close to the customer experience across an increasingly diverse customer base changing over time is no longer a matter of choice. It is a business imperative and a matter of corporate survival.
The Age of the Customer now calls for companies to be a customer-centric company. Successful ones have discovered that building a customer-centric company depends, first and foremost, on building a Customer-centric Culture.
This framework focuses on the building a Customer-centric Culture utilizing the Corporate Culture Framework. The Corporate Culture Framework is anchored on 4 Primary Cultural Attributes and 4 Secondary Cultural Attributes.
The 4 primary Cultural Attributes are critical in building a Customer-centric Culture.
1. Collective Focus
2. External Orientation
3. Change and Innovation
4. Shared Beliefs
Customer-centric organizations also project 4 secondary Cultural Attributes.
1. Risk and Governance
2. Courage
3. Commitment
4. Inclusion
Companies with a Customer-centric Culture can drive superior financial results and a rich source of competitive advantage.
This deck also includes slide templates for you to use in your own business presentations.
Got a question about the product? Email us at flevypro@flevy.com.
More Information:
https://flevy.com/browse/flevypro/business-transformation-success-factors-5561
Business Transformations have become a necessity in the fast-changing technological and competitive business environment. Transformation is characterized by significant and risk-laden restart of a company, with the objective of accomplishing a profound improvement in performance and changing its future course.
Undertaking such arduous effort requires approaching the task in a structured way. Research shows that quite a few of such undertakings are based on anecdotal beliefs instead of being based on empirical data.
This presentation provides a detailed overview of the 5 Factors Critical for achieving the desired results from Business Transformation, based on empirical evidence. These 5 factors are:
1. Cost Management
2. Revenue Growth
3. Long-term Strategy and R&D Investment
4. New, External Leadership
5. Holistic Transformation Programs
Other topics discussed in the presentation include the rationale for Business Transformation, its effects, phases, and the trends that trigger Business Transformation.
The slide deck also includes some slide templates for you to use in your own business presentations.
More Information:
https://flevy.com/browse/flevypro/employee-engagement-measurement-and-improvement-5321
Employee Engagement has emerged as one of the significant pillars on which the Competitive Advantage, Productivity, and Growth of an organization rests. Measuring Employee Engagement is vital in shaping Employee Engagement Strategies that help propel the organization towards growth.
This presentation provides a detailed overview of the Employee Engagement Scorecard, a framework that is quite effective in measuring the existing levels of Employee Engagement and devising strategies based on the individuals’ requirements. The Employee Engagement Scorecard encompasses 5 dimensions or guiding principles:
1. Enhance Employee Satisfaction
2. Promote Employee Identification
3. Enhance Employee Commitment
4. Ensure Employee Loyalty
5. Manage Employee Performance
The slide deck also includes some slide templates for you to use in your own business presentations.
More Information:
https://flevy.com/browse/flevypro/digital-transformation-workforce-digitization-3969
The approaching Age of Automation, together with the impending penetration of digital technology into the labor force, threatens to destabilize crucial aspects of how employees work by. It undermines the stability companies depend on to be agile.
Executives can re-solidify their companies even while making the most of the coming Transformation. There is just a need for executives to adjust their leadership behavior, embrace Digital Workforce Platforms, and deepen their engagement with digitally enabled workers.
This framework provides a good understanding of Workforce Digitization, the Workforce Platforms, and its 4 core benefits (listed below).
1. Collaboration
2. Retention
3. Succession Planning
4. Decision Making
The use of Workforce Platforms can provide companies greater chance to succeed in making markets for talented workers inside their organizations.
This deck also includes slide templates for you to use in your own business presentations.
More Information:
https://flevy.com/browse/flevypro/strategic-human-resources-5310
Today's information-based, knowledge intensive, and service-driven economy has forced organizations to make substantial changes to the way they do business. With talented Human Capital now becoming the key strategic resource, the locus of the battle front has shifted. Managers not only have to fight for product markets and technical expertise but also for the hearts and minds of the most talented people in the market.
This presentation discusses the 3 core processes that Human Resources (HR) must adopt to evolve into the strategic HR function that has become the new realm in this age of disruption:
1. Building
2. Linking
3. Bonding
Other topics discussed in the slide deck include the changing perspective and responsibility of top management amidst rapid Business and Digital Transformation; and the shifting role of HR from being an auxiliary function to that of a driver.
The slide deck also includes some slide templates for you to use in your own business presentations.
[Whitepaper] 8 Key Steps of Data Integration: Restructuring Redeployment Asse...Flevy.com Best Practices
More Information:
https://flevy.com/browse/flevypro/restructuring-redeployment-assessment-management-5439
More Information:
https://flevy.com/browse/flevypro/restructuring-redeployment-assessment-management-5439
Restructuring becomes essential at some stage in the lifecycle of any organization. In order to emerge triumphant through this tumultuous challenge, it is necessary that the focus remains on the challenges impeding the organization, Strategy Development to tackle the challenges, and prioritizing Strategic Initiatives to deliver radical results that lead the organization to Operational Excellence.
Redeployment is the most significant phase in the Restructuring process. Within Redeployment, the Assessment phase is critical as the revitalization of the whole organization is dependent on correct Assessments and right placement of employees based on those Assessments.
Proper Redeployment Assessment Management is of utmost importance in Restructuring, and it should follow a structured approach, which means managing 5 core areas:
Manage Assessment Team
Manage Anxiety Level of Candidates
Manage Amount of “Deviant Behavior” in the Assessments
Manage Level of Duplicity, Wild Guessing, and Other Forms of Distortion
Manage Amount of Feedback and Its Timing after the Event
Managing 5 core areas ensures smooth implementation of the Redeployment Assessment process, which is a major milestone of the Restructuring project.
The Redeployment Assessment process has to be detailed, accurate, and prompt. Due Diligence in documenting the process, verifying particulars, and balance between Rapidity and Accurateness is essential because:
Organizational requirement to concentrate on post-restructuring environment is intense.
Employees’ urge to swiftly find out about their future is deep-seated.
Objections by employee stakeholders, as a consequence of large-scale retrenchment is high.
Probability of legal recourse by employees is also distinct.
Future Employee Engagement is dependent on fair Assessment and correct placements.
More Information:
https://flevy.com/browse/flevypro/strategy-classics-value-disciplines-model-5138
According to Treacy and Wiersema, organizations need to make tough strategic choices in order to become market leaders. Market leaders choose to excel in delivering extraordinarily levels of one particular value to their customers. This way they can remain focused and become the absolute best in a certain value proposition.
Gaining market and Operational Excellence requires that the company's entire Operating Model be adapted in a way this it is aligned with the chosen Value Discipline. A Value Discipline is a unique value that organizations can deliver to a chosen market. The Value Discipline Principle is in line with Porter's Generic Strategies, where Michael Porter describes how companies gain Competitive Advantage by either focusing on low cost, differentiation, or a niche market.
This presentation discusses the Value Disciplines Model and the 3 Value Disciplines organizations must choose from.
1. Operational Excellence
2. Product Leadership
3. Customer Intimacy
If your company has not reached yet any of the Value Disciplines, don't wait longer.
[Whitepaper] The Definitive Guide to Strategic Planning: Here’s What You Need...Flevy.com Best Practices
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https://flevy.com/browse/flevypro/best-practices-in-strategic-planning-2738
For many organizations, this is the time of the year is when Leadership will conduct the annual Strategic Planning process and plan the near-, mid- and long-term strategies.
This article breaks the full Strategic Planning and Execution processes into 3 sections:
Strategic Planning
Strategy Development
Strategy Execution
For each section, we will highlight important concepts core to the topic, as well as direct you to important resources for further understanding.
1. Strategic Planning
Per Wikipedia, we can define Strategic Planning as:
Strategic Planning is an organization’s process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. It may also extend to control mechanisms for guiding the implementation of the strategy. Strategic Planning became prominent in corporations during the 1960s and remains an important aspect of strategic management. It is executed by strategic planners or strategists, who involve many parties and research sources in their analysis of the organization and its relationship to the environment in which it competes.
