As Sanjay Sharma (Strategy Consultant from Corn & Cherry, Abu Dhabi), we were asked to make a presentation to Prof. Charles (Strategy Professors) – as a mock‐up of our meeting with the Corn & Cherry panel. We had to make a 10‐15 slide presentation highlighting key assumptions, references to data and key conclusions. We were asked to answer following questions: 1. Analysis of DGHE’s competitive position using SWOT, BCG matrix and/or Porter’s 5‐forces model to outline DGHE strategy. 2. Devise a model to select a region of exploration (from Appendix 4)? How does DGHE planets arena (market) for projects? Using a PESTLE analysis for Oil & Gas, recommend countries of choice where DGHE must continue operations, penetrate etc. 3. What is the value and contribution of D & G Hydrocarbon Engineering (DGHE) inD&G’s portfolio? Is there an impact from D&G’s corporate strategy on DGHE’s competitive advantage?

1. Team: ShootingStars
L&T OutThink 2017
Juggling Hypercubes: long-term EPC
Business Strategy for Hydrocarbon
Sector
September 30th, 2017
This case is developed by L&T Institute of Project Management, Vadodara.
All the recommendations related to the business problems, as mentioned in the case, has been given by team Shooting Stars from IIM Rohtak
Image: Pexels

2. Executive Summary & the Approach
1
Existing Business Model
Value & Goals
External Analysis Internal AnalysisSWOT
Business Level Strategy
Global Strategy
Arena Selection Model
Corporate level Strategy
Portfolio
Contribution
Impact on
Competitive
Advantage
Human Leverage
Strategy
Formulation
Strategy
Implementation
1
2
3 4
5
6
7
8
9
10
Approach Flow Chart
1
2
3
Source: Case study, Team analysis. In our analysis we have assumed that DGHE business is very much similar to LTHE business of L&T Group
BCG, SWOT and Porter’s Five Forces
analysis suggests DGHE has a strong
competitive positioning
Arena Selection Model suggests
Middle East & North Africa as a first
choice followed by South East Asia.
PESTLE analysis suggest South East
Asian countries as 1st Preference
DGHE’s contribution to DGHE has
significantly increased. Its EBITDA
margin is 6.8%

3. 3
Outlining DGHE’s Strategy (2-6)
Arena Selection Model (7-9)
DGHE’s Contribution (10-13)
Source: L&T annual report

4. DGHE executes capital projects through EPC contracts. DGHE can leverage on its value
proposition to gain a competitive advantage in a maturing industry…
2
*We have assumed that the growth in orders of DGHE is similar to LTHE unit of L&T. SOURCE: L&T Annual report , Case study & Team analysis
1 Existing Business Model
EPC Contracts
offshore onshore
• Well-head
platforms
• Process
Platforms
• Modular
Structures
like living
quarters,
heavy
jackets
• Subsea
pipelines,
brownfield
• Floating
system &
offshore
drilling rigs
• Refinery
expansion
and
revamping
projects
• Gas
treatment
facilities
• Fertilizer
projects
• Petrochemi
cals
• Cryogenic
storage
tanks and
terminals
• Pipelines
₹ 7,025.00 ₹ 6,133.00
₹ 3,029.00
₹ 12,392.00
₹ -
₹ 2,000.00
₹ 4,000.00
₹ 6,000.00
₹ 8,000.00
₹ 10,000.00
₹ 12,000.00
₹ 14,000.00
₹ 16,000.00
₹ 18,000.00
₹ 20,000.00
2015-16 2016-17
Growth in Orders of DGHE Subsidiary*
Domestic International
Source: Annual Report and Appendix 1
Pros:
 “Single Point Responsibility” ensures completion of
projects in schedule and budget
 Guarantees Competitive advantage to clients
Cons:
 Over-aggressiveness w.r.t schedule leads to unfavorable
delays, and decline in quality
 No periodic assessment of costs and risk of not having
the skilled labor force to complete the project
2 Value Proposition and Goals
Can DGHE meet its goal and continue
offering the customer value?
The recent increase in the orders is favorable, but we should also
look into the cons of the business model to address the demand
DGHE
Suppliers
Competitors Complementors
Customers
PLAYERS: DGHE, DGHE’s existing client base, new clients, other
competitors, Co-opetitors (Potential Partners)
ADDED VALUE: Flawless project deliveries, state of the art
execution, top class safety, sharp focus on quality, huge experience
RULES: Usually projects are EPC contract based, risk is high
TACTICS: Excellent PTR, high available capacity, integration
SCOPE: Huge scope in emerging economies
Currently, DGHE is more focused on Indian subcontinent
and nearby regions. Existing business model offers an
excellent leverage to venture into other economies

