ADCO Global Strategy and Competitiveness
The Abu Dhabi Company for Onshore Oil Operations (ADCO) as the name suggests functions onshore and in the coastal waters of Abu Dhabi. An agreement was made with Petroleum Development Ltd in 1939 however; the geological work did not begin until the Second World War. The exploratory drilling in Abu Dhabi was initiated in 1950. Being renamed ADPC (Abu Dhabi Petroleum Company) in 1962 and then the government increasing its interest from twenty-five percent to sixty percent in 1970.
The government interest is now held by ADNOC (National Oil Company) and ADCO was formed in 1978 under Law number 14 and been since then responsible for the operations in the area. Today ADCO produces from five oil fields: Asab, Bab, Bu Hasa, Sahil and Shah. These fields are linked by pipelines and the storage and shipping facilities are provided at Jebel Dhanna and also, the tankers load here with crude oil for many markets of the world.
In 1998, exploration was limited to the evaluation of the hydrocarbon potential in the concerned areas and assessing the deep reservoirs. In 2001, major upgrading of the offices and infrastructure was done and by 2002, five projects were completed. The company continues to get industry’s high achievements till today.
IMPORTANCE OF STRATEGIES IN TODAY’S BUSINESS WORLD
One of the most dramatic elements of change today is the technology centered workplace. In this workplace, there is much importance given to ideas and creative thinking, information, networks and relationships. Most organizations today are inclined towards the learning organization in which there is continuous learning and change. The new trends such as e-business, enterprise resource planning (ERPs) and knowledge management require the organization to be updated and incorporating the latest technology as well as ideas into the business processes. Strategy is the plan of actions that the organization would pursue to achieve its long-term goals and a grand strategy can be of: growth, stability or retrenchment.
Apart from the three, depending on the organization, the strategy can be a global one. This is done so as to achieve globalization, to pursue a multi-domestic strategy or a transnational one. The reasons for ADCO to develop strategies in regards to the business environment it is exposed to are many. Firstly, the strategy that is designed and implemented later is important for core competencies. ADCO excels in drilling and exploration of oil in the region and hence, development of a relevant strategy would allow it to be the best in what it does. Secondly, for ADCO the relevant strategy would lead to synergy.
There would be smooth interaction between the different parts/departments of the organization such as: Finance, Marketing, Production, Exploration on field and Human Resource etc, as these all would know that the eventual goals for ADCO can be achieved through the strategy it implements. Moreover, synergy can also be promoted by developing good relations with the suppliers and this would all be covered in the company’s strategies. Lastly, for value generation, ADCO implements the strategies that it has devised. This is essential because in the end, the product that ADCO creates has to satisfy the buyers so they know they paid for something worthwhile.
STRATEGY OF ADCO
ADCO is currently created a vision that focuses not just on increasing its balance sheet, but by promising a sustainable future to Abu Dhabi by ensuring that the resources are explored and extracted in the best way possible and served for best purposes. To achieve this vision entitled “Vision 2020”, ADCO has devised five factors under the strategy:
1. To achieve the highest standards of HSE performance in the industry
2. To develop technical efficiency and leadership in competency so that the complexity of the business can be managed effectively
3. Continuous evaluation and execution of optimum development of the reservoir to maximize recovery and minimize the costs
4. Adopting the technology that allows most efficient field development
5. The integrity of the facilities has to be ensured on a cost effective basis so that system availability is optimum.
The departmental strategy for the operations aims at the integration of the existing facilities on a cost effective basis to optimize system availability. Under this, ADCO has to ensure to stay in good books for HSE, develop asset integrity management system (AIMS), provide support which is knowledge based to all business units, adopt the best maintenance practices and continue to conduct researches and studies for the latest technology. This is all aligned with the organizational strategy to use the resources for ADCO efficiently so that it can be a leader with the best standards and utilize its operations best.
STRATEGY SCHOOL USED BY ADCO
ADCO is implementing strategies based on the “positioning and fit” school of thought. In a dynamic business environment, the long term profitability is ensured by the average profit potential of the industry and the competitive advantage. In this school of thought for strategy, Michael Porter has also proposed the five forces model. Under this model, five forces that affect an organization’s competitive advantage are shown: the rivals within the industry, the power exerted by suppliers, the influence of the buyers, the threat of substitute products and the entry of new potential.
Therefore, as indicated by Porter, a firm can establish integral dominance over its rivals and other forces only if it shows a difference and continues to maintain it and hence it gives it a competitive advantage. Even though the company has effective returns and cuts costs with efficiency and has operational excellence, it cannot stand for long if it does not dare to differentiate.
