Strategic Analysis and Evaluation of ORPIC

Executive Summary

strategic analysis and evaluation Oman Oil Refineries and Petroleum Industries Company (ORPIC) has oil refineries and petrochemical business. The relentless pressure to innovate and intense competition has forced the company to change its internal strategy of working. Moreover, the company is going through an era of extreme volatility and uncertainty, as evident through the worldwide spread of COVID-19. In order to deal with these challenges, this report conducts strategic analysis and evaluation of ORPIC. It applies strategic tools of SWOT, VRIO and Cascade choice model. Application of these models suggests that ORPIC should promote organizational creativity, improve human resource management, give flexible working conditions and employ the use of digital technology. Moreover, to effectively compete with its rivals, ORPIC should diversify its income sources and invest in manufacturing plants. Furthermore, to deal with the time’s uncertainty and volatility, the government of Oman should give ORPIC a bailout package and should work to make Oman a full-time member of the Organisation of Petroleum Exporting Countries (OPEC).

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Introduction

Oman Oil Refineries and Petroleum Industries Company (ORPIC) has multiple refineries in the country and also deals in polypropylene and chemical production (Gulf Talent, 2020). In recent times, the company, like other refineries, has come across multiple internal challenges, especially magnified with the emergence of novel coronavirus (COVID-19), as illustrated by Corrigan and Greenan (2020). Moreover, relentless pressure to compete with rivals has also posed numerous problems for the organization.

The purpose of this report is to develop a strategy involving different tools to overcome internal challenges. The tools applied in this report include SWOT Analysis, VRIO analysis and the integrated cascade of choices. Moreover, in this report, government policies which can help ORPIC to overcome these challenges are also discussed.

Challenges faced by ORPIC

ORPIC is facing following challenges:

  1. Intense competition with the rivals like Duqm refineries, Petroleum development Oman Lekhwair, ONGC limited and Rabab Harweel Integrated Plant.
  2. Uncertainty of oil market as price of oil prices fell rapidly in the wake of coronavirus emergence (Corrigan & Greenan, 2020)
  3. As explained by Zhu and Singh (2016), different political and economic factor make Oil and Gas industry volatile. Hence, it is challenging for ORPIC to ascertain the exact amount of oil that needs to be produced to ensure profitability.
  4. The employees in ORPIC are following traditional management strategies like autocratic leadership which inhibits creativity. Hence, ORPIC is facing a relentless pressure to innovate.

SWOT Analysis- focusing on strengths and weaknesses

SWOT analysis is a strategic tool to evaluate the strengths, weaknesses, opportunities and threats particular to an organization or a plan (Gurel, 2017). To evaluate the internal challenges faced by ORPIC, only the strengths and weaknesses will be discussed to develop solution to specified problems.

No. Strengths Weaknesses
1 Impressive integration of refineries and other plants. Inability to allow employees to work from home because refineries require personnel on field (Seba & McWilliams, 2020).
2 As it is a governmental organization, so easy to comply with governmental policies (Legal 500, 2018). Great power-distance as lower-level employees are not included in decision making.
3 Export of products in over 16 countries (OQ, 2020)- thus, excellent international reach and relations. Lack of multiple partners/contractors and even distrust of suppliers (JCCP, 2018).
4 Over 2,600 employees, so huge human resource (Gulf Talent, 2020). Inability to hire experienced and qualified staff (JCCP, 2018).

Table 1: SWOT Analysis of ORPIC focusing on strengths and weaknesses

In order to overcome the weaknesses and in light of the above-mentioned strengths, following strategies can be adopted.

  1. In volatile and uncertain times, especially in the post-COVID era, making a mechanism to allow employees to work from home is necessary because an increased number of people prefer to remote work (Routley, 2020). The refineries under ORPIC work for 24 hours a day, and due to lack of automation, employees have to be on the field to monitor the working. However, by incorporating automation and artificial intelligence, the majority of employees can be allowed to work from home to monitor the working, as illustrated by Coombs et al. (2017).
  2. In order to allow greater communication between employees, democratic leadership should be adopted by ORPIC. When even lower-level employees are heard, then creativity and innovation are bound to increase (Derecskei, 2016). Furthermore, by incorporating democratic leadership, HRM practices of ORPIC would be improved.
  3. To compete with its rivals, ORPIC should enter into partnerships with private organizations. Due to this partnership, risks will be reduced and shared among the members. Moreover, creating such partnerships will increase available resources, which would ensure early completion of projects, as illustrated by Giesecke (2012). Particularly, ORPIC should enter into partnerships with organizations that outsource digital technology. In this way, the scope of digital application at ORPIC would increase, giving it a competitive advantage.
  4. For attracting the most suitable employees, ORPIC must delineate its company vision and mission. Hence, employees who agree with the vision and mission would apply for the jobs. Moreover, to ensure that the talent is retained, ORPIC should develop an employee reward and training mechanism, which would result in an improvement of HRM, creating a competitive advantage for the organization.

