The Impact of Globalisation on PETRONAS
Introduction
The world was undergoing tremendous change even before the horrors of 11 September. Both democracy and the market economy have proliferated globally since the collapse of communism, and revolutionary developments in communication and information technology have helped trigger an increasing interdependence between countries at an unprecedented pace. Further, the end of the Cold War signalled the displacement of ideological obstinacy in favour of a heated pursuit towards economic advancement and competition for resources and technology. Economic statecraft, whereby nations use trade, loans, grants and investment to influence the action of other states, is now becoming more important.
Globalisation around the world – has been one of the most hotly-debated topics in international economics over the past few years. Rapid growth and poverty reduction in China, India, and other countries that were poor 20 years ago, has been a positive aspect of globalisation. But globalisation has also generated significant international opposition over concerns that it has increased inequality and environmental degradation. The most common interpretations of globalisation are saying that the world is becoming more uniform and standardised through a technological, commercial and cultural synchronisation coming from the West. These perspectives equate globalisation with Westernisation. However, there are other assessments that argue from viewing globalisation as the process of hybridisation, which gives rise to a global melange.
In this regard, this paper attempts to evaluate the impact of globalisation on Petroliam Nasional Berhad (PETRONAS). Basically, the major focus of the international marketing strategy of PETRONAS or Petroliam Nasional Berhad is to adapt to the globalisation scheme. The changes in the environment had been sharply perceived by PETRONAS, as it operates both within and beyond its national boundaries. PETRONAS today is continuously growing; its main objective is to be famous in providing organisations and consumers with oil and gas. PETRONAS is most commonly referred to as the number one oil and gas resources in Malaysia and is entrusted with the responsibility of developing and adding value to these resources. The major concern of this analysis is to determine the level of the company to be geographically positioned in accordance with globalisation degree and with the strategic issue at stake locally and globally. It will be analysed through the use of different models and theoretical concepts in the marketing analysis.
Globalisation
The different strategies in different markets helped the company have an initial feel of the different markets. The different strategies also helped the company have a better understanding of how the market works. The different markets help in introducing to the company the cultures and characteristics of the markets thus it became educated with how to adjust in the different setting. Lastly the different strategies helped in making sure that the company encounters lesser problems while starting up a new market. By using different strategies the company has not committed anything that will give it more problems. In developed countries it is somewhat easier to enter because they usually have fully developed communications, distribution and transportation systems, to name but a few facilitating factors.
According to (2006), the most successful global businesses are aggressively building their global strategies around these themes: (1) increased market access because of the opening up of markets in China, Central and Eastern Europe; (2) increased market opportunities because of the deregulation of many markets, such as the financial market and privatisation of state-owed utilities; (3) greater uniformity pf industry standards, encouraged, for example, by the European Union; (4) sourcing of products and components initially, but more recently services, too, from a wider range of countries, particularly those emerging markets with a high ratio of skills to cost; (5) more globally standardised products and services, particularly in areas of new technology, but increasingly in more culturally sensitive product areas, such as food; (6) common technology used in many more markets, particularly in areas of information technology, when there is a high cost of research and development that must be recovered through sales in many countries; (7) similar customer requirements leading to transnational customer segments, resulting from increased communication and travel; (8) competition from the same organisations in each major market and thus interdependence of markets; (9) global organisation strategies that increasingly treat the world as one market, among several other themes.
Marketing is a universal activity that is widely applicable, regardless of the political, social and economic systems of a country. However does it nor mean that consumers in all parts of the world must or should be satisfied in exactly the same way (). This is largely the effect of globalisation to the formulation of international marketing strategies, the insertion of the adaptation of such strategies to the particular country in which the company or any international business operates. Consumers from various countries are significantly different due to varying culture, income, level of economic development, and so on. Therefore, consumers may use the same product without having the same need or motive, and in turn may use different products to satisfy the same need.
