MBA assignment for Strategic Management

STRATEGIC MANAGEMENT
MBA Part-Time
Assignment Report
Yousef Hamad
L0009SBSB0913
6th November 2014
Lecturer: Dr. D. Khaldoun
London School of Commerce

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Contents
INTRODUCTION .......................................................................................................................... 4
Company Overview .................................................................................................................... 4
Industry Brief.............................................................................................................................. 4
Customer Segments .................................................................................................................... 4
TASK-1........................................................................................................................................... 5
1.1. PESTEL-Analysis ............................................................................................................ 5
1.2. Porter’s Five Forces ......................................................................................................... 7
1.2.1. Construction.............................................................................................................. 7
1.2.2. Operation and Maintenance (O&M)......................................................................... 8
1.3. SWOT-Analysis ............................................................................................................... 9
1.4. Competitors Analysis ..................................................................................................... 10
1.5. Resources and Capabilities Analysis.............................................................................. 11
1.6. Value-Chain ................................................................................................................... 12
1.7. Industry Lifecycle .......................................................................................................... 14
1.8. Sustainable Competitive-Advantage (SCA)................................................................... 14
1.9. Culture............................................................................................................................ 14
1.9.1. Cultural-Web........................................................................................................... 15
1.10. Drivers for Change ..................................................................................................... 16
1.11. Objectives ................................................................................................................... 16
1.12. Strategy Option........................................................................................................... 17
TASK-2......................................................................................................................................... 18
2.1. Strategy........................................................................................................................... 18
2.1.1. BCG-Matrix ............................................................................................................ 18
2.1.2. Ansoff-Model.......................................................................................................... 20
2.1.3. Generic-Strategy ..................................................................................................... 20
2.2. Resources ....................................................................................................................... 21
2.2.1. Financial.................................................................................................................. 21
2.2.2. Human..................................................................................................................... 21
2.2.3. Technology.............................................................................................................. 22

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2.2.4. Physical-Resources ................................................................................................. 22
2.2.5. Intangible-Resources............................................................................................... 22
2.3. Business-Model Canvas ................................................................................................. 22
2.4. Service and Operations Management (SOM) ................................................................ 23
TASK-3......................................................................................................................................... 25
3.1. Lewin-Model.................................................................................................................. 26
3.1.1. Unfreeze-Stage........................................................................................................ 26
3.1.2. Change-Stage .......................................................................................................... 26
3.1.3. Refreeze-Stage ........................................................................................................ 27
3.2. McKinsey-7S-Model...................................................................................................... 27
3.2.1. Strategy ................................................................................................................... 28
3.2.2. Structure.................................................................................................................. 28
3.2.3. Systems ................................................................................................................... 29
3.2.4. Share-Values ........................................................................................................... 30
3.2.5. Style ........................................................................................................................ 30
3.2.6. Staff......................................................................................................................... 31
3.2.7. Skills........................................................................................................................ 33
APPENDIXES .............................................................................................................................. 34
REFERENCES ............................................................................................................................. 38

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INTRODUCTION
The author is an engineer used to be the Deputy General Manager of Libonatti 2004-2011.
Before this period he worked for two Oil&Gas Majors in Libya for about 15 years.
This report proposes a strategy for business resilience and sustainability for Libonatti Board of
Directors taking into account the external and internal forces. It is composed by three interrelated
tasks. Each task contains number of recommendations mentioned within the context.
The report has total word-count of about 3885 excluding this introduction, tables, figures,
appendixes and reference list.
Company Overview
Libonatti is a subsidiary of Italian-group, registered in Libya as a general contractor providing
construction/logistic services. As one of the construction leaders, it has been delivering services
since 1979 to the Oil&Gas sector for upstream and downstream companies. Libonatti relies
mainly on overseas suppliers and uses expats rather than locals- the approach that is deemed
‘Double-edged sword’ impacts firm’s reputation/brand, prices, quality and time-delivery.
Industry Brief
Libya’s Oil&Gas sector is managed by National Oil Corporation (NOC) through about 15
upstream and downstream operators. Libonatti, MAAN and JAP used to be the most dominating
contractors in this sector before market has been penetrated by new entrants from China and
India who provide cheaper service thus steal market-share.
Customer Segments
1. Purely national firms those care more about service prices rather than quality.
2. Joint-venture firms between and NOC international majors those care about quality and time-
delivery.