5. 0
2
4
6
8
10
12
14
16
18
1965 1975 1985 1995 2005 2015 2025 2035
OECD China India Other non-OECD Asia Africa Other
Following the prolonged downturn, the oil & gas industry is showing some signs of revival, oil
prices are expected to rise and emerging economies will be the largest energy market …
3
Source: Team analysis, BP global outlook 2017 . *scores based on team analysis
3 External Analysis
Five Forces Analysis*
A region - based perspective
-2.5
-1.5
-0.5
0.5
1.5
2.5
3.5
4.5
5.5
1965-75 1975-85 1985-95 1995-05 2005-15 2015-25 2025-35
GDP(%) Primary energy(%) Energy Intensity(%)
Growth in GDP is expected to become stable, but
growth in primary energy is expected to decline
Due to increase in energy efficiency, there’s a
slowdown in primary energy requirements.
The pace at which global energy intensity
declines is projected to increase as China’s
economy rebalances and India leverage its
growth on favorable macro conditions
• China is expected to be the largest
energy market, but India will overtake it
by the end of 2035. Africa, also will be a
growth market in a long term.
• DGHE should consider it expansion in
these countries to gain as an early
mover by leveraging its value
proposition
Energy Consumption by region
0
1
2
3
4
Bargaining Power of
Buyers
Bargaining Power of
Suppliers
Threat of New EntratnsThreat of Substitutes
Industry Rivalry
Middle East and North Africa Russian Common Wealth
South East Asia North America
• Industry attractiveness is more in middle
Eastern Countries
• South Asian countries are center of
attraction for DGHE

6. Advancement in technology has led to slow down in oil demand from industry and transport
sector. DGHE should focus on diversification of its services…
4
0
1
2
3
4
5
6
7
1965 1975 1985 1995 2005 2015 2025 2035
Industry Buildings Transport Non-Combusted
Production by region Consumption by region
0%
20%
40%
60%
80%
100%
120%
1975 1985 1995 2005 2015 2025 2035
Gas Non-Fossils Oil Coal
There’s a supply -
demand gap of
around 4-5 million
barrels per day.
Majority of the
consumption is
from Asia Pacific
Region, America
& Europe
Due to recent advancement in
technology, the share of primary
energy has shifted from coal to non-
fossils sources of energy. It’s a risk
for Hydrocarbon Engineering EPC
firms
Shares of Primary Energy Increase in energy efficiency has led to the
slow demand in industry and transport
sector
Total energy consumption by sector
Macro factors are not that
favorable, because it’s
maturing industry. Business
diversification is required
Source: Team analysis, BP global outlook 2017

7. Immense amount of experience has led DGHE to gain a competitive advantage. BCG analysis
suggests that pipelines and head platforms are most profitable project types for DGHE…
5
4 Internal Analysis: Building Blocks of Competitive
Advantage
Competitive Advantage:
• Differentiation
• Cost effective
Superior Quality
Superior
Efficiency
Superior Innovation
Superior
Customer
Responsiveness
• In-house capabilities helps to deliver complete from design to build turnkey
solutions
• The business has repeatedly delivered, large, critical and complex projects,
globally, by virtue of its customer focus & responsiveness, experienced &
highly skilled human resources, world-class Quality & HSE practices and
culture of excellence
BCG Matrix analysis for project types (Revenue Streams)*
Relative Position (Market Share)
GrowthRate
High Low
High
Low
Invest ?
Cash Cow Dog
• BCG analysis shows that businesses like well head platforms, subsea
pipelines, cryogenic storage tanks, pipelines are in “investment zone”
• DGHE should use its resource to leverage on these kind of projects
Source: Team analysis, Annual Report, EY business outlook

