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Competing in the 1990's.

From well-head to gasoline pump, he oil and gas industry, worldwide, has experienced unprecedented volatility during the past 20 years. Industry dynamics make it almost impossible to predict future events. We in Pakistan, therefore, need to develop appropriate corporate management strategies that will enable us to survive and succeed in the turbulent economic world of today.

Applying past concepts and logic to predict changes will not work. Technological breakthroughs are almost impossible to anticipate. Not only is the world changing, but it seems to be changing at an increasingly faster pace. The communications revolution has allowed markets to react quickly resulting in increased price volatility. Those managing oil and gas organizations in this environment may find the ten concepts discussed in the following paragraphs useful:-

Change is Inevitable

Vagaries of the Political, Economic, Social, Technological climate inevitably effect the business conditions. One of the rules of the game is that the rules change with changing times and circumstances. We must, therefore, be prepared with ever new ideas and strategies to deal with changes in business conditions and be willing to use them to our best advantage.

Manage What You Can Control

An integral part of reducing costs is improving performance through effective management. While taking all possible steps to minimize the damaging impact of uncontrollable factors, we must concentrate our fullest attention on factors that are within our access to control, i.e. unproductive expenditure, overstaffing, waste etc. Managing costs is an integral part of the oil and gas business. Only the cost conscious and cost effective developers, producers, refiners and marketers of oil and gas will survive in the long term.

Build on and Develop Strengths

We should identify the elements which have been instrumental in the success of one's organisation. These may be in the form of skills (Technical ability, special knowledge, financial management, negotiating proficiency) or an exceptional business position (trade concession, business relationship, market share, financial structure, a corporate image). It is also important to recognize that a skill your company thought was unique may no longer be so.

Once the strong elements are identified, we must endeavour to make them even stronger by such means as adding more skilled personnel, improving leading technology, and developing new markets. Being ready and willing to terminate a strategy when it is not working and withdraw from situations that do not use your strengths or are unlikely to develop into a strength is as important as knowing when to strengthen and build on your capabilities.

Develop and Exploit Niches

A niche is a situation where you can use your company's strength to obtain a unique strategic advantage. To create and preserve such a situation is fundamental to business survival and success. Companies should strive more vigorously than ever to achieve uniqueness and make sure that everyone in the organization can understand and state its importance.

Develop Flexibility

In a dynamic world, you need to make decisions quickly. This means solving problems as close to its place of occurrence as possible by delegating the requisite authorities to your people. In a volatile and uncertain situation, there is a natural inclination to centralize control of all decisions. This is the wrong direction on take. Decision making should be decentralized so problems can be solved quickly and efficiently.

Maintain flexible thinking to cope with an ever changing environment. You should find good ideas wherever you can and use them. Provide a working environment where people can apply their talent and enterprise. We need to develop a managerial style suitable for the 21st century. This will involve more freedom to act, individually and as teams, in the pursuit of goals. Success should be appropriately and adequately rewarded. Unsuccessful endeavours should be treated as a normal element of the business, however, lack of endeavour should not be tolerated at any cost.

Fund the Best Opportunities

In developing a strategy, the basics should never be neglected. Companies should invest in those projects that are the most vigorous under a variety of possible business scenarios and support the underlying corporate strategy.

Make Decisions When You Have to

This is more commonly known as crossing the bridge when you come to it. It is also very important to know when to give up on a project and when to preserve. Because business conditions are rapidly changing, decisions should be made as late as possible. It is prudent to make funding decisions at each phase of the project. Work commitments and expenditures should have options to terminate the project after each stage. If results at any stage do not meet the company's expectations, the option should be unhesitatingly exercised.

Define and Manage Risks

While funding the best opportunities the company's exposure to negative situation should be clearly understood. The risk should be quantified and acceptable levels clearly defined. One strategy to reduce risk is spreading the risk through joint venture, partnerships etc.

Use Innovation and Adapt to Change

Successful organization of the future will be one that can change with times. Its management and workers will need to be highly adaptive, psychologically resilient and open to an evolving reality.

Creativity at the individual and corporate level is the most vital weapon in the competitive arsenal of today's business. A creative organization has the collective ability to learn in order to survive by:

* Adopting changes in its operating environment.

* Evaluating its success in terms of how well it fits the operating environment.

* Transforming its internal processes on a continuous basis.

Get on with it

With the very volatile business environment, one will never have all the answers. When business conditions are very complicated, there is a tendency to be more analytical in the hope of getting a better answer. Unfortunately, more analysis does not necessarily produce a better answer. We should, therefore, be careful not to fall prey to paralysis by analysis. At some point, one needs to make a decision and 'just do' the project.
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Copyright 1993 Gale, Cengage Learning. All rights reserved.

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Title Annotation:Special Section: Energy; Pakistan's oil and gas industry
Author:Hak, Shahid K.
Publication:Economic Review
Article Type:Industry Overview
Date:Jun 1, 1993
Words:987
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