Strategic Planning is a crucial process, but often poorly executed, leading to poor translation from Strategy to Execution.
In most organizations, executives complain that their Strategic Planning is overly bureaucratic, insufficiently insightful, and doesn’t accommodate today’s rapidly changing, digital markets. To combat these issues, there are a few best practices we should follow:
Explore Strategy across 3 time horizons.
Encourage productive and stimulating Strategic Dialogue.
Engage a broad, decentralized group of stakeholders.
Let’s dive a little deeper into each of these best practices.
Explore
The 3 time horizons we want to explore can be defined as short term (1-year timeframe), medium term (3–5 years timeframe), and long term (5+ years). Each horizon is uniquely considered and has different objectives.
[Whitepaper] The Definitive Introduction to Strategy Development and Strategy...Flevy.com Best Practices
More Information:
https://flevy.com/browse/flevypro/strategy-classics-porters-five-forces-4051
More Information:
https://flevy.com/browse/flevypro/strategy-classics-porters-five-forces-4051
[Whitepaper] The “Theory of Constraints:” What’s Limiting Your Organization?Flevy.com Best Practices
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https://flevy.com/browse/flevypro/theory-of-constraints-1883
The Theory of Constraints (TOC) is a methodology for identifying the most important limiting factor — i.e. constraint — and systematically improving it. It was developed by Dr. Eliyahu Goldratt, introduced in 1984 book, The Goal.
TOC differs from traditional management views, in that traditional methods seek to make improvements throughout the organization. They divide the organization into smaller, more manageable pieces. The objective, thus, is to maximize the performance of each part, resulting in global improvement.
On the other hand, TOC takes a more focused approach. Instead of improving everywhere, the TOC approach seeks only to improve the few variables (or constraints) that have the largest impact on the organization’s performance. By trying to improve everything everywhere, the risk is that nothing will be improved that really counts. TOC follows the adage “a chain is no stronger than its weakest link.” An interesting phenomenon about chains is that strengthening any link except the weakest one does not improve the strength of the whole chain. Strengthening the weakest link produces an immediate increase in the strength of the whole chain, but only up to the level of the next weakest link.
There are 3 types of constraints that exist in an organization:
Capacity Constraint. This constraint occurs when a resource which cannot provide timely capacity as demanded by the system.
Market Constraint. This is when the amount of customers orders is not sufficient to sustain the required growth of the system.
Time Constraint. This occurs when the response time of the system to the requirement of the market is too long to the extent that it jeopardizes the system’s ability to meet its current commitment to its customers as well as the ability of winning new business.
More Information:
https://flevy.com/browse/flevypro/supply-chain-cost-reduction-transportation-5482
Companies looking to improve efficiency and reduce costs can gain significant ground in the Supply Chain Management function by incorporating Lean Management and Six Sigma techniques.
Reason this area has gone under the radar is that companies do not consider Supply Chain to be their core competency.
Not only Warehousing but Transportation also has almost the same potential in terms of opportunities for Cost Reduction and Process Improvement. The approach to Transportation Costs Reduction, though, is different to that of Supply Chain Cost Reduction in Warehousing. This is in part due to the complexity in Transportation Costs, as the costs come from numerous widely distributed individual operations every year.
The approach to Supply Chain Cost Reduction in Transportation encompasses 2 phases:
Understand the Baseline
Identify and Implement Opportunities
[Whitepaper] A Great Leadership Experience: Dr. Rachid Yazami, Inventor of th...Flevy.com Best Practices
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https://flevy.com/browse/flevypro/leadership-competency-model-3661
Leadership has become a usual term often misunderstood by many people even those holding the status of a leader. There is no doubt that everyone can be a leader, but not everyone can be a genius leader. Leadership is far limited to prestige, a high status, or to financial abundance; it is neither about authority nor power. Leadership starts when you go beyond the self to serve and empower others.
This article is not for a purpose to redefine leadership with its different aspects, but it is simply about a great example of leadership that mirrors outstanding performance and remarkable human qualities. Dr. Rachid Yazami is an eminent scientist and best known for his research on lithium ion batteries. This technology is used by billions of people worldwide for their cell phones, cameras, tablets, laptops, power tools, and many other devices. Dr. Yazami started his career from scratch to build an empire based on the battery technology. My main interest is not to make a compilation of his achievements and honors, but to tap into his personality traits and characteristics; to discuss the main qualities that enabled him to succeed as a scientist, a researcher, and a leader of his field. My purpose is to understand also the sources of his inspirations and the secret behind his motivations and limitless resilience. His unique path is a textbook of insightful lessons that I aim to summarize and share with you based on a set of interviews with him.
[Whitepaper] Finding It Hard to Manage Conflict at the Workplace? Use the Tho...Flevy.com Best Practices
More Information:
https://flevy.com/browse/flevypro/thomas-kilmann-conflict-mode-instrument-tki-3722
A major reason for employees leaving their workplaces is conflict with their bosses. To succeed in today’s fiercely competitive market, organizations need to invest in developing their leadership, such that they further develop their teams by training them on the desired competencies and create a sense of engagement in them.
A big challenge for leaders is getting their employees to believe in the organizational vision. No two personalities have the same viewpoints and aspirations, thus conflict is bound to occur between team members while they interact.
The Thomas-Kilmann Conflict Mode Instrument (TKI), developed by Dr. Ralph H. Kilmann and Dr. Kenneth W. Thomas, is an easy-to-use, online assessment tool to Conflict Management. Human Resources (HR) and Organizational Design (OD) consultants utilize the TKI tool as a mechanism to initiate discussions on differing topics and facilitate in mediation by learning how conflict-handling modes affect personal, group, and organizational dynamics.
Each of us has a predominant conflict style that we use in a particular situation. The Thomas-Kilmann Conflict Mode Instrument provides a basis to measure a person’s behavior in conflict situations, where individuals appear to be unable to get along. The individuals’ behavior in conflict situations encompasses 2 broad dimensions:
Assertiveness
Cooperativeness
These behavior dimensions define 5 predominant conflict handling styles (or modes) that we use while responding to conflict situations:
Competing
Accommodating
Avoiding
Collaborating
Compromising
Got a question about this presentation? Email us at support@flevy.com.
[Whitepaper] Key Account Management: Handling Large Global Accounts the Right...Flevy.com Best Practices
More Information:
https://flevy.com/browse/flevypro/key-account-management-kam-large-global-accounts-3765
Large accounts make up a significant portion of business for most B2B companies. Therefore, losing an important customer can have detrimental effects on the organization. The significance of key accounts is urging top B2B companies to revisit their key account management approaches. Additionally, the increasing level of sophistication of the purchase process being adopted — such as, centralized procurement, competitive bidding and auctions, and laborious negotiations — by large buyers is a crucial element for B2B companies to consider to win large accounts.
Studies have shown that large buyers suggest price, product features, and reliability as the most important factors in their purchasing decisions, even more so than sales and service experience. However, detailed analysis of data into the actual purchasing decisions by buyers reveal that suppliers’ service and support capabilities mean a lot to large purchasers — in fact, almost as equal in importance as price. Large buyers often involve senior team members in procurement, which necessitates the need for inclusion of people possessing high-quality management and sales skills while serving key accounts.
With more intensifying sophistication of the procurement process at large businesses in future, the buyers will keep trying to cut costs and gain significant advantage while negotiating with procurement. The suppliers, in turn, can create a win-win situation by providing first-rate key account support and service.
Leading suppliers utilize the 4 drivers of growth to develop best-in-class key account management practices and increase their large contract win ratios. These drivers are actually the 4 imperatives that forerunners undertake to fuel their growth:
Quantified Value Proposition (QVP)
Value-based Selling
Coordinated Account Management
Negotiation Preparation
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[Whitepaper] Nudge Theory: An Effective Way to Transform Negative BehaviorsFlevy.com Best Practices
More Information:
https://flevy.com/browse/flevypro/nudge-theory-key-challenges-3895
Changing the behaviors of people is the foremost issue with every transformation initiative.
