The Sinopec Group (Pvt) The Case Solution
Stakeholder Mapping: Conflicts of Interest and Power-bases
In international oil and gas industry; there are major players so, conflicts among any countries or companies strictly affect the activities of Sinopec International Petroleum Exploration and Production Corporation. For example: the recent conflict between Russia and Saudi Arabia has also affected the overall oil market. Oil prices are high in the global market. The stakeholder’s major issues in the current time are environmental issues. Customers are concerned with environmental issues and their concerns have increased the pressure on oil and gas companies. The overall industry is divided into three streams, and these three streams have different stakeholders. These three different streams are: upstream activities, midstream and downstream. Upstream activities involve the initial production process to exploration process and the production of crude oil. Midstream activities involve processing, sorting, marketing and transportation process. Whereas, downstream involves refining, processing, production and distribution activities. These three streams have different stakeholders and their power bases also differ from one another.
Include here also any CSR issues
CSR involves actions by the companies that are for the betterment of the environment and social welfare. We can say that it is an attempt to reduce the adverse impact on the environment and people. CSR allows the companies to contribute in the development of the country. In last five years, CSR is being highly focused by the companies. The oil and gas industry is growing business that is involved in CSR activities for so long, i.e. social activities, political activities, technological activities and environmental activities (Frynas, 2005). Due to the nature of business in oil and gas industry; these activities have increased the threat for the environment. So to compensate that threat; the companies are involved in the SCR activities. Sinopec International Petroleum Exploration and Production Corporation works on reducing the poverty, aids donations, provides support for construction project, participates in social welfare programs, works for local employment, works on green projects to save the ecology system, and strictly complies with international laws and regulation.
Area 2: External Analysis
Macro Level Issues
PESTLE Analysis
Political
In oil and gas industry; the government has bilateral and quadrilateral agreements, alongside which, it deals with the international relations with different companies from different countries throughout the world.
Economical
China has invested in several development plans and these projects generate huge economy. In an inclusion to this, it also generates awide range of clients that affects the economic recovery. Chinese economy is increasing, and it is increasing through different projects.
Social
SIPC has been involved in several social initiatives and has supported programs on global level. Along with that, the Global organization world compact Chinese network is also supporting two summits that are aimed at working on the climate change and for social cause. Not only this, the company does care about its employees and takes part in public welfare activities.
Technological
The company is focused on technology and innovation.Due to its business nature; it is essential for the company to become technologically sound. During last three years; the company has won several innovation awards, i.e. seven national awards. The company has acquired several domestic and foreign intellectual properties for technologies. The company is also doing well in analysis sand exploration.
Legal
The company has to deal with new rules and regulations related to rock oil trade, and has to compliance with the overseas laws.
Environmental
The obligation of environmental issues in increasing for the company, as there are bottlenecks in the whole process and other issues as well, i.e. blue air schemes and clear water. Companies have to deal with these issues and at least meet the minimum requirements of environment friendly activities. The activities in oil and gas industry have huge impact on environment.An increasing environment concern requires the companies to play their part.
Market and Industry Analysis
Five Forces Analysis
Threats of the latest Entrants
New entrants in the industry bring innovation, but it require huge investment to start operating in oil and gas industry. New entrants bring innovation, new ways of purification, and refining. But current players in the industry have reached to their economies of scale, irrespective of projects. But the threat of new entrant is the industry is low because of government rules and regulations, political pressure and investment requirement.
Bargaining Power of Suppliers
Companies in oil and gas industry have different suppliers as there are few major players in the market and the suppliers are dominant in the industry. The company’s image and business value have allow-edit to have the negotiation power due to its global business image. The bargaining power of suppliers is moderate in the oil and gas industry.
Bargaining Power of Buyers
The bargaining power of buyers is low in the oil and gas industry.Due to the involvement of the government; the buyers usually pay for the process set by the government. Companies estimate their prices based on the cost of exploration and processing. Companies look for profitable deals.
Threats of Substitute product or Services
Threat of substitute is low, because oil and gas, and natural reserves and almost everything around us needs oil or gas. In the near future, this ratio will go down because the companies are working on electrical appliances and gadgets. But it is not possible to totally replace the consumption and usage of oil or gas. The threat of substitute in oil and gas industry, in terms of product, is low, but the technology will evolve with time.
Rivalry among the prevailing Competitors
The rivalry in the global market is increasing, and the countries a making full efforts to dominate the oil and gas market. The trade is also growing in the oil and gas industry.
Environment-Organisation-Fit
Scanning Practices
The scanning practices are the process of analyzing the business issues and threats, alongside which, it also analyzes the external opportunities. These issues and opportunities affect the decision making of the company. So, the external scanning considers the trends, competition, customers, economy, labor supply and legal rules, technology and regulations. SIPC evaluates individual factors, especially:government rules and regulations, technology innovation, trends and economy fluctuations................
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