Strategic Analysis Report: Tullow Oil

Strategic Analysis Report: Tullow Oil
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Strategic Analysis Report: Tullow Oil
Executive Summary
Tullow Oil is a business specializing in exploration and production of oil and gas in emerging markets in Africa and South America. This strategic report analyzes the internal and external environment for the business. The analysis provides the recommendations needed to ensure that Tullow Oil remains competitive in the industry. A reflection of the module is done to establish the essence of the course.
Introduction
Tullow Oil is a UK-based independent oil and gas company focused on Africa and South America. Founded in 1985, Tullow Oil has become one of the largest exploration and production companies. It has interests in more than 30 exploration and production licenses across eight nations (Tullow Oil, 2023). The business focuses on discovering and developing oil and gas resources in emerging markets through exploration, development, and production. Entering emerging markets has enabled Tullow Oil to employ its technical expertise in challenging environments. The business remains committed to sustainability through its understanding of the needs and demands of its stakeholders.
Current Situation of your Company
External Environment
* PESTEL
Political: Regulatory changes in the various countries where Tullow Oil operates impact the business's operations. For instance, in 2018, Tullow Oil shut down its oilfield operations because of unrest (Reuters, 2018).
Economic: Fluctuations in oil prices impact revenue for businesses in the oil and gas exploration and production industry (Sulemana, 2020). Tullow Oil is forced to incur heavy losses when prices drop below the cost of production.
Sociocultural: Tullow operates in different countries which have different cultures. The business must adapt its operations to meet local expectations (Reeves & Deimler, 2012).
Technological: The emphasis on renewable energy sources could reduce the demand for oil and gas (Gielen et al., 2017). This could disrupt Tullow’s business model.
Environmental: Tullow may encounter pressure to minimize its carbon footprint and employ more sustainable practices. Oil and gas explorers face increasing pressure to reduce their cabin footprint (Okeke, 2021).
Legal: Breach of contractual obligations could adversely impact how Tullow operates.
* Porters 5-forces
The threat of new entrants: The threat of new entrants in the oil and gas industry is low due to the high capital requirements, posing as a barrier to entry (Hokroh, 2014). Businesses in the exploration and production of oil and gas need heavy capital, which most new entrants may not have.
Bargaining power of suppliers: The bargaining power of suppliers is moderate. The oil and gas industry is competitive with many suppliers, which reduces the bargaining power of any suppliers (Taha, 2014).
Bargaining power of buyers: The bargaining power of buyers is moderate since Tullow has different buyers. The availability of alternative suppliers allows buyers to negotiate prices.
The threat of substitutes: The threat of new entrants to the market is high due to the availability of cleaner sources of energy like solar, which are becoming popular. Tullow needs to diversify its product portfolio to include renewable energy.
Rivalry among existing competitors: The rivalry among competitors is high due to the availability of many players in the market (Alonso-Alvarez, Di Nino & Venditti, 2022).
Internal Environment
* VIRO
Valuable resources: Tullow Oil has valuable resources like its expertise in exploration and production. Further, the business has access to capital, which allows it to venture into more countries, especially in the least developed world.
Rare resources: The business is known for its capability to develop new resources in challenging environments. Tullow Oil is bold enough to explore and produce oil and gain in countries experiencing political unrest. It can also venture into difficult environments as it has done offshore Ghana. Such a rare resource sets it apart from other players in the industry.
Inimitable resources: The patents of Tullow Oil are difficult to imitate since it is not legally allowed to imitate a patented product. Developing similar products and getting them patented is expensive. Further, the distribution network of Tullow is difficult to imitate competitors since it has been developed over a long period.
Organizationally supported resources: Tullow Oil's resources are organized strategically to make use of the available opportunities and reduce threats.
* Value Chain
There are several aspects of Tullow Oil’s value chain. Firstly, the operations of Tullow Oil entail the exploration and production of oil and gas. The business has invested resources to get the needed technology to optimize its operations (Oil, 2019). Secondly, Tullow Oil has invested a lot in marketing and sales. The business identifies potential buyers and makes contracts with them. The sales and marketing strategies have allowed the business to maintain good customer relations. Thirdly, the business undertakes inbound logistics, sources for the necessary licenses, engage with suppliers, and manages the entire supply chain. Lastly, the company undertakes outbound logistics, selling its products to consumers. Tullow Oil has invested in a strong transportation network to ensure that oil and gas reach clients.
Analyzing Strategic Choices
* SWOT Analysis
Strengths: Tullow Oil has strong technical expertise in the exploration and production of oil and gas (Mullins & Wambayi, 2017). This expertise allows it to venture into challenging markets. Additionally, the business has access to capital markets, allowing it to raise the capital needed to sustain its operations.
Weaknesses: The business over-relies on merging markets, vulnerable to political instability. Such markets are likely to disrupt business operations and significantly affect profitability. According to Statista (2023), Tullow Oil has seen its revenues decline since 2012 by 45%, as shown in the figure below.
Figure 1: Sales revenue of Tullow Oil from 2012 to 2022 (in a million U.S. dollars)
Opportunities: The emerging markets in South America and Africa allow the business to continue expanding its market. Moreover, technological advancement has made oil and gas exploration and production more efficient. The business can leverage technicity to improve its processes and reduce costs.
Threats: Oil and gas exploration and production are highly competitive, with more established companies seeking to dominate the market (Stevens, 2018). Tullow Oil faces stiff competition, which could adversely affect its profitability. Additionally, there is increasing pressure from environmentalists for individuals and organizations to reduce their carbon print. There is a shift from oil and gas to more renewable energy sources like solar and wind, which could reduce the demand for oil and gas in the future.
* TOWS Analysis
Strengths-Opportunities: Since Tullow Oil has strong technical expertise, it can use it to increase its portfolio in emerging markets. This will allow the business to increase its market share in emerging markets.
Strengths-Threats: for Tullow Oil to maintain its competitive advantage, it can use its relations with suppliers to negotiate better deals, lowering the cost of its operations. Such a move will...