Introduction
Saudi
Aramco is the official name is Saudi Arabian Oil Company, it is Saudi Arab
state owned enterprise and global petroleum-energy based organization. It was
founded in 1933 and it’s headquarter is in Dhahran, Saudi Arabia. It is involved
in the activities ranging from exploration of oil and gas to production,
distribution, refining, shipping and marketing of petroleum based products and
petro-chemicals, to export of crude oil and natural gas. In December 11, 2019
Saudi Aramco launched IPO (Initial Public Offering) that generates over one
trillion dollar; it has become the world-largest public company surpassing
Apple Inc. and Microsoft (New york Times). The purpose of this case study
analysis is to give the brief introduction of company (Saudi Aramco) and
critically examine its products and offering, vision and mission statement
target market and customer, external and internal environment analysis (SWOT),
industry analysis and competitive analysis. The functions, resources, capabilities
and core competencies of organization will be identified and listed in the form
of table. Finally, the business level strategy, corporate level strategy, and
international business strategy of company will also be discussed briefly. On
the basis of major finding of SWOT analysis of Saudi Aramco, this report will
make recommendations and conclude its finding to solidify its position as a
world leading organization
3.1. Vision Statement
The
vision statement of Saudi Aramco states as
“Today, we
continue to deliver on our core mission of reliably supplying energy to the
Kingdom and the world, and continue to progress towards becoming the world’s
leading integrated energy and chemicals enterprise, a top refiner and a creator
of energy technologies.”
3.2.Mission Statement
The
mission statement of Saudi Aramco states as
“Today, we
continue to deliver on our core mission of reliably supplying energy to the
Kingdom and the world, and continue to progress towards becoming the world’s
leading integrated energy and chemicals enterprise, a top refiner and a creator
of energy technologies.”
Target Market
Saudi
Aramco targets three major energy markets
· Asia
(Saudi Aramco subsidiary sells to Japan, India, and China including Taiwan,
Philippines, and South Korea in Asia)
· Europe
· North
America
3.0. SWOT Analysis
SWOT
analysis is acronym analysis of strengths, weaknesses, opportunities and
threats present in the internal and external.
3.1. External environment analysis
· Economic factor
The whole Saudi economy is dependent on oil
that’s why it is an important fact to consider in analyzing economic factors of
Saudi Aramco. It is national oil corporation of Saudi Arabia, the revenue
generated by Aramco are translated into government revenues.
· Demographic factor
Saudi Aramco is operating globally as it
has oversees operation and subsidiaries. It has a global presence and it is key
crude oil supplier to India, China, Japan, South Korea and the
Philippines. The trade route is another
important demographic factor to consider, Saudi Aramco main supply route are
Arab Gulf and Strait of Hormuz and Iran influence both of these routes.
· Political/legal factor
In general external environments, the
political factors that affect Saudi Aramco are anxieties over stability and
future of monarchy in Saudi Arabia. Geopolitics also plays an important role in
analyzing political factors mainly Saudi-Iran rivalry and enhanced tensions in
the region. As Middle East is facing the issue of terrorism, many legal factors
affecting Saudi Aramco emerged in this context such as various Lawsuits by US
under the pretext of the Justice Against the Sponsors of Terrorism Act.
· Technological factor
Technological factor includes continuous
innovation and increase efficiency in the all operations of Saudi Aramco as per
its vision (Saudi Aramco,
2019). The
significant technological aspect is investment and joint ventures made by
Aramco in strategic technologies.
· Socio-cultural factor
There are issues of employability of local
Saudis as there is shortage of local talent, in Saudi Aramco. The corporate
social responsibility programs are widely popular as they are seek to help
local population and skill development among locals in future.
· Global factor
The global factor in analyzing general
external environment includes global events that directly impact oil prices and
demand of oil in world market. The recent Corona Virus pandemic has impacted
the global demand for oil and fall in oil prices is unprecedented (The Wall
Street Journal, 2020).
