The Main Objective of the Cairn Energy PLC Company - Essay Example

? Analysis Cairn Energy PLC Table of Contents Executive Summary 4 Introduction 4 Organization Background 4 Stake Holder diagram 5 Stakeholders’ Expectation 5 Organizational Structure 6 Group Structure 6 Divisional Structure 6 External Environment Analysis 7 PESTEL Analysis 7 SWOT Analysis 10 Competitor Analysis 11 Problem Statement 11 Analyse the Problem 13 Communication Model 13 Porter’s Generic Strategy 14 Performance Management 16 Conclusion 17 Recommendations 17 Immediate 17 Short Term 18 Long-term 19 References 19 Executive Summary The project has been conducted in lieu to make a strategic analysis of Cairn Energy. Cairn energy PLC is a Scottish oil production and exploration company. The project has focused on external and internal environmental analysis of Cairns energy PLC and looks to make an appropriate recommendation to the probable changes. Introduction Organization Background Cairn energy PLC is a Scottish oil production and exploration company. The headquarters of the company is situated in Edinburg. The company was founded by Sir, Bill Gammel who also happens to be a former rugby player. The initial operations of the company were in USA. However, after the listing of the company on London stock exchange in 1988 the company expanded nationally and internationally into Spain, China, Vietnam, Australia, Bangladesh, Albania, Nepal, Tunisia and Papua New Guinea. The average oil produced by the company is 33,000 per day (approx). However the largest operations of the company are in India as the company has been able to make over 20 discoveries in the state of Rajasthan. This includes one major discovery in Mangala. The main products produced by the company include natural gas, Petroleum and petrochemicals. Stake Holder diagram Stakeholders’ Expectation Stakeholders Expectations Employees Competitive payment Structure, Transparent policies, opportunity for growth and development, friendly organizational culture Communities Community development programs, environment protection programs Channel Partners Long-term relationships Investors Corporate communication strategy, effective corporate governance Governments Legal factors, Revenue and employee generation Business Partners Maintaining Industry Reputation Media Transparent communication of performance and strategy Organizational Structure Group Structure Divisional Structure External Environment Analysis PESTEL Analysis Political The government have been very involved in the production and exploration of oil and gas. The geopolitical violence and developments in few countries have lead to a less than suitable and highly risky for foreign investments in production and exploration of oil and gas. Economic The global economy is looking to make a comeback from the economic downturn in Europe and USA. Add to that the western oil and gas market has become extremely competitive. Therefore companies are looking to invest in some of the emerging economies of the countries in the eastern region. Companies also enjoy favourable corporate conditions, tax breaks and relatively low labour rates the market has also witnessed an energy crisis. The crisis has mainly occurred changes in demand and supply side limited resources for production leading to increase in costs or production. Also the oil prices are decided by the supply and demand factors. Due to the fluctuations in these two factors has lead to instability in the prices. This actually posses a major risk in the times of low oil prices (Henry, 2008, p.201). Social Change in climate has led to a change a change in the lifestyle of the people. This also led to a change in the mindset of the people towards Carbon emission mainly in the developed countries. Due to such developments the corporate social responsibility has become an integral part of the marketing strategy of the companies to develop long relationships with environmental activists and local communities. Technological Innovative drilling technology and exploratory techniques like the 3d seismic processing, improved plant design and 3d modelling techniques have increasingly become important pre-requisites for the purpose of Successful drilling. Major oil companies have invested in territories like India, Greenland as well as technology to increase the chances of finding oil and return in investment. Also the changing climates have changed the attitude of the companies towards modern wind and electric technology as well as hybrid vehicles. Companies are looking to adapt to the change in global climate. The companies may decide to invest in renewable energy resources. Environment Global warming and increased exploratory acts have led to the discovery of oil on then virgin territories. The oil and gas companies face impediments from national as well as international bodies. The companies are also likely to pay extra taxes to the national governments as the governments are looking to ensure environmental protection from hazards. Legal Oil producing countries impose legal restrictions and limitations on the activities of the companies that