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TASK-1
1.1. PESTEL-Analysis
PESTEL is purely a checklist and reminder that is employed selectively. Its results can be
misleading if every single-conceivable item is listed, instead, 3-4 strong-justified items can
realize useful summary (Lynch, 2009). It offers broad data to identify major change
drivers/factors those affect the strategy’s success or failure as well as the implications on
organisational-current and future change (Johnson, et al., 2008).
Table 1.1: Detailed PESTEL Factors
Political  New regulations require foreign firms to contribute to local-content developing
Libya’s HR, transferring technology, and subcontracting local contractors.
 Restrictions on employing foreigners for jobs those locals can perform.
 No mega projects due to unstable situation, but civil-war created several
rehabilitation works to upstream and downstream facilities.
 Taxation police: 3.6% contract registration and fees and 15% of total sales.
Economic  Energy sector generates 80% of Libyan GDP, 95% of export gains and almost
99% of state income.
 Oil&Gas sector trend is focusing on core business and outsource the rest.
 Central Bank fixes the interest rate.
 Average exchange rate: is usually applied in Oil&Gas projects (between the
rate in date of signing the contract and the rate in date of paying an invoice).
 Labor cost is low.
Socio-culture  Government is sending lots of Libyans to study abroad.
 Favoritism is high that increases overstaff which in turn decreases wages.
Technology  Three cell-phone providers. Public/private sectors provide Internet service.
 Japanese, German and Italian technologies are commonly used.
 Oil&Gas sector widely applies technology.
Environment  National Oil Corporation (NOC) enforced new rules to maintain environment
by decrease gas flaring and to improve oil economies by utilizing such gas.
 Oil&Gas operators emphasize HSE procedures.
Legal  Cyclicality is relatively common with frequent changes in laws and
regulations, but legislations are strived for improvement.
 Investment law-9 is attractive (exempts investors from taxes &gives
incentives).
(Cia.gov, 2014; Privatization-and-Investment-Board, 2014; Amereller-Rechtsanwälte, 2013;
Almontaser, 2012)

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Although Libya is politically unstable, its oil production is one million bpd (Faucon, 2014).
Libya can grow fast, as it possesses a strategic location close to Europe, having the longest coast
on Mediterranean-Sea and huge resources. According to Dr Nuri Berruein NOC chairperson, the
top priorities are securing the oil fields and the return of majors and contractors to service. He
asserted Libya is excellent place for Oil&Gas investment (Appendix-1).
Some key issues can be extracted from the above PESTEL listed in Table-1.2.
This leads to analyze the construction industry.

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1.2. Porter’s Five Forces
1.2.1. Construction
Red-Ocean Strategy
According to Kim and Mauborgne, concentrating on construction leads to a heat-to-head
competition with rivals; meaning competitive convergence where the business environment
becomes tough and threatening. This is described as ‘Red-Ocean Strategy’ where financial loss
takes place causing bloody-competition (Johnson, et al., 2008).
Blue-Ocean Strategy
Above framework clearly indicates a very high competition in construction service. Instead of
continuing red-ocean strategy, Libonatti executives could apply ‘Blue-Ocean Strategy’ where
there is unexploited market-gap, irrelevant competition, creating demand, and growing

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profitability. Libonatti can stay ahead of inevitable imitation by the ignorance of beating its
rivals and adopting “value-innovation’ strategy whereby value is created for the company and
clients, hence uncontested market-space is opened (Kim and Mauborgne, 2005) which -in this
case- is O&M service gaining ‘first-mover-advantage’.
1.2.2. Operation and Maintenance (O&M)
O&M service can be delivered to customer either directly after the completion of plant
construction or as after-sales service (ASS) which is awarded directly without bidding/tendering
to the Original-Equipment-Manufacturer (OEM) or to OEM-Licensed contractor. Both
approaches are valid for Long-term Service Agreement (LTSA) with customer.
Libonatti has strong relations with GE and SIEMENS through past consortiums of EPC power
and process turn-key projects. Both OEMs have the largest fleet of equipment (power rotating

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equipment) and associated systems installed in Libya. O&M needs infrastructure/capabilities
based in Libya which are available with Libonatti, but not with OEMs. OEM core business is
technology/manufacturing. Utilizing its reputation and brand, Libonatti can be exclusively OEM-
Licensed to provide ASS. OEM provides technology/knowhow and equipment, whereas
Libonatti provides logistic, manpower and field activities. With this license and apart from ASS,
Libonatti can also establish a workshop in Libya to repair/refurbish spares those customers
always send overseas. ASS can also be offered by unlicensed provider, but many clients do not
accept because such provider cannot secure OEM-warranty. ASS includes plant optimization and
system upgrade. As long as it is valid, exclusive OEM-License prevents imitation. Competitors
can only target other OEMs. Accordingly, O&M is an attractive industry. O&M is analyzed as a
scenario (Appendix-2).
1.3. SWOT-Analysis

