Discuss about the Thriving Competitive Global Context System.
A value chain can be defined as a set of activities which is performed by an organization operating in a specific industry in order to enhance the value of its service or product in the international market. The concept of value chain analysis was first developed by Michael Porter in the year 1985 (Fearne, Martinez and Dent 2012). The book in which the concept of value chain analysis was first described was named ‘Competitive Advantage: Creating and Sustaining Superior Performance’, which was a best seller. Value chain analysis can be considered as a strategic tool which is used to analyze the internal activities of an organization. The chief goal of the above-mentioned analysis is to recognize the specific internal activities of an organization that can be considered as the most valuable ones. The values of the internal activities are measured in terms of cost, competitive or differentiation advantages. Since the value chain analysis enables the organizations to look into the internal activities of the organization, the management of the organization is able to understand the organization’s competitive advantages and disadvantages in the global market. If the organization competes through cost advantage, it will be able to perform better than its competitors by producing superior service at costs lesser than its competitor (Soosay, Fearne and Dent 2012). This, in turn, will enable the organization to gain a competitive advantage over its competitors in the global market.
The chief purpose of value chain analysis is to create or strengthen the competitive advantage of an organization. In order to understand the process of utilizing the Value Chain Analysis tool, an organization should first understand what type of competitive advantages does it wants to create. Competitive advantage can be segmented into two parts namely, Cost Advantage and Differentiation Advantage (Hilton and Platt 2013). The concept of cost advantage includes when an organization compete on the basis of costs and hence needs to understand the cost advantages as well as disadvantages along with identification of the factors that drive these costs. Some of the examples of organizations that use the cost advantage approach are Amazon, McDonald’s and Toyota. On the other hand, differentiation advantages are practised by firms who provide superior services or products to the consumer within a fixed price range. Some of the common examples of international organizations whose goal is to obtain differentiation advantages include Apple, Samsung Electronics, Starbucks and Google (Johnson 2016).
The Value chain analysis tool is chiefly used by the company to ensure that the value created by the company is exceeding the cost invested by the company to create the value. This can be done by analyzing the five primary value chain activities that include inbound logistics, operations, outbound logistics, marketing and sales and services. If an organization successfully creates advantages in any one of the above mentioned activities, the company gains a competitive advantage in the global market which in turn enhances the overall revenue of the organization.
While there are several advantages of conducting a value chain analysis, one of the crucial disadvantages of performing the same includes loss of the chief vision and strategy of the company. This happens since, in order to conduct value chain analysis, organizations need to break down its operations into segments (Ross 2012). Another disadvantage of incorporating value chain analysis tool in the development strategy of the company includes the possibility to lose sight of how the activities are associated with each other. Several times, the value chain analysis is unable to link each activity to the chain which results in enhancement of compatibility.
The Oman Oil Company (OOC) is referred to a national investment company located in Oman. The entire organization is owned by the government of Oman. Established in 1996, the Oman oil Company invests in energy infrastructure and transportation, power generation, petrochemicals manufacturing and oil refining, in addition to the oil and gas exploration and production (Fuccaro 2013). Being a highly renowned company in the global market, the Oman oil and gas company owns 49 percent stake of the Oman Oil marketing company and has a network of 179 oil filling stations across Oman under the brand name of OmanOil.
Application of value chain analysis to the global operations of Oman Oil Company
In order to apply value chain analysis to the global operation of the mentioned company, it is crucial to identify the primary and secondary activities of the company.
According to the value chain analysis framework, the primary activities of the Oman Oil Company can be segmented as follows:
Inbound logistics can be defined as the transport storage and delivery of goods associated with the business of an organization. The supply chain of Oman Oil Company like other oil and gas industries is highly complex. When it comes to oil and Gas Company, The transporting products needs strict regulatory compliance, special equipment as well as extensive safety procedures. Along with that the supply chain of the mentioned company also requires multiple modes that include every step initiating from supplying materials to the oil rigs to transporting extremely heavy and hazardous materials. According to researchers, the inbound logistics of the Oman Oil and Gas company demands high visibility and high sense of urgency (Wood et al. 2012). Unlike other companies, if materials are not supplied on time during the production, the consequence can lead to a disaster. It is really crucial for the company to maintain the oilrig. Any deterioration of oilrig may result in the loss of more than 1 million dollars per day (Wood et al. 2012). Since the mentioned company follows traditional oil and gas operation, it chiefly relies on trucking and warehousing as major inbound logistics.
Oman Oil Company has four chief sectors that operate the projects of Oman Oil Company. The four sectors of the mentioned company include Takamul Investment company SAOC, Oman Oil Facilities Development Company LLC, the Oman Oil company Exploration and production and Oman Duqm Development LLC. In addition to the four main sectors, the company also has international assets that are managed by the international investment unit of the Oman Oil Company (Kumar and Chandrakar 2012). The operation of the OOC includes exploration, extraction, refining as well as transportation of petroleum product. Along with the mentioned operations, marketing the petroleum product in the global market can also be defined as a part of the operation of the company. Two of the largest value product of the mentioned organization includes gasoline also known as petrol and fuel. Petroleum also acts as a raw material in the several chemical industries that include solvents, pesticides, fertilizers, synthetic fragrances and pharmaceuticals (Kumar and Chandrakar 2012). In order to enhance its overall revenue, apart from oil and gas exploration as well as production, the company also invests on power generation, energy infrastructure and transportation, oil refining as well as petrochemical manufacturing.