Company Profile
Background
PETRONAS, short for Petroliam Nasional Berhad, is a Malaysian owned oil and gas company that was founded on August 17, 1974. Wholly owned by the Government, the corporation is vested with the entire oil and gas resources in Malaysia and is entrusted with the responsibility of developing and adding value to these resources. PETRONAS is ranked among Fortune Global 500's largest corporations in the world.
Since its incorporation PETRONAS has grown to be an integrated international oil and gas company with business interests in 31 countries. As of the end of March 2005, the PETRONAS Group comprised 103 wholly owned subsidiaries, 19 partly-owned outfits and 57 associated companies. Together, these companies make the PETRONAS Group, which is involved in various oil and gas based activities.
Business Mission and Objectives
"We are a business entity"-- PETRONAS and its Group of Companies are on-going enterprises organised and run in a rational, economic and commercial manner with the purpose of enhancing its shareholders' value or wealth. This means that it must conduct itself in a professional, ethical and business-like manner where sound business principles such as clear business objectives, growth and profitability, and being customer-focused are the way of life in the corporation. To achieve this, PETRONAS must be committed to enhancing the capability of its employees, as a corporation is only as good as the people who work for it.
"Petroleum is our core business"-- PETRONAS focuses its energy and allocates its resources to petroleum business, which is its core business. This includes the integrated chain of activities covering exploration, development and production of oil, gas and condensates; refining, trading and supply; marketing; distribution; petrochemicals and other manufactured petroleum products and derivatives. PETRONAS may also undertake other non-petroleum businesses that reinforce its strategy and performance of its core business. To ensure continued future supply of petroleum for Malaysia as well as continued skill building in its core business, PETRONAS would selectively seek opportunities overseas to explore and secure new reserves and develop and add value to these resources.
"Our primary responsibility is to develop and add value to this national resource"-- Petroleum resources are the national resource of a nation, be it Malaysia or any other country in the world. PETRONAS' mission is to develop and add value to these resources wherever it operates, converting these resources into higher-value products that would satisfy the needs of customers and bring benefits to the people.
"Our objective is to contribute to the well-being of the people and the nation"-- PETRONAS' goal is to contribute to the well-being of the people and nation where it operates. To fulfil this role, all of its business activities must be viable and profitable. PETRONAS' contributions - designed to assist in enhancing the quality of life of the people and help in the development of the nation - include the provision of quality petroleum and related products and services at a fair price; promoting and creating business and job opportunities in the petroleum industry; enlarging the country's industrial base; and ensuring safe and clean environment.
Corporate Strategy
The Group is engaged in a wide spectrum of petroleum activities, including upstream exploration and production of oil and gas to downstream oil refining; marketing and distribution of petroleum products; trading; gas processing and liquefaction; gas transmission pipeline network operations; marketing of liquefied natural gas; petrochemical manufacturing and marketing; shipping; automotive engineering; and property investment.
International Business Strategy
Born out of a need to serve Malaysia and its people, PETRONAS has been genuine in fulfilling national aspirations. The people it deals with on a daily basis acknowledge and commend its strong sense of duty to the nation and its employees loyalty to the organisation.
PETRONAS' passionate spirit is one of its most enduring traits and has been largely responsible for its business success. As a group, it is committed towards excellence and progress. It continually pushes its own limits to discover new strengths and capabilities. As it grew and expanded into other corners of the globe, it retained these valuable traits, exporting its own unique economic model that espouses a philosophy of "Growing With The Nation" wherever it operates.
In contrary to the international business strategy of PETRONAS is the perception that going global does not mean that the company must necessarily have a presence around the world. This simply means that the company must perceive global competition and global markets and has determined the best strategy to prosper in that environment. The word “global” means the entire world, but is made up of smaller, more individual geographic entities, beginning with the market in a particular state or province and extending beyond, thus, does not limit only to the participation of large manufacturers (2002).
