Strategic management is a process of setting out strategies by management that describe the objectives, goals, and values of an organization (Pearce, Robinson & Subramanian, 1997). The process further involves defining the goals and the procedure to be followed to achieve these goals. Strategic management is important since it analyses the environment in which a business is operating, that is, the analysis of both internal and external environment of an organization (Porter, 2008). The process of strategic analysis is a very important aspect of any organization and therefore a comprehensive and clear strategic management formulation are key to ensuring growth and competitiveness of an organization(Pearce, Robinson & Subramanian, 1997). Strategy formulation, on the other hand, is the selection and determination of the best and most workable process to be followed in order to achieve set goal and objectives. This process involves allocation and management of resources in order to achieve the goals. After the formulation of strategies, the next very important process is the implementation and evaluation of the strategies. This is the process of putting into action the strategies and processes using the available resources and manpower. Additionally, it involves monitoring and evaluating the processes as they are being implemented with an aim of determining their workability and achievability. Every organization has a unique and distinctive strategy that fits its form of business; therefore giving it a competitive advantage over other firms in the same industry.
This paper seeks to analyze the strategic management of Abu Dhabi Gas Development Limited (Al Hosn). Further, it examines the history of the organization, its products and the business line that it operates. Additionally, it analyses the strategy formulation process of the company and the outcome of the strategies. Finally, it investigates the process of implementation and evaluation of the set strategies and their applicability to the overall objectives of the organization.
History of Al Hosn
Al Hosn is a limited liability company that has its headquarters in Abu Dhabi in the United Arab Emirates (Rai & Victor, 2012). It is a member of ADNOC group of companies having been formed in the year 2010, its’ Emiri Decree number is 03/2010 which was issued on February 1st, 2010 (Rai & Victor, 2012). Formation of the company was to specifically handle and develop oilfields that were discovered in 1966 in Shah at the onshore of Abu Dhabi. One year after the establishment of the company, it started drilling activities at Shah. Construction work at the site also started the same year. The company has since grown and this is evident from the award they received which was a significant show of commitment to innovation and dedication to success. In July 2012, the company initiated the drilling operations of its oil wells. In the year 2015, the company started the process of gas production and therefore defining it business specifications (Rai & Victor, 2012).
Al Hosn company objective is mainly the extraction of sour gas in Shah Field which would see the construction of Arab A, B, C, and D reservoir. Additionally, the company is involved in the manufacture of sulfur (Rai & Victor, 2012). It has, however, expanded its business to include production, transportation and marketing of the sour gas and sulphur products. Finally, Al Hosn Company is also involved in the production and manufacture of liquefied hydrocarbons.
Vision and Mission– To be a world class company in the development of sour gas resources and a distinguished partner of choice.
Values– the Company is anchored on three main values that guide in its operation and association with its partners, the three values are;
Agility- the company is anchored on the value of strict strategy and prompt adaptation to changing markets trends and customer needs.
Innovation- Innovation being very important in ensuring companies adapts to technological changes, the company values innovation that would ensure it produces quality a product at an affordable cost.
Collaboration- In order to penetrate global markets with ease, the company is anchored on ensuring fair collaboration with the other companies with common interest.
Strategy formulation is the process of determining the best and the most efficient path to follow in order to achieve objectives and goals of a particular organization (Pearce, Robinson & Subramanian, 1997). This process is very important since it sets an organization in the direction to follow in order to realize both short term and long term objectives. The process of strategy formulation follows a series of five steps which are of the essence.
The first step is setting out objectives. At this stage, policy makers and managers design both long term and short term objectives that are to be achieved. The objectives must be in line with the aim and values of the organization and must be within the laws of the country in which the company operates. Additionally, these objectives should be measurable to allow the determination of applicability during implementation and evaluation stages (Pearce, Robinson & Subramanian, 1997). the second stage is formulating of objectives. This stage involves determining internal and external factors that affect operations of an organization and designing how the company will adapt to the environment. Analyzing the environment is achieved by application of SWOT analysis technique which divides the factors into internal and external factors depending on the level of control in which managers have. The third stage of the process is setting targets. This stage involves formulating of benchmarks upon which achievements of an organization are based (Porter, 2008). The targets must be measurable achievable and realistic both in time and in space. The next stage is performance analysis. This stage involves the determination of the workability and applicability of strategies. It also involves analyzing of all possible routes to achieving an objective while determining advantages and limitations of each path (Pearce, Robinson & Subramanian, 1997). This enables the determination of the challenges that are likely to be encountered by each of the path. The final stage is choosing the best strategy to apply. In order to determine the best strategy, considerations are made for the various options available and determining the best path to use in order to achieve goals. Strategies determined should be simple to implement and also provide for check throughout its implementation.