VRIO Analysis

VRIO is an analytical technique that evaluates methods to develop a competitive advantage and it stands for value, rareness, imitability and organization (Cardeal and António, 2012). Following resources of ORPIC can be analyzed through VRIO model (see the table 2 below)

No. Characteristics of ORPIC Valuable Rareness Imitability Organization
1 Human Resource Management Yes No Yes No
2 Research and development Yes No No No
3 Application of digital technology Yes No No No
4 Indigenous production of equipment like centrifugal pumps Yes Yes Yes No

Table 2: VRIO Analysis of ORPIC

Like other refineries, ORPIC also invests in research and development, which is a valuable activity. However, if research is undertaken on developing the latest methods to perform oil refining, the advantages over competitors can be earned. Moreover, as demonstrated by Hojeige (2019), competitive advantage can be achieved by researching developing multiple income resources to protect itself from fluctuating oil prices and decline in demand as it did during the spread of COVID-19. Similarly, to make HRM rare, ORPIC should develop the latest technology of shortlisting CVs through computer programs. Moreover, by investing in a high-quality training program, ORPIC can create a mechanism that trains its employees through different courses.

Although ORPIC employs digital technology in its operations, the scope of these technologies is relatively limited. By increasing the range of application of digital technology, ORPIC could deal with the relentless pressure to innovate and develop a competitive advantage. For instance, ORPIC should employ and utilize artificial intelligence programs that would automatically turn a plant off in case of an emergency. Moreover, the artificial intelligence program would increase plant efficiency because it would learn from its past mistakes and would be able to predict future based on available data (Welsh, 2019). In this way, employees would be held accountable, and performance would improve.

One valuable aspect of ORPIC is rarely seen in other refineries, i.e. its indigenous production of some parts of the refinery in its machine shop, including centrifugal pumps and ducts. In order to turn this practice into a long-term competitive advantage, the scope of manufacturing should be increased by developing a separate manufacturing plant for producing equipment like boilers, heat exchangers and compressors. Moreover, this equipment can also be sold to other refineries and be made a new source of income to deal with the volatility and uncertainty of oil demand.

Strategy choice cascade

The strategy choice cascading model is a framework that would allow ORPIC to develop mechanisms to promote creativity in the entire organization and deal with uncertainty and volatility of time. One of the essential parts of this model is that advice follows from both top of the leadership and lower level of employees. There is a constant feedback mechanism so that the effects of selected strategic choices can be examined clearly (Lafley & Martin, 2013). ORPIC can utilize this model to overcome internal challenges, as illustrated in figure-1.

Competitive advantage Managing volatility and uncertainty of market

Oman

Diversified revenue stream

Organizational creativity

Improving digital capabilities

Developing manufacturing abilities

CPS process model

Interactive and democratic leadership

Risk management

Figure 1: Strategy cascade model for ORPIC

Governmental policies to help ORPIC

Following policies can be implemented by Omani government to help ORPIC to deal with the uncertain and volatile times.

  1. There is only five percent duty on the import of oil in Oman (Austrade, 2020). This percentage should be increased to inhibit the import of oil, which would support local refining of oil, thus promoting growth of ORPIC.
  2. Moreover, due to the emergence and spread of COVID-19, the oil business has suffered greatly. The oil demand suddenly fell which led to a great decrease in oil prices (Arezki & Nguyen, 2020). In such an instance, all oil refineries suffered from great economic loss. Hence, in order to save ORPIC, government should announce a bail-out package, so that ORPIC does not have to fire a lot of its employees or shut down its operations.
  3. The government of Oman should also work to include Oman as a part of OPEC. Majority of Oman’s oil producing neighbours are members of OPEC (OPEC, 2020). Hence, if Oman becomes a member of the institution, then ORPIC would have an opportunity to sell its products to a wider market. Moreover, it would allow ORPIC to improve itself because OPEC helps in capacity building and provides required infrastructural support.

Conclusion

ORPIC is facing several challenges in the form of intense competition, volatility and uncertainty of time, and relentless pressure. In order to encounter these challenges, ORPIC needs to implement strategy tools that change the internal working of the organization. The strategy tools used include SWOT analysis, VRIO analysis and cascading choice model. By applying these models, it is concluded that ORPIC should focus on honing creativity and developing multiple earning methods to build a competitive advantage. Moreover, the government of Oman should develop favourable policies to help ORPIC deal with the relentless pressure and volatility and uncertainty of time.

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