Outbound logistics can be defined as the transport, storage and delivery of the products that are moving out of the company. The Oman Oil Company has developed highly advanced logistics and supply chain solution that ensures reliable transportation as well as storage of the petroleum products. The management of the mentioned company also ensures high visibility into capacity management as well as in shipments for the transaction (Terpstra, Foley and Sarathy 2012). The intermodal transportation network of the company operates with clockwork precision in order to ensure smooth inward as well as outward cargo delivery.
According to the researchers, all the major oil companies at Muscat, Oman has evidenced a drastic drop in the overall revenue in the year 2017 (Terpstra, Foley and Sarathy 2012). The chief reason behind this drastic drop in revenue is considered to be an enhancement of the fuel prices and reduction in sales volume of Petrol. The fuel price reforms that was introduced by the Omani Government in 2016 along with the economic slowdown has imposed a negative impact on three major oil and Gas organizations of Oman, namely, Shell Oman Marketing Co, Al Maha Petroleum Products Marketing Co. and the Oman Oil Company. While the other two major competitors of OOC, that is Al Maha Petroleum and Shell Oman has evidenced a drop of 38 percent and 19 percent drop in their net profit, OCC has experienced 8 percent decline in the net profit of the company by 2017 (Al-Shubiri 2015). Hence the company is planning to change their marketing and sales strategies to enhance their overall revenue at the end of the year. The refining and marketing assets of OOC serve three strategic purposes. Firstly, the company concentrates on fulfilling the local demands for refined products that are necessary to be used as fuel. Secondly, the company provides building blocks for the development of petroleum industry in Oman and thirdly, they promote Omani products that include both processed materials as well as raw hydrocarbons to the global market. The company also markets as well as transports local products to the international clients with the help of its Shipping and trading assets.
When it comes to the Oil and Gas industry, consumer service can be defined as the field which helps the companies to earn consumer loyalty by providing efficient consumer care service. The core objectives of the Oman Oil Company include:
From its objectives, it can be clearly understood that the chief consumers of the company are both from Oman and international market. Since the company suffers from major competition in both Oman as well as in the international market, the company pays special attention to provide excellent after sales services to the consumers. The mentioned company understands the requirement and expectation of the consumers to enjoy the enriching experience and authentic services. Thus the consumer service of Oman Oil Company is committed to provide and maintain the above-mentioned experiences. The company understands that great consumer experience is the key to the expansion of the business. The new call centre of the Oman Oil Company that has been relaunched in the year 2009 has reordered to provide outstanding service to the consumers in terms of technical assistance as well as an emergency complaint (Oman-oil.com. 2018). Thus the mentioned sector of OOC has managed to successfully handle consumer’s requirements by directing, obtaining and managing the requests of the consumers. In order to enhance their consumer care service, in 2009, the company provides effective consumer service training to the senior managers, consumer service agents, filler as well as the employees. The Oman oil company is constantly working on incorporating new technologies and creates new systems for providing superior quality of service to the consumers. In the year 2018, the motto of the company is to provide more consumer-friendly service by using latest technologies and equipment available in the market. According to the researchers, when it comes to consumer care services, the consumer care services of the Oman Oil Company is much better than that of its competitors (Oomco.com. 2018).
Considering the fact that the Oman Oil company invests in power generation, energy transportation and infrastructure, petrochemical manufacturing, in addition to oil exploration and production, the three specific areas across the value analysis chain where the company gains clear competitive advantages include production, sales and marketing and after sale consumer service. Considering the fact that the upstream investment of Oman Oil Company is managed by the Oman Oil Company Exploration and Production LLC, the aim of the mentioned subsidiary is to invest in strong operational processes in order to ensure huge financial as well as operational results (Oman-oil.com. 2018). Another chief target of the production subsidiary of the company is to pursue opportunities that will help the Oman Sultanate to meet the energy requirement in the future along with providing professional development of the workforce of the company. When it comes to exploration and production of Oil, The chief assets of the Oman Oil Company includes Abraj Energy Services, Block-42, MGP and Abu Tabul with an OOCEP share of 100 percent. Some of the major highlights of the production of Oman Oil Company are as follows:
Thus it can be clearly understood that the production of the mentioned oil company is pretty high compared to its competitors, both in Oman as well as in the International market.