3.2.Industry Analysis by applying Porter’s Five forces model
Porter’s five force model provides a
standard process for identifying and analyzing company external environment of
the company. The porter’s five forces model of Saudi Aramco is used as industry
analysis and it results in following,
· Rivalry among competing firms
There is minimum competition for Saudi
Aramco in domestic market as it is a national oil company. The main area in
which Aramco get a preference over other domestic firms are expansion of field
and refining because of its technological advancement and infrastructure.
However, in the global market, competition is high as it competes against
global corporate giants like Exxon Mobil, Marathon Petroleum Shell and BP.
· Threats of new entrants
Oil and gas industry is closely inclusive
and there are requirements of high investment, support from government and
regulatory bodies. That’s why, there is low threat of new entrants in domestic
market and also low in global market as well.
· Threat of substitution
There is increase support for renewable
energy resources but supply from these resources did not make one percent of
global energy demand (Ricardo et al, 2019). Hydrocarbons are still main source
of energy around the globe, that’s why threat of substitution is very low for
Saudi Aramco.
· Bargaining power of suppliers
There is no issue as bargaining power of
supplier as Saudi Aramco is its own supplier. It explores and drill oil on its
own.
· Bargaining power of customers
There is also no significant issue as
bargaining power of customer because of two reasons. First, Saudi Aramco has
monopoly in domestic market. Secondly, it is member of Organization of
Petroleum Exporting Countries (OPEC) that controls global supply oil and oil
prices thus, buyer has no significant power as oil as an essential product only
handful countries supply.
3.3.Competitive analysis
Closed competitor
Saudi Aramco’s close
competitors in the industry are Shell and
BP.
|
|
Shell |
BP |
|
|
|
|
Direct
competitors |
|
|
Company Profile |
Company
Highlights |
International
energy company (oil and gas) Operates
globally Founded in 1907 Revenue 2019
$388 billion |
Multinational
corporation oil and gas company Operates
globally Founded in 1909 Revenue 2018 $282 billion |
|
Key Competitive
Advantage |
|||
|
Target Market |
Market
Information |
Asia Europe Americas |
Asia Europe Americas |
|
Market Share |
|||
|
Marketing
Strategy |
|||
|
Products And
Services |
Product
Information |
Petroleum products
including oil and natural gas Competitive
pricing |
Petroleum
products including oil and natural gas Competitive
pricing |
|
Prices |
|||
|
Distribution
Channels |
|||
|
Strengths |
SWOT Information |
Market leader operate globally corporate
governance less transparency invest in
technology environmental
concerns over firm practices in dealing with hydrocarbons |
Operate globally corporate
governance less transparency invest in
renewable energy to diversify products environmental
concerns over hydrocarbons |
|
Weaknesses |
|||
|
Opportunities |
|||
|
Threats |
|||
3.4. Internal organization analysis
|
Functions |
Function
description |
Resources/capabilities/core
competencies |
Gaps/areas need
to improve |
|
Exploration |
Finding
oil fields |
Technology
to find out oil resources |
Environmental
concerns |
|
Production |
Drilling
& Pumping |
Drilling
of oil using natural and artificial method |
Adjust
capacity per demand |
|
Transportation |
Transfer
the oil to refinery |
Through
tankers, long roads and pipelines |
Add
new infrastructure |
|
Refining |
Convert
crude oil into final product |
Innovation
and Technological Advancement |
Use
Environmental friendly technology |
|
Distribution |
Distributes
oil to government |
It
refines oil for the government to sell to customers globally |
New
government regulations to support local businesses |
|
IT |
Cutting
edge technology |
Investment
in research and technology |
Competitors
technological advancement |
4.0. Summary of SWOT analysis
 |
|||||
 |
|||||
 |
 |
||||
The
SWOT analysis of Saudi Aramco shows that company strength lies in its size and
scope of operations as it is operating globally and its pumping capacity is far
greater than its competitors. However, there are some weaknesses that needs to
be addressed as well, first of all Saudi Aramco is heavily relied on the
foreigners and immigrants for staffing and management due to lack of local talent
and skills. Secondly, Saudi Aramco lacks
diversification in its products as it mainly depends on petroleum and
petro-chemicals. The opportunities include investment in the new technologies
and investment in the renewable energies for future growth. The main threat to
the company in this current environment the ongoing trade war between the US
and China; largest costumers of the company and global trend setters for demand
in energy products. The second threat is the pandemic COVID-19 that has impacted
the global supply chain and demand for Aramco products. The competitive
analysis showed that Saudi Aramco has the competitive advantage as it is state
owned, sheer size of the corporation and after its IPO launch it is still ahead
of its competitors.