That is what we can also observe in ADCO’s Vision 2020 plan. It indicates an entire hierarchy of how to achieve the vision as well and what strategies can be employed to achieve the highest standards in HSE performance, make strategic choices and decisions (through organizational integration, smart field, portfolio management and improved information quality), implement the best technology to enhance fieldwork, achieve integrity in operations and conducting performance management at a continuous level so as to review the process at the same time. As we can see, these strategies show how ADCO can really obtain that single most point for differentiation and would actually be able to withhold it for long if it really implements it without flaws(Chung,63).
SWOT ANALYSIS OF THE STRATEGY
Strengths: ADCO has already achieved many milestones when it comes to drilling activities. It has always honored the oil industry guidelines and has also achieved the best environmental/safety tactics employed. This step is necessary for the strategy to acquire the best HSE standards and the work plans required to achieve these standards are already aligned with the National Oil Company’s objectives.
The strategy to improve decision making involves the transformation of the functional model to asset model which is strength for the company, because the existing structure is flexible unlike rigid hierarchies. In the strategy of portfolio management that comes under making strategic choices, the current prioritization is within functional portfolios which a strong point as it focuses on the functions on the whole. Also under technology strategy, ADCO is individually optimizing portfolios and this would lead to improved efficiency and greater value. ADCO’s performance management program has been embedded since 2002 and it allows continuous improvement(Deegan 90).
Weaknesses: While improving strategic decision making during organizational integration some functions would be maintained as centralized. And the organizational transition would be finalized after the plan. In operations integrity, risk based methodologies are to be studied and implemented which should be done prior to the implementation of other strategies (Campbell 85).
Opportunities: Business Intelligence (BI) Environment solutions to monitor the operations cycle and there can be development and execution of change management programs. In the future there can be maximum usage of the existing facilities, infrastructure and wells which would lead to optimized portfolios. Once the identification of must-do technology solutions is done, they can be implemented. The establishment of Collaborative Working Environment (CWE) can lead to integration of workflows and technologies as well as real time data. Programs can be made for workers and contractors safety and health.
Threats: The workers issue is a sensitive one and the operations can be easily affected by their issues if they’re not taken care of properly and with care. The technology for real time information must be developed fast because the competitors are already exploring this avenue.
THE CHANGING INDUSTRY, COMPLEXITY OF CULTURE AND THE FUTURE
In 2009, the commodity prices for oil became low and the demand for energy had a huge impact in the industry of oil exploration. But in the end, the prices increased and the benefits could only be reaped at the end. Moreover, many companies have engaged in mergers and acquisitions to increase the size and scope of the operations and these are not just financial but also strategic. Most production companies are the likely target for acquisitions. ADCO’s strategy to implement technology and business intelligence solutions seems like tools for overcoming such a crisis. Also with its focus on the workers and contractors, there is much chance for higher productivity.
As for the culture in the international trade, ADCO facilitates the loading of oil tankers at one of its spot from all over the world. It is very much updated about the current trends about women’s liberation and involvement in the work fields and has implemented a lot of regulations to show support to them. With the big companies all aiming for acquisitions, the best option for ADCO is to dare to differentiate and develop its own operational excellence to use it as a competitive advantage.
As for ADCO’s future, it apparently seems successful because of the strategies that it has outlined are bold and can be implemented. “Vision 2020” outlines where ADCO wants to be in the future and the strategies have all been planned with effective performance management reviews, plans and execution. Moreover, the strategies for different departments make it easier for them to relate to the organizational goals and vision on the whole.
COMPETITIVE STRATEGY FOR THE FUTURE
ADCO can pursue the strategy of stability rather than growth or retrenchment. This is because in this arena of huge companies all seeking out the weaker ones, it is better to be productive and ensure the comfort of the employees so they do their best. Also since ADCO is oil exploration and drilling company, it should focus more on research and analysis of the fields and reserves and also the technology it should use to have better performance than the competitors. This would also let it develop better relations with the suppliers and the buyers and meanwhile pursuing stability, ADCO can focus more on developing its network and image (Sheldon, Langdon, Connor, John, Chandler,& Jellison,34).
Campbell, Tracy, “Integrating EM sounding into workflows reduces pre-drill risk”, World Oil: July 2010
Chung, Laura Walker, Vault career guide to the energy industry, USA: Vault Inc, 2005
Deegan, James F. An econometric model of the gulf coast oil and exploration industry, USA Arno Press Inc, 1979
Sheldon, Langdon, Connor, John, Chandler, R. Brett & Jellison, Michael J. “Benchmarking a new connection technology in the deep Gulf of Mexico”, World Oil: July 2010