International Business Strategy Critically Analyze Essay

Excerpt from Essay :

Other than humans and the impact on their social and economic life, the oil companies also have a profound negative influence on the environment. The oil drilling and exploration process affect the environment at every stage. The first step is the identification of oil reserves in the region and assessing whether it can produce oil to cover the cost of drilling and exploration. The oil wells can be found inland or offshore. If the oil well is found inland, then it has to be dug out to assess its usability while for offshore drilling, the first step is to send seismic waves to understand its depth and exploration possibilities. This affects the organisms that depend on it especially the seismic waves can confuse the marine animals and disrupt their breeding grounds.

The next step is the exploration and this can lead to large scale displacement of people and misuse of agricultural and fishing areas. It can also destroy the natural flora and fauna of the region which in turn can affect the well-being of wild and endangered animals. This is followed by the refinery process which has waste water and sludge as its by-products and these can have a significant effect on the environment as well. Thus, every step of oil drilling and exploration affects the environment in numerous ways and the oil companies have to come up with better technology as soon as possible to avoid further environmental degradation.

Better technology for drilling and extraction

A good way to continue being competitive is to constantly innovate and use better technology for drilling and exploration. This will not only be cost-effective and quick for the company in the long-run, but will also reduce the carbon footprint of the exploration process on the environment. Therefore, the company should plan to invest heavily in its research and development department to further strengthen its position in the energy sector.

In short, oil companies have a profound negative effect on the environment as well as on the people who depend on it. Also, there is a growing threat from renewable resources and the fear that the oil resources will run dry in the future. To combat these challenges, the oil companies should shed their complacency and constantly look for ways to make themselves more competitive through innovation and prudence.

Question 2: How will this have changed by 2025?

The future of the oil and gas industry is likely to be affected by a combination of many factors such as growing demand, more environmental protection and a changing economic and political environment. The oil industry has to take these factors into consideration before planning for its future.

Growing Demand

The demand for oil is estimated to increase by leaps and bounds within the next decade. A good chunk of this demand will come from growing economies like China and India that import oil in large numbers to satisfy the growing aspirations of its people. By 2030, it is estimated that China will import more than 80% of its oil (Inkpen,2010). This is a huge demand because of its ever-increasing population figures. Also, there is little regulation as regards to environment and human rights and this is probably why the Chinese cities are one of the most polluted in the world. They have higher sulfur concentrations in their oil mix than most other countries and this can change the way oil companies explore and refine oil.

India is another booming economy that will become the fifth largest importer of oil by 2025. (Inkpen, 2010). Its population is growing steadily and as more and more opportunities come up,. so do the aspirations of its people and this simply means more energy consumption per person. The oil industry cannot afford to ignore these two Asian giants and they have to come up with ways and means to cater to this significant percentage of population, if they want to continue to dominate the energy sector. In order to meet the growing demands of India, China and other countries around the world, they have to look for new resources and come up with a better technology to extract the oil reserves.

Environment consciousness and renewable resources

More and more governments around the world are looking at non-hydrocarbon or renewable resources as an alternative forms of energy to reduce their dependence on the oil-rich countries. A good example is the Obama administration that is encouraging companies to adopt greener measures and is encouraging the technology and usage of alternate resources like solar, hydro-electric and wind. The European Union is also thinking along the same lines and this could mean that competition from renewable resources is a bigger threat than previously thought. The oil companies should be prepared to integrate these renewable resources into their business and use it to supplement their existing production.

Another factor is the growing awareness of the environmental impact of the oil and gas industries. As the effects of global warming is experienced by people across the world, there is a growing urgency to protect the environment. This can lead to some people taking a voluntary stance to avoid the usage of oil and energy and instead opt for energy-saving and renewable options. Though the percentage of people who are fighting against this industry is insignificant today to have any major impact, these numbers are expected to increase within the next decade as the effects of global warming become more profound. So, the oil companies should look at reducing their impact on the environment now to ensure that it gets the continued support of people. Otherwise, it can lose a good amount of its market share to renewable sources by 2025.

Mergers & Acquisitions

Mergers and acquisitions have always been an integral part of this industry and this is likely to continue well into 2025. The only expected change in this segment is likely to be the increase in the number of oil companies from emerging markets like India and China that will play a bigger role on the international market. This is partly due to the growing economic prowess of these countries as well as the demand of its increasing population. These companies will look to garner a larger market share especially from poorer regions such as Sudan and Nigeria that have oil resources, but not the technology to extract them.

Problems with exploration and transportation

As the demand for oil increases, so does the need for new resources. Unfortunately, most of the accessible resources are already being used or they are depleted and this makes it all the more difficult to find newer places where oil and gas can be found. The resources that are being explored are at a greater depth in the ocean far away from land or they are found in inaccessible places that make it difficult to use them with the existing technology. Furthermore, they are found at a distance from human habitation and this means the companies have to incur more costs to get them to the consuming markets. They have to come up with an economic way to refine and transport it to the consumers without passing on more burden in terms of price to the final consumer.

When the oil companies look to pass on this economic burden to consumers, it will only lead to a fall in demand and a consequent increase in the search and technology of renewable products. This is a double whammy for the oil industry and this trend is likely to intensify by 2025 when the renewable resources are likely to be tapped with superior technology. So, the industry as a whole should be prepared to meet this challenge and this can be a crucial phase for the oil and gas companies.

Political Instability

A major concern for the oil and gas industry is the political instability in the key oil producing regions. The last few months has seen a lot of political changes in the middle east region that has the largest reserves of oil in the world. The democratic movements and the resulting overthrowing of their leaders have created a climate of political uncertainty and has raised a bigger question for the future of oil companies in this region.

The wave of changes taking place in countries like Libya, Tunisia, Egypt and Bahrain throw light on the problems that can come up when the political government is averse to allowing oil companies to continue their operations in the country. This can be catastrophic for the oil industry and its players because they have huge stakes in these middle eastern countries. This is one of the most important changes that is likely to have a big influence on the operations of the oil and gas industry as a whole.

In short, the oil and gas industry is facing a tough future and by 2025, its problems are only going to become more complicated. Not only will there be a reasonable threat from the renewable energy sources, but its own…

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