Introduction to ENOC
ENOC (Emirates National Oil Company) is a leading player in the international oil and gas industry and value chain. Established in 1993, the Government of Dubai owns and controls the company through an Investment Corporation (ENOC, 2020). In essence, ENOC’s primary objective at its formation was to satisfy the rising energy needs or requirements of Dubai. The Group is operating various functional business entities that include energy operations and general services across the oil and gas value chain. The energy operations entail the gas and oil exploration, production of related products, supply, and retailing. Beyond its influence in the energy industry, ENOC has managed to establish a solid presence globally through various subsidiary enterprises in more than 60 countries (ENOC, 2020). The company draws its market leadership from its ability to provide excellent customer services through the implementation of various innovative processes. ENOC is expressing strong commitments towards pursuing socio-economic diversifications and sustainable development processes in Dubai.
ENOC is committing to the provision of global energy needs to facilitate the expansion of various development processes in aviation, hospitality, and travel, among other sectors. Accordingly, the company depends on clear corporate governance and management structures to promote its operations. The Government of Dubai and the Investment Corporation of Dubai owns 100% stakes in the company (ENOC Annual Review, 2016). However, the corporate governance structure makes the company accountable to its key market stakeholders and partners. The owner (Government of Dubai) is responsible for establishing policies and comprehensive management systems contributing to its efficiency and effective operational excellence (ENOC Annual Review, 2016). ENOC is also continually focusing on incorporating unique operational standards to sustain its performance objectives, initiatives, plans, and corporate governance practices.
ENOC has a vision to transform itself into an innovative partner in the global energy industry, with the ability to deliver sustainable value and industry-centric performances. Through such sustainable and integrated solutions, ENOC hopes to implement its strategic goals and objectives (ENOC Annual Review, 2016). One of the corporate goals is to serve the rising energy needs of Dubai residents and companies towards the attainment of the city’s strategic plans. ENOC is also aiming to develop excellent capabilities to sustain its domestic and international growth and development patterns (ENOC Annual Review, 2016). Correspondingly, to strengthen operational excellence, governance, and high-energy standards, ENOC hopes to develop integrated approaches along the value chain. The last corporate objective is to maximize customer satisfaction and value delivered to key stakeholders such as employees and global business partners.
ENOC is managing a comprehensive portfolio of product categories spanning across the gas and oil industry. The products emanates from the company’s extensive exploration and production of oil and gas in the country (ENOC Annual Review, 2016). In particular, ENOC is involved in oil and gas refining and trading, oil storage and bunkering, and the sale of blended and liquefied lubricants and petroleum gas respectively.
While the global oil and gas industry has been facing serious setbacks in terms of demand and prices, ENOC continue to record impressive financial results and situation. The company attributes its financial strength to its excellent value and supply chain processes and sustained increase in the domestic demand for its products and service. ENOC is also commanding robust and efficient debt servicing capabilities that focuses on the optimization of the company’s competitive advantages. According to the 2016 Annual Report, ENOC’s revenues reached approximately $16,415 million, a 24% increase from the previous fiscal year (ENOC Annual Review, 2016). The company is revamping its refinery production capacities to expand its daily output and to strengthen its financial position and outlook.
The company is implementing various business projects to sustain its unique influence on the oil and gas industry. Some of these projects include the expansion of convenience stress and other critical automotive services (ENOC Annual Review, 2016). Services such as the innovation VIP Prepaid services for personal car owners, car-wash centers, automotive maintenance services, and the vehicle testing and registration units are enhancing ENOC’s market leadership.
ENOC’S Strategic Priorities
ENOC hopes to enhance its competitive positioning by streamlining its supply chain processes and leveraging operational synergies. The company also anticipates the development of an excellent business structure that can promote operational excellence and sustainability (ENOC Annual Review, 2016). Another ENOC’s strategic priority is to enhance and maintain its operational performances with the main intention of building a profitable and sustainable global business.
Industry Rivalry Analysis
ECON is facing intensive competition in the global oil and gas industry. Some of these global industry competitors include Sinopec Company, ExxonMobil, PetroChina, and Total, among others. Local and regional competitors include Gulf Petrochem, Qaiwan Group, Yasref, Emirates Refinery, and the International Petroleum Investment Company. The table below provides detailed description of these major competitors.
Figure 1: ENOC’s main Competitors in the Oil and Gas Industry
Source: Statistic (2016)
Threat of New Entrants
The threats of new entrants in the oil and gas industry are low. As such, ENOC is facing limited challenges from other small entities seeking to gain entry into the industry. The threat is low because of the huge capital investments required by entities seeking to venture into the business. The new entrants may also face legal restrictions and other bureaucratic processes. ENOC also control large deposits of proven oil and gas reserves in the country.
Bargaining Power of Buyers
The primary consumers of oil and gas products include National Oil Companies, refineries, capital-intensive companies, and retailers, among others. The bargaining power of buyers in the industry is low. The primary concern of the stipulated buyers is price and the quality of the commodities.
