Evaluate the changes implemented by the firm for the year 2014- 2016
This study deals with a company named as Statoil Oil Company. In this particular assignment, proper emphasis has been given for understanding the oil price drop that took place during 2014 to 2016. This drop in oil prices had led to fall in profits in given firms that operate in energy sector (Tesfay 2014). The energy sector faced major issues while making the strategic choices as well as changes during that period. The current segment elucidates to highlight the Merger & Acquisition that act as a change brought by Statoil Oil Company. Changes are majorly difficult for implementing purpose but have the possibility for getting positive results in the near future. Various business models are adopted by the company for bring positive change within the operations because of low crude oil prices. This study explains the strategies as well as change management process that are adopted Statoil Oil Company during the period 2014 to 2016. The study explains the leadership style and how the company manages with the change management for given period. Change management was presented by drafting McKinsey 7s Framework and explaining each element in the model. This has been done by linking it with the changes that are faced by Statoil Oil Company (Strand and Freeman 2015).
The situation in the global oil as well as gas industry has been changing significantly at a faster pace (Rosendahl, Johan and Revang 2014). During the year 2014 to 2016, when the oil price per barrel of Brent oil was around $114 so it has plummeted to the present level around $40 per barrel. It has been noted that the commerce need to regulate to a potential oil price at a considerably lower level when the oil price fell during 2014. The steep decline in oil prices has prominently forced the complete industry for making the important changes in the operations (Rothaermel 2015).
Statoil and Shell were preparation on structuring a gas-fired power plant in Norway as it will infuse carbon dioxide subversive or beneath the seabed. This has been surplus with the plan because of financial reasons. During the period 2014 to 2016, Statoil focus on sustainability that had earned them acknowledgment as it is traditionally infrequent for the oil and gas industry. For the year 2014, Statoil was ranked as the forth most sustainable business in and across the world in regard with the industry and sustainable energy company (Rosendahl, Johan and Revang 2014). In the year 2015, the company had received a disclosure score of 100 as well as performance score of 80 from the Carbon Disclosure Project. In the year 2016, Statoil were recognized by Carbon Disclosure Project as the most sustainable oil as well as gas producer in and across the world.
Factors driving Statoil to adopt these strategies
Statoil is one of the principal National Oil Company despite the fact that the company is listed on the major exchange stock markets in and across the world where 67% is on Norwegian State Ownership (Rødseth et . 2016). This Oil Company deals in global business operations that are comparable in case and consider under major International Oil Companies. This company operates in many countries but its primary business operation is located in Norway but with a significant market presence in countries such as Brazil, UK, Canada as well as USA and Algeria.
There are following strategies that is used by Statoil as a result of 2014-2016 crude oil price fall
Job Cut- Norway’s Statoil Oil Company has ditched the plan for building a futuristic-looking head office in Stavanger after cutting the size of their workforce by almost 3000 in recent years for the oil and gas firm. In the year 2014, Statoil Oil Company launched plans for constructing an oval building with a sloping roof to accommodate 3500 employees but the price of Brent crude fallen by half (Rosendahl, Johan and Revang 2014). The company needed office space during that time but now Statoil Oil Company meets the needs. The company faced issues because of workforce reductions as well as involved in conducting efficient use of workspace. In the year 2013, Statoil Oil Company stated in the website that they have 20500 employees but it reduced after job cut and falls down at 23400. In the year 2015, Statoil Oil Company sold their head office building in Stavanger to Colony Capital Inc by signing a 15 year lease with possible taxation (Rahimi et al. 2016).
Cut down on investment- Statoil Oil Company revealed that they need to work hard for increasing the level of competence in an era of prolonged price weakness after the Norwegian group announces a surprise net loss for the second quarter for the year 2016. Chief Executive of Statoil Oil Company is of the opinion that they have to cut costs as they saved another $1 billion off Statoil Oil Company capital expenditure for the year 2016. Statoil Oil Company had reduced in their operating expenses by 18% in the year 2015 but the actions was not enough for preventing a net loss of $28 million in the given months (Musacchio, Lazzarini and Aguilera 2015).