The External Assessment
External assessment is the analysis of conditions that cannot be controlled by the organization. This means that managers and decision makers of an organization cannot pass resolutions that control these factors (Porter, 2008). The most important of external factors affecting an organization is competition. Al Hosn is involved in gas and chemical business; a highly dynamic venture with customers distributed around the globe. The business is very competitive due to the huge number of market players and the ever-evolving technology which guide market trends. The Middle East and the UAE are globally known for the production of oil and petroleum products for world markets, therefore, analysis of the level of competition and keeping track of the competitor both quantitatively and qualitatively helps in the formulation of strategies. This is aimed at ensuring that the company is competitive and remains relevant. However, despite the high level of competition, Al Hosn is coping well and is competitive. This is as a result of various factors which include the fact that it has diversified its production, therefore, reducing the risk of making losses when one line of product is not performing. In the petroleum and oil industry, it is also important to constantly monitor competitors and track their innovations and marketing strategy so as to formulate a strategy that will be relevant and highly adaptive to the changing environment. Al Hosn mode of marketing is coping well with competitor hence, there is no need of changing marketing strategies since it is effective.
The Internal Assessment
These are activities that can be controlled by managers and policy makers and can, therefore, be changed in order to fit a situation. Internal assessment is important in ensuring that production cast is kept low while ensuring that quality is not compromised. Al Hosn requires constant and regular assessment in order to remain competitive. Among the factors to consider during the internal assessment include quality human resources, the level of technology application in comparison to that of competitors. Further, an assessment of the level of innovation and interconnection between different factors of production is also required so as to ensure there is no delay due to lapse in one department. An assessment of Al Hosn shows that more investment into innovation is required so that it can constantly improve its production.
Strategy Analysis and Choice
Strategic analysis is the process of reviewing the position of the company in relation to factors of production and competitors. Analysis tools that aid in the process of strategic analysis are the SWOT and Porters Five Force model. SWOT analysis gives a perfect interpretation of the environment in which the company is operating. Therefore, to formulate correct strategies, it is important to critically apply the SWOT analysis to determine important factors that dictate both the internal and external environments of a business (Houben, Lenie & Vanhoof, 1999). The first two letters in the acronym (S and W) represent Strengths and Weakness. These are the internal environment while the last two (Opportunity and Threats) are the external environment.
SWOT Analysis of Al Hosn
SWOT is a short form which is an acronym for Strength, Weakness, Opportunity and Threats. These are the factors that dictate a business environment and show existence of competitive advantage of a company (Houben, Lenie & Vanhoof, 1999). Competitive advantage is a term used to describe the situation in which profit margins of a company is higher than those of companies in the same field of business. SWOT analysis will give the real picture of how the company is comparing with others in the same industry.
The greatest strength that Al Hosn exhibits is its financial ability, this is because it is able to secure financial assistance from its mother company and other financial institutions and therefore, it can easily venture and expand without financial difficulty (Rai & Victor, 2012). This makes it simple for the company to compete and venture into new markets or expand its facilities. Additionally, financial ability enables the company to easily invest in better technological production and hence reducing production cost while improving quality. Secondly, the company inherited business units from its mother company. These units are very experienced and are the backbone of operations in the company. Additionally, the units have adapted well to the market and their brands have been accepted by customers. Finally, the nature of the business is highly profitable and the returns are high. This implies that even during low business seasons and high competition it will still make profits.
Weaknesses are areas where the company is not performing but can be improved if corrective measures are put in place to counter the situations. Weaknesses are risky since they drag progress that would have been achieved while at the same time they provide a loophole for competitors to exploit and take advantage (Houben, Lenie & Vanhoof, 1999). When weaknesses are corrected on time the business quickly picks up and maintains a competitive advantage. Al Hosn has some weaknesses that need to be addressed, marketing of its products is not intensive, and therefore it relays on loyal customers. However, it should do serious marketing to attract new customers and expand its territory. Marketing will enable the company to venture into new markets without necessarily getting into mergers.