5.0.
Recommendations based on the SWOT analysis summary
On
the basis of SWOT analysis, Saudi Aramco should invest more in renewable energy
products and technologies through collaboration with other companies for future
growth purposes and sustainability (Khalid A.
Al-Falih, 2019). It is evident
that popularity and demand for clean energy is rising and international
agreements like Paris accords are driving countries to adopt more carbon
efficient energy sources to save the planet. Secondly, corporate social
responsibility program of Aramco should extend to rural and backward regions in
Saudi Arabia and other countries to develop local skill pool that will be
needed for staffing in the company. Thirdly, it needs to heavily invest in
developing more efficient exploring and drilling technologies and old pipe
lines for distribution should also be replaced to avoid wasting of crude oil.
6.0. Saudi Aramco
Strategies
6.1. Business level strategy
Saudi Aramco
business level strategy includes expand its business in Asia main focused on
China and Korean markets in particular. The business strategy of Aramco is
shifting to increase its refining capacity through downstream strategy (Economist,
2017).
It
has adopted the downstream strategy include investing Indian western region to
build a refinery and showed interest in Pakistan China economic Corridor (Technolgy,
2019).
6.2. Corporate level strategy
“Saudi Aramco's entry into chemicals and its
ambitious strategic plan
to become a fully integrated global petroleum and chemicals enterprise will
leverage its capabilities and resources to create jobs and help diversify
the Saudi economy
beyond oil” (Khalid A. Al-Falih, 2019)
The corporate strategy of Aramco is focused on
the diversification and continuing becoming a global leader in the petroleum
industry.
6.3. International business strategy
Saudi Aramco is
exploring new markets for its products and operations around the globe. In 2019
alone, it has made the investment in multiple countries in expanding its
operation and building refineries in Korea, Pakistan, India etc.
7.0. Conclusion
Although
there is completion in the global market among energy companies but Saudi
Aramco has lower competition due to its strong strategic position among its
competitors. The critical analysis of company strengths, weaknesses,
opportunities and threats, internal and external business analysis and business
strategies supported the Saudi Aramco claim on world largest organization
beating Apple and Microsoft. However, Aramco need to constantly innovate and
invest in technology to boast its leadership position in the future.
References
· Economist,
P. (2017). Saudi Aramco’s overseas
ambitions pick-up speed.
·
Khalid A. Al-Falih.
(2019). Saudi Arabia’s Vision for 2030
and Saudi Aramco.
·
Saudi Aramco. (2019). Technology development Strategic investments
Saudi Aramco Energy Ventures.
·
Technolgy, O. (2019). Saudi Aramco’s overseas ambitions pick-up
speed.
· Saudi Aramco – Strategy, SWOT and Corporate Finance Report, 2018
· Ricardo G. et al, 2019 The role of
renewable energy in the global energy transformation.
·
The Wall Street Journal, 2020 “Coronavirus’s
Worst Impact on Oil Demand Has Passed, IEA Says”
·
Saudi Arabian
Oil Co.
(2012). Innovation at Saudi Aramco. Web.
·
Saudi Arabian
Oil Co.
(2012). Our vision. Web.
·
Saudi Arabian
Oil Co.
(2012). Our vision. Web.
·
Saudi Aramco.
(2006). Help and support. Web
·
https://www.saudiaramco.com/en/who-we-are/overview/our-history
· https://www.saudiaramco.com/en/who-we-are/overview
· https://www.jobsataramco.eu/people-projects/saudi-arabias-vision-2030-and-saudi
· aramco#:~:text=Saudi%20Aramco's%20entry%20into%20chemicals,the%20Saudi%20economy%20beyond%20oil.
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