Cut Cost- Statoil Oil Company plan to slash down the jobs with this round cutting into the areas such as health, safety as well as environmental health. The company tries to continue for boosting regarding the cutting costs for gaining profitable position at an oil price of USD 25per barrel. This company has managed for reducing the cost by 40% (Lussier and Achua 2015).
Role of Leadership in a change management process
The changes adopted by Statoil Oil Company are Merger and Acquisition with Norsk Hydro.
- High dependence on European Gas Market (Rosendahl, Johan and Revang 2014)
- Host Governments whereby Statoil operation can increase taxes, putting new restrictions on exploration as well as production and imports and exports that depends upon Statoil business assets (Jackson, Schuler and Jiang 2014)
- Intense competition with countries such as Russia, Azerbaijan and Algeria over European Oil and Gas Market
- Increase role of Norwegian State in the management of the company for long-term because of low oil price that has a primary objective for covering the national budget
- Profits are generated from the oil and gas sales (Hill, Jones and Schilling 2014)
- Intense competition from the Major Integrated Oil and Gas Companies as well as National Oil Companies (Heyden, Sidhu and Volberda 2015). This is in fact that global competition is evident where Statoil is well positioned for the global competition in oil and gas industry. In other words, intense competition will help Statoil for bringing efficiency as well as innovative practices for destructing the business strategies (Rosendahl, Johan and Revang 2014)
Figure: Statoil suffers from consecutive adjusted loss
(Source: Hansen and Steen 2015)
Statoil Oil Company has defined its strategic platform for future development activities that will focus on sales, innovation and values and efficiency for the company. The oil company manages the growth by optimizing the shareholder value. The company makes ways for getting recognized as innovative and fuel retailers among the customers. Statoil Oil Company creates culture for simplifications as well as lean operations and cost efficiency. The company makes strategies for improving in the capital efficiency by attracting passionate fuel and retail professionals (Haines 2016).
Figure: McKinsey 7S Framework for the change management process adopted by Statoil
(Source: Goetsch and Davis 2014)
Strategy- The strategy means the plan that is devised for maintaining as well as building competitive advantage over the competition (Garcia, Lessard and Singh 2014). People at Statoil Oil Company work hard for bringing a smooth procedure for people development, operation as well as presentation and payment that act as an integrated part in the performance organization
Organizational capabilities as well as gaps need to be identified by Statoil Oil Company on the basis of business strategy. Strategy translation as well as target setting starts from setting of strategic objectives, then selection of Key performance indicators and targets, proceedings and forecasts, presentation goals and performance assessment rewards. Strategy expansion is a risk-based as well as event-based process that defines the ambitions and direction (Frynas 2015). This accomplishment translates strategies into detailed planned objectives for Statoil Oil Company. The first responsibility is the information technology arena where it ensures that the portfolio for taking IT initiatives support for the company strategy and creates ownership for the group. The role of the compensation as well as leadership development Committee majorly assist the Board of Directors for taking innovative strategies that can improve in the oil prices. The company shares extended attributes by sharing the corporate information without any appropriate approval. This information takes into consideration those strategies such as mergers & acquisitions, oil and gas reserves, negotiations as well as production volumes and financial information on future revenues (Fraser, Simkins and Narvaez 2014).
How Statoil manage the Change Management Process
Structure- The structure means the way the organization is structured as well as who reports to whom regarding any change management policies. Statoil Oil Company uses operating model for managing the level of performance. It helps in setting right priorities that is based on values as well as drives performance by safe execution with quality and speed. Statoil Oil Company organizational principles explain the structure and the way it is managed in a given way. Their organizational principles explain the simple organizational design that is flexible for meeting the demands of changing business environment. Statoil Oil Company uses Capital Value Process at the time of decision-making process especially in case of investment projects such as cessation projects (Eden and Ackermann 2013). This model is one of the structured as well as comprehensive approach for projecting identification, execution and planning where the investment project are developed from the business opportunity in a value chain process. Governing structure at Statoil Oil Company controls the process as they ensure ways for running the business in a justifiable as well as profitable manner that benefits the people, shareholders, society and customers. Statoil Oil Company is a public limited company with a governance structure that is based on Norwegian law.