8. SWOT analysis, with a score more than 2.5, suggests that DGHE has a huge competitive
advantage over its competitors…
6
5 SWOT Analysis: Strategic Factor Evaluation Matrix
External Factors Weight Rating Weighted Score
Threats
High growth rate of renewable sources 0.15 4.8 0.72
Sharp decrease in demand of coal 0.15 4.2 0.63
Projected closure of global refineries in Europe, OECD Asia,
North America
0.10 3.5 0.35
Decrease in demand of oil due to use of non-combustibles 0.05 1.6 0.08
Increasing energy efficiency 0.05 1.2 0.06
Total Scores 1.00 3.79
Internal Factor Evaluation Matrix
External Factor Evaluation Matrix
Internal Factors Weight Rating Weighted Score
Weaknesses
Little presence in markets other than India, Middle East 0.20 4 0.8
Project assessment not as good as European
companies
0.10 2.5 0.25
ROE is less according to Indian standards 0.10 2.0 0.2
Total Scores 1.00 4.03
Internal Factors Weight Rating Weighted Score
Strengths
Robust track record on project deliveries 0.15 5 0.75
Vast client base, covers almost all major players 0.15 4.8 0.72
Market leaders in capital intensive projects 0.15 4.8 0.72
Major Focus on Operational Excellence 0.10 4 0.4
Umbrella for huge range of services 0.05 3.8 0.19
External Factors Weight Rating Weighted Score
Opportunities
Projected substantial increase in import of LNG in China and
Europe
0.15 4.8 0.96
large scale and low cost resources in Middle East, US,
Russia
0.10 3.0 0.3
Projected decline in liquids supply, while demand increases
for China, Asia, Europe
0.15 3.4 0.51
Slow increase in oil producing market in Brazil 0.05 1.6 0.08
Increase in energy consumption to generate power 0.05 2 0.1
SWOT Analysis suggests that odds are in favor of DGHE
Source: Team analysis, case study, annual report

9. Hydrocarbon industry is in mature stage. The business level strategy for DGHE should be more
focused on deterring rivals and diversifying across economies…
7
6 Business level Strategy: for Maturing Industry
Strategy for
Deterring
Entry of Rivals
Product
proliferation
Price Cutting
Maintaining
Excess
Capacity
Strategy to
manage
Rivalry
Price Signaling
Price
Leadership
Nonprice
Competition
Capacity
Control
Market
Penetration
Product
Development
Market
Development
Product
Proliferation
Products
Existing
MarketingSegments
New
NewExisting
• By focusing on diversified range of products,
DGHE can improve its competitive positioning
and deter competitors from entering
• Dynamic price cutting for high margin products
and efficient cost structure will give a
competitive edge
• DGHE can maintain excess capacity by
developing well tested processes
• DGHE can go for a tit-for-tat price signaling
competitive strategy
• DGHE can leverage over its experience, resources
and capabilities to gain price leadership
• Right forecast of capacity will help DGHE in
efficient budgeting
• Hydrocarbon segment has high EBITDA
margin – hence penetration should be
done
• Electrical & Automation in Hydrocarbon
segment – penetration may lead to
competitive advantage
• Innovation can lead to new product
development in EPC life cycle
Four Nonprice Competitive Strategies
Source: Team analysis, case study, annual report

10. South East Asian & North African Countries seem very attractive after Middle East Countries.
DGHE should look for divestment in these countries…
8
Source: Team analysis, case study, annual report BP energy outlook
6 Arena Selection Model
Oil consumption per capita (in tonnes)Trade flows worldwide (in million tonnes)
Most trade flows in
this region
Huge consumption in
Middle East, America
and South East Asia

11. Arena selection model suggests, after taking 7 important parameters, Middle Eastern and North
African countries for penetration, followed by South East Asian countries. Qualitatively, south
Asian countries are preferred..
9
Source: Team analysis, case study, annual report
0
1
2
3
4
5
6
Track record Repeatable
Availability of
Projects
Customer Base PEST Analysis Risk Metrics Accessibility (CAGE) Availability of
Resources
Middle East and North Africa Russian Common Wealth South East Asia North America Average Socre
Arena Selection Model – Analyze on different parameters and compare
with the average
We can clearly see from the above model suggests Middle East, North Africa and
South Asian Countries
0
0.5
1
1.5
2
2.5
3
3.5
4
Political
Economical
Social
Technological
Legal
Environmental
Middle East and North Africa Russian Common Wealth
South East Asia North America
Average
PESTLE ANALYSIS
After qualitative analysis, preference order of
region where DGHE should penetrate: South
Asian Countries > Middle East & Africa > North
America