Nudge theory is a novel Change Management model that underscores the importance of understanding the way people think, act, and decide. The model assists in encouraging human imagination and decision making, and transforming negative behaviors and influences on people. The approach helps understand and change human behavior, by analyzing, improving, designing, and offering free choices for people, so that their decisions are more likely to produce helpful outcomes for the others and society in general.
Nudge theory helps reform existing (often extremely unhealthy) choices and influences on people. The theory is quite effective in curtailing resistance and conflict resulting from using autocratic ways to change human behavior. The model promotes indirect encouragement and enablement — by designing choices which encourage positive helpful decisions — and avoids direct enforcement. For instance, playing a ‘room-tidying’ game with a child rather than instructing her/him to tidy the room; improving the availability and visibility of litter bins rather than erecting signs with a warning of fines.
Organizations are increasingly using behavioral economics to optimize their employee and client behavior and well-being. Nudge units or behavioral science teams are being set up in the public and corporate sectors to influence people to address pressing issues. For instance, to increase customer retention by changing the language of support center staff to motivate customers to consider long-term benefits of a product; or to make employees to follow safety procedures by placing posters of watching eyes to remind them of the criticality of the measure.
An effective Nudge initiative necessitates much more than deploying a few experts in heuristics and statistics. The senior leadership should lay out a conducive environment for successful behavioral transformation. This entails assisting the Nudge unit to focus, place it appropriately, create awareness, train and de-bias people, implement effective rewards, and follow high ethical standards.
The leadership needs to think about and prepare to tackle 6 key challenges Nudge units face when implementing effective behavioral transformation initiatives:
What should be the focus of the Nudge unit?
Should the Nudge unit be placed at the headquarters or at the business unit level?
Which resources be made part of the Nudge unit?
What are the critical success factors to consider for the unit?
How to communicate the results and early wins?
What should be done to tackle skepticism and resistance to change?
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[Whitepaper] Business Model Innovation: Creation of Scalable Business Models ...Flevy.com Best Practices
More Information:
https://flevy.com/browse/flevypro/business-model-innovation-bmi-scalable-business-models-5182
Scalability is described as possible meaningful changes in magnitude or capacity. In business terms, it’s the capability of a system to enhance productivity upon resource augmentation. Scalability provides an organization the capabilities to develop compelling value propositions — that are hard to imitate by the rivals — and achieve profitable growth even in the wake of external threats, cut-throat competition, stringent laws, or financial downturns.
Today’s challenging business ecosystems and economic outlook demand from the enterprises to develop novel and Scalable Business Models that are able to leverage positive returns on investments. To accomplish this, leaders need to identify and eradicate any capacity issues, enhance collaboration with existing partners, build new partnerships, or develop platforms to work with their opponents.
Executives should invest in scaling options only when they are sure to boost returns. They have to be quick to exit a business when returns on investment to scale backfire.
5 Patterns of Business Model Scalability
Benchmarking a number of successful organizations reveals that their Business Models were flexible enough to sustain internal and external pressures. Business Model Scalability hinges on aligning the strategic partners and Value Propositions to serve the customers.
To drive Business Model Innovation (BMI), leading organizations consistently display 5 critical patterns of Business Model Scalability:
Operate with multiple distribution channels
Eliminate typical capacity limitations
Outsource capital investments to partners
Allow customers and partners assume multiple roles in the business
Create platform models
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[Whitepaper] Shareholder Value Traps: How to Evade Them and Focus on Value Cr...Flevy.com Best Practices
More Information:
https://flevy.com/browse/flevypro/shareholder-value-traps-5239
Changing industry ecosystems and competition today demand from the organizations to undergo strategic shifts. The purpose of a company is undergoing Business Transformation from serving the interest of shareholders to serving all stakeholders that influence the organization.
Shareholders are often considered the only stakeholders that invest in a business. Senior management needs to be cognizant of the importance of shareholders as well other stakeholders who create value for the organization. They should work on building a collaborative Organizational Culture and paying heed to the welfare of all those groups that play a role in organizational growth.
This warrants a thorough evaluation of all stakeholders, their long-term interests, and Value Creation — or Value Destruction — potential for the organization. But first, this calls for finding answers to the following key questions:
Who creates the most value for the organization?
Who among the stakeholders typically secure the best deals from the organization?
Who is the victim of having the worst deals from the organization?
Who among the stakeholders is potentially untrustworthy?
Are there any intermediaries or stakeholders fulfilling their personal agendas?
Answering these questions is critical for the executives, otherwise they may risk falling into Shareholder Value Traps. Recognizing and understanding stakeholder value traps while the managing stakeholders’ various interests helps executives achieve shared and individual long-term goals. These 5 common traps prevent stakeholders’ interests to get integrated with the interests of the organization and destroy the value of a company if overlooked:
Ignoring cash-flow driving stakeholders while distributing cash
Miscalculating reaction from stakeholders
Supporting under-performing units
Conceding to willful vulture capitalists
Misjudging intermediaries role in transactions
Got a question about this presentation? Email us at support@flevy.com.
Premium MEAN Stack Development Solutions for Modern BusinessesSynapseIndia
Stay ahead of the curve with our premium MEAN Stack Development Solutions. Our expert developers utilize MongoDB, Express.js, AngularJS, and Node.js to create modern and responsive web applications. Trust us for cutting-edge solutions that drive your business growth and success.
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LA HUG - Video Testimonials with Chynna Morgan - June 2024Lital Barkan
Have you ever heard that user-generated content or video testimonials can take your brand to the next level? We will explore how you can effectively use video testimonials to leverage and boost your sales, content strategy, and increase your CRM data.🤯
We will dig deeper into:
1. How to capture video testimonials that convert from your audience 🎥
2. How to leverage your testimonials to boost your sales 💲
3. How you can capture more CRM data to understand your audience better through video testimonials. 📊
Cracking the Workplace Discipline Code Main.pptxWorkforce Group
Cultivating and maintaining discipline within teams is a critical differentiator for successful organisations.
Forward-thinking leaders and business managers understand the impact that discipline has on organisational success. A disciplined workforce operates with clarity, focus, and a shared understanding of expectations, ultimately driving better results, optimising productivity, and facilitating seamless collaboration.
Although discipline is not a one-size-fits-all approach, it can help create a work environment that encourages personal growth and accountability rather than solely relying on punitive measures.
In this deck, you will learn the significance of workplace discipline for organisational success. You’ll also learn
• Four (4) workplace discipline methods you should consider
• The best and most practical approach to implementing workplace discipline.
• Three (3) key tips to maintain a disciplined workplace.
"𝑩𝑬𝑮𝑼𝑵 𝑾𝑰𝑻𝑯 𝑻𝑱 𝑰𝑺 𝑯𝑨𝑳𝑭 𝑫𝑶𝑵𝑬"
𝐓𝐉 𝐂𝐨𝐦𝐬 (𝐓𝐉 𝐂𝐨𝐦𝐦𝐮𝐧𝐢𝐜𝐚𝐭𝐢𝐨𝐧𝐬) is a professional event agency that includes experts in the event-organizing market in Vietnam, Korea, and ASEAN countries. We provide unlimited types of events from Music concerts, Fan meetings, and Culture festivals to Corporate events, Internal company events, Golf tournaments, MICE events, and Exhibitions.
𝐓𝐉 𝐂𝐨𝐦𝐬 provides unlimited package services including such as Event organizing, Event planning, Event production, Manpower, PR marketing, Design 2D/3D, VIP protocols, Interpreter agency, etc.
