Gazprom - One of the Largest Gas Producing Companies of Russia - Essay Example

Gazprom One of the Largest Gas Producing Companies of Russia Company analysis Gazprom is one of the largest gas producing companies in Russia and is jointly owned by the state and the other institutions. Datamonitor (2007) mention that the company operates primarily through its subsidiaries, including Gazprom-PKhG, Gazprompererabotka, Gazpromseverpodzemremont, Gazpromyugpodzemremont, Gazpromtransgaz-Kuban and Gazpromtrans. The various operations of the company can be classified as follows: 1. Production of Gas a. Gas resources: The Company possesses 17% of the world’s proven gas and over 60% of Russia’s reserves. (Gazprom.com, 2008a) b. Gas production: It accounts for 85% of total gas production of Russia and 20% of natural gas output of the world. (Gazprom.com, 2008b) c. Transmission: Natural gas produced in Russia is pumped into gas trunk lines integrated in the Unified Gas Supply System of Russia (UGSS) which is the largest gas transmission system in the world and represents a unique technological compound comprising gas extraction, processing, transmission, and storage and distribution facilities. UGSS assures steady gas supply from the wellhead to the end user. (Gazprom.com, 2008c) d. Processing: Gazprom Group’s processing segment is made up of gas and gas condensate processing plants (GPP), the enterprises of Sibur Holding, and the oil-refining capacities of Gazprom Oil (Sibneft). (Gazprom.com, 2008d) e. Power industry: Its strategic task is to become a world scale energy production company with one whole chain – from production to sales – not only gas but also liquid hydro-carbons as well as producing a wide range of end products, electrical power being just one of such. (Gazprom.com, 2008e) 2. Distribution of Gas a. Russia: b. Europe: c. CIS and Baltic countries: d. Other countries: Global strategy of the firm: The global strategy of Gazprom is to become the largest in the world for producing and distributing gas to the entire world so that appropriate amount of utilization of the natural resources can be done. Datamonitor (2007) states that 2006 was the first year after Gazprom’s share market liberalization. During this period, OAO "Gazprom" capitalization increased by over 70 % and amounted to $270 billion in the end of the year. Evaluation of the strategy: The increase in the company’s capitalization is possibly for the reason of their financial and economic rise and strategy. The striking financial results achieved in 2006 have made it possible to raise its dividends. Gazprom has been developing a unique resource base, production capacities and pipeline system. This effort take taken the company as the world’s most reliable energy resource suppliers to enterprises, organizations, and individuals. They are devoted to a specialized and accountable advance towards development of these resources and the supply of the markets both in Russia and globally. Gazprom is engaged in research and development activities to strategize important energy resources in cooperation with the most successful and responsible international energy companies. This makes them quite strong in their operations base and marks the strength of their strategy for further growth. Gazprom is constantly pursuing its business globalization strategy, and actively increasing the supply to the entire globe for its gas production. In 2006, the company supplied liquefied natural gas to the UK, Japan and Korea for the first time. Gazprom has secured direct access to many companies and nationals for supply of gas to their markets. Gazprom’s success in the export areas is due to the fact that it was prompt in solving the problems and issues of the domestic market and extensive research and development work. SWOT analysis: The strengths can be attributed as follows: Strong position in the market: Gazprom possess and owns the largest natural and hydrocarbons reserves. Gazprom pedals above 60 % of the natural gas reserves in Russia and over 17 % of natural gas reserves globally. It is the largest among the gas producers in Russia and one of the largest in the world. Its market occupancy and monopoly paves the way to fetch better resources and hand in growth and development. Brand image: The brand image which has already been created for Gazprom would serve them a purpose to get online and cater to international demands and choice. This factor is a great component for making the appropriate difference among its competitors. Network strength: Gazprom possess a successful network for the transmission and supply of gas all over Russia, Europe and many other countries in the entire globe. It has been long working on the expansion of transportation capacity and diversification of gas transportation routes. The company has successfully waved the pipeline network for transportation of the natural gas to European markets. Gazprom intense desire to take its enterprise global comes with enough passion to grow in dimension and attitude to compete with international players and provide a better image to its brand and products would find a better and wide market for its long term survival. Franchisee or Distribution network: Creating a franchisee network would make sure that enough sales are generated and consumers get to touch and feel the products for purchase. The franchises can be set up in international markets so that they are able to reach the wide customers. The enterprise can create a chain with the suppliers and the vendors so that they are able to launch the products in the international market. It is an inexpensive way to market its products so that Gazprom gets to access the international market with the help of the in-house suppliers and marketers as they are in a better position to market its products successfully to the intended focus group. Creating campaigns and sales would generate sales and reach the customers with a limited period of sale. This method would not generate many earnings as they would not be driven to large scale sale of products. Commercialization is not possible as the product range is quite for the focused group and not for general public. Strong financial performance: Gazprom’s performance is quite strong in