Strategic Development: Woodside Case Study Essay

Questions:

Briefly trace the development and growth of the organisation from its beginnings to the present through the application of corporate strategies – what types of strategies have these been?

There have been many criticisms of the business practices that company has pursued over the years. Describe TWO of these practices and outline the outcomes.

Perform an environmental analysis for the involvement of the organisation in the context of the industry(ies) it operates in – what are the main opportunities & threats?

Describe the organisational culture or leadership style within the organisation.

Answers:

Introduction

Woodside Company was registered to operate legally in Australia in 1954, adopting the name of the region. It has since maintained right strategies that have enabled it to grow over time and become the largest producer and supplier in the oil and gas industry in Australia (Woodside.com, 2017). The operational strategies of this company fall into four categories, which include; people and safety, economic, society and environment (Woodside.com, 2017). The mission, vision and operational structures of this firm are major determinants of its growth in both initial and advanced stages.

Growth and development in Initial stages

The operations and models used for development of this company in the early stages can be traced from 1950 to 2000. After registration and obtaining license in 1954, this firm has grown to acquire several oil fields and operational centers, its growth strategies can be explained using the following models;

Growth model: Growth refers to expansion and diversification of activities, (Bernal et al., 2010, p. 615). In this example, companies expand their operations through the development of more branches, acquisition of technology, and more production lines. Woodside has also adopted this strategy in its operations. Since registration, it has formed several operational centers, and projects, which have aided its fast growth and expansion. Some of the growth strategies conducted by this firm include; the discovery of Goodwyn gas and condensate fields in the west of North Ranking in 1972. Discovery of the Lambert oil fields located on the West Shelf, development and execution of Sunrise and Troubadour fields in Timor Sea in 1974 and the Luminaire oil fields found in Timor Sea, (Woodside.com, 2009)These show clear growth strategies.

These discoveries enabled the firm to expand its operations in both oil and gas fields. The company spent its initials stages of operation in development and improvement of new oil fields. Growth strategy requires utilization of resources to acquire new operational assets and technology.

Combination approach: The combination strategy is used by companies who adopt more than one models of operation, (Sigh, 2010). A firm can use either growth and stability or stability and retrenchment as a model to guide its activities, (Parnell, 2010, p. 305). In its initial stages of development, Woodside Company used both growth and stability. This can be traced from 1970 to 2000. The company went on to acquire new operational bases while retaining its old oil and gas fields as well. Retention of old oilfields shows stability, (Stojkovic, 2011). The oil fields discovered by this firm were put into operation upon attainment of registration and license from the Australian government. Some of the oil fields created in this period are the Cossack oil field, the Yodel gas field, and the Perseus and Hermes oil fields, (Stojkovic, 2011). The combination of these strategies enabled this firm to acquire more fields and at the same time operate the original areas held.

Growth and development of Woodside in later stages.

Firms have different levels of development, including, formation, growth, stability and decline stage. These steps are important determinants of success of business since the managers use them when designing management and development strategy for the firm, (Kitching et al., 2008). Between the years 2000 to 2017, Woodlands Company has continued to grow and develop its operational bases in several parts of Australia, (Woodside.com, 2017). This has been enabled through the adoption of a combination of growth and stability models.

Growth and stability: This orientation is always adopted by companies who need to expand their operations, regarding resources and workforce, and at the same time retain its useful achievements, (Bernal et al., 2008p. 548). The combination of growth and stability is vital for companies that need to constantly upgrade their technology, develop new operative structures, and enjoy the benefits of already existing projects.

After developing a market position in Australia, and being shortlisted in the stock exchange, Woodside developed a stability orientation. The company also continued to develop other sites like, The Woodside Pluto LNG which began operation in 2011 delivering cargos to Japan. The Pluto LNG later commissioned Woodside Rogers LNG vessel in 2013, (Woodside.com, 2017). These are some of the growth strategies developed in the later stages.

Using the Boston Group Model, products can be grouped into four categories; cash cows, stars, money traps and question marks, (Parnell, 2010, p. 305). The cash cows are products that have developed a high market share. Woodside Company in its late stages of growth established a position in the market as the largest manufacturer in the oil and gas industry. It, therefore, exploits this strength by using a combination of stability and growth to maintain the developed fields and acquire new fields at the same time.