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⭐ 𝐅𝐞𝐚𝐭𝐮𝐫𝐞𝐝 𝐩𝐫𝐨𝐣𝐞𝐜𝐭𝐬:
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➢ Korean Vietnam Partnership - Fair with LG
➢ Korean President visits Samsung Electronics R&D Center
➢ Vietnam Food Expo with Lotte Wellfood
"𝐄𝐯𝐞𝐫𝐲 𝐞𝐯𝐞𝐧𝐭 𝐢𝐬 𝐚 𝐬𝐭𝐨𝐫𝐲, 𝐚 𝐬𝐩𝐞𝐜𝐢𝐚𝐥 𝐣𝐨𝐮𝐫𝐧𝐞𝐲. 𝐖𝐞 𝐚𝐥𝐰𝐚𝐲𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞 𝐭𝐡𝐚𝐭 𝐬𝐡𝐨𝐫𝐭𝐥𝐲 𝐲𝐨𝐮 𝐰𝐢𝐥𝐥 𝐛𝐞 𝐚 𝐩𝐚𝐫𝐭 𝐨𝐟 𝐨𝐮𝐫 𝐬𝐭𝐨𝐫𝐢𝐞𝐬."
Business Valuation Principles for EntrepreneursBen Wann
This insightful presentation is designed to equip entrepreneurs with the essential knowledge and tools needed to accurately value their businesses. Understanding business valuation is crucial for making informed decisions, whether you're seeking investment, planning to sell, or simply want to gauge your company's worth.
Skye Residences | Extended Stay Residences Near Toronto Airportmarketingjdass
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Digital Transformation and IT Strategy Toolkit and TemplatesAurelien Domont, MBA
This Digital Transformation and IT Strategy Toolkit was created by ex-McKinsey, Deloitte and BCG Management Consultants, after more than 5,000 hours of work. It is considered the world's best & most comprehensive Digital Transformation and IT Strategy Toolkit. It includes all the Frameworks, Best Practices & Templates required to successfully undertake the Digital Transformation of your organization and define a robust IT Strategy.
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https://www.oeconsulting.com.sg/training-presentations]
Sustainability has become an increasingly critical topic as the world recognizes the need to protect our planet and its resources for future generations. Sustainability means meeting our current needs without compromising the ability of future generations to meet theirs. It involves long-term planning and consideration of the consequences of our actions. The goal is to create strategies that ensure the long-term viability of People, Planet, and Profit.
Leading companies such as Nike, Toyota, and Siemens are prioritizing sustainable innovation in their business models, setting an example for others to follow. In this Sustainability training presentation, you will learn key concepts, principles, and practices of sustainability applicable across industries. This training aims to create awareness and educate employees, senior executives, consultants, and other key stakeholders, including investors, policymakers, and supply chain partners, on the importance and implementation of sustainability.
LEARNING OBJECTIVES
1. Develop a comprehensive understanding of the fundamental principles and concepts that form the foundation of sustainability within corporate environments.
2. Explore the sustainability implementation model, focusing on effective measures and reporting strategies to track and communicate sustainability efforts.
3. Identify and define best practices and critical success factors essential for achieving sustainability goals within organizations.
CONTENTS
1. Introduction and Key Concepts of Sustainability
2. Principles and Practices of Sustainability
3. Measures and Reporting in Sustainability
4. Sustainability Implementation & Best Practices
To download the complete presentation, visit: https://www.oeconsulting.com.sg/training-presentations
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
What are the main advantages of using HR recruiter services.pdfHumanResourceDimensi1
HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
What are the main advantages of using HR recruiter services.pdf
Industry Report- Saudi Arabia Energy Industry
1. The Impact of multinational
companies
A case study of the energy industry in Saudi Arabia
2. 1
Abstract
Globalization has become the essence of international trade and has been the primary reason why
companies have gone beyond their national boundaries and setup production centers in different
countries. As a consequence, consumers today are getting high quality, low priced and
technologically enhanced products and services all over the world. Some commodities that have
been widely affected by globalization are oil & gas, our primary sources of energy. World
energy sector has been booming as giant corporations go to different countries in the search of
new sources of energy. Saudi Arabia since its inception and the discovery of oil has been the
center of the world oil trade and politics. It plays a major role in the supply of oil and keeping the
prices in balance. So, it naturally attracted the major oil exploration and production giants from
all over the world to extract the biggest source of energy. This paper gives an overview of the
multinationals operating in the Saudi Arabian energy sector and how they have impacted the
growth of the sector.
This dissertation through use of secondary resources and qualitative analysis intends to add value
to the existing literature by bringing out a new perspective in the international business research.
Literature Review forms the base of the dissertation and is essentially divided into three parts.
The first part explores the existing theories relating to Multinational companies and
Internationalization. It explains the evolution of the theories and presents counter views on the
internationalization of companies. The second part talks about the macroeconomic environment
of Saudi Arabia using the PESTLE framework and describes the factors any company should
3. 2
consider before investing in Saudi Arabia. The third and the last part of the Literature review we
discuss the energy sector of Saudi Arabia and the major companies operating in it. It uses the
well known Porter’s Five Forces model to understand the competitive structure of the Saudi
Arabia energy sector.
The next section of the dissertation is key findings where the information received from the
previous section is analyzed. The impact on the energy sector is discussed followed by the gaps
in the existing studies and the future prospects of the Saudi Arabian energy sector. The
dissertation concludes by summarizing the key findings obtained from the various studies and
paves way for further research on this topic.
4. 3
Contents
Part 1 of the dissertation ........................................................................................................... 4
1. Introduction........................................................................................................................... 4
1.1. Background and Rationale of the Research ................................................................... 6
1.2. Aims & Objectives of the Research.............................................................................. 8
1.3. Key Research Questions.................................................................................................. 9
2. Literature Review................................................................................................................ 10
2.1. Overview of Multinational Companies: Definition & Theories.............................. 10
2.2. PESTLE Analysis of Saudi Arabia.................................................................................. 15
2.3. Energy Sector Structure in Saudi Arabia.................................................................... 23
2.4. Porter Five Forces Model for analysis of Energy Industry ..................................... 24
2.5. Major Companies in the Energy Sector in Saudi Arabia........................................ 30
References for Part 1 ................................................................................................................ 35
Part 2 of the dissertation ......................................................................................................... 39
3. Research Methodology ..................................................................................................... 39
4. Key Findings & Discussion ............................................................................................... 46
4.1. Impact on the growth of Saudi Arabia Energy Sector............................................ 46
4.2. Gaps in the existing studies ......................................................................................... 48
4.3. Future Outlook of the Saudi Arabian Energy Industry ........................................... 50
5. 4
5. Conclusion ........................................................................................................................... 57
References for Part 2 ................................................................................................................ 60
Part 1 of the dissertation
1. Introduction
In this era of globalization, there has been a fundamental change in the way international
business is being done. Due to the ease of communication and advances in the sophisticated
communication systems more and more companies are becoming global and expanding their
operations and creating production facilities away from their home countries. This trend has
given rise to today’s Multinational Corporations (MNCs) whose role in the international scene is
increasing rapidly. With increased international development and cooperation, the MNCs have
been able to create such a network that their budgets, organizational structure and influence on
the world trade stage rivals many nations (UN Conference Proceedings, 2006). With their
immense economic power and strong political connections and the fact that globalization is seen
as a ―Business driving phenomenon‖, MNCs are in a strong position to influence the economies
6. 5
of the countries they operate in (Nourafchan, 2011). Today, MNCs not only impact the trade and
the economy of the nation in which they operate but also impact the social and cultural aspects.
In the world energy market dominated by oil, the role of multinational companies in the oil
exploration and supply has been tremendous. As oil became the most important commodity in
the energy market, the Multinational oil companies found new markets and opened up sites in
various countries to produce and supply crude oil and petroleum products. With increasing
demands in the oil, there was a need of inexpensive supply of oil and this led the MNCs to the
shores of South America, Pacific countries and Middle East countries. Saudi Arabia with its vast
amount of oil reserves became one of the most important oil production destinations in the
world.