12. After selection of the market, DGHE should align its global strategy with its business
strategy and core competency…
10
8 Global Strategy: How to concur the world?
GlobalStrategyforSupplyChainofOilandGas
Cost cutting: A diet for the overweight
Vertical Integration: One-Stop shop
New Revenue models: for future rewards
Consolidation: Increasing Concentration
New Service models: Design to value
• Cost cutting by making well tested process
• Use improved tech and BIM to reduce leaks
• Collaboration to simplify contractor management
• In-house equipment purchase – 30% cost reduction
• High leveraged capital structure
• Focus more on OPEX and capitalize by parts
• Joint ventures to gain the competitive adv.
• Merger and Acquisition to gain mkt. share
• Collaboration with other co-opetitors
• Leverage on technology
Company Response Strategy
Diversification of Revenue Streams
Effective cost controls & Customer Service
Safety and Human Capital Investment
• Offer broad service range
• Consolidate & Leverage existing business in UKCS
• Emerging market opportunities such as Africa
and Asia
• Continuous Capital Expenditure & Technology
investments to improve economies of scale and
efficiency
• Reduce operational cost base utilizing innovative
approaches (e.g. cut down wastage)
• Ensure project deadlines & service delivery timely
• Investment in Employee Health & Safety
• Initiatives to ensure continuous supply of talent
pool
• Adequate succession planning for senior
management
Overcoming the Barriers to Change
• Utilize integrated logistics
policies to cut down project
timelines
• Bespoke risk & asset
management strategies to
address capital allocation
decisions.
• Effective communication
strategies to understand
employee & customer needs
• Training and human capital
development
Source: Team analysis, case study, annual report

13. D&G corporate strategy has four key areas. D&G group subsidiaries should contribute to
D&G’s portfolio by focusing on these 4 areas…
11
9 Corporate level Strategy: Four Key Areas
Strengthening execution
and operational
efficiency
Business value unlocking Digitalization
Emphasis on improving
Working capital
level
D&G Group
DGHE
Source: Team analysis, case study, annual report

14. DGHE’s contribution to D&G’s portfolio is very significant. There’s a substantial increase in
orders & EBITDA margin but asset size has remained low…
12
10 Portfolio Contribution of DGHE to D&G
6%
10%
0%
2%
4%
6%
8%
10%
12%
0
5000
10000
15000
20000
25000
30000
2016 2017
Number of Orders % Contribution
• There’s a significant increase in the number of
orders from around 15000 to 25000
• The percentage contribution to total portfolio
has also increased significantly from 6% in
2016 to 10% in 2017
• Hydrocarbon segment’s EBITDA margin has
increase significantly frim 0.5% to 6.8% in a
matter of one year
• Such increase indicates that the portfolio
contribution of DGHE to the parent company
has become significant
• Despite being a significant increase in EBITDA
margin, there’s no significant increase in
Assets as such
• DGHE has achieved such a high EBITDA
margin by having a light asset base
D&G consolidated – Hydrocarbon order book
D&G consolidated – EBITDA Margin D&G consolidated – Assets
Source: Team analysis, case study, annual report

15. The Impact web shows that the there’s a huge impact of corporate level strategy on DGHE’s
business. DGHE’s should effectively use human capital to gain competitive advantage …
13
5
2
3
4
Strengthening
execution and
operational
efficiency
Business value
unlocking
Emphasis on
improving Working
capital level
Digitalization
The Impact Web
• High EBITDA margin from DGHE business is inline with the corporate strategy of
strengthening operational efficiency and execution
• D&G is planning to divest some of its business to diversify. DGHE being a high
EBITDA and low asset business, it’s highly unlikely of such case to occur
Leveraging Human Capital
Organizations deliver superior and sustainable value
when they have:
Evolutionary Purpose
Spiritual Intelligence
Entrepreneurial Ability
Shared Tacit Knowledge
Trust Communication
DGHE should leverage on it’s strong human
capital by creating a trust among the employees
Source: Team analysis, case study, annual report