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1.4. Competitors Analysis
Using Critical Success Factors (CSF) Matrix, this analysis will focus on direct competitors those
could compete in offering O&M service such as JAP and MAAN, and indirect competitors those
are OEMs such as GE and SIEMENS. Libonatti, JAP and MAAN can compete for delivering
construction and O&M, while OEMs can only compete for ASS related to equipment/systems
they produce.
Libonatti concentrates on some clients with whom it has strong relationship and doing good
business. It is the market leader in delivering service on time (sometimes before) with high
quality, but at higher prices. Libonatti uses highly-qualified and skilled expats, but does not
consider utilizing local manpower. It neither subcontracts local contractors nor outsources non-
core works. Libonatti relies on foreign suppliers ignoring local procurement where competitive
prices, low tax and short time-delivery are available. Libonatti usually avoids transferring
knowhow to locals and retains it for its expats.

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1.5. Resources and Capabilities Analysis
Libonatti should explore the main resources’ roles and realize how to deliver superior profit
thereof add value and identify which resources can secure competitive-advantage and how to
improve them over time to attain sustainability (Lynch, 2009).
Despite the O&M industry-attractiveness and the resources and capabilities mentioned in Fig-
1.4, Libonatti still need to take actions to realize competitive-advantage:
a. Match the-right-resources with the-right-capabilities for the-right-service. For example, some
special/sophisticated tasks do not need mobilizing camps, heavy equipment, suchlike, but

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only two engineers with two helpers and special tools to deliver high-quality and fast service.
In this case customer provides board and lodging.
b. Invest in building engineers/technicians certified by OEM.
c. Apply change and adapt the organisation to tune with strategy such as McKnsey-7S in terms
of structure, system, skills, etc. (see Task-3).
d. Provide training that meets O&M requirement.
e. Minimize costs where possible, for instance, hiring locals and outsourcing some activities.
1.6. Value-Chain
It helps Libonatti in identifying how to create value for clients and specify the competitive-
advantage sources and where it lies (Lynch, 2009; Johnson, et al., 2008). According to Porter
(1985), Libonatti can deliver to customers value overreaches its cost creation.
The following activities are interdependent creating value and increasing the profitability
margins based on (Lynch, 2009; Johnson, et al., 2008; IMA, 1996; Porter, 1985):

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1.7. Industry Lifecycle
Oil&Gas industry has five key stages: exploration, site-survey, drilling, development, and
production. Libonatti is active in the last three stages where delivers logistic and construction.
Services last for decades depending on oil/gas wells’ age and productivity. O&M is scalable
during the plant/facility lifecycle.
1.8. Sustainable Competitive-Advantage (SCA)
As it is deemed a key step of achieving a competitive-advantage (Bressler, 2012), developing a
new service (O&M) have several merits, for example (a) first mover advantage; (b) unique; (c)
less cost/risk than construction; (d) higher profit margin; (e) does not require large
mobilization/demobilization; (f) tunes with customer strategy of outsourcing non-core business;
(g) allows joining OEMs thus gaining/transferring technology and knowhow and winning
projects without tendering; (h) increasing the gap with competitors.
Libonatti should develop over-a-period-of-time a SCA. Based on Kotler (2003), Libonatti should
create customer superior-value and use tactics preventing rivals from copying the business. This
is possible by (i) signing two independent agreements with GE and SIEMENSE (minimum one
of them); (ii) apart from ASS, the agreement will include refurbishing used-parts, and
installation; (iii) establishing One-Stop-Workshop in Libya thereby no need to dispatch spares
abroad saving time/cost. These steps can be enhanced by providing 24/7 call-off service.
As to Oosterhout (2012), Libonatti can realize sustainability also by innovation which lies in
upgrading/modifying/optimizing plants and facilities. Attaining competitive-advantage needs
leadership (Porter, 1996) thereof Libonatti should improve the organisational structure/culture
and leadership. According to Bressler (2012) Libonatti should consider the marketing-mix to
attain sustainable competitive-advantage (see Appendix-3)
1.9.Culture
Organisational strategy successful implementation needs to understand the new cultural-values
and management and staff behaviors/features/attitudes. Libonatti must recognize what the
incompatible elements are of the present culture and the intended strategy. Seniors should