Saudi Arabia has been blessed with huge amount of oil and natural gas resources that essentially
drive the economy of the kingdom and form a huge part of their energy industry. The Saudi
Arabia Energy sector is mainly dependent upon its petroleum resources. Electrical energy is
mainly produced in thermal power stations that are run using natural resources. The demand for
energy is increasing due to industrialization and growing population by around 7% per year. To
meet the demand, the government has taken several steps like consolidation in the energy sector
and has created a public company called Saudi Electric Company to manage the energy
operations. The government has also lowered restrictions on Independent Power producers
(Federal Research Division, 2006)
Foreign investment in Saudi Arabia has a complicated history since its inception in the oil energy
sector. It started in 1933, with a concessional agreement between the Saudi Arabia Government
and the Standard Oil Corporation of the United States to explore oil in Saudi Arabia. Further, the
establishment of Arabian American Oil Company (Aramco) in 1944 was another significant step
7. 6
in this direction. In 1988, Saudi Aramco was established as the National oil corporation of Saudi
Arabia that took full control on oil exploration and supply activities in Saudi Arabia. Saudi
Arabia’s Accession to World Trade Organization (WTO) is also considered a major step in its
integration into the modern international economic relations (Law Teacher, 2011). After several
years of negotiations and trade agreements, Saudi Arabia became a member of WTO in 2005 in
order to achieve sustainable growth, increase international trade cooperation and for creating
stable and beneficial conditions for foreign investment. This has led to favorable conditions of
foreign investments in the country as MNCs are no longer required to take Saudi partners (except
banking and insurance services)(Law Teacher, 2011). The government is also encouraging
foreign investments in several sectors including energy and power.
This dissertation analyses the impact of the multinational companieson the various aspects of the
Saudi Arabian economy through the example of the Saudi Arabia energy sector.
1.1. Background and Rationale of the Research
The development of Saudi Arabian Economy goes hand in hand with the development and
expansion of its energy sector. During the last 70 years the idea of building the state, fortified by
oil revenues distributed through the modern institutions of bureaucracy, has worked to unify this
economically diverse country(Mongabay, 2011). The establishment of the ―Kingdom of Saudi
Arabia‖ that led to the unification of diverse regions and the discovery of oil in 1938 can be
considered major events that have shaped its economy. The rebuilding of Europe after the World
War II also played a major role in solidifying Saudi Arabia’s position in world oil industry.
These events led to an exponential increase in the oil revenues of the kingdom and resulted in
widespread economical changes and a shift from the traditional economy.
8. 7
Due to its prominent location as the oil hub of the world Saudi Arabia became an important part
of the West’s strategic plans. Moreover, a steady flow of oil was considered as an essential
element for the worldwide economic development. For United States, the importance of Saudi
Arabia as a trade partner became clear during the Gulf war of 1991, when they sent troops to
expel Iraq from Kuwait. Saudi Arabia was clearly seen as the biggest oil producing country that
had the excess capacity of crude oil production and a strong hold on the oil supply and prices.
Globalization has affected almost every citizen of the world and this through is very well
reflected in the products and services we used today. Multinational companies have served as the
carriers of growth and development in international trade, economic development, human
resource development and industrialization across national boundaries (Mababaya, 2002). They
are also responsible for advanced technology transfer and innovative products availability across
the national boundaries. In all they are affecting every sphere of business cycle across globe and
adding to the human welfare by providing products and services that were not available before.
Multinationals in Saudi Arabia have been playing the role of country’s development through
numerous joint ventures, contracting projects, outsourcing projects, consulting & financing
activities and in return they have enjoyed beneficial business conditions from the government of
Saudi Arabia. The energy sector in particular has seen many International companies like Exxon
Mobil, Shell, and Conoco Philips setting up oil exploration and production projects in Saudi
Arabia. It can be safely said that their contribution in the development of the Saudi Arabian
Energy sector and the economy as a whole cannot be ignored and needs to be studied in detail.
Moreover, the effect of MNC’s on Saudi Arabian society and culture needs to be understood in
detail.
9. 8
There aren’t many research studies that have been done in this particular are. Some studies talk
about the Role of Multinationals in Saudi Arabia, but do not focus on the energy sector in
particular. At the same time there are various studies and reports on the energy sector in Saudi
Arabia. But there is hardly any study that links the impact of multinationals and the energy sector
in Saudi Arabia. Hence, this dissertation brings out a completely new view on this topic and
would be a good add on in the research domain of international business.
1.2. Aims & Objectives of the Research
The main aim of the dissertation is to understand the impact of the various multinational
companies who have invested in Saudi Arabia Energy by studyingits business environment,
structure and policies and the factors that have been affected the most. The dissertation strives to
achieve the following objectives –
To review the existing theories on internationalization and multinational companies
To understand the Saudi Arabian Energy Sector in terms of its major players governance
structure, investment policy and other factors
To review the latest trends in the Saudi Arabian foreign investment policy, especially
after its accession to WTO
To review the growth of major international companies having operations in Saudi
Arabia in the energy sector
To identify the factors that play a major role in the successful operations of MNCs in
Saudi Arabia
To understand the working environment for the international companies
To understand the impact of the multinational companies on the energy sector growth and
its future prospects
10. 9
To evaluate the effect of unconventional sources of energy on the growth prospects of
Saudi Arabia Energy Sector
1.3. Key Research Questions
This dissertation aims to answer the below mentioned research questions –
How is the macroeconomic environment of Saudi Arabia for foreign investors?
What are the latest trends in the Saudi Arabia Foreign Direct Investment policy?
What is the structure of the energy industry in Saudi Arabia?
What are the major players in the Saudi Arabian Energy industry and their significance?
What is role played by the multinational companies in developing the energy sector in
Saudi Arabia?
What is the impact of the multinational companies on the economy and the growth Saudi
Arabia?
What is the impact of unconventional sources of energy on the Saudi Arabia Energy
sector?
11. 10
2. Literature Review
Literature Review is the process of gathering and evaluating information on the chosen topic
from a wide variety of sources. Literature Review as a section is the most important section of
the dissertation as it provides the independent views of previous studies done on the topic and
this knowledge helps to create a consolidated view to assess the chosen topic. This section helps
in understanding the sub topics through an array of readings and builds the base of the
dissertation. Literature Review should be clear and concise, well structured so that the reader of
the dissertation understands the depth of information and the reasons of choosing the topic
(Loughborough University, n.d.)
2.1. Overview of Multinational Companies: Definition &
Theories
A Multinational Enterprise (MNE) or Multinational Corporations (MNC) can be generally
defined as an organization operating in several countries but managed from one home country
(Business Directory, 2011). Another definition given by (Caves, 1996) states “Multinational
corporation is a firm which control and organize production using plants from at least two
countries”.
Multinational companies can be found in four different forms – 1) A decentralized organization
with a strong base at home 2) A global centralized organization with major operations
concentrated at one place 3) International company that builds on Parent company’s brand name
12. 11
, technology or product 4) A transnational enterprise that companies the previous three
approaches (Business Directory, 2011).
A study by UNCTAD shows that the number of Multinational Corporations in the world is in the
excess of 63,000 and they contribute to about 25% of the world’s output and employ about 83
million people (Ionescu, n.d.). About 2/3rd
of world’s export is manufactured by MNCs
(Dunning, 2003).
Multinationals are being considered as the most flexible actors in promoting globalization
(Ionescu, n.d.). The contributions of MNCs in the country they operate in are multifold – cross
border value adding transactions, joint ventures, project management, increase in the
investments, infrastructure upgrade, job creation and others. Some of the important organizations
that affect the evolution of any multinational company are WTO, IMF, OPEC, UNCTAD and
regional associations like European Union and Arabian states.
There have been various theories developed to understand the concept and trends of the MNCs.
