Global Corporate Strategy: Case Study of the Oil, Gas and Petrochemical Industry2008Executive SummaryThe global oil and gas industry is characterized by a set of paradoxes in which the large and growing yet complex business environment provides immense opportunities for growth yet is ridden with the pitfalls that may result in organizational and social failure. In the pursuit of maximizing shareholders’ value, oil and gas companies often ignore other stakeholders, resulting in issues in corporate governance, business ethics and corporate social responsibility. As a result, dangerous explosions have occurred in BP’s refineries and Shell’s operations have resulted in environmental damages (M& As).
As a result of globalization and developments in the global industry, markets and technology, oil and gas companies operate in a very complex business environment. Organizations get access of resources through joint ventures but their success depends on the synergies of the various assets. Lack of synergies, insufficient knowledge management and organizational learning lead global alliances to fail. Therefore, BP needs to adopt organizational learning more seriously so that it can prepare itself for changes in business environment rather than respond to such changes.
Only this will allow the company to resolve the paradox between maximizing employee performance and maintain corporate social responsibility. IntroductionThe oil and gas industry now spreads across various countries. Multinational companies engaged in exploration, production, refining and distribution of oil and gas companies have to operate under diverse business, economic and political factors. As a result, they are faced with issues and paradoxes that are not limited to a particular national or business context. In this paper, I will analyze the corporate governance and ethical issues that prominent oil and gas MNCs, British Petroleum (BP) and Shell, have faced in terms of the stakeholder theory and the agency theory.
Then, I will discuss BP’s globalization strategy in terms of transaction cost theory and the resource-based view. Finally, I will discuss the managerial strategy that BP needs to adopt in the context of the complex business environment so that it can adapt to chaotic situations. Corporate Governance and Business Ethics of BP and ShellAn organization has a number of stakeholders that it affects and is affected by their behavior as well.
The company has extensive duties to stakeholders like employees, customers, suppliers, communities, government and so on. Typically, managerial responsibility of most companies is driven by the goal of maximizing shareholders’ value. But in the presence of various stakeholders of the company interacting in diverse ways, it becomes difficult to meet the goals effectively if the other stakeholders are not addressed to, resulting in paradoxes of the firm’s aims (Heath and Norman, 2004). The stakeholder theory was first suggested by Freeman (1984), who defined a stakeholder of an organization as “any group or individual who can affect or is affected by the achievement of the organization’s objectives” (quoted in Jonker, 2004).
The organization needs to manage the stakeholders effectively for a collective development process through proper identification of stakeholders, set up processes to organize relationships with the stakeholders as well as the transactions with them. The stakeholder map, which details the two-way cause and effect between stakeholders and the organization is not static but may change over time with changes in the business as well as the political and social structure (Donaldson and Preston, 1995).