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identify and maintain the valid cultural-themes and eradicate invalid themes then be enough-
conceived to create new themes fit for the purpose of executing the new strategy (Potter, 2010).
Jonson and Scholes developed in 1992 the Cultural-Web (Fig-1.6) with six interrelated elements
those assist in creating the work environment paradigm which is in turn significant in strategy
formulation.
1.9.1. Cultural-Web
By identifying six interrelated cultural factors, Libonatti can make-up its work environment
model or ‘Paradigm’ as Johnson and Scholes call. Libonatti then analyzes each element and
investigate what element works, what doesn’t, and what should be changed. This helps in
looking at the organizational-culture in its current situation, then look at it in the foreseen
situation, and finally to compare between the two situations coming-up with differences which
are the changes Libonatti should undertake to attain the target high-performance culture. (Jonson
et al., 2008)
Symbols
Believing in ‘Customer is First’, Libonatti has the highest living standards at the camps provided
for its and customers’ staffs. This enhances employees’ loyalty and customer
satisfaction/experience. Libonatti logo appears on all its high-quality equipment cars and
uniform.
Stories
Libonatti had accomplished a project for Wintershall
(international oil major operates in Libya) before
scheduled time. This anticipated the oil production
saving millions of dollars to the client.
Routines and Rituals
Libonatti has long working hours/week focusing on
outcome rather than process. General Manager often
makes individual meetings with managers. People

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work hard to get job done. Libonatti does not arrange celebrations except in few occasions for
customers.
Control System
Libonatti applies informal control system through rewarding supervisors (controllers) who are
often expats. This mainly prevents time-waste and secures quality. However, local employees
consider it as a kind of discrimination.
Power Structure
According to Charles Handy (1999), Libonatti is an organisation of ‘power-culture’ the model
which is described as spider’s web where the spider captures power from positioning at web
centre “the closer you are to the spider, the more influence you have” (Henry, 1999, p.86).
Organizational Structure
Libonatti has a very basic/rigid/hierarchical organizational-structure. Libonatti must promote a
structure that copes with the new strategy and meet the new service requirements.
See Appendix-4 for detailed elements.
1.10. Drivers for Change
1.10.1. New entrants apply cost leadership strategy grabbing market-share and increasing the
competition and threat.
1.10.2. Clients started focusing on their core business thus outsourcing the others which create
new business opportunities.
1.10.3. New laws and regulations necessitate exploiting local workforce and contractors.
1.10.4. Environmental restrictions create new business opportunities.
1.11. Objectives
 Minimizing the operating cost.
 Contributing to the local content.
 Growing double digit in the next five years.

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1.12. Strategy Option
The optimal option is to adopt a mix of inventive and incremental strategies, as Libonatti
Directors seek strategy that secures both business resilience and sustainability. According to
IBM, business-resilience is “The ability of an organization’s business operations to rapidly
adapt and respond to internal or external dynamic changes –opportunities, demands, disruptions
or threats –and continue operations with limited impact to the business” (Gaddum, 2004).
The combination supports Libonatti controlling its course whilst stimulating the learning process.
"Organizations...[may] pursue...umbrella strategies: the broad outlines are deliberate while the
details are allowed to emerge within them" (Hax and Majluf, 1996, p.17; Mintzberg, 1994, p.23-
25).

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TASK-2
2.1. Strategy
Based on external/internal forces, Libonatti corporate-strategy is to maintain its business and
build a sustainable competitive-position.
This requires adopting business-strategy of enhancing the core-business (Construction) and
developing a new unique/sustainable/differentiated service (O&M).
2.1.1. BCG-Matrix
Construction (core-business) has yet a ‘threatened’ high market-share in a low-growth/high-
competition market (Cash-Cow). Winning gas-utilization projects (construction opportunities)
will maintain core-business hence create important value and more cash to cover salaries,
financing new service development/marketing, suchlike. Some logistic-services (Dog) should be
outsourced to save money/time/effort (cut-cost). O&M (Wildcat) has high potential in a high-
growth market but no market-share yet. The greatest opportunity for (Star) position is to
differentiate in O&M service (market-leader and dominant-player) by (i) OEM-Licensing to
provide ASS, plant optimization/upgrade; and (ii) investing in local workshop. Both contribute in
capturing market-share thus more return, and develop local-content and transfer technology to
Libya hence attaining high credibility. (Lancaster & Massingham, 2011)