may limit business felicities. It may limit growth potential of production and exploration. Also government breach of contract and uncertainties in policies have become quite visible in countries like India and Bangladesh. This has led too legal battles between the Governments and the companies (Cowan, 2005, p. 131) SWOT Analysis Strengths Steady Revenue Growth and prospect for growth. Diversification assets. Entry into virgin territories like Greenland. The company belongs to FTSE 100 Index. Approximately 33,000 barrels of oil production. Relationships with local communities; this may eliminate the cultural barriers. Weakness Controversy in oil drilling during Greenland Increase in the production costs Opportunities Entry and establishment into emerging economies India. Exposure to high tech drilling and production facilities Positioning itself as company that is environment concerned. Opportunity for diversification in renewable energy sources Technical and Business expertise that can be used for global expansions. Threats Strict environment standards by the national and international governments to control threat possessed by carbon footprints. The recent economic downturns. Changing attitude of people towards oil and gas companies as people are becoming more energy concerned. Decrease in the consumption of Oil and Gas in UK. Scarcity of resources Political instability in some Asian countries that have investment prospects. Competitor Analysis Problem Statement Few Problem Statements for Cairns Energy have been listed below. Energy Crisis The present situation for Cairn Energy is very much conflictive, as the demand for oil and gas is increasing in global market, but in UK the demand is decreasing drastically. Moreover, government is adding more pressure on the gas and oil industry in UK with their carbon footprint and taxations (Hunter, 2011, p.33). The energy crisis not only affects the organization but also impacts the customer badly. Therefore, it is feasible that the organization may get affected by the decreasing demand. Shareholder Spring Cairn Energy has become the major sufferer of the shareholder spring. Almost 67% of the investors have voting the organization down due to the controversial oil drilling in Arctic (Gelbspan, 2008, p.221). Moreover, the investors were angered as the organization was forced at an unexpected general meeting. Safety Engagement and Employee Motivation Introducing commission about the new facilities are the key challenging hazardous activities in the gas and oil industry. The facilities involve several risks relating to environment, property and people. People who are not rewarded or motivated according to their job performance can directly or indirectly affect the business performance. Analyse the Problem After seeing these problems, several models have been implemented in order to analyze the problems. Communication Model It is feasible that Cairn Energy has become the major sufferer of the shareholder spring. And almost 67% of the investors have voting the organization down due to the controversial oil drilling in Arctic. Moreover, energy crisis is a growing issue within the UK market (Kambara and Howe, 2007, p.109). Therefore, the organization should response to the crisis and rebuilds the confidence of the stakeholders. In order to overcome the stakeholder problem, Cairn Energy should follow five specific steps in order to obtain public forgiveness, such as Explanation of the mistakes. Demonstration of sincere and contrition concern. Implementing necessary steps in order to fix the problems. Request for help from the sufferer. Alternative way to pay. Figure 1 In terms of PR, Cairn Energy has downplayed the Oil Spill. After the disaster performance of this segment, the organization has changed the public head. As an element of PR strategy, company has able to get the sponsor link from Google. It has helped the organization to provide one of the top rank result of the key words related to the term called Oil Spill. Porter’s Generic Strategy Porter’s Generic Strategy consists of four strategies, such as Cost Leadership strategy, Differentiation strategy, Middle of the road Strategy and Focus Strategy. Cairn Energy from it starting years was using Cost Leadership strategy but currently the organization is implementing Middle of the Road Strategy. Figure 2 The oil disaster in US is the major crisis in the history of gas and oil industry. The Transocean driller was not secure enough to for the exclusion of drilling mud from the specific well (Gorelick, 2011, p.133). The driller could not imagine that the specific well is 100 percent prepared for close down. However, they should start to eradicate the mud before drilling. Although, the crisis did not affected the organization that much, but it is necessary for the organization to prepare some recommendation plan in order to overcome the probable threats. People of developing countries are really concerned about the environmental pollution level and carbon emission level. Performance Management Introducing commission about the new facilities are the key challenging hazardous