Effects of Globalisation on PETRONAS
Value Chain
In order to understand clearly the activities leading to a competitive advantage in petroleum business, an organisation can begin with the generic value chain and then identify their relevant activities. Thus, process flows can be mapped, and these flows used to separate the individual value–creating actions.
Once the prudent actions of an organisation are defined, connections between actions should be identified (Porter, 1986). A connection is present if the performance or cost of one action affects that of another. As stated, competitive advantage may be acquired by optimising and coordinating linked actions.
Value-chain analysis appears at every step of an organisation goes through, from raw materials to the output. The objective is to deliver greatest value for the least possible total cost. The value chain also is useful in outsourcing decisions. Understanding the connections between actions can lead to best decisions that can result in either a cost advantage or a differentiation advantage. The goal of these activities is to create value that exceeds the cost of providing the product or service, thus generating a profit (2000). In the case of PETRONAS, the entire operation of the business should be examined and evaluated in order to determine the service delivery processes that strengthen as well as weaken the business. This will result to managerial options to eliminate the liabilities that detract the business or the need to developed and intensify some aspects of the operations.
Porter's Diamond
Globalisation plays significant role and effect to different businesses. PETRONAS has company extensive promise to milieu in providing secure and vigorous environment for the employees and for the community. Actually, PETRONAS is devoted to scheming, creating, upholding and operating amenities that guard the people in terms of physical resources. As part of globalisation changes and international approach of the company, PETRONAS is committed in reducing the crashing of business in environment through protection and recycle ways and use of energy programs in promoting dirt free air also water and decrease landfill squander as stated in universal system of conduct as based on subsequent environmental philosophy such as the following:
Ø The business industry is mannered by fulfilling the appropriate laws and system and provide secure and vigorous milieu
Ø minimise the collision of PETRONAS business on situation through techniques that are publicly accountable and systematically base and efficiently thud like for example materials recycle ways and maintenance
Ø mounting program that encourage dirt free air as well as water and power conservation and the decrease of land wastes
Ø through sustaining programs that inform and educate as well as motivate PETRONAS employees to help preserve good atmosphere
Ø By assisting together with diverse business organisation in finding answers for diminishing pollution problems and the back-up process applied to ecological policies
PETRONAS is able to offer service required by the customers and the employees are motivated to optimise input and obtain practice in diverse areas of operation like for instance, if PETRONAS decided to surmount the international market so there can be options the company will come across and it is important that the management of PETRONAS should choose marketing strategy that is suitable for their products and services being offered for the PETRONAS to be more competitive as there can be stabilisation of political as well as economic power as there is the providing of needed environment encouraging to marketing activities as well as overseas investments. Likewise, culture is imperative feature in understanding PETRONAS’ market status as the company operates effectively for universal position as to how business culture will pressure PETRONAS’ market efficiency for their success and or failure.
Manufacturing and/or Services
In regards to the globalisation practices of PETRONAS, technology tends to affect the business process of the organisation. In the case of PETRONAS, when production technology is high, production will become more efficient that can lead to increase in supply. However, technology is not the only factor of production existing in the producer’s plant. There exist more complex interrelationships between these factors to be able to exploit the improved efficiency of one. The most crucial of all is governing human resources. Without proper guidance from the leaders of a firm, production efficiency will not hold because of resistance, de-motivation or just a plain technological ignorance. Technology is not 100% automated and human intervention as well as errors is inevitable. In addition, technology may also be intended for a specific segment of the industry, say, large corporations. As such, aggregate supply may not necessarily increase because small entrepreneurs who cannot afford to buy the technology cannot contribute in increasing supply.
Operation
In business operation of PETRONAS, the general rule is that when the cost of operation in global business will rise, producers will cut back on product leading to decrease in supply. However, the evidence of the price-sensitive oil and exporting industries continuing their businesses is a primary exemption to the rule. The existence of learning curve, oligopolistic market structures and risk diversification of large international firms has the ability to absorb price shocks to the cost of inputs, technology, organisational changes and government polices (e.g. taxes). As observed, there is an eminent presence of rationality exemplified by these producers. Since they have the financial, structural and strategic depth, they enter an industry which has dynamic and unpredictable cost of production. In this way, they may have financial loss from time-to-time, but long-term gains will be pervasive due to the opportunity to dominate the market.