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Accordingly, construction will pay the bills and O&M is important to pay the future bills. Can
Libonatti executives balance sustaining ‘Construction’ with new-service (O&M)? It is possible
to develop new-service while protecting ‘core-business’? (O’Reilly and Tushman, 2004)
Mintzberg argued that plenty of planned strategies cannot be implemented because of unforeseen
circumstances, thereof he came-up with different approach of ‘unplanned responses to
unexpected changes’ (Hill and Jones, 2008).
While running the-day-to-day core-business, Libonatti also integrates a focus on O&M
consistently. Inventive/incremental strategies can present purposeful conversation that supports
strategic-management. Inventive-strategy (Prescriptive) engages the management-team
identifying/taking actions to fulfill certain objectives using, e.g. Porter and/or Ansoff models
which rely on planning and predicting the future. This is difficult especially in fast changing
environments where reality contravenes plan. Perspective-strategy fails when launching new-
service in new-market. Emergent-strategy (Incremental) conversely appears when not executing
on plan/prediction, but instead Libonatti organisational-behaviors evolve to respond to
reality/changes. However, management finds it difficult to control. As Mintzberg noticed, few
strategies are entirely either inventive or incremental because they mean respectively no learning
and no control; accordingly management should have way(s) of controlling within the
organization while simultaneously enhancing learning. (Viki, 2014)

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Ansoff/Porter/SWOT combined approach is selected (Course-Manual, p.158).
2.1.2. Ansoff-Model
Ansoff-Matrix emphasizes capturing further market-share to augment the core-business and
developing unique/sustainable/differentiated new-service O&M (see Task-1). Also Mintzberg-
strategy supports these two options via Elaborating-approach (Course-Manual, p.162).
2.1.3. Generic-Strategy
Porter (1980) said “competitive advantage is at the heart of a firm’s performance in competitive
markets”. Libonatti should utilize effectively its strengths to build a sustainable competitive-
advantage in its market realizing less cost, successive focus strategy, and differentiation.

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Promoting O&M differentiates Libonatti from rivals. Libonatti continues focusing on Oil&Gas
customer segment. Outsourcing, local procurement and hiring locals support Cost-leadership.
Above combined-approach derives Competitive-strategy:
Competitive-Strategy
Licensed O&M service that is distinctly-different and effectively utilizing strengths (see SWOT)
attain competitive-advantage. It is more competitive and sustainable by establishing One-Stop-
Workshop whereby Libonatti saves time/money/effort even for its customers who often send
spares abroad for refurbishment/repair. Mintzberg-strategy also supports ‘Licensing’ via
‘Extending Core-business’ (Course-Manual, p.165) which is already Libonatti focus. Since
O&M/ASS complement the construction (core-business), they are delivered through OEM-
licensing. This license also secures construction/installation of power-stations and
compression/pumping stations manufactured by OEM.
2.2. Resources
Based on Johnson and Scholes’ definition of strategy, Libonatti will configure its resources
among other requirements to meet strategy satisfying market needs and attaining stakeholders’
expectations.
Developing O&M service has two stages:
1. Embarking on ASS which mainly relies on providing manpower to work on existing plants.
2. Launching a workshop which can be established by Libonatti or by partnership with a
customer who possesses existent workshop but lacks technology, skills and competences.
This stage could commence two years after launching stage-1 (ASS).
2.2.1. Financial
O&M -unlike workshop- does not need big investment, however, Libonatti shareholders and
core-business returns are the main sources of capital, as well as customer in case of partnership.
2.2.2. Human
Apart from available on-site skills, O&M requires qualified/certified staff in all disciplines e.g.
electromechanical, marketing, QA/QC, HSE. Libonatti should hire the required people,
particularly, attracting those of customers and provide them with training and OEM-certification,

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and develop managerial-skills, also assign strategy manager to follow-up the strategy
implementation/control.
2.2.3. Technology
OEM will provide service technology/knowhow which Libonatti will gain over time.
2.2.4. Physical-Resources
IT system is integrated with suppliers, OEMs and customers including Libonatti representative
co-located at OEM-offices to facilitate service-delivery and improve performance. Libonatti can
rent facilities for short-term service located remotely from its camps. Libonatti should mobilize
for long-term services.
2.2.5. Intangible-Resources
Libonatti should protect its brand and maintain reputation/goodwill mainly by keeping high
quality and on-time delivery, and firm marketing strategy.
Refer to Value-Chain for further details.
2.3. Business-Model Canvas
Nine building-blocks (Osterwalder et al., 2010) plus tenth block (Course-Manual) model is
applied for aligning Libonatti strategy with its organisational-structure, operations and
environmental-elements in attaining competitive-advantage and delivering superior proposition-
value to customers in varying time, quality, cost, flexibility, effectiveness and innovation.
This framework is also a formula for generating profit from uncontested market-space (O&M)
within Blue-Ocean environment (Course-Manual).