The social aspects of a growth strategy for this organization can be viewed based on its corporate social responsibility practices. This company has always carried out activities that ensure the welfare of the community as a whole is respected (Woodside.com, 2017). It has programs directed towards cleaning the environment, since oil extraction results into dangerous emissions to the atmosphere (Woodside.com, 2017). Woodside participated in the Carbon Disclosure Project in 2007 and became a member of London Benchmarking Group in 2009. All these actions were geared towards ensuring effective corporate social responsibility.

Criticisms

Although the company has made tremendous progress in the industry, some criticisms have been launched by different stakeholders against the enterprise.

Criticisms by the community: This Company was criticized by Broome community members when it attempted to gain DIA permissions to enter into sand dunes located at James price point, (Stojkovic, 2011). The community members viewed this effort as unethical, and they held aerial protests to oppose it. The dunes were considered, culturally significant as they had original heritage sites.

Criticism by Friends of Australia Rock Art (FARA): The Company was blamed for damaging rock arts from the nearby oil mining practices, (Woodside.com, 2017). The allegations stated that air emissions from the mining sites posed severe damages to the rock arts. The members of the community, therefore, opposed the mining activities in the sites located next to rock skills.

Analysis of Woodside’s environment

Environment refers to the surrounding of the business. It consists of factors that may influence the business both negatively and positively, (Helms & Nixon, 2010, p. 215). The analysis of Woodside’s environment can be conducted using two approaches; PESTEL and SWOT analysis.

According to Yuksel (2012, p. 52), PESTEL analysis is a method that can be used to investigate the external environmental factors that affect business performance. Some of the factors influencing Woodside’s operations can be evaluated using this model as follows:

Political factors: These are factors associated with leadership style in a country and the structure of the government, (Gupta, 2013, p. 015). Political calm in Australia is one of the main reasons why Woodside has been able to thrive in business. However, the fluctuations in tax rates over time in Australia impose a great challenge to the Success of Woodside. The company is forced to comply with stringent government fiscal policies. This has always reduced the profitability of this business.

Economic factors: These are factors related to the status of the economy of a nation, (Yuksel, 2012, p. 52). There has been deterioration and consistent fluctuation of the value of the currency of Australia as compared to the dollar, (Connolly & Orsmond, 2011, p. 7). This imposes a great challenge to this company as it needs to compete with other global companies. Availability of credit and credit terms also impose significant challenges to companies whenever they want to obtain loans from banks. This has hindered this company from borrowing more funds for its expansion plans.

Social factors: Factors relating to the culture and norms of the society are classified as social factors, (Gupta, 2013, p. 16). Australian population consists of people with different cultural beliefs. The opinions of the society towards this company's corporate social responsibility among various communities in Australia differs. This company also faces a major cultural challenge in interacting with the communities living near its oil sources.

Technological factors: Technological growth imposes a major challenge to businesses, (Gupta, 2013, p. 13). This is because companies are forced to execute policies that would ensure it keeps track of the new technology in the market, (Yuksel, 2012, p. 52). To compete favorably with other companies like Santos, Woodside is forced to acquire technologically available infrastructure and processing facilities. This is a major challenge as it is expensive to administer technology in an organization. Woodside has made several technological improvements to compete favorably.

Ecological factors: These are environmental factors that affect business operations, (Gupta, 2013, p. 14). The oil and gas sources of Woodside are located in places with different climatic conditions, (Stojkovic, 2011). Some of these sources are situated in scorching areas making the employees at those sites find it difficult to adapt. This company, therefore, faces challenges faced by climatic changes, as Australia is prone to climatic variations.

Legal factors: The government in Australia imposes several regulations to businesses. Firms need to comply these regulations to operate peacefully, (Yuksel, 2012, p. 52). Woodside is always forced to renew its operating licenses and compliance with global environmental laws which may be expensive.

SWOT analysis

According to Zavadaskas et al. (2011), SWOT is a model used to evaluate the threats opportunities strengths and weaknesses of a particular firm. Strengths are factors that are fully developed in the enterprise while weaknesses are sections that are not entirely designed, (Helms & Nixon, 2010, p. 215). Opportunities refer to gaps that the environment avails to the business, while threats refer to factors that may contribute to the failure of the firm.

Woodside’s opportunities.

Opportunity to diversify its locations: Woodside is a well-established company with a broad range of equipment (Stojkovic, 2011). It also has an excellent credit rating in the global market. It is, therefore, capable of creating more branches worldwide and expanding its operations.

