Competitive Strategies and Government Policies
Global competition is one of the challenges in oil industry because of many oil distribution corporations. Firms, traditionally competed with only two economic factors including quality and price unlike presently, where there are many factors including technology and advertisement. Companies such as, Shell, Exxon and BP have also formulated new strategic plans to try and manage global competition menace (Davis, 2005).
Shell Company to begin with, started 2014 by getting a new CEO in an effort to increase its global performance. additionally, it launched a competition period dated 31st September 2013 to 31st may 2014, where public ideas were invited on how to gain a competitive edge, calling it ‘‘Shell Ideas360’’. One of the company’s resolutions is to ensure enhanced financial efficiency by selling some of its assets and reducing growth investments.
With increased gas prices, Shell is cutting down on its expenditure to maintain their supply amount. BP Oil Company in 2011 adopted the same measure, cost reduction but it affected its market share adversely. The company decided to ship its oil products as opposed to transporting it via pipeline to cut down on transportation costs. However, at the Gulf of Mexico, the ship exploded spilling off the oil.
The company suffered a great loss because of the spillage as well as a bad brand image affecting its sales. In 2013, Exxon Oil Company suffered pipeline spillage reducing its headquartering sales from $7.870 million to $1, 700 million (Bofah, 2014). Such led to creation of different government policies on public policies and environmental pollution thus, increasing expenditure for oil companies.
Shell, Exxon and BP oil companies have also engaged in restructuring as well as delivery of new projects to win client loyalty and trust (Davis, 2005). One of the decisions made by BP and Shell was an ideal merger between the two companies to increase their standing and to gain a cutting edge. Exxon on the other hand has a strategic plan targeting 2040 as it estimates that global population will have increased by then (Bofah, 2014).
The company also made investment plans in renewable energy sources to assert social responsibility and gain an ideal market share. An increase in oil demands is however a major challenge for the companies. Exxon and Shell are therefore targeting natural gas exploration indulgence and climate change measures (Bofah, 2014). The companies are also investing in technological advancement as a way of ensuring efficient oil supply across the globe. This is based on the fact that refining companies are faced with regular cuts in supply because of security in producing countries including Nigeria causing delays in supply of oil.
Shell management in this regard has decided to stop its exploration projects in Alaska and focus on maintaining its standing competitive (Davis, 2005). Additionally, the company intends to cut down its capital spending to save on cash and invest in large scale profit making projects for instance Pearl gas to liquid. In oil industry are now sourcing affordable labor from foreign countries to manage high costs incurred in production process.
Lastly, they have employed a quality increase measures, client satisfaction and modern advancement in technology. These are managerial decisions in oil industries because of increased global competition.
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Bofah, K. (2014). Exxon shareholders whining about dividends. Retrieved from: http://seekingalpha.com/article/1955931-exxon-shareholders-stop-whining-about-dividends