When it comes to the marketing and sales strategy of the mentioned company, the company’s refining and marketing assets serve three strategic purposes to enhance the overall revenue of the company. The first strategy of the company includes fulfilling the local demand for oil and fuels. Secondly, the company concentrates on providing building blocks for the overall development of the petroleum industry in Oman. The third and final marketing strategy of Oman includes promotion of Omani products that include processed materials like petrochemicals as well as raw hydrocarbons in the global market, through minor investment in the key countries (West, Ford and Ibrahim 2015). When it comes to major marketing assets of the Oman Oil Company, the mention worthy marketing assets of the company include Oman oil Marketing Co. SAOG (Omanoil), Qingdao Lidong Chemical, Oman Refineries Limited and Oman Oil Refineries and Petroleum Industries Company. The core business of Oman Oil Marketing Co. S.A.O.G. involves marketing and distribution of lubricants and fuels and direct fuel sales to the commercial sectors as well as the government. Some of the major marketing and refining highlights of the company are as follows
However, as discussed earlier, instead of having a strong marketing and sales base, the company is suffering from decrement in the net profit due to enhancement in the price of oil.
As been discussed earlier, the third primary activity which has the potential to provide effective competitive advantages to the company is the Oman Oil Companies Consumer service. Considering the fact that some of the major competitors of the company include Al Baraka Oilfield Service and Arbaco Oil and Gas Company, it can be stated that the consumer service of Oman Oil Company is better than its competitors. The Company has understood that one of the chief methods of gaining competitive advantage is to market the consumer feel that they have listened and their queries have been solved. In order to enhance the skills of their consumer service management staffs, the Oman Oil Company also implements effective consumer service training. Apart from that, in order to provide 24*7 services to the consumers, the company has established new call centres (Kalathinkal and Ahmed 2015). In order to cope up with the rapid advancement in technology, Oman Oil Company has decided to implement latest technologies that can enhance their consumer service and in turn, enhance the consumer loyalty of the company.
Conclusion
From the above discussion, it can be concluded that being one of the most popular oil companies in Oman, the company has high brand equity in both local as well as global market. The marketing and sales strategy of the Oman Oil Company is highly effective and have helped the company to gain a competitive advantage in the global market. However, in this era of modernization, the competitors of OCC are incorporating online marketing strategies to gain more and more consumers. This trend should be followed by the company to ensure maintenance of their brand equity. When it comes to the inbound as well as outbound logistics of the company, the porter’s value chain revealed that the logistics need to be improved in order to ensure more productivity. The Oman oil company needs to enhance its supply chain visibility as well as improve its compliance with the suppliers to enhance its inbound logistics. The value chain analysis also revealed that the company has excellent consumer complaint service. Thus, it can be stated that by improving its logistics, the Oman Oil company can gain one of the topmost positions in global the oil and gas industry.
Several factors like brand new markets, rapidly shifting geopolitical relationships an extraction breakthrough are affecting the company negatively. The resulting volatility of the market is compelling the oil and gas organizations including the mentioned company to maximize the efficiency of their supply chain. Considering the fact that the Oman Oil Company faces a high amount of logistic challenges both in the upstream and downstream spectrum, some of the recommendations for the company to enhance its inbound logistics are as follows
In spite of the fact that the Oman Oil Company has an effective marketing strategy, the company has recorded a decrement in revenue by 8 percent. Thus in order to gain a competitive advantage in both local as well as international market, the Oman Oil Company should incorporate online marketing policy in its marketing strategies. Internet marketing can be considered as one of the best methods to ensure that the organization is able to reach out to a huge number of consumers within a short range of time. The reasons for which online marketing and sales have been recommended to the company are mentioned below:
Competition: Considering the fact that the mentioned company faces a huge amount of competition in both global as well as local market, by implementing internet marketing strategies the Oman Oil company will be able to rank high in the search engine results for keywords typed by consumers to find services associated with the OOC (Al-Shubiri 2015).
Online availability: To ensure effective marketing online, the mentioned company must create, maintain and enhance its number of consumers as well as consumer loyalty. One of the most effective online marketing strategies that can be considered by the Oman Oil Company is social media marketing. For social media marketing, the company can promote as well as market its products and services through popular social media platforms like Facebook, LinkedIn and Snapchat. These social media platform will enable the management of Oman Oil Company to directly communicate with the consumers. This, in turn, enables the company to understand the specific needs of their consumers which helps them to develop more consumer-specific products and services (Kumar and Chandrakar 2012). Besides that, Social media platform will enable OOC to promote their business to consumers who are not aware of the company’s product and services. Thus the mentioned organization will be able to enhance their number of consumers a well as their consumer loyalty.
Brand awareness: In this era of modernization, a majority of the competitors of the Oman Oil Company has implanted online marketing strategies to enhance their brand equity. If OOC builds its brand online, it will be able to inform its potential consumers about the products as well as services of the company. In order to enhance its brand awareness, the mentioned organizing should create its official webpage where all the information related to the products and services offered by OOC along with it terms and policies will be enlisted (Rodriguez, Peterson and Krishnan 2012). Considering the fact that the company’s official website determines its image to the consumers, OOC must ensure that its official website is unique and different from its competitors.
Reference Style:
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