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2.4. Service and Operations Management (SOM)
To meet competitive goals and through (Transformation) process, Operation-manager is
responsible for the most of Libonatti cost and revenues, and manages the most of physical-assets
and people (Inputs), and generates profit from delivered service (Outputs). SOM deals –in-real-
time- with customers having many challenges come from unexpected operations, reacting with
the customer needs, managing people and making decisions to deliver adequate/quality services
on-time and at adequate cost that create/maintain value. (Johnston/Clark, 2012; Anil-
Kumar/Suresh, 2008)

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Libonatti-SOM will consider internal/external feedback to improve performance and keep the
system functioning as desired. Listening to customer is significant for continual service
improvement. SOM should also consider stakeholders’ feedback/relationship. To save
money/time/effort, SOM should also minimize the subsystems by outsourcing (Mayfield and
Mayfield, 2013). SOM will also handle the activities shown in Fig-2.5
Libonatti-SOM should harmonize the service design, achievement and preservation and keep
learning and evolving methods to maintain such
harmony thus realising sustainable-advantage
(Parker, 2012).
Because these processes should deal with and
implicate intended/unintended events that need
continual learning and applying control, an
integrated prescriptive-emergent strategy has been
selected.

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TASK-3
Author suggests realizing the change using an integrated-framework. McKinsey-7S-model
contains seven interdependent organisational-elements that are successful when aligned. Unlike
Lewin-model, McKinsey-7S does not talk about how to promote/facilitate the change in the
organisation such as mitigating fear-of-change, persuading people and communicating the
change. However, it focuses on analyzing current/proposed situations identifying
inconsistencies/gaps between them then adjust each element to tune with the other elements and
ensure organisation runs effectively. Lewin-model has three stages; ‘Unfreeze’ for preparation,
‘Change’ where proposal starts, and ‘Refreeze’ where change takes place becoming part of the
culture.
Once completing McKinsey-7S analysis for current and proposed situations coming-up with a
proposal, Libonatti can then embark on Lewin-model. For example, Strategy and Share-values
elements fall in Unfreeze-stage as supporting evidences to communicate the change. McKinsey-
7S proposal falls in Lewin Change-stage. Once McKinsey elements formulated in their final
shape meeting strategy requirement and competitive-advantage, the change is set and situation is
refrozen.

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3.1. Lewin-Model
3.1.1. Unfreeze-Stage
Driving-forces are stronger than restraining-forces (Table-3.1). Keeping status-quo can
jeopardize the company because of threatening competition and governmental-restrictions on
expats. On-the-other-hand maintaining Libonatti needs to grab opportunities.
Therefore management should start with the change preparing the organisation for acceptance
and mitigating the resistance to change. People must be aware/convinced of status-quo
consequences and change importance as well as government and customers. Vision, Strategy and
Values are taken as supporting-proof.
Because change will affect top management, Shareholders/Board support is needed.
3.1.2. Change-Stage
People start resolving the uncertainty created in Unfreeze-stage and acting proactively towards
change but takes time due to specific personal-transitions’ issues in changing environment (Fig-
3.2).

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People should understand their benefits from change. Change is communicated to people along
planning/implementation, dispelling rumors and answering questions. To promote/facilitate
change and as kind of motivation, employees should actively participate in change process and
be rewarded. Daily-progress is reported to management.
3.1.3. Refreeze-Stage
Change takes place and becomes part of Libonatti culture. People are trained/supported to stay
on the right-track and regularly checked to assure change is happened and that they are using the
new-implemented process. Feedback system is established to improve performance. Successful
hard-workers are celebrated to help them believe that future changes will also be successive.
3.2. McKinsey-7S-Model
Each aspect/element below contains brief on current situation with relevant
proposal/recommendations that should be put in action.