These are business gaps that can be exploited to the benefit of an organization and therefore increase its profit margins and customer coverage (Houben, Lenie & Vanhoof, 1999). Al Hosn has many opportunities that it should exploit in order to gain a more competitive advantage and expand its profit margins. The first opportunity is the growing UAE and world economy which present a perfect opportunity for growth. This is because demand for products will increase while at the same time production costs will reduce due to economies of scale. Growing economy leads growth in industries that rely on products which are produced by Al Hosn, therefore, increasing demand for the products. Secondly, the company is able to do acquisition and form merger which enables it to easily penetrate new markets that would otherwise prove difficult to penetrate. This would introduce the company into new markets and therefore increase demand for its products. Finally, technological improvement has led to the production of huge output at a relatively lower cost. This is an opportunity that the company can exploit and invest more in innovation that will see the production of a large volume of quality products at a lower cost. This will enable it to maintain its profit margins and therefore enable it to remain competitive.
The greatest threat that the company faces is competition from other companies dealing with the same line of products (Houben, Lenie & Vanhoof, 1999). Competition in the industry is very high and therefore any mistake committed by a single industry greatly affects its operation and may lead to losses. However, Al Hosn is well shielded from stiff competition due to its connection and attachment to the mother company. Furthermore, it has formed mergers and acquisitions which have enabled it to command a huge market. Al Hosn also deals with a wide range of products and therefore, when a single line of products fails it is cushioned by another line product (Rai & Victor, 2012). Finally, environmental concern and requirement for greener energy are a threat to the growth of the industry. However, this challenge affects its competitors equally.
From the SWOT analysis, it is discovered that Al Hosn has a competitive advantage over other companies while at the same time it shows great opportunity for growth and expansion. Illustratively, the company’s’ strengths can enable it to survive and penetrate new markets while on the other hand; its weaknesses are solvable without external consultation. Al Hosn should, however, increase financial allocation for innovation and improvement of staff through training. This will ensure that remains at the apex in technology and improvement product quality. The company must also ensure that its products and production processes are environmentally friendly and do not pose a danger to the environments.
Strategy implementation is the process of putting into practice the strategy that has been analyzed so as to achieve the required outcome. This is the most important part of the strategic management process because it is the reason for the entire process. The process of implementation follows a sequence that ensures that the process is traceable and measurable. The process has the following steps:
This step involves analyzing of the key terms of the strategy so as to ensure it is in line with the objectives and aim of the organization. In this stage of implementation managers and policy makers come together and discuss the strategy and iron out any issues that are not clear before the strategy can be given to other members of staff (Chaffey, 2007). At this stage, the qualitative and quantitative aspect of the strategy is defined and interpreted.
At this stage, the strategy is examined by people who will actualize it. They include human resource employed by the company and any other external authority or person who may be affected by the strategy. In this stage, it is important to ensure that all the stakeholders understand the strategy and any issue raised should be addressed in order to enable all the stakeholders to move as a team (Chaffey, 2007). Further, the end goal of the strategy must be explained and important aspects of the strategy explained too.
This is the stage of implementation where the theory is put into practice by the relevant people. For a successful translation process, it requires a good communication and a positive mind that will ensure the desired change is achieved.
After a successful implementation, it is important to do an evaluation and check actual output against the desired output and adjust difference that may have occurred.
The process of evaluation is where a strategy is analyzed to make sure it is workable and practical at all stages of implementation (Chaffey, 2007). This process should start immediately the implementation process begins. It helps in correction of mistakes that may occur at an early stage, therefore, ensuring that the mistakes do not affect the company negatively. In this stage, processes and procedures that do not help in achieving objectives are rectified and replaced with a correct process.
In conclusion, Strategic management is a process of setting out strategies by management that describe the objectives, goals and values of an organization. This process is important since it determines the competitiveness of an organization and its ability to adapt to various changes that occur in the market. In order to ensure competitiveness, strategy formulation which is the selection and determination of the best and the most workable process to be followed to achieve set goal and objectives needs to be developed. Al Hosn is a limited liability company that has its headquarters in Abu Dhabi in the United Arab Emirates Its line of business include; production of liquefied hydrocarbons, manufacture of sulphur and production of sour gas From the SWOT analysis, Al Hosn has a competitive advantage over other companies, Therefore, indicating that is able to adapt well to the changing markets. However, it is important to formulate strategies through a sequential order that will ensure that the company remains at the apex.
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