Omani Oil and Oil Company: The Choice About Which Marketplaces to Enter
Globalisation is 1 of the causes within the external marketplace environment that the firm cannot handle. The emerging systems in the industry of communication plus transport make it feasible for companies to learn foreign markets as a way of achieving development. In Oman, numerous foreign firms possess set up their own branches in main cities such as Muscat and Bawshar. The entry of new firms increases the level of market rivalry, making it necessary for local companies to come up with unique strategies for addressing the challenge. One of the best ways is to explore foreign markets. Such a strategic move would require a firm to understand external environmental forces in the foreign market that would have a direct bearing on its operations.
Lokkesmoe, Kuchinke, and Ardichvili (2016) explain that before a firm can make an entry into an international market, the management should develop effective strategies for dealing with various forces in the host country. The primary aim should be to ensure that operations in the new market are not only sustainable but also profitable despite the existence of various challenges. This report focuses on how Omani Oil and Petroleum Company can make a successful entry into a specific foreign market to help achieve sustainable growth in this industry.
An Overview of the Company and the Industry
When planning to explore a new market, Zajda (2015) advises that one of the initial steps that the management should take is to conduct an initial analysis of the industry in the foreign market and define internal forces within the firm to establish if there is an alignment of the two. Omani Oil and Petroleum Company specialise in the refining of crude oil for local consumption in Oman. The company receives crude oil from different suppliers and processes it into different products, with the main ones being petrol, diesel, kerosene, and jet fuels. These products are then sold to various distributors within the country using the company’s large fleet of oil tanker trucks.
Once the product is delivered to the client, this company is no longer responsible for the activities of selling it to the final consumers. The company is currently undergoing integration with other firms operating under Oman Oil as a way of increasing its market coverage within the country. The management also made the decision of producing polyethene and polypropylene, which are the primary raw materials for plastic. The diversification of the product portfolio was a strategic move to help this firm to increase its profit in the face of increasing market competition. This company is currently planning to explore a new market beyond the borders of the country. In this research, the researcher will certainly concentrate on explaining the reason why India would become the best nation for this organization to focus on as this explores foreign marketplaces.
VRIO analysis. A critical evaluation of the firm’s resources and abilities will help in identifying the ease along with which it can make an entry into the foreign market. VRIO model helps in determining the resources and capabilities of a firm and its ability to achieve a competitive advantage over its rival firms. This model holds that a firm can only achieve a competitive edge in the market if its resources are valuable (Lewis & Mckone 2016). Oil products are in huge demand in the global market. The high value of these products gives it a competitive edge in the market. The second step in this framework is to determine if the product is rare.
Oil products are rare, as many countries around the world have to import them from the Middle East and parts of North Africa. The next stage is to evaluate the imitability of the product. Refined oil products (petrol, diesel, kerosene, and jet fuel) are standard products that cannot be modified in a way that makes them different from that of rival firms. The company is organised in a way that would support the decision to explore the new market. The top management unit made the decision to explore foreign markets, and a team of highly skilled has been identified to plan the process. In the four steps, it is evident that the imitability of the company’s product is the only area in the company that lacks a competitive advantage. Figure 1 below shows how the assessment should be done using this model.
SWOT analysis. Conducting a SWOT analysis makes it possible to identify strengths, weaknesses, opportunities, and threats that this company will face as it makes an entry into the foreign market. The financial strength of the company makes it possible to sponsor extensive market research in the foreign market to understand forces that may affect its operations. The fact that its refineries are located close to the oil field in Oman means that the company is assured of a steady flow of the product without interruption. Despite these facts, it is important to appreciate the fact that there are challenges that this company has to overcome. The biggest weakness of this firm is the need to operate in a market where the brand is barely known. Many customers often prefer dealing with known brands in the market. Another major weakness is the limited knowledge that top managers have about the new market.
The new market presents growth opportunities for Oman Oil and Petroleum Company. The huge population of Indian offers a large market for this company. The improving industrial and transport sector in the country means that petroleum products are in huge demand. A successful entry into this market will open avenues for entry into the regional market. The management should be ready to deal with various threats. Issues such as culture shock, stiff market competition, and policies set by the host government may affect the operations of this firm. Table 1 below summarises the SWOT analysis.
Table 1: SWOT Analysis.