activities in the gas and oil industry. People who are not rewarded or motivated according to their job performance can directly or indirectly affect the business performance. The facilities involve several risks relating to environment, property and people (Bullock, Haddow and Coppola, 2011, p.270). Figure 3 The organization has arranged road shows on several themes, such as electrical equipment safety, stored pressure hazardous, commissioning of power equipment. Most importantly all these themes had represented by colourful videos and photos. A safety monitoring and observation programmes and several motivational conferences on the attitude based safety that is run by the experts. These experts are hired by the organization from outside. Leadership team meeting, motivational programme, reward facilities for the employees according to their performance and several work process safety training have extracted 100% performance from the employees. It has reflected on the business output of Cairn Energy. Conclusion The present situation for Cairn Energy is very much conflictive. The demand for oil and gas is increasing globally. In terms of UK, the demand is decreasing as the people of UK are getting concerned towards the environment and social sustainability. They have started to use eco-friendly substitutes of oil. Almost 67% of the investors have voting Cairn Energy down due to the controversial oil drilling in Arctic. Moreover, energy crisis is a growing issue within the UK market. Therefore, the organization should response to the crisis and rebuilds the confidence of the stakeholders. Cairn Energy from it starting years was using Cost Leadership strategy but currently the organization is implementing Middle of the Road Strategy. It has been evidenced that, the organization may suffer from several prolems like increasing carbon emission, issues related workplace safety and many more. In order to overcome, the problems several recommendations have been implemented below. Recommendations Immediate Cairn Energy has faced rebel like attitude from the shareholders regarding payment issues after the controversial drilling project in Greenland. Therefore it is important for the company to adopt an effective corporate communications strategy to ensure healthy relationship with the investors and stakeholders. In the midst of the economic turmoil the biggest challenge for the company would be hold on to the existing customers. Hence the company should focus upon customer loyalty programs to retain customers. Short Term Over the course of next 12 months the company should focus integrative communication strategy to position itself as an environment conscious company in the minds of the consumers. One of the key aspects of any oil and gas company is the health and safety standards. The company should focus on making the adequate health and safety practices as an integral part of the company culture to reduce accidents and maintain healthy employee and public relations. Medium Term Cairn Energy may face several legal and environmental problems due to increasing carbon emission in the environment. It may affect the brand reputation. In order to overcome the problem, the organization should implement advanced technology and should use renewable energy source in order to reduce the carbon emission level in environment. They should reduce gas energy consumption in their business process by 20% in the current year. Moreover, they should highly rely upon the renewable energy resources. It will help them the organization to reduce the CO2 emission level within the next year comparing to the current emission level. They need to organize CSR activities in order to sustain their business process. They should focus on the social, economical and environmental sustainability in order to increase its brand reputation. Long-term As the company has expanded operations in foreign countries the company the main objective of the company should be to achieve economies of scale. Also scarcity of resources is a major problem that the company has to overcome. Hence the company should focus on diversification. This may be achieved through the concentration on the production of renewable energy resources. References Bullock, J., Haddow, G., and Coppola, D., 2011. Introduction to Homeland Security: Principles of All-Hazards Risk Management. London: Butterworth-Heinemann. Cowan, A. 2005. Risk Analysis And Evaluation. London: Global Professional Publishing. Gelbspan, R., 2008. Boiling Point: How Politicians, Big Oil and Coal, Journalists and Activists Are Fueling the Climate Crisis--And What We Can Do to Avert Disaster. New York: Basic Books. Gorelick, S., 2011. Oil Panic and the Global Crisis. New Jersey: John Wiley and Sons. Henry, A. 2008. Understanding Strategic Management. London: Oxford University Press. Hunter, J., 2011. A Dance Called America: The Scottish Highlands, the United States and Canada. New York: Random House. Kambara, T., and Howe, C., 2007. China and the Global Energy Crisis: Development and Prospects for China's Oil and Natural Gas. Cheltanham: Edward Elgar Publishing. Read More