Some of them focus on the international production and FDI, while others are talk about other
modes of internationalization such as joint ventures, subsidiaries or licensing. According to
(Ietto-Gillies, 2003), it was the era of 1950s and 1960s which saw the inception of the trend of
FDI by most Western companies and then it flowed towards the developing countries. One of the
well known theories of internationalization was developed by(Hymer, 1976) which was based
upon two critical components – 1) Concept of Control that differentiates between a company’s
intention of FDI or other modes of internationalization 2) Market imperfections – that explain
why firms want to invest abroad. Another author (Vernon, 1966) bases his theory of
internationalization on dual concepts of – 1) International product life cycle and 2) Theory of
trade based on technology gap. He states that product innovation is the key to
13. 12
internationalization as it gives the firm to exploit the markets at home and when the product
reaches maturity they can exploit the same abroad. He further iterates that as the product goes
from innovative to maturity phase in one country there is a need to find new markets for it. Thus,
innovation and technological changes form the main base of Vernon’s theory.
Most of the other theories of internationalization find their roots in the theory developed by
Ronald Coase who states that firm grows as a result of attempts to economize on the costs of
market transactions (Coase, 1937) and (Coase, 1991). This theory was further developed by O.E.
Williamson who applied the concepts of transactional costs to explain the development and
growth of a modern organization (Williamson, 1975) and (Williamson, 1981). This approach is
different from that of Hymer and Vernon and as it places transactional market imperfections at
its core as opposed to imperfections of structural types. To summarize, market imperfections
generate cost issues and uncertainties that can be avoided by internationalization and hence the
concept of FDI and the MNC.
Another expert, John Dunning has been a major figure in the internationalization theory domain
and has developed a theory called ―systematic theory‖ or a ―paradigm‖. His framework answers
basic questions like why do MNCs engage in new markets, what method of internationalization
they choose, how the country of investment is chosen and others. His three point proposed
framework helps to answer the above mentioned questions. He points out that a firm can have 3
types of advantages- 1) Ownership advantages – To determine why a firm is better placed than
its rivals to go ahead with the foreign investments 2) Location advantages – It explains why a
particular location is chosen and why it is preferred over any other location 3)
Internationalization advantages – It explains under what conditions will the firm choose direct
production or licensing (Dunning, 1977) and (Dunning, 1980).
14. 13
Another thinker Cantwell has put forward a modern and evolutionary approach to explain the
growth of MNCs. His model is based on the concept of innovation and technological
accumulation. It is different from the theory of Vernon has his model was that of technology
transfer while Cantwell model proposes technology creation and diffusion. He explains that
firms invest in innovation in order to stay head of their competitors. They invest in several
centers and gain experience from the diverse environments. The resulting benefits would spill
over to the other industry and locations where the firm operates. Thus, there is a technological
diffusion taking place (Cantwell, 1989) and (Cantwell, 2000).
Thus, the different theories that have been highlighted are different and yet have many common
points.
The evolution of the MNCs is not always helpful to the countries in which they operate. Two
views have been propagated about the impacts of multinational companies in a country. The first
view argues whether the multinational companies actually help in the development of the host
country and whether national states have to defeat their interests against multinationals (Ionescu,
n.d.) There is sometimes a standoff between the intentions of a multinational company of
maximizing profits and the legislations of the country they are operating in. It is alleged that
Multinational firms driven by their own profit maximization agendas tend to propagate
destructive competition and try to manipulate the entire economies. Due to their large scale
operations they are perceived to be sole profit making entities and encouraging practices like
sweat shops and child labor.Moreover, there are other concerns like loss to the domestic
industries, environmental issues especially in case of oil & gas industry.It is also perceived that
MNCs tend to exploit the labor and the natural resources of a country. This leads to protectionist
15. 14
policies by the host country resulting in trade barriers, closing of economy, high taxation, limited
operations etc.
The second view counteracts the first view and proposes the benefits of the MNCs in the
developing world. One of the reports called Home and Host Country Effects of FDI (NBER
Working Paper No. 9293), the author Robert Lipsey propagates there is very little evidence that
MNCs are guilty of the many evils that they have been accused of (Robert Lipsey, n.d.). The
study was undertaken to find out whether foreign investments by a multinational firm actually
lead to unemployment, depressed wages and exploitation of cheap labor as widely believed by
the critics of globalization. His research shows that the benefits of MNCs in the host country are
multifold as they not only pay higher wages as compared to the national companies but also tend
to increase productivity through their sophisticated large scale operations. Another author, Gary
Quinlivan in his article ―Multinational Corporations: Myths and Facts‖ has countered the critics
of globalization and MNCs by presenting a view that global competition is not destructive, but
rather has benefitted the entire world by giving high quality, diverse and low priced products
(Quinlivan, 2000). He strengthens is point further by stating that there are studies that show
foreign investment in the host country has actually boosted domestic investment. Two studies
cited by United nation’s ―World Investment Report, 1999‖ gives evidence that ―an additional
dollar of foreign direct investment increases domestic investment in a sample of sixty-nine
developing countries by a factor of 1.5 to 2.3‖ (Quinlivan, 2000). The study by Quinlivan further
dismisses the notion that MNCs siphon jobs from high wage to low wage countries. Evidence by
World Bank and United Nations strongly supports the view and further concludes that MNCs
have been a key factor in the welfare of developing countries in the past forty years. MNCs no
matter make profits but that doesn’t mean it is at the expense of the host country. It is mutually
16. 15
beneficial as the host country also receives bigger tax base, investments, jobs and better
technologies.
Thus, we can see that both critics and proponents of the MNCs have different views, but given
the growth of MNCs it is evident that the positives are more than the negatives.
2.2. PESTLE Analysis of Saudi Arabia
As we have seen from the previous section, one of the biggest concerns for any multinational
company that wants to invest in other countries is to consider its macroeconomic environment.
Some of the factors that determine the macroeconomic environment of a country are Foreign
Direct Investment (FDI) policies, tax rules, trade laws, government policies, demographic
changes and political outlook. The knowledge of these factors helps the organization and its
managers to decide the quantum and the period of investments. It also helps in determining the
type of investments whether a joint venture, wholly owned subsidiary or just a representative
office (Oxford University Press, 2007). One of the most important and widely used frameworks
to assess any country’s macroeconomic environment is the PESTLE analysis framework. Using
this framework we can analyze any country’s macroeconomic environment on six important
factors viz. Political, Economic, Social, Technological, Legal and Environmental.
“A PESTLE Analysis is one of the most important frameworks of macro-environmental scanning,
framework which comprises the most important factors used in environmental scanning, as part
of advanced strategic management”
- (Marketing Minefield, 2011)
Saudi Arabia as a country has risen tremendously due to its oil reserves and offers wide
opportunities for the multinational companies. However, rising incomes has not entirely
17. 16
benefitted the majority of population resulting in unemployment and income inequality. More
over its education sector is not well developed. The government has not done enough to improve
the status of women. Environmental regulations also need to be improved. So considering such
issues it is important for any multinational company to undertake an in depth analysis of Saudi
Arabian macro environment before investing in it. The figure given below summarizes the
PESTLE analysis of Kingdom of Saudi Arabia –
Figure: PESTLE Analysis of Saudi Arabia. Source (By the author, adapted from (DataMonitor,
2008))
HF Highly Favorable
F Favorable
LF Less Favorable
PESTLE
ANALYSIS OF
SAUDI
ARABIA
Political
Analysis
(F)
Economic
Analysis
(HF)
Social Analysis
(LF)
Technological
Analysis
(F)
Legal Analysis
(HF)
Environmental
Analysis
(F)
18. 17
Political Analysis
Kingdom of Saudi Arabia’s political system has remained unchanged since its current existence
in 1932 and is currently ruled by King Abdullah. The regime is intolerant to any opposition
parties and has restrictions on media. The country has a strong influence in the Middle East
region as far as regional politics is concerned and is going to have a major say in World Oil
prices in the years to come. Its political environment remains stable given King Abdullah’s
popularity and good relations with the religious leaders. The table given below summarizes the
political landscape of Saudi Arabia –
Current Strengths
Stable Government and stable policies - Due to the fact that Saudi Arabia is being ruled by the
members of the same dynasty, it is political stable and the policies have been stable without any
radical changes.
