Question

Discuss the major developments that took place during the rise of seven-sisters (1928 – 1960) in the Pre – OPEC era.

bi) Distinguish between Economic Investment Analysis and Financial Investment Analysis.

ii) What is economic analysis?

Answer 1

SOLUTION

1 MAJOR DEVELOPMENTS DURING THE RISE OF SEVEN SISTERS

On August 28, 1928, in the Scottish highlands, began the secret story of oil. Three man had an Achnacarry Castle - a Dutchman, an American and an Englishman. A Dutchman was Hendry deter ding, a man nicknamed the Napoleon of oil, having exploited a find in Sumatra. He joined forces with a rich ship owner and painted shell salesman and the two men founded the royal Dutch shell. The American was Walter C. Teagle and he represents the standard oil company, founded by John D. Rockefeller at the age of 31 - the future Exxon. Oil wells, transport, refining and distribution of oil - everything is controlled by standard oil.

The Englishman, Sir Johncadman, was the director of the Anglo - Persian oil company, soon to become BP on the initiative of a young Winston Churchill, the British government had taken a stake in BP and the royal navy switched its fuel from coal - oil. With fuel hungryships, planes, tanks, oil become,

" The blood of every battle"

The new automobile industry was developing fast, and the Ford T was selling by the million. The world was thirsty for oil, and companies were waging a merciless context but the competition was making the market unstable.

That August night, the three men decided to stop fighting and to start sharing out the worlds oil. Their vision was that the protection zones, transport costs, sales price everything would be agreed and shared. And so begun a great cartle whose purpose was to dominate the world by controlling its oil

Four others soon joined them and they came to be known as Seven sisters - the biggest oil companies in the world

b) 1 ECONOMIC INVESTMENT ANALYSIS AND FINANCIAL INVESTMENT ANALYSIS

ECONOMIC INVESTMENT ANALYSIS

Economic analysis helps assess sustainability of investments that will help improve the welfare of the beneficiaries and the country as the whole. And also the economic investment analysis must be coordinated with the institutional, Financial, environmental, Social and Poverty analysis, forming an integral part of investment appraisal.

FINANCIAL INVESTMENT ANALYSIS

Financial analysis is the examination of a business from a variety of perspectives in order to fully understand the greater financial situation and determine how best to strengthen the business. The financial analysis looks at many aspects of a business from its profitability and stability to its solvency and liquidity.

2) ECONOMIC ANALYSIS

Economic analysis is the study of economic system. It may also be a study of a production process or an industry. The analysis aims to determine how effectively the economy of something within it is operating. They measure, in monetary terms, what the benefits of a project are to the economy or community. In business economic analysis allows to incorporate elements from the economic environment such as inflation, interest rates, and exchange rates, GDP growth into the cooperate planning. Every organization is an open system that impact and is impacted by the external context this means that's a proper assessment of the economic variable facilities the identification of opportunities and threats that could effect the companies performance.

EXAMPLE

Kleyton industries harvest wheat in large quantities and produce a narrow range or wheat based products. It exports most of the production to low and middle income countries. A new board of directors consider that a more complete process of strategic planning should be made to be adequately prepared for uncontrollable variables affecting the worlds economy. They decided to conduct an economic analysis with a help of an expert consultant as a first step to develop a coperate planning.