the financial market which makes sure that enough integration is done for the future prospects of the company. Strong marketing support: The strong marketing support would make it possible to gain an upper hand to meet with the necessary requirements for getting online and presentation of its products and services over the internet. Weaknesses: Competitive gas fields: Gazprom’s major fields, the ’Big Three’, in Western Siberia: Urengoy, Yamburg, and Medvezh’ye comprise more than 70% of total natural gas production, but these fields are now in decline. The natural gas production at Gazprom’s key fields declined by 25.2 bcm in 2006 (Medvedev, 2006). The Russian government and Gazprom each project continued declines in Gazprom’s mature gas fields up to 2010. In spite of the fact that the company has been investing heavily in developing new fields, the maturing fields will impact Gazprom’s gas production in the near term. Pipelines get older: The aging of the pipeline is the major issue facing the company as some of them are over a decade older. The replacement of the pipelines would take a great effort and money for getting them changed. Opportunities: Diversification: The diversification of the gas product into other forms and deliverables and other making of natural products would make sure that enough business continuity and planning is done at periodic stages. Globalization: The supply of gas and gas products to various locations in the globe is an objective of the firm as they aim at opening gas stations in every nation for cost-effective supply of gas and various gas products and at the same time does not cross the natural and environmental imbalance. Marketing: Appropriate strategies can be formulated for meeting the traffic of the website and marketing in the internet. Financial, operational and marketing strategies can be formulated accordingly by the higher management of Gazprom and unless they are committed it gets quite difficult to impound right things at the right place. Getting online: The online technologies would act wonders for Gazprom enterprise in giving them a global stand and make them quite susceptible to attract competition. Presently it caters to a limited amount of consumers. Its desire to enlarge its wings to international market makes sure that the global demands of the consumers would result it fostering standard practices in line with international standards. The products would be made to compare with the competitors and would further add the brand and quality for sale in the international market. Rendering to international customers is quite a challenge for any enterprise as they perceive the products and services of other countries with extreme competitive motives and continuous comparisons with their usual practices. The brand image of Gazprom would accelerate the products sale and push its image into the international market for better collaboration and sale. Collaboration with international suppliers and vendors for sale would result in making immense profits and would compose better deals for making profits. Threats: Weather: The gas is seasonal and depends entirely on the weather conditions and physical vulnerabilities and threats. Pricing: The pricing of the various gas and related products are not intensively economical with the competitor market. The complexities of the business processes are handled with ease and the status of the company makes it quite possible to handle all the processes in a diligent manner. The product prices make it quite eligible to compete against competitive prices offered by the companies and creating the exact image for making a mark. Transportation and pipeline costs: The costs incurred every quarter in the maintenance of the transportation and a pipeline cost is extensive and is a huge drain of the company’s resources. Supply chain and logistics: Driven by the relentless demands of competition, global companies have turned to increasingly sophisticated technology solutions to help manage their supply chain and logistics operations. Supply chain and logistics management critically links their suppliers, distributors, manufacturers, and customers. Business to Business is all about product and materials procurement, and the basic inescapable fact is that the supply chain is the vehicle/conduit through which B2B and actually all commerce is ultimately consummated. The question is what forms or routes will these supply chains take? The answer again inextricably links B2B and Supply Chain Management, with the answer emerging over the next few years as the final outcome of the B2B/SCM/Trading Exchange revolution we are currently experiencing. The two are inextricably linked, without a supply chain there could be no business, and without business, there would be no need for a supply chain. Final remarks Gazprom is rotating into the most luxurious business on the world market, gathering capital, acquiring property and hauling out insistent expansion into Europe. The monopoly organization is a severe debacle with representatives of various clans inside the company having different visions on what Gazprom should be. The difference of thoughts is to be mapped successfully into strategic analysis for greater integration of reforms for better growth and development. References / Bibliography Armstrong, A. & Hagel , J (1996). The Real Value of On-line Communities, Harvard Business Review, pp.134-141. Datamonitor (2007). OAO Gazprom: Company Profile. Gazprom.com (2008a). Retrieved 10, January 2008 from http://www.gazprom.com/eng/articles/article20150.shtml Gazprom.com (2008b). Retrieved 10, January 2008 from http://www.gazprom.com/eng/articles/article20151.shtml Gazprom.com (2008c). Retrieved 10, January 2008 from http://www.gazprom.com/eng/articles/article20157.shtml Gazprom.com (2008d). Retrieved 10, January 2008 from http://www.gazprom.com/eng/articles/article20165.shtml Gazprom.com (2008e). Retrieved 10, January 2008 from http://www.gazprom.com/eng/articles/article20164.shtml Kraemer Kenneth & Dedrick Jason (2001). Dell Computer: Using E-commerce To Support the Virtual Company. Medvedev, A I (2006). EXPANDING RUSSIAN GAS EXPORTS TO THE EU GAS MARKET UNDERGOING LIBERALIZATION. 23rd World Gas Conference, Amsterdam. Read More