Financial capacity to finance market research
Refinery located close to the precious raw materials
Limited knowledge of the market
Huge population in the proposed market
Improving industrial and transport sectors
Potential of expanding to neighbouring markets
Policies plus regulations in the particular new market
Oil remains the main resource of energy within the industrial field across the globe. Based on Lokkesmoe ainsi que al. (2016), weather change and worldwide warmings are facts and countries close to the world cherish embracing alternative plus cleaner energy resources. Nevertheless , the commercial sector still greatly reliant on gas, diesel, kerosene, plus jet fuel because the main causes of energy. The business continues to be growing regularly together with global economic growth. Although international oil prices keep fluctuating, major global economies such as the United States, European Union, and China still import large amounts of this product from various producers around the world. As explained above, Omani Oil and Petroleum Company should consider making an entry into the Indian market.
India has the second-largest population in the world, estimated to be around 1. 3 billion people, and is currently the third-largest importer of oil, after the United States and China (Lynch 2015). The market is strategic because recent reports have projected that the country is set to experience continued growth over the coming years, which means that the demand for oil and related products, including the raw materials for plastic, will increase. India is one of the countries regulating the use of specific types of polyphone papers in an attempt to protect the environment. However , plastic bottles such as those used in soft drinks, plastic plates and cups, and numerous plastic materials are still commonly used in this country (Lynch 2015). With such a huge population, this company would have a huge market for its product if it uses effective strategies to enter this market. The petroleum industry in India is one of the most profitable, and as such, the management of this company would only need to define effective strategies to start operations in this country.
Strategic groups. When conducting an analysis of the industry, Ayden, Demirbag, and Tatoglu (2018) argue that it is often appropriate to use a strategic group map to identify the position of a firm in relation to its rivals. As shown in figure 2 below, this strategy helps to determine the pricing/quality strategy against geographic coverage. Some top rivals in this market, such as Shell and BP, have focused on market coverage, while others have focused on pricing. This company will focus on pricing when it enters this new market.
Competitors. Oman Oil plus petroleum Company will certainly face stiff competitors from firms, that are already operating within the forex market. Some associated with the top competitors in this marketplace include Indian Essential oil Corporation Limited, Bharat Petroleum, Reliance Oil Limited, and Essar Oil Limited (Glowik 2017). Some associated with these companies are typically in this market with regard to a long period, plus they understand local market dynamics, giving them a competitive edge over new market entrants.
Suppliers. The company has a competitive edge over most of the competitors in the Indian market because of its close working relations with major suppliers of crude oil. The company has a close working relationship with Grand Drilling & Petroleum Services LLC, one of the leading oil drilling companies in Oman. It is assured of a steady flow of this raw material throughout the year.
Buyers. Oman Oil and Petroleum Company can sell its products directly to consumers or use intermediaries to help in distribution. Given the vastness of the market, it would be advisable for this firm to sell the product to specific distributors. The strategy will speed up market penetration. These distributors will become the primary customers of the firm.
Product substitutes. The products that will this firm offers do not possess close substitutes. Even though green electricity provider such because solar power, blowing wind energy, and biogas are gaining recognition in India plus the remaining globe, they still be short of the potential to aid transport and commercial sectors. As Lasserre (2017) observes, alternative energy is yet to become major threat to essential oil companies all over the world.
New companies. The Indian native market already has numerous companies offering this important commodity. The Indian government has policies that make it easy for foreign companies to invest in the local economy. It means that the threat of new market entrants will still exist. Having an unique selling proposition is the only way of gaining and retaining a competitive edge in this market.
Strategic Factors to Consider When Selecting the Market
When planning to make an entry into a new market, Lasserre (2017) advises that it will be crucial to take in to consideration various tactical factors. Some associated with these factors, like as the competition from the industry, the particular ease with which usually a firm may enter the marketplace, as well as the internal capability from the firm, possess been discussed within the sections over. In this area, primary is to talk about strategic factors within the external atmosphere.
Strategic Environment Assessment
The exterior environment plays the critical role within the success of the new firm. The particular PESTEL model will be often appropriate whenever evaluating the exterior environment. The politics environment in Indian is supportive associated with foreign investment in to the local economic climate. Reeves, Haanaes, plus Sinha (2015) clarify that although presently there is always a few political interference throughout periods of political election, such issues are usually becoming less typical. Economically, India is recognized as one of the fastest-growing economies in the world. The purchasing power of its citizens is also increasing consistently, which means that there is a huge opportunity for this firm. The social environment, especially the cultural practices in this country, is significantly various from that within Oman. However, social forces do not really influence the product this firm offers with this new marketplace. Regardless of their tradition, Indians need the particular energy to help growth within the transportation and industrial industries. Technology has turned into a key component of procedures in this nation.