Bargaining Power of Suppliers
The suppliers in the oil and gas industry control large stakes in the market. The suppliers include established companies such as ENOC and ExxonMobil, and are capable of controlling oil prices and other important industry operations. The suppliers have a lower bargaining power because of the high cost of conductive extensive oil and gas exploration processes.
Threat of Substitute Products or Services
The threat of substitutes in the oil and gas industry is high. Some of these substitutes include nuclear energy, coal, hydrogen, and renewable energy sources such as solar and wind energy. Increased investment in nuclear energy in other countries will reduce the global market share of ENOC and other companies in the gas and oil industry.
Key strengths and weaknesses
ENOC’s main weakness is that it has inadequate network of oil and gas stations outside the United Arabs Emirates. Another weakness or challenge is political instability and insecurity that is prevalent in the Middle East. The main strength of the company is its huge market share in Dubai and the region. The company is also relying on its premium quality products and experienced industry professionals to remain relevant in the competitive oil and gas industry.
ENOC’s lifecycle seeks to minimize the risks of its capital-intensive operations on its human resources, assets, and the surrounding communities. ENOC is designing, constructing, and conducting oil and gas operations in a sustainable manner. The implementation, monitoring, and auditing of the company’s Occupational Health and Safety standards are strengthening their operational standards.
Consumer needs, wants, and Industry trends
The oil and gas industry is facing significant shifts in various operational standards. Some of these trends include the development of new technological systems such as seismic technologies in the oil and gas exploration processes. Overall, ENOC is satisfying its customers’ increased demand for quality products and services.
Two Strategic Management Questions
- What are some of the growth strategies that you would recommend to ENOC to support its international expansion activities? Justify your responses using different marketing models.
- How might ENOC apply the Porter’s five model to gain and sustain competitive advantage? Illustrate your answers using accurate examples.
Part 2: Teaching Notes
Identify and analyze the macro-environmental drivers for change in the oil and gas industry
Emirates National Oil Company is multinational Oil and Gas Company located in the United Arabs Emirates (UAE). The United Arabs Emirate is a country located in the Middle East, bordering countries such as Oman, Saudi Arabia, and Iran. The subsequent PESTEL Analysis reveals important macro-environmental factors that may face the operation of Emirates National Oil Company in the UAE. The analysis offers relevant professional insights into various political, economic, sociological, technological, legal, and environmental issues capable of influencing entities in the oil and gas industry.
Figure 2: The PESTEL Model
Source: Professional Academy
The subsequent PESTEL analysis will rely on the above model in figure 1. The model will provide a simple framework for the analysis of the macro-environmental factors that are likely to affect ENOC’s operations in the UAE. The company will use the information from the PESTEL analysis to mitigate the potential impacts of the macro-environmental factors on their operations (Islam, 2017). Besides, the analysis will enable ENOC to identify and exploit new opportunities in the oil and gas industry. However, PESTEL Analysis may provide shallow information on true industry information, limiting ENOC’s ability to respond to related challenges.
The Analysis of Economic factors
The United Arabs Emirate is a major global exporter of oil, gas, and other fossil fuels. In particular, oil and gas products contribute to about 30% of UAE’s aggregate GDP (Trading Economics, 2019). Other top exports contributing to the country’s GDP include minerals such as gold and diamond with major export destinations comprising of India, China, and Japan. The country has a per capita income of about $75,440 making it one of the richest in the world (Harrington, 2018). In essence, the UAE attributes its remarkable socio-economic progress over the years to abundant deposit of natural resources. Besides, the increased diversification of the UAE’s economy, innovative solutions, and the increase in FDI (foreign direct investment) continue to strengthen the country’s economy. The country’s membership to various international, political, and economic forums such as the OPEC and Arab League improves its global position. UAE has a GDP of about $414 billion coupled with an impressive growth rate of approximately 4.34% (Trading Economics, 2019). The country’s Free Trade Zones with 100% foreign ownership and zero taxation continue to attract foreign direct investments (Santander, 2019). The lack of taxes on income and corporate wealth will continue to attract more investors into various sectors of the UAE’s economy such as the oil and gas industry.
The Analysis of Political Factors
The United Arabs Emirate is a federation comprising of seven emirates (Abu Dhabi, Ajman, Dubai, Fujairah, Ras Al Khaimah, Sharjah, and Umm Al Quwain) under the independent control of rulers. The emirates are under the control of an advisory Federal National Council. The country is also a stable constitutional federation with the Abu Dhabi emirates serving as the capital city. UAE is indeed a powerful political player in the Middle East with impressive diplomatic and trading relations with the West. However, the Civil War in the bordering Yemen is threatening its political stability. The country’s strained relationship with Iran, another major regional power may affect its booming oil and gas industry (Encyclopedia Britannica, 2019). Similarly, UAE citizens do not have political freedom to participate in elective processes. The seven leaders of the emirates are wielding the ultimate or absolute political powers. The citizens and visitors do not enjoy civil liberties and must operate based on the restrictive laws (Freedom House, 2019). These political intrigues may have negative impacts on multinational companies such as ENOC. In particular, professional expatriates coming to work in the companies may struggle to accommodate the lack of civil freedom in the UAE.
