Running Header: ANALYSIS of STRATEGIC CONTEXT for PROJECT

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Running Header: ANALYSIS OF STRATEGIC CONTEXT FOR PROJECT

Darren Naugler

AspenUniversity: Module 2: Analysis of Strategic Context for Project

June 26, 2017

The oil and gas industry is infused with challenges and opportunities. It has been found that change management is an essential aspect in respect of running the oil and gas industry and it has also been found that enhancing formal and informal channels and modes of communication are essential to give the change management process a proper shape. In this regard, it must also be noted that there are certain primary dynamics in the oil and gas companies’ external environment that create both threat and/or opportunity for the organizations and for the industry as a whole.

The political environment in which the oil and gas companies conduct business should be considered both the source of challenges and opportunities. There are certain issues that are influenced by the external political environment and such factors, in terms of analyzing the modes of operations of the oil and gas industry, must be divided into factors like geopolitical conflicts, political instability, indigenous control of the oil and gas industry by the governments of respective nations, etc. (Pitatzis, 2016). It is noteworthy that “The presence of the significant amount of oil and gas reserves in a country can begin civil wars, and increase corruption. These side effects are known to the world as “resource curse.” All of the above, it is obvious that are barriers for foreign oil and gas companies to invest in these countries” (Pitatzis, 2016). So, it can be seen that if the political regime of a country is liberal then there are chances for the incoming of foreign direct investment (FDI) into the oil and gas industry of the concerned nation. But it is also a truth that if there is political instability then that would eventually hinder the process of smooth inflow of FDI into the concerned economy. Moreover, economic and governance policies are external factors that have the potential to impact negatively on an oil and gas company operating either domestically or internationally. In this respect, it must be noted that “Each government has the legal right to change the national taxes for oil and gas industry profits. If the government increases these specific taxes, then oil and gas companies can face many problems such as decreasing profits, the uneconomic feasibility of expensive oil and gas projects and significant implications in their future corporate strategic and economic planning” (Pitatzis, 2016). Furthermore, in respect of the external factors related to the economy, it must be noted that global economic crises and problems like the bankruptcy of large commercial banks can have drastic negative impacts on the oil and gas industry. Moreover, issues like shadow banking also impact negatively on the operations and business of oil and gas companies in any developing economy (Pitatzis, 2016). Environmental regulations are also to be considered as external factors that may either impact negatively or positively on the operations of oil and gas companies. In this respect one must take into account the fact that, “the recent global environmental trends for decreasing CO2 emissions, reducing the use of fossil fuels in the global energy mix and increasing of renewable sources of energy in the global energy mix can shape up the whole global oil and gas industry” (Pitatzis, 2016). Furthermore, external economic factor like tax changes also renders thorough impact on the oil and gas companies like any other companies belonging to any other industry. It is to be noted that, “Proposed Tax changes also have the industry on high alert during the election year. The elimination of federal income tax deduction was cited by 73 percent of companies, dramatically increasing from just 43 percent in 2011” (Hall, 2012). Also, it must be noted that among the external factors that may impact negatively on the operations of oil and gas companies are factors like regulatory and legislative changes and the increase in the cost of compliance (Hall, 2012). Moreover, volatile oil and gas prices also tend to impact negatively on the business of oil and gas companies (Hall, 2012). Often it has been seen that in developing economies the inability of oil and gas companies to expand reserves or to find replacement resources/reserves also should be considered as external factors that may impact negatively on the business of oil and gas companies (Hall, 2012). Besides, operational hazards like blowouts, oil spills, and personal work hazards also act as disruptions to the operations of oil and gas companies (Hall, 2012). Uncontrollable external environmental factors like natural disasters and extreme weather conditions also act as hindrances to the operations of oil and gas companies (Hall, 2012). Moreover, in many developing economies external economic factor like the wrong evaluation of reserve and inadequate liquidity or access to capital and indebtedness also contribute to the decline in the operations of oil and gas companies (Hall, 2012).

In the lights of modern economic crises and changing facets of globalization, the aforesaid external factors and their negative impacts have been changing drastically. The changing externalities have the potential to impact either negatively or positively on the process of change management. In this respect, it must also be noted that the communication patterns conducive to the proper management of change in the oil and gas industry also are impacted thoroughly by the concerned external factors. Proper infusion of formal and informal channels of communication is an imperative for securing success in the sphere of change management. Change is about uncertainties and if uncertainties are not explained and conveyed properly to the stakeholders to the uncertainties then the entire process of change could turn into a disaster. Resistance to change is quite prevalent in the oil and gas industry (just like any other industry), and it is in the context of overcoming such resistance that a proper communication plan must be developed in the context of change management. It is noteworthy in this respect that, “Managing change has received increasing attention as both internal and external factors accelerate their pace and challenge organizations to respond accordingly. An integral part of the strategic change is effective internal communication that corresponds to each stage of the strategy” (Stoyanova, 2011). In the lights of changing external environment the ambiguities and uncertainties related to change are affecting employee performance in the oil and gas industry, and to address and mitigate the problem what the management of oil and gas companies need is to give more emphasis on the process of communicating to employees as internal stakeholders the actual result and outcome of the change that would be ushered organization-wide (Stoyanova, 2011).