Enterprise source planning (ERP) offers particularly become the critical tool within managing the purchase of materials with regard to companies in this particular market. It might be appropriate with regard to this business to accept the brand new technology. Environmentally, it is very important note that will environmental conservationists possess been championing the particular reduction of the particular emission of green house gases in the particular country. They are usually also strongly compared to the use of plastic materials because of environmental concerns. Such initiatives may have a negative impact on this company. The legal environment is supportive of both local and foreign companies operating in the country. The government has created a levelled legal ground for all firms. However, they have to operate with the legal confines asset in various regulatory policies.
Models of Market Entry Available for the Firm/Strategic Options
When planning to enter the new market, the management of the particular Omani Oil plus Petroleum Company ought to consider the many appropriate model that will can work within the Indian marketplace. As Tihanyi, Pedersen, Devinney, and Banalieva (2015) observe, different environment forces may impact the strategic choices of a company think about appropriate marketplace entry strategies. Within this section, the particular researcher will talk about four of the very most practical options that this administration of the organization can choose through when exploring fresh markets.
Direct conveying is the almost all appropriate strategy that will Omani Oil plus Petroleum Company ought to use when getting into the brand new market. Within this context, the particular company will market usana products directly in order to the targeted marketplace after meeting the particular conditions and needs set by the particular host country. Keller (2016) explains that will direct exporting may take different methods depending on the size of the market, the local culture, the financial capacity of the exporting company, the level of competition, and other market forces. India has a population of over 1. 3 billion people, and they all use petroleum products directly or indirectly. It may take a while for employees of this company (parent country nationals) to understand the local culture in this country. As such, the most appropriate approach that this company should use under the direct exporting strategy is having agents acting as distributors of these products.
The Omani company will be responsible for all the logistical operation from Omani to selected Indian deports. The suppliers will then distribute the products to different parts of the country. Although it is the most expensive of the four selected strategies, it is considered more effective because the exporting company will have full control of operations in the host country. It will give this company a competitive edge over rivals that may opt with regard to other less aggressive strategies like franchising. The company does not worry about nearby cultural practices plus beliefs because the particular distributors is going to be straight responsible for someone buy of these items. Nevertheless , Keller (2016) advises that the particular management should arranged a clear guide that defines the connection between the company as well as distributors.
Franchising might be the minimum desirable of the particular four strategies talked about with this section yet the easiest in order to embrace. With this technique, the Oman Essential oil and Petroleum Organization will concentrate on producing a strong brand name in the world market that can easily rival Total, Covering, and BP. The particular firm will get franchisees in Indian native or any some other foreign market this targets. The administration of the company (the franchiser) will collection standards of procedures that needs to be met simply by the franchisees within the foreign marketplace. The franchiser will never need to spend in an international country other compared to strengthening its brand name globally.
Given the truth that oil businesses in India transfer the item from numerous countries, the Oman Oil and Oil Company can possess an additional set up with the dispenses that could make our own company sell the products to these types of local firms in better terms compared to other firms that will are not franchised at this time company. The particular strategy was regarded as less desirable due to the fact it is not really guaranteed that the particular franchisees will choose the franchiser because the sole provider. Besides the royalties, this business would not obtain profits from the particular sale of the goods (Tihanyi, Pedersen, Devinney & Banalieva, 2015). However, the particular strategy can function inside a market that will this firm views hostile or as well competitive to create a direct entry. It is going to permit the company to improve its revenue without having making further expense abroad.
How to Achieve Competing Advantage in the particular Foreign Market
The market has several challenges, as talked about above. Nevertheless , this is important with regard to Oman Oil plus Petroleum Company in order to find a competing edge over the rivals in the particular market. Keller (2016) explains it is the particular responsibility of the particular top managers in order to find ways associated with gaining an advantage over its marketplace rivals in the particular market. It needs the very best leaders in order to identify the actual firm can do in an unique way to outsmart rivals. Porter’s generic strategies identify possible options that a firm may consider.