Opportunity to attain export parity pricing: This Company can commission its LNG projects to other countries like New Guinea, Papua, and Gladstone, to obtain export parity pricing (Woodside.com, 2017). This will enable it to make more profits and escape challenges imposed by fluctuations in the value of the currency.

Opportunity to create other lines of production: This company is old-established, (Woodside.com, 2009). It, therefore, has the required finance and appropriate credit rating that can allow it to venture into other lines of production apart from oil and gas and maximize its profitability.

Opportunity to tap other markets globally: This Company is the largest oil producer in Australia (Woodside.com, 2017). It, therefore, has the potential of exporting its oil to other untapped markets like Africa.

Woodside’s main threats.

Unfair competition: Santos is a well-established oil company in Australia. This company gives Woodside a very stiff competition, (Connoly & Osmond, 2011, p. 8). Woodside has not expanded its operations globally, while Santos operates in the global market creating unfair competition between the two firms.

Taxation variations: The tax laws in Australia are subject to change, (Connoly & Orsmond, 2011, p. 14). The company must comply with these tax legislation to operate legally. This may impose future operational difficulties when the taxes change against the expectations of the enterprise.

Variations in environmental and emission laws: Extraction of oil results into the emission of dangerous gasses to the atmosphere (Woodside.com, 2017). Companies are therefore obliged to comply with environmental laws that regulate emission levels. These rules are subject to changes and may change in future to the detriment of the company.

Decrease in consumption: Success of this endeavor greatly relies on the consumption level of oil and gas, (Hunter & Storey, 2008, p. 11). However, with an increase in the degree of usage of solar energy and electricity by households, consumption levels for this firm's products may decrease in future resulting into losses.

Woodside’s culture.

As explained by Berson et al. (2008, p. 633), organization culture refers to a combination of norms, beliefs, and values within the organization. The culture of Woodside is based on the integrity of every employee, respect teamwork, and discipline, (Woodside.com, 2009). The company has maintained this culture over the years, by identifying it as its primary success determinant. Woodside has also developed a culture of keeping its employees safe while carrying their duties, by encouraging teamwork.

Leadership styles.

Managers adopt different leadership styles, based on the cultures and values of the organization. Leadership theories define the approaches used by various leaders in directing their agencies, (Walumbwa & Schaubroeck, 2009, p. 1275). Don Voelte served as a CEO for Woodside’s until 2011 when he was succeeded by Peter Coleman. During his tenure as the CEO, he observed integrity and respect for all employees and shareholders, (Woodside.com, 2009). He attended board meetings and delivered reports as required. To be a good leader, one must have good leadership traits. This can be explained using the trait theory of leadership.

This assumption suggests that to be a leader, one must have the important qualities. Some qualities of a leader postulated by this model include; intelligence, decisiveness, honesty, and integrity, (Colbert et al., 2012, p. 672). During his tenure, Don Voelte, demonstrated honesty in dealing with the firms, transactions. This ensured the tremendous growth of this company, as there was no misuse of shareholders’ funds.

Don Voelte retired from Woodside in 2011 and was succeeded by Peter Coleman. The appointment of Peter Coleman was based on merit, (Stojkovic, 2011). During his speech, the chairman of this company assured shareholders that Coleman had good experience in the oil sector and leadership. This is a clear depiction of traits theory. The new CEO has strived to abide by the culture of the firm, by maintaining integrity, teamwork, and cooperation among employees.

Behavioral leadership theory

According to Derue et al. (2011, p. 11), this theory describes leaders using their actions. Some of the approaches to leadership according to this postulate are democratic, Laissez-faire, autocratic and democratic leadership.

In Woodside, the two CEOs used democratic leadership style, to conduct the activities of the firm. They allowed the employees to work freely, by demonstrating respect for all the staff, (Woodside.com, 2009). Voelte tried to promote openness, by providing persuasive speeches in board meetings to the shareholders, to help the keep track of how their funds were being used.

After taking leadership in 2011, Coleman, followed suit in encouraging honesty and openness in the organization. This has made the company to develop and outshine its competitors in the oil and gas industry, (Stojkovic, 2011).

Conclusion

In conclusion, it is apparent that Woodside Company has developed over time to become the Australia’s largest producer in the petroleum and gas industry, due to the adoption of clear growth strategies. It also has a strong organization culture that enables it to operate peacefully and interact appropriately with its environment. The management system in this company is based on transparency and honesty, making it thrive tremendously, compared other companies.

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