The Analysis of Social Factors
UAE’s conservative ideals or traditional beliefs make it one of the strictest in the Middle East. However, the country is increasingly embracing globalization and accepting liberal practices. For instance, Dubai is in becoming a dynamic and flexible emirate with an exciting social life. Abu Dhabi is also another flourishing business emirate with modern social life. The stipulated examples are clear indication that the UAE is integrating its conservative socio-cultural life with more liberal attitudes. The United Arabs Emirate also has a population of about 9.8 million people according to the latest statistics with the Emirati nationals constituting only 20% of the population, making it a cosmopolitan country (Trading Economics, 2019). The country has one of the highest populations of immigrants coming from countries such as India, the United States, Canada, and China, among others. Correspondingly, the country’s main language and religion is Arabic and Islam, respectively (BBC, 2014). The social nature of the Emiratis implies strong emphasis on religion, tribal loyalty, and traditional family ties. However, the increase in income or wealth gap in the UAE is a major problem in the country. The country is also facing other socio-economic challenges such as high cost of living and racial discrimination.
The Analysis of Technological Factors
United Arabs Emirate is experiencing rapid progress in advanced technological developments. The conservative Emiratis have active presence in various social media platforms such as Facebook and Twitter. Correspondingly, the introduction of the country’s digital currency (e-Dirham card) in 2001 further strengthened its belief in technological innovations. The UAE government is also very keen on increasing their investment in other technological advances such as nuclear energy and advanced ICT. The advanced technologies such as seismic systems are helping companies in the oil and gas industry to adapt to the changing business environments. Increased adoption of technologies such as nuclear energy will reduce the market share and profitability of companies in the oil and gas industry.
The Analysis of Environmental Factors
The UAE is adopting various green technology solutions in its stunning shopping malls, skyscrapers, and indoor theme parks. However, the constant noise pollution from the construction sites is one of the serious environmental challenges facing the country. The increase in industrial development is also attracting higher carbon footprints. The increased reclamation of land from the sea implies a constant reduction in water resources for domestic and industrial use. Another environmental challenge is overfishing because of the increased demand for food from the expanding population (Government AE, 2019). Land degradation and desertification are other adverse environmental challenges predominant in the UAE. These environmental challenges will affect the operation of entities in the country’s oil and gas industry. For instance, ENOC may implement various environmental regulatory frameworks to reduce its carbon footprints.
The Analysis of Legal Factors
The UAE is a federal constitutional monarchy with local judicial systems responsible for the management of internal affairs of independent Emirates. The judicial system comprises of the Court of First Instance, the Court of Appeals, and the Court of Cassation. Commercial and labor laws in the country also apply to both the Emiratis and foreign nationals. The labor laws also define maximum working hours to a maximum of 48 hours weekly. Overall, the robust and efficient legal systems make the UAE a safe country for foreign investment and other related activities.
Possible growth strategy for ENOC
Growth strategies describe plans of action that can encourage and enable entities to attain higher market share. The strategies depend on the business’ financial position, targeted consumer bases, and the general industry conditions. The proposed growth strategy in this case study of ENOC is based on the Ansoff Matrix or the product/market expansion grid (Yin, 2016). The matrix is effective in facilitating the analysis and planning of a company’s market objectives and related potentials.
Figure 3: Ansoff Matrix
Source: Statistic (2019)
The above matrix is a strategic planning tool that can help businesses to develop effective frameworks and strategies for their market operations. The model is also relevant in the analysis and generation of alternative solutions and direction to different strategic development plans. One of the growth strategy stipulated under the Ansoff Matrix is the market penetration plan (Yin, 2016). In addition, the Ansoff Matrix stipulates that a growth strategy through diversification will help ENOC to expand its control and influence in the new markets. However, product diversification may attract possible rejections or criticisms from the company’s existing customers. Ansoff Matrix also suggests a market expansion or development as the viable growth strategy for ENOC (Loredana, 2016). Under this strategy, the firm will seek to venture into new markets within the Middle East, Asia, and Africa, among other viable suggestions.
The penetration strategy is only possible through a reduction a company’s product prices to attract more consumers and the acquisition of a competitor operating in the same industry. The business may also apply comprehensive promotion and distribution strategies to sustain its existing market leadership. ENOC can use this strategy to market its current products within the UAE market and the Middle East. The strategy is effective because it will enable ENOC to enhance its market share by adopting various strategic decisions. For instance, the company can implement a low price strategy to attract and retain local consumers in the UAE. ENOC can also rely on a combination of product differentiation and lower prices to expand its consumer bases and local market share.
The penetration into other markets will also help ENOC to expand its market share in the highly competitive industry. Under product expansion strategy, Ansoff Matrix suggests that ENOC should concentrate on strengthening the penetration of its product lines by introducing new features and quality specifications. The primary aim of the production penetration strategy is to strengthen ENOC’s ability to increase sales potentials and profits. For instance, a product penetration strategy may include the development of more production unit specializing in the distribution and sale of ENOC’s oil and gas products in the existing market. The primary aim of the strategy is to improve ENOC’s local market share.
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