Porter’s Generic Strategies
Porter’s generic strategies can be used to define a path that a firm can take to overcome stiff competition in the market. As shown in figure 2 below, it can consider cost leadership, differentiation, differentiation focus, or cost focus depending on its core competencies and other internal factors within the firm. Oman will be selling petroleum products in the new market. It may not be possible to achieve differentiation when operating in the oil and gas industry. As such, the most appropriate strategy that this company should consider is cost leadership. Given the fact that this company has a close working relationship with oil extracting companies back in the home market, it can afford to lower its cost of making the products available in the foreign market. The strategy will ensure that even if this firm charges a price that is slightly below the market average, its profitability will not be compromised. Lien (2016) explains that many Indians often consider pricing as the most important factor when purchasing a product that cannot be easily differentiated, such as petroleum products. It means that this strategy will be effective in this market.
The concept of strategic groups can help the management to identify the position of different market rivals in terms of factors such as geographic coverage, pricing, quality of products, distribution channels used, the strength of the brand, marketing effort, and integration (Lewis & Mckone, 2016). It makes it possible for a firm to compare its current position against that of its major rivals. In this context, the firm will use brand strength and geographic coverage as the main premises upon which the comparison will be made. It will be possible to determine if the current position of this firm gives it a competitive advantage. It will also make it possible for the management of this firm to understand major market rivals with the strongest brand and widest geographic coverage. Figure 3 below shows the strategic group map.
As shown in the figure above, it is evident that the Indian Oil Corporation Limited is the dominating company in this particular industry in conditions of geographic protection. It has several branches enabling this to create its items available in nearly every part of the particular country. Essar Essential oil Limited has got the most powerful brand with this marketplace in terms associated with the degree of have confidence in customers have in the direction of it. Bharat Oil also has a powerful brand, but this does not need wide geographic coverage. These are usually the main competitors that Oman Essential oil and Petroleum Organization will have in order to observe closely within this market. Oman Oil and Oil Company has the weak brand plus low geographic protection within the Indian marketplace since it is yet in order to start its procedures.
The SAFE AND SOUND Criteria
When the competitive strategy offers been selected, Mortgage (2016) explains that one may use SAFe requirements to determine the appropriateness in the market. In this case, the cost leadership strategy will have to be assessed based on the local market forces. The suitability of this strategy can be assessed by looking at key opportunities and constraints. In a study by Keller (2016), over two-thirds of Indians live on $8 or less a day. As such, they are often keen on purchasing low-cost products. This strategy will earn the firm more clients within a short time. The second criterion is its acceptability. It must be acceptable to stakeholders. Shareholders and top managers of this company will find the strategy acceptable if it promises more revenues and improved profits. The last factor is feasibility. It must be practical, as Glowik (2017) observes. The cost management approach that will certainly be embraced will never compromise the firm’s profitability and capability to remain sustainable in the market. Table 2 below summarises these factors.
Future Potential Options
The initial plan is to make an entry into the market with the refined oil product. The goal is to strengthen this brand with this popular product in the Indian market. When the brand gains popularity, Oman Oil and Petroleum Company will then introduce the raw materials for plastic. According to Glowik (2017), India, just like many other countries around the world, is coming up with policies meant to regulate the production of plastic products. The new policy is meant to eliminate the production and use of thin plastic bags because of their threat to the environment. During the initial years of operation, this company will have the opportunity to understand these new regulations, the requirements that have to be met by companies producing plastics, and potential customers who can purchase this product.
With established offices in India and strategic partners in this market identified, the company will have the capacity to introduce the new products in the foreign market without facing any significant challenges. The management will also consider exploring regional markets, especially in China. The Chinese market also presents a huge potential because of its massive population and strong economy. According to Glowik (2017), China has the largest population and the second-largest economy in the world. It presents a huge potential for both refined oil products as well as the raw materials with regard to plastic.
Oman Oil plus Petroleum Company offers registered impressive overall performance in your home market. Nevertheless, the management offers made your decision that will the firm ought to explore new marketplaces beyond the edges of Oman. Indian has been chosen since the preferred marketplace due to its huge populace and rapid financial growth. The almost all preferred market access strategy is direct exportation. The firm will identify major oil distributors that will receive this product once it is delivered from Oman to major depots in India. This strategy will ensure that this firm can focus on making the product available in the country instead of focusing on marketing strategies. The report recommends that this firm should focus on cost leadership as a strategy of achieving a competitive advantage in the market. It should find ways of reducing its cost of operation in a way that would enable it to lower its operational cost in the market.
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