Legislative Reforms - Due to the establishment of the Central government, there have been
improvements in the legislative process. The Central council nominated by the king advises the
country on the formulation of general policies.
Current Challenges
Lack of Democratic Setup – Saudi Arabia is ranked very low on one of the World Bank
Governance indexes of Voice and accountability due to restrictions on media, political parties
and freedom of expression
Poor implementation of regulations- Saudi Arabia’s performance in keeping up with laws and
control of corruption has been poor and moreover its rank in governance and quality of
regulation do not match up to acceptable standards.
Future Prospects
19. 18
Policies for economic and social reforms – Government has taken steps in the direction of
improving foreign investment and infrastructure and social living through improve education,
healthcare and women empowerment. Accession to WTO is one of the major steps.
Future Risks
Security Risks – Due to its location and its oil reserves Saudi Arabia could be a potential target
for Islamic extremists from the neighboring countries.
Table: Political Analysis of Saudi Arabia
Economic Analysis
Saudi Arabian economy has grown at a constant average rate of about 5% since 2003 and even
during the global crisis of 2008 it showed a growth rate of around 3.4%. Government has taken
several economic initiatives like opening up of power, oil, telecommunications and
petrochemicals to the private sector. The foreign investment policies have been eased up to
increase the FDI. Some of concerns relating to the economy are unemployment, inflation and a
possible decline in the oil prices.
Current Strengths
Strong and stable GDP growth& Government Finances – The economy has been showing
strong growth and the performance of all the sectors has been positive. The country enjoys
positive trade balance and its current account balance has significantly increased from 7.6% in
2000 to 24.5% in 2007 as a percentage of GDP.
With increasing oil revenues the government finances are in good shape. The fiscal balance is in
the range of 15-20% of GDP. The government debt as a percentage of has reduced significantly
from 93.3% in 2001 to 19% in 2007.
Current Challenges
20. 19
Unemployment concerns – Despite its fast economic growth, the education sector in Saudi
Arabia has remained underdeveloped leading to a dearth of required skills to succeed in the
business environment. This has given rise to unemployment which stood at around 26% in 2007.
Future Prospects
Increase in infrastructure spending -The economy would be boosted by huge investments by
the Saudi Arabian government in the infrastructure space. Projects equivalent to $480 billion are
in place for various sectors like oil & gas, petrochemicals, transportation and others. The
government is also promoting public-private partnerships (PPP).
Future Risks
Global Economic Slowdown – Due to the global crisis fears there is a possibility that oil prices
would decline. Moreover, there are inflationary fears and the weakening of the currency. Also,
discovery of unconventional sources outside Saudi Arabia could lead to decrease in reliance of
Western countries on Saudi Arabian oil.
Table: Economic Analysis of Saudi Arabia
Social Analysis
Saudi Arabia has ranked low in terms of Human Development Index (HDI) as compared to the
other countries with similar GDP. The society remains conservative and the quality of living is
low as compared to developed countries. Healthcare facilities also need investments and
upgrade.
Current Strengths
Comprehensive Social Security system- Government has developed a robust social security
system aiming at the welfare of citizens with schemes such as aids to poor, pensions to the old,
land and house loans to all citizens, social development in small town and cities etc.
21. 20
Young society – One of the advantages for Saudi Arabia is its relatively young population with a
median age of 21.5 years.
Current Challenges
Low rank on HDI and Income inequality–Saudi Arabia scores low in HDI and Gender related
development index (GDI). One of the reports by UNDP shows that Saudi Arabia ranks 144/156
in both HDI and GDI values. Also, growing income inequality is a major cause of concern and
can result into social unrest among the population.
Future Prospects
Government Reforms for improving Quality of life– Investments in healthcare, women
education, steps for poverty reduction and disabled care are some of the initiatives undertaken by
the Saudi Government. The budget for healthcare and social affairs was about $11.84 billion in
2008.
Future Risks
Restrictive immigration policies & growing populationneeds are some of the risks that Saudi
Government would face in the future.
Table: Social Analysis of Saudi Arabia
Technological Analysis
Saudi Arabia has created favorable policies for investments in R&D. Corporate tax laws have
given boost to private investments in R&D in certain sectors.
Current Strengths
Strong financial position for technological development – Due to its consistent GDP growth
Saudi Arabia is in a strong position to increase investments in technological development.
22. 21
Current Challenges
Current low investments in R&D and technological education – As a percentage of GDP, the
spending in investments in pretty low (around 0.25% in 2006) as compared to many developed
countries like France (2%), Japan (3.18%) and US (2.68%). Also lack of investments in technical
education and centers for higher education, Saudi Arabian workforce is not fir for technology
intensive industries.
Future Prospects
Growing Focus on R&D and conducive FDI policies will help Saudi Arabia to improve upon
its technological environment. Some steps like opening up of economic cities, investments in
technological infrastructure, medical research and integrated medical services zones have already
been taken.
Future Risks
Saudi Arabia lacks in implementation of laws and policies and one of the risks could be poor
implementation of Intellectual Property Rights (IPR) leading to hampering of growth in the
innovation environment
Table: Technological Analysis of Saudi Arabia
Legal Analysis
Following WTO commitments, Saudi Arabian legal environmental is improving with reforms in
privatization and liberalization.
Current Strengths
Better Business environment – Saudi Arabia has been ranked highly (ranked 25th
in World
Bank’s Ease of doing business report) in terms of ease of doing business. Radical changes in
23. 22
minimum capital requirements and reduction of required procedures from 13 to 7 has made
Saudi Arabia a preferred investment destination.
Current Challenges
Underdeveloped judicial norms – One of the issues with the legal environment is that judicial
system is not well developed and still follows capital punishment norms unlike many developed
nations. The king is the head of the judicial system, thus making it an extension of political
authority and not an independent entity.
Future Prospects
Plans of reforms in the legal environment – Initiatives like establishment of two different
supreme courts – general court and administrative court, training of judges, infrastructure
development and others have been taken in this direction
Future Risks
Preference to Saudi Nationals and lack of transparency in investment laws could hamper
Saudi Arabia’s chances of attracting foreign investments in the future. Corporate taxes and laws
of foreign arbitration need to become more transparent.
Table: Legal Analysis of Saudi Arabia
Environmental Analysis
Saudi Arabia has been a late mover in implementing world standard environmental regulations.
It is only after signing international Convention on Biological Diversity(CBD).The country has
further restructured the prices of gasoline, diesel and cooking gas to control over-consumption
Current Strengths
Commitment to environmental regulations – Saudi Arabia has adopted many international and
24. 23
regional environmental conventions. Some of them include Basel convention, The Kuwait
Regional Agreement for Co-operation on Protection of Marine Environment from Pollution, The
Regional Agreement for Protection of the Red Sea and Gulf of Aden, The Protocol on Marine
Pollution Due to Exploration and Exploitation of the Continental Shelf in the Arabian Gulf
Sea Area and United Nations Framework Convention on Climate Change.
Current Challenges
Poor performance on environmental indexes – Due to air pollution and marine pollution near
the Saudi gulf caused to incidents like oil spillage or waste dumping Saudi Arabia’s rank in
environmental indexes is pretty low.
Future Prospects
Focus on Environment – Saudi Government has become more aware in terms of environmental
issues and has even approved the Kyoto Protocol in 2004. It has also imposed restrictions on
over consumption of oil and waste dumping.
Future Risks
Expected loss of revenue due to Kyoto Protocol – Due to Kyoto Protocol, the developed
countries would be cutting down on their energy consumptions. It is estimated that the country
could lose about $19 billion per year from 2010 and more after 2012 when the Kyoto protocol
norms become more rigorous.