Diversity in the workforce, economic instabilities, market price volatility and governmental regulations all can add to the dilemmas that the oil and gas companies are recently facing. But it would be necessary on the part of the management of such companies to develop and eventually keep in reserve communication plans that would be implemented in the course of organizational change. As Barrett has suggested (as cited in Stoyanova, 2011) in the sphere change-related uncertainties, considering the influence and impacts of micro economic and macro-economic factors, it is imperative for the management of an oil and gas company to launch a planned communication strategy that could help the management in informing the internal stakeholders in a timely manner about the predicted outcomes of such change process (Stoyanova, 2011). Management of oil and gas companies should never forget the basic philosophy (in the course of managing change and improving communication) that “Allowing employees’ voices to be heard can develop a better understanding of how internal communication can facilitate strategic objectives” (Stoyanova, 2011). In the oil and gas industry, just like in any other volatile industry where change is the only constant, “understanding people’s responses to change is instrumental in fostering their support and reaching organizational goals for the sake of mutual benefit” (Stoyanova, 2011). It has been often observed that external factors like political decisions and political plans, policies, and strategies bring about a demarcation between the point of view of the management and the employees in respect of change management efforts. For the change strategists, the management, change is a need whereas for the change implementers and change recipients, the employees, change is pure uncertainty (Stoyanova, 2011). The political environment that surrounds the oil and gas industry makes it impossible for employees to attain the position of decision makers, and this inability is a primary source of confusion among the change implementers and recipients. It is noteworthy in this respect that due to differences of political character, these…actors in the change process perceive the communicated strategic objectives in often conflicting ways” (Stoyanova, 2011). Hence, it can be seen that a proper communication plan and strategy should be developed and implemented in order to bridge the gap that exists between the way of thought of the employees and the senior management in the course of change management in the context of oil and gas industry. Also, external factor like technological advancement has also made it quite essential for the senior management of oil and gas companies to develop a change management plan based on the essence and philosophy of effective communication. In this respect, one must take into account the fact that, “Members of modern organizations enjoy an unprecedented freedom to voice personal opinions both throughout and outside the workplace. The speed of media allows for fast sharing of messages that can affect organization both directly and indirectly. Therefore, change management needs to effectively listen and communicate with employees”( Stoyanova, 2011). Hence, it can be seen that the changing faces of externalities provide ample opportunity for the management of oil and gas companies to infuse developments in the change management strategies by taking into account the influence of external factors on the internal communication processes. Besides, just like any other volatile industries, the oil and gas industry should also be aware of the fact that, “internal communication is used during strategic change as perceived by employees themselves. This, in turn, will help identify the effective and the ineffective practices utilizing internal communication in change” (Stoyanova, 2011).

In conclusion, change management is an essential aspect in respect of running the oil and gas industry and it has also been found that enhancing formal and informal channels and modes of communication are essential to give the change management process a proper shape. In this regard, it must also be noted that there are certain primary dynamics in the oil and gas companies’ external environment that create both threat and/or opportunity for the organizations and for the industry as a whole. In respect of the external factors related to economy it must be noted that, global economic crises and problems like bankruptcy of large commercial banks can have drastic negative impacts on the oil and gas industry. Moreover, in many developing economies external economic factor like wrong evaluation of reserve and inadequate liquidity or access to capital and indebtedness also contribute to the decline in the operations of oil and gas companies. Diversity in the workforce, economic instabilities, market price volatility and governmental regulations all can add to the dilemmas that the oil and gas companies are recently facing. But it would be necessary on the part of the management of such companies to develop and eventually keep in reserve communication plans that would be implemented in the course of organizational change. Diversity in the workforce, economic instabilities, market price volatility and governmental regulations all can add to the dilemmas that the oil and gas companies are recently facing. But it would be necessary on the part of the management of such companies to develop and eventually keep in reserve communication plans that would be implemented in the course of organizational change. Finally, it must be noted that the changing externalities have the potential to impact either negatively or positively on the process of change management. In this respect, it must also be noted that the communication patterns conducive to the proper management of change in the oil and gas industry also are impacted thoroughly by the concerned external factors. Proper infusion of formal and informal channels of communication is an imperative for securing success in the sphere of change management.

Additional analysis needs to be conducted on the implementation of change management during execution of major capital projects in the oil and gas sector. Industry-wide opportunity to improve the implementation of the change management processes and communicationswill result in capital and operation cost and schedule savings.

References

Hall, C. (2012). Factors that Could Threaten the Oil & Gas Industry in the Future. Retrieved June 23, 2017, from

Pitatzis, A. (2016). PEST Analysis For Global Oil and Gas Companies Operations. Retrieved June 23, 2017, from

Stoyanova, T. (2011). Strategic Change Management and the Use of Internal Communication: The case of HP. International Business Communication. Aarhus School of Business, University of Aarhus Department of Language and Business Communication, 3-82.