Question

A Market Development for Petronas purpose Petronas is featured in the opening chapter case as a firm that engages in excellent strategic planning, despite being hurt recently by falling oil prices.

The purpose of this exercise is to give you practice extending a company’s global strategy into new geographic regions.

Instructions

Step 1 Visit the website and review the company’s latest Annual Report. Especially assess where and in what respect does Petronas do business in Asia, Australia, and the Middle East. Identify six countries that Petronas currently does not do business with.

Step 2 Based on your analysis in Step 1, evaluate the six countries identified in terms of their business culture, environment, and attractiveness for Petronas to begin doing business there.

Step 3 Rank order the six countries identified and evaluated in terms of a proposed plan for Petronas to begin doing business in these places. Prepare a two-page executive summary to support your suggested plan.

Answer 1

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Visit the website and review the company’s latest annual report. Especially assess where and in what respect does Petronas do business in Asia, Australia and the Middle East.

Petronas is a company working in the whole world but has their main focus in Asia. They are represented in more than 50 countries worldwide and are involved in different businesses in different markets. The company’s headquarters are based in Asia as well as most of the wide spectrum of petroleum activities that the company is engaged in. The following list will give a clearer picture of what activities Petronas are engaged in, in each continent.

In 2016 annual report (as the latest annual report) Petronas stated that they have had a tough year and has been struggling with their financial results in the same way as the global economy has. The world economy has struggled with a weak labor market, low productivity and with political uncertainties which most definitely affected the businesses around the world. Renewable energy options is demanded more than ever because of the Paris agreement and it is now crucial for Petronas to offer what is demanded.

New projects started in Australia and North America which made Petronas LNG (Liquid natural gas) supply to increase. In Colombia, Jamaica and Malta the import of LNG slowly started for the first time. While in Asia pacific, the Middle East and North America the ethylene demand increased 3.3 percent.

2) Identify six countries that Petronas currently does not do business in. Based on your analysis in step 1, evaluate the six countries identified in terms of their business culture, environment and attractiveness for Petronas to begin doing business there.

AND

3) Rank and order the six countries identified and evaluated in terms of proposed plan for Petronas to begin doing business in these places.

There are a many possible countries for a successful company like Petronas to expand to. First of all there are a couple of countries in Asia left to expand in. Since the main focus lies in Asia and the culture here is similar there would be a normal expansion plan that is less risky. The business culture is quite similar, the countries are close by and the culture overall is similar. Following six countries could be of interest for Petronas:

Sri Lanka

A country within reach for Petronas to expand to. With the Ministry of petroleum resources in charge of the country’s energy supply and with CEYPETCO as their head competitor it might be tough getting into the petroleum market in Sri Lanka. It seems as there is some sort of petroleum monopoly in Sri Lanka with the government company CEYPETCO in charge although if Petronas get into the market in other ways than with petroleum products it might be a way of later on interrupting the existing monopoly.

Maldives

The Maldives is experiencing a steady growth in the tourism sector and is known for its luxurious resorts and beautiful oceans. The country is a good place for new investments because of the steadily increasing tourism and the government is currently seeking assistance for oil exploration. It would therefore be a good country to expand in.

Israel

Paz Oil Company (previous shell) is the leading oil company in Israel with 30% of the market share and will be a tough competitor in the country. Although new discoveries has been made in the country lately and they are currently undergoing an oil and gas exploration boom. Interest from giants in the petroleum industry has been rising and Petronas should also be involved in the process as a big actor in the business. With current uncertainties in the country and with the ongoing war in close countries like Syria it might be a bit risky to start business in this country. But on the other hand it might be a good time to enter when other companies might hesitate.

Afghanistan

Petronas has no current activities in this country but has ongoing activities in neighbouring countries like Iran, Uzbekistan and Kazakhstan. With a reform in the ministry of petroleum as of 2013 it will probably be a good time to invest in this country. Since they have such a new ministry with new regulations it means that the competitors are quite new as well which could be favorable. Although it is still quite unsafe to be in Afghanistan because of the ongoing war which makes an investment questionable.

  Venezuela

As a holder of the world's biggest oil reserve this is the country to be in when in the petroleum business. The country is currently facing some problems since the governments national oil company PDVSA is suffering with financial problems and most of the oil is therefore still not accessed. But the government is in charge of the majority of all projects and are greedy in the way that they won't let international actors take on bigger parts of the investments. But Petronas should at least take on some minor project in the country and be awake if some governmental changes will be made as predicted.

Mexico

The country has most recently opened up the gulf territory for international investors and even though Petronas already has both upstream and downstream investments in this country they should start a project delivery & technology here as well. Since the newly opening for foreign investors it is important to allocate many resources to this area since it now is under development and new market shares could be addressed.

1. Mexico - Because of the recent decision to open up for new investors. A good place investments in order to get market shares.
2. Maldives - Because of the rise in tourism sector this is a hopefully a market that will grow.
3. Venezuela - A country to make a small investment in and be aware of governmental changes that might occur.
4. Israel - Might be a bit risky because some conflicts in the country but they are experiencing an exploration boom that Petronas should take part in.
5. Sri Lanka - A country in the Asian area with similar culture as Petronas are used to.
6. Afghanistan - A new petroleum admission which is a positive thing but the ongoing war would not make an investment favorable.