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3.2.1. Strategy
To sustain its business, Libonatti visions to
provide peerless-integrated services and needs to
respond to internal/external dues and build a
sustainable competitive-position.
Strategy is to keep ‘Construction’ capturing more
market-share and develop a new-unique service
‘O&M’ gaining first-mover-advantage. This
needs minimizing costs, but maintaining quality and be customer-oriented. Contribution to local-
content and bridging technology and transferring knowhow increase credibility and meet
governmental-dues and customers’ wants/needs apart from cutting costs. O&M via OEM-
Licensing realizes sustainable competitive-advantage.
3.2.2. Structure
Libonatti has combined leadership-structure (Chairman/CEO) with non-executive directors, and
hierarchal-structure with three headquarter-based departments (Fig-3.4). Structure lacks of
public-relations, marketing and training. Personnel and Finance are supportive departments to
Operations department. Latter handles service activities from tendering to service-delivery.
Decision-making and control are centralized.
New structure (Fig-3.5) satisfies new strategy. For example, splitting between chairman and
CEO augmenting corporate-governance decreases costs and improves performance (Baker,
2008), and as Libonatti targets to be customer-oriented, PR/Marketing department will be part of
structure, and a ‘customer-first’ should be instilled into the organisation mindset.

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Direct communication/coordination is sometimes allowed among sections from different
departments, for instance Engineering-with-O&M, Construction-with-Procurement, and
PA/Marketing-with-Logistics/Sites decreasing bureaucracy, saving time/effort, improving
performance and enhancing team-work. Libonatti representative -who reports to O&M manager
and communicates with other sections-, is co-located at OEM-offices to coordinate/expedite ASS
activities. Critical and strategic activities are handled carefully following the hierarchal-structure.
(Fleisher and Bensoussan, 2007)
3.2.3. Systems
Chairman/CEO and Operation Manager run the system. Management is fear of change. Meetings
are not common, but Chairman/CEO meets managers separately. Chairman/CEO and Operations
manager control/monitor almost everything. Policy/rules emphasize power-culture. Libonatti has
Personnel department (not HR) which mainly works on hire/fire and payroll, while Finance
handles accounting, salaries, and bills/invoices.
New structure mitigates centralization and distributes control/monitoring among CEO, COO,
CAO and managers. Creating more senior positions meets requirement and improves

30
performance and simultaneously deemed motivation. Policy is amended to match new structure
and environmental-dues in-terms-of local employees, salaries/incentives, and documentation-
process and coordination-procedures, suchlike. New system considers Information-System that
supports for running business and implementing strategy successfully. (Fleisher and Bensoussan,
2007)
3.2.4. Share-Values
3.2.5. Style
Libonatti has tough leadership of power-culture. Because Libonatti is product-oriented (Kotler &
Keller, 2009), its workforce is not as prior as service-quality. Strict-Policies push people to
perform; the reason behind hiring Fareast-Asians. Chairman/CEO and Operation manager often
communicate implicitly. Power-culture with new bigger-sized structure and many activities
cannot function (Handy, 1999).
Libonatti should have organisational-growth and adopt effective management techniques, like
Greiner’s Organizational-Growth-Model (Fig-3.6), creating revolution at some lifecycle stages,
e.g. control/autonomy crises for management-decentralization and adopting delegation notion,
and injecting new bloods by leadership crises (Greiner 1972).

31
Executives should be more open with explicit communicators.
Customer-orientation requires focusing one getting-job-done at customer satisfaction and
competition where workforce is substantial.
As Libonatti delivers the service in project (task) form, it will adopt Task-culture (team-culture)
which focuses on having-job-done by aggregating/converging proper resources and the-right-
staff at the-right-level to accomplish such project. Team-culture relies on unifying team power to
improve efficiency and support the individual identifies organisational-objectives. (Handy, 1999)
3.2.6. Staff
Libonatti has neither development/training programmes nor motivation/reward; however, it
offers comparably high salaries.
With new governmental-policies, Libonatti will rely more on local-manpower gaining several
benefits:

32
Management should foster recruitment, development/training, and motivation and authorize
young people for managerial/executive positions assigning them for critical/challenging roles
which positively influence long-term organizational-effectiveness (Fleisher and Bensoussan,
2007). Libonatti need to concentrate on some specializations/experiences/competencies:

33
3.2.7. Skills
Libonatti often hires temporary highly-skilled expatriates for its projects (project-by-project). A
project team in many cases kept for next project.
Due to the environmental-change, organisational-expansion and new services, Libonatti should
developed/acquire appropriate soft/hard skills (as sustainable-competitive-advantage’s raw
material) for all disciplines and decrease investment in established skills. On-job training and
coaching are required too. (Fleisher and Bensoussan, 2007)