Systems- The systems mean the daily activities as well as procedures that the staff members get engaged in getting the job done. At Statoil Oil Company, they have management system that comprises of principles, requirements as well as recommendations as it supports organization for fulfilling the task for achieving the future objectives (Beckmann, Hielscher and Pies 2014). The safety, sustainability as well as ethics committee assist the Board in financial related matters.
Shared Values- Shared values are also known as superordinate goals whereby the model was developed as the core principles of the company shows evidence in the business culture and general work ethic. At Statoil Oil Company, they ensure a shared understanding of the delivery where the sub-tasks are performed after identifying the knowledge and experience for effective execution. The next requirement is to develop shared understanding of the task assigned (Strand and Freeman 2015).
Style- Style is the leadership form that is adopted by the organization. At Statoil Oil Company, they believe in their people who are capable of meeting the challenges as well as deliver the promises. They have the essential skills as well as personally committed resulting to effective leadership for reaching the goals. Statoil Oil Company leaders have impact as well as deliver the sustainable results as and when required. Leadership profile at Statoil Oil Company includes integrity, personal humility, willpower, external orientation as well as accountability and execution rigor (Barney and Hesterly 2015). Leader of Statoil Oil Company is talent scouts who are responsible for building future leaders for meeting the business goals. This leader drive their own development, demand a sketch assignment for embracing mobility, developing domain expertise and general leadership capabilities, building strong and diverse teams.
Staff- Staff means the employees and their general capabilities when they work in business organization. At Statoil Oil Company, they believe in protecting the personnel, assets, customers as well as interests from any kind of malicious activity with reasonable realistic measures (Rosendahl, Johan and Revang 2014). The company ensures that they are correctly informed regarding the identity, competence as well as professional background of employees and temporary staff members. Statoil Oil Company train employees for delivering sustainability ambitions.
Skills- Skills means the actual competencies of the employees when they work in the given business organization. At Statoil Oil Company, they need skills as well as personal commitment for reaching the strategic goals in the near future. It requires taking responsibility for learning and developing activities by building new skills and sharing of knowledge. Here, Leadership means active demonstration of skills that is use in the model where the main attributes are values, partnership, leadership principles and people (Strand and Freeman 2015).
It is recommended that Statoil Oil Company for seeking new opportunities to deliver the attractive returns by using technology and business innovation. The oil company should focus majorly on the change of the global energy system to a low-carbon society. In order to keep the oil prices demand rising, it requires taking into consideration the buying power of consumers needs as it is rising at faster pace. It means some combination of consumer wages as well as level of debt for needs of the consumers needs to be rising as rising debt is helpful because more debt help in buying goods at given rates. Statoil Oil Company reported steep declines in earnings because lower crude process continues for inflicting pain on major oil companies. Statoil Oil Company requires preparing for investing as there are continuous opportunities for acquisition purpose. It is recommended to measure the Statoil Oil Company investment level as well as stock return where it is exposed to fluctuations in crude oil price. It is necessary for the company for paying the dividend and extends the payouts in stock by more than 5% discount. This company reduces the net debt to capital employed by 30%.
Conclusion:
At the end of the study, it is concluded that Statoil Oil Company is a company that operates in energy sector and faces low crude oil prices. The above analysis explains the state of Statoil Oil Company and provides recommendations on how to manage with the change management activities prevailing in the company. There are several reasons that have been identified for adopting the change management strategies for Statoil Oil Company. There has been even Mergers and Acquisition that took place for solving the financial status and loss faced by Statoil Oil Company. The McKinsey model clearly illustrates the elements as it focus on understanding the reason for change management and the initiatives taken at the same time. It is thereby essential for the company for finding innovative ways for change management so that they can manage with the low crude oil prices in the near future.
Reference:
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