GRAN TIERRA ENERGY INC. Harvard Case Solution & Analysis

GRAN TIERRA ENERGY INC. Case Study Solution

Firm-specific Advantages and Their Importance in Entering New Markets

In order to better understand the firm’s core advantages and their role in entering in new markets of the company.

1. The company is operating at lower cost than its competitors, which had helped the company in remaining competitive in the market for such a long time.
2. Other core strength of the company is its research team, which had always provided the company with right potential opportunity.

• Moreover, other core strength of the company is its local, experienced staff its teas, which had proved to be very vital and effective in entering into the various international markets.

1. Having most experienced and talented team at its top management is also one of core advantage of the company.
2. Having smooth flow funds is again an advantage, which has made company eligible to undertake the right growth opportunities at the right time.
3. Long history of working smoothly in the industry is an additional advantages to the company, which had made company eligible to attract investors.

Relevant Location Advantages and Reasons which made Brazil Attractive for Gran Tierra

One of the very important factor behind the success of the company is the relevant location advantage, as location is always an important for factor behind success of any investment strategy. Moreover, we will discuss the major reasons which made Brazil an attractive investment opportunity. We have discussed major location relevant advantages and factors below,

1. As Grant Tierra had already had strong presence in the South American region due to its existence in Argentina, Peru and Colombia. This strong foundation, helped the company to investigate the opportunity and allocate the resources at a lower cost.
2. As the company had presence in North America also, which enabled the company to remain updated and due to which it easily introduced the technology of Plane penetrating and multi-stage splitting, which was not yet introduced in Brazil. This provided the company an additional advantage over its competitors.

• We can see the impact of location advantage, when while entering Brazil, the company was aware about the various risks, but due to ample available off shore resources, company decided to enter the market to tap the opportunity.

1. On more advantage of location was that, the company had a local teams, who had enough knowledge and experience, which every time proved as an additional advantage to the company.

Similarities and Differences of Brazilian Market in Comparison to Already Operating Markets

In comparison to other markets where company was already operating, Brazilian market was different in some aspects but similar in others. In order to better understand, we will discuss the similarities and differences in detail.

As the company had been already operating in Colombia, Argentina and Peru, where Grant Tierra used Argentina as a base for its expansion into South American market. Starting from Argentina, every time when the company decided to enter one market, it started with hiring a local team of experts and doing detailed analysis of its legal and business environment study. One more reason for initial success in recently operating markets was, Grant Tierra had entered the market early and didn’t faced any fierce rivalry But Brazilian market on the contrary was already dominated by monopoly and new players had little chance of success.

As, after the initial success, the political risk was very high in the South American, because it didn’t has strong and stable political and legal system just like North America. Which was the reason decision making team of the Grant Tierra faced difficulties in conforming the purity of decision in countries like Ecuador, Venezuela and Bolivia for the longer period of time.

But as the company already had available large infrastructure in the South American region, so the risks associated with entering Brazil were decreased significantly. Even though the risk of uncertainty was so high, which obliged the company to enter the market by doing a joint venture with two of the companies already working in Brazil.

Feasibility of Current Operating Methods If Economic Condition in Peru become Viable.

There are several reasons which paved the way towards adoption of the operating method, which Grant Tierra has currently adopted. We will discuss the major implications of the current operating methods, if the conditions in Peru become viable for doing business.

As, we have already discussed the current operating method of the Grant Tierra, where it starts from firing a local staff and then do complete analysis of political and business environment in the reasons. Given the current operating methods, if the economic conditions in the Peru become viable for doing business, then the company would have following potential outcomes.

1. It can help Grant Tierra in creating strong relationships with foreigners, as the country is inviting and is welcoming the international investors.
2. Given the reputation and history of the company, it can attract experienced and talented staff from the country, which would be a great addition in the company’s long-term success in Peru.

• Moreover, once successful Grant Tierra can use this as a launching pad for expanding further in to South American Market.

Some Important Risks that Gran Tierra Might Face.

Even though, the company has seen many successful investment strategies, there are always risks associated, which companies tries to minimize by adopting effective planning and analysis. Similarly, Grant Tierra might also face risks, some of which are given below.

1. The major potential risk which the company might face is an old conflict related to social and safety issues related with the business.
2. Political and economic risk that company has faced in the past in Peru and would face in future, because the political environment of South America is not much stable as compared to North America, where political and economic risks are much lower.

• Due to terrorist activities, Company may face risk of disruption in operation due to any terrorist activities. As, the weal political situation always make it difficult to control security matters.

Recommendations

After analyzing the current operating method, strengths and risk associated and after evaluation of the company’s international strategy, I would give following recommendation to C.E.O and President of Dana Cofield and Gran Tierra.

At given level of risks associated with the opportunity in the form of operational problems and high fixed cost associated, in comparison to the huge growth prospects in Brazilian market, it would be rational for the company to dis-continue with its operations in Brazil. As Mexico also has rich oil reserves and has low competition, Grant Tierra should divest from Brazil and enter the Mexican market. In long-run it provides an opportunity to grow and dominate the South American market.........

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