35
Appendix-2 Scenario Analysis
Stage 1 Scenario: Develop a new service in Operation and Maintenance (O&M)
Stage 2 Causes of scenario Cause weight
(1-10)
2.1 Lack of mega projects (construction). 4
2.2 Increasing competition in construction. 3
2.3 New laws and regulations of involving local content. 1
2.4 New environmental restrictions. 2
Stage 3 Scenario likely outcomes
3.1 First mover advantage. 3
3.2 O&M has better profit margin than construction. 2
3.3 O&M complements the construction after project completion. 1
3.4 Customer satisfaction. 2
3.5 Gaining technology of Original Equipment Manufacturer(s) OEM. 2
Stage 4 Effect on business
4.1 Increasing revenues. 2
4.2 Maximizing profits and corporate value. 2
4.3 Cutting cost, as O&M is less costly than construction. 2
4.4 Reducing risk level. 1
4.5 Gaining OEM knowhow and technology. 3
Stage 5 Areas of key impact
5.1 Organizational structure and culture 3
5.2 Human Resources 3
5.3 Logistics 2
5.4 Supply chain 2
Stage 6 Need for change assessment
6.1 Clients prefer to award the plant O&M activities to the same construction contractor
in order to guarantee better performance especially in the first two years where the
most of design and construction errors burst on the surface.
Entering O&M business will need Libonatti to make changes from top to down in the
organizational structure and culture. It also needs to evaluate the capabilities, human
capital, infrastructure, supply chain. Due to its new service, Libonatti will need to
build-up relationships even with customers’ O&M people.
Stage 7 Actions required
7.1 Improving the organizational culture, reducing the centralization and applying
corporate governance.
7.2 Establishing new O&M business unit within the structure.
7.3 Approaching the OEM for license and for train and certify Libonatti engineers and

36
technicians for ASS.
7.4 Select staff from inside and recruit from outside. By law Libonatti will need to engage
Libyans. Better for Libonatti to acquire customer qualified people those are aware of
existing plants/ facilities.
7.5 Setting training programmes.
7.8 Co-locate Libonatti representative at OEM premises as a focal point among customer,
Libonatti and OEM to monitor and expedite service.
7.9 Approaching new suppliers those satisfy O&M needs.
7.10 Setting marketing strategy and promoting the service.
7.11 Maximizing the involvement of local content: manpower, subcontractors, and
suppliers.
Appendix-3 Marketing Mix
Price Using cheaper and qualified experts for daily-rate service. For LTSA, at cost
service can be offered for short period applying Price/Risk-Reward Ration and then
increase it incrementally. Cost cutting is possible as exhibited above.
Product O&M is End-to-end service. The construction is a current mature service in mature
sector. Libonatti should achieve benchmark service.
Place Libonatti geographically is almost everywhere with 10 camps complete with
equipment, tools, warehouses, facilities etc. and local one-stop workshop.
Promotion New service should be promoted in proper ways to customers. It could be
advertised in the Oil&Gas Magazine, on web-pages and media, via presentations
and through customers’ O&M staff.
People Libonatti needs to promote the service within the organisation to its staff and
delivering training and development programmes and applying motivation and
incentives/rewards.

37
Appendix-4 More Details: Culture ElementsSymbols
Every year Libonatti distributes on its clients high-class gadgets and diaries carrying its
logo, recent achievements and special events those keep good relationship with clients
and create a good image in their mind.
Stories
Libonatti had accomplished a project for Wintershall (international oil major operates in
Libya) before scheduled time. This anticipated the oil production saving millions of
dollars to the client because of Operation manager leadership, commitment and how
effectively he managed time and how his team was hardly working. Wintershall then
granted Libonatti big reward which is now part of Libonatti history and heritage. This
attitude affected the entire organisation, and had positive impact on delivering
satisfactory service to customers.
Routines/
Rituals
Local employees have no chance for training and development. Libonatti should make
big improvements here by apply policies, organize daily meeting at different levels, train
locals, make celebrations, create community within the organisation which augment the
loyalty.
Control
System
Bonus is not common; however, in few cases it is individually-based. Libonatti will need
to mitigate such kind of control and apply fair control system and encourage teamwork
and motivate/reward people for better performance.
Power
Structure
Although it has strong leadership, Libonatti is still suffering from centralization. The
only Chairman/CEO and Operation Manager have almost absolute power- the main
reason of anti-change. The top management is fear of change and almost risk-averse
which are deemed key weaknesses and maybe threaten the strategy. Board should adopt
strong corporate governance to protect the business.
Organizational
Structure
Leadership is significant for strategy (Porter, 1996). Libonatti must promote a structure
that copes with the new strategy and meet the new service requirements. For example,
O&M needs to have different teams in different organisations: Libonatti Headquarters,
OEM premises, site, and perhaps customer and supplier offices among which
communications/coordination could take place directly and beyond of hierarchy.

38
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