Global Marketing Strategy
To promote the company and its product in global marketing context, the company may use TV/video advertisements, print advertisements and the concept of e-marketing. Business meeting were also imposed by the company to reach their target market. These promotion and communication strategy will tend to meet the consumers from different places everywhere in the globe, especially those target markets or consumers that needs oil and gas supplies. As part of promotion strategy, PETRONAS should made it a regular practice to move its best managers from positions in one business unit to assignments in the other two business segments to promote the transfer of skills, practices, know-how, and innovative ideas from one business to another because it is believed that such shifting of key personnel helped PETRONAS capture strategic fit relationships among its different businesses, build stronger competitive capabilities, and keep managers’ thinking fresh and innovative.
Global Competition
One of the impacts of globalisation is the increase in competition among other firms in the same industry. A global firm (e.g. PETRONAS) may be in a better position to compete with its global rival, as it can enhance its resources globally ( 2003). Being able to participate in its foreign target market makes the global firm more advanced and more developed compared to its rivals in the same industry, for it is able to meet the standards and demands of its foreign customers. From this perception, major suppliers and stakeholders would prefer the global firm to other firms.
To attain success in globalisation, PETRONAS should be also aware to the possible effect of competitions. Rivalry analysis, price tactics, marketing strategies and business development procedures should be carefully evaluated.
Functional and Business Strategies
Marketing
A lot of business organisations and companies engage in and focus on international marketing, with the desire for more profits, sales and recognition from consumers. International marketing also allows business organisations opportunities for further development and improvement, in terms of their products, services, strategies, systems, and operations. This is because international markets offer vast business opportunities for firms with a product or service in high demand, in line with newness, cultural adaptation, attractiveness, and appropriate marketing strategies that can assist them particularly (2007). In addition, when PETRONAS focus on international marketing, they are given the chance to gain more knowledge and information in their industry, thus, having the opportunity to provide more innovative services and products to their consumers. Merging, acquiring and partnering with local companies have been a key component of PETRONAS’ international expansion and response to globalisation.
Production/manufacturing
The several macro factors, which affect the global market and the business organisations are important to assess and examine for they can largely determine the success of the business organisation in the market. PETRONAS must be able to have skills in developing new products and innovating new technologies to cope with the changes happening in the society today. Along with developing new products, PETRONAS must also produce effective marketing strategies to provide solutions to the challenges that they face. In addition, it will also be necessary to anticipate problems and plan, in case a specific problem comes their way. This would help the company prepare and come up with alternative solutions for easy implementation of plans.
Human Resources
As part of the business advantage of PETRONAS in globalisation, the company should continue recruiting and retaining the best and brightest in a variety of exciting and challenging fields. As their practice, PETRONAS tends to discover these talents from amongst the local and overseas graduates.
In partnership with their continuous business growth, they should continue the talent search exercises to meet their increasing human resource needs. It is also admirable that PETRONAS offers occupational mobility along either the technical or managerial tracks, and ample opportunities for learning and growing.
Conclusion
Over the last few years, the importance of international marketing has increased as globalisation has increased the range of possible opportunities for proactive organisations with aggressive growth strategies. To develop the capabilities of PETRONAS to make effective strategic marketing decisions, they need to have the ability to understand the changing dimensions of the market in which they operate and the impact this has on their competitive advantage. They need to be able to challenge the traditional thinking and develop an innovative culture through learning and knowledge management in order to re-orientate and reformulate competitive strategies, in order to sustain their advantage in the market. They must have the ability to appraise strategic marketing decisions and assess strategic options with regard to the potential return on any investments made.
Credit:ivythesis.typepad.com
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