Table: Environmental Analysis of Saudi Arabia
2.3. Energy Sector Structure in Saudi Arabia
Saudi Arabia produces more oil and natural gas than any other country in the world. The growth
in the economy is mainly dependent upon production and oil exploration that is mainly done
25. 24
through the Saudi Arabia oil company called Saudi Aramco (Federal Research Division, 2006).
Oil plays a major role in the Saudi Arabian Economy and according to a US Energy Information
Administration it forms 90-95% of Saudi Arabia’s export, 70-80% of country’s annual revenues
and about 40% of the country’s GDP (Federal Research Division, 2006). It is estimated that
Saudi Arabia has about 261.9 billion barrels of oil that could last for about 50 years (Federal
Research Division, 2006). Saudi Arabia is also a highly influential member of the Organization
of Petroleum Exporting Countries (OPEC). The boost in the oil production has been so
tremendous that the country’s oil rigs nearly doubled between 2004 and 2006. Apart from the oil,
country’s natural gas reserves are very high and form around 4% of the entire world production.
It is estimated that total natural gas reserves amount to 235 trillion cubic feet. In 2002, Saudi
Arabia created world’s largest natural gas plant based in Hawiya that would increase production
by around 30%. Saudi Arabia has a very well structured network for electricity across the
country and the electricity reach is about 97% (Reegle, 2007). However, one of the concerns
relating to the reserve margin is that it is only 3% in Saudi Arabia as compared to world average
of 10%. Due to this there is demand supply mismatch and hence the Saudi Electricity Company
(SEC) has to cut down the supply to some areas during peak times.
Saudi Arabia has opened up its economy after its accession to WTO. As a consequence, foreign
companies are allowed to open up a 100% owned enterprise. But, the sector of oil exploration,
drilling and production still remains protected.
2.4. Porter Five Forces Model for analysis of Energy Industry
In his five forces model Michael Porter (1979) argued that the nature and degree of competition
in an industry hinged on five forces: the threat of new entrants & barriers to entry, the bargaining
power of buyers, the bargaining power of suppliers, threat of substitute products and competitive
26. 25
rivalry. The collective strength of these five forces determines the ultimate profit potential of an
industry. This model would be used to evaluate the energy industry and the impact of the various
players involved in its various sub sectors.
Figure: Porter’s Five Forces Model. Source (Quick MBA, 2010)
The table given below shows the importance of each parameter –
27. 26
Porter’s Five Forces Impact & Importance
Threat of new entrants&
Barriers to entry
In ideal conditions, a free market should exist where in any firm and
enter or exit easily. But in reality, the industry is dominated by large
firms that inhibit rivals from entering the market and eat in to their
profits. Barriers to entry have been used as a tool to maintain the
market equilibrium. Some of the used methods are government
regulations, patents, copy rights, economies of scale etc.
Buyer Power Buyer power reflects the influence of customers and their power in
making a product / service successful or unsuccessful. Buyers are
normally powerful in those industries where product standardization
is high, substitutes are easily available, buyers are few big institutions
that dominate the market and buyers have the capability for backward
integration. Some of the examples of such industries are automotive ,
retailers and others
Buyer power is weak in those industries where there is a high
switching cost for changing suppliers, any supply component is
critical to the buyer’s end product, buyers are fragmented and where
forward integration is possibility. Some of the examples are – movie
industry, computer chip making industry etc.
Supplier Power In any industry supplier’s influence the end product through the
quality of raw materials and other supplies. Relationship with the
suppliers is a critical component of an organization’s strategy.
Suppliers are powerful in those industries where they are less in
28. 27
number or manufacture critical components. While, the suppliers are
normally less powerful if the buyer has large scale operations, their
supplies are standardized and substitutes are easily available.
Threat of Substitutes In Porter’s Model this factor refers to the alternative products or
services from some other industry. As more substitutes are available
the demand of the product goes down. For e.g. demand for beverage
cans made of aluminum would go down if substitutes such as steel
cans, plastic cans or glass bottles are available at a lower price even
though they are not from the same industry.
Competitive Rivalry Intensity of rivalry is influenced by several factors that determine the
level of competition in a given market. In a market where there are
large numbers of firms the rivalry would be high to gain the market
share. Other factors are slow market growth, high fixed costs, low
switching costs, low levels of product differentiation, high exit
barriers, diversity of rivals etc.
Table: Porter’s five Forces: Impact & Importance. Source (Quick MBA, 2010)
The energy industry mainly consists of three types of companies – 1) Oil & gas exploration and
production, 2) Energy equipment suppliers 3) Service Providers (Energy Business Daily, 2010).
The application of five forces model on the energy industry gives the following results -
Threat of new entrants and barriers to entry– The major revenue generators of the energy
industry are the type 1 companies viz. Oil & gas exploration and production. Some of the biggest
names in this fragmented industry are Saudi Aramco, Exxon Mobil, Royal Dutch Shell, BP,
Chevron and others. These companies are vertically aligned and have strong hold in the industry
29. 28
and hence lowering the threat of new entrants. Due to their globalized large scale operations it is
unlikely that any small company would be able to challenge their supremacy. Another factor
that influences the threat of new entrants is the presence of these companies in several parts of
the supply chain. They use vertical integration and large scale production to be more efficient
and cost effective. Moreover, their huge investments in research & development of sophisticated
techniques of oil exploration, rig equipments, technology and man power has made their position
as incumbents in this industry. Another deterrent is the huge initial investment that is required to
set up basic facilities. Regulatory environment with its strict laws is another concern for new
entrants as it is very difficult to get permission for oil & gas exploration in new fields. Norms
relating to taxation are complex and there are several other restrictions due to the environmental
concerns. Also given the current economic situation and fear of recession, these big giants are
better equipped to handle the crisis then other small companies. Thus, all these factors make the
threat of new entrants very difficult.
Competitive Rivalry – Energy industry is characterized by large scale operations, high fixed
costs and high exit barriers for the players in the industry. As the world energy demand is
increasing there is a need to find new sources of energy leading to increased rivalry among the
major players like Saudi Aramco, Royal Dutch Shell, Exxon Mobil etc. As most of the
companies have similar nature of operations there was a need of geographical and / or product
diversification. Saudi Aramco has successfully created a monopoly in the Saudi Arabian energy
sector. Exxon Mobil has taken the route of diversification and has ventured into refining and
marketing of oil and gas. They have further invested in electricity generation and production of
commodity petrochemicals to reduce their exposure on only one particular sector.
30. 29
Bargaining power of buyers – As discussed before, the energy sector has several subsectors
and due to highly integrated nature of the large companies, they act as both buyers and players in
the different sectors. Due to their large size and capacities the oil companies have significant
power over their buyers. Also, the fact that oil, gas, coal and other commodities are in demand
and strategically important to its users weakens the bargaining power of buyers. On the other
hand some of the factors increase the bargaining power of buyers. Some of the institutional
organizations tend to buy oil and gas in huge quantities and hence they are able to secure good
discounts. Lack of brand loyalty and low product differentiation leads to increased bargaining
power for institutional organizations. Crude oil & natural gas prices are regulated through
mercantile exchanges throughout the world giving more options to buyers. The major buyers in
this sector are electricity generators that look for sources to produce electricity at a lower cost.
Such companies also have large size and huge financial muscle and command high bargaining
power. If the same quality of coal is available at a cheaper price and other conditions remaining
the same they would easily switch to a new supplier.
Bargaining power of suppliers - As far as the equipment suppliers and service providers are
concerned some of the major players are Halliburton, Schlumberger, Smith International, Baker
Hughes and others. They are mainly the suppliers to the type -1 companies. This sector of the
energy industry is characterized by highly specialized equipments, few suppliers and economies
of scale and hence giving a considerable bargaining power to the suppliers. The companies
mentioned are highly diversified and have huge product portfolios giving them a vantage point in
the buyer supplier relationship. Baker Hughes as an example caters to most of the big companies
of the oil and natural gas sector with its huge product portfolio. Apart from selling equipments it