Strategy can be grouped into three different levels namely; corporate level, business level and functional or departmental level. Strategies help firms to compete and survive. It is true when you hear people say or argue that corporations don’t compete, it is products which compete. Products are developed by business units and so it is important that every corporation manage its business units and products to make them competitive hence, meeting the corporate purposes or objectives. (Kozami 2005).
The corporate level defines the issues or duties that the corporate is supposed to perform, for example; identifying the goals of the organization, the types of businesses the corporate should get involved with and the methodologies of business integration and management. The strategy also defines the position in the corporation where competition should be localized. The strategy helps in managing activities and interrelationships in businesses. This strategy helps corporations to create value using their business by managing the portfolio of their business, ensuring effective operations over the long term, developing business units and in some cases, making sure that each business relates well with the others in the portfolio. (Goold, Alexander & Campbell, 1994)
Business level strategy helps a corporate to develop and sustain a competitive advantage for the goods and services that it produces by implementing; cost leadership, differentiation and focus. The strategy deals with; putting a business in a position to compete with rivals, demand forecasting and anticipating changes in technologies and integrating them in the corporation.
In this context, I am going to discuss with you how the two strategies; business unit level and corporate level strategies are employed in corporations.
Total, (Oil and Gas Company)
The company came to being after the World War 1, after the then Prime Minister of France rejected a request of amalgamating with Royal Dutch Shell with a focus of creating dependent oil company in France. Total S.A is a multinational oil and gas company which is based in France. It is one of the six super major oil companies in the world. The business covers the entire oil and gas chain ranging from crude oil and natural gas exploration and production to power generation, transportation, refining, marketing of petroleum products and international crude oil and trading of products. For this reason, the company cuts cost that it could have incurred while providing revenue. The Total Company is also a large scale manufacturer of chemicals.
The company is currently has more than 96,000 employees and is in operation in more than 130 nations. Total’s French origins is an added advantage to the company as it gives it an advantage over the oil majors in the western, because of its large reserve and production bases in young and high yield places for instance Africa and the Middle East. The company is diversified as it producers fertilizers and petrochemicals and makes special chemicals for different markets. Total, a French oil company has employed business unit level strategy in coping up with the competition with its rivals, demand forecasting and anticipating changes in technologies and integrating them in the corporation.
Business level strategy
Total’s competitors, the other international oil majors, include; Exxon Mobil, Conono Phillips, BP, Chevron, the Royal Dutch Shell and Eni S.P.A. (International directory of company histories 1988). Constraints have been on the rise making the access to petroleum resources a hard task as a result of the soaring costs and complications of energy projects. The collapsing in oil prices have made oil companies to rethink of their investments and scurry to cut costs. In the 1990s, the French oil company negotiated with Saddam Hussein government to develop Iraqi oil fields, but recently everything changed when the Iraqi officials declared that they preferred American companies to European ones. Total had no choice but to move away. Total still has its eye targets to develop its assets around the world. It is aiming; Angola deep offshore sites, the Sahara in Libya or the forest of Venezuela.
Total company uses the town of Pau in south- western France, as its global research center and as a communication hub linking its global operations. Global teams send core samples from the wells for analysis. The laboratory workers or employees use magnetic image technology. The magnetic image technology is also used in the medical industry to look for oil traces in the samples. This global research center is a home to one of the world’s most powerful computers, which breaks a lot of seismic information to provide clues of where the oil deposits are hidden. The geologists of Total Company then analyze the data and consult with drill site which are very far away using the technology that connects the research center to all platforms globally.
Total, French oil and gas company do all its best to improve processes and technologies in order to remain competitive. The company has predictive maintenance systems, forecasting and analysis systems, trading and risk management systems which it employs which help the company to maintain its competitiveness. Oils produce and less as they mature.
Corporate level strategy
Total has employed this strategy which helps corporations to create value using their business by managing the portfolio of their business, ensuring effective operations over the long term, developing business units and in some cases, making sure that each business relates well with the others in the portfolio. The corporate level is concerned with the whole organization. It assesses things that a business does and makes authoritative decisions whether the business should diversify into different areas, do away with the product lines or develop partnerships with other organizations.
The company is diversified as it produces fertilizers and petrochemicals and makes special chemicals for different markets. Through Total’s refining and chemical activities, the company processes crude oil and natural gas to make products for sale. Supported by a policy of innovation and investment, Total’s refineries and petrochemicals sites are among the most competitive across the globe. Fertilizer and specialty chemicals e. g adhesives, paints and inks are manufactured by the company. In the year 2011, the specialty chemicals posted revenue increased by 9 % compared to 2010.
The Total Oil Company has and will continue to make partnerships with different institutions globally especially to places where it has its branches. The company has built networks in Africa for example, South Africa, Kenya and Sierra Leone where it has donated scholarships in support of education and research. France’s Total and Exxon Mobil Corporation agreed to exchange interests in a range of assets on the Norwegian Continental Shelf in October 2012. The exchange was purposely to help the firm to focus on fewer bit larger assets.
Analysis of Competitive environment
Oil is one of the most traded commodities in the whole world. This is clearly evidenced by the three top petroleum firms being among the list of the world’s 10 largest firms by capitalization. Constraints have been on the rise making the access to petroleum resources a hard task as a result of the soaring costs and complications of energy projects. The collapsing in oil prices have made oil companies to rethink of their investments and scurry to cut costs. In the competitive environment, I will compare the Total, French oil company with the Royal Dutch Shell. Shell group is the world largest oil company in terms of revenue.
Unlike Total Oil Company which has 130 branches in different nations with small assets, shell group has 90 branches in different nations worldwide with larger assets. The shell group has partnerships with other organizations- 50- 50 joint ventures. Royal Dutch Shell is likely to be successful in the long term. The shell group is more concerned in doing the best to protect, maintain and extend the competitive advantage in pursuing oil field across the globe. Total is not of exception because it is currently applying almost the same strategies that the shell group are using. Total group should focus on fewer larger assets and this will make it successful. Another thing, it should merger with international oil companies to ease its operations while opening new stations in new firms. This can also help it get permission to invest in foreign countries without discrimination.
Slow cycle and fast cycle markets
There are three conditions in competitive markets namely; fast cycle markets, slow cycle markets and standard cycle markets. In the fast cycle markets, Companies relies on innovations as engines for their growth. Companies competing in the first cycle markets are more concerned on how to continuously new competitive advantages which are more powerful than theirs within a short time. In slow cycle markets, companies concentrate on protecting, maintaining, and prolonging competitive advantage. In our case above about the Royal Dutch Shell and the Total oil company, my choice (successful company) differs with the fast cycle markets since the Royal Dutch shell being the largest in the whole world must be concentrating on protecting, maintaining and prolonging competitive advantage to remain in that position. It has to do its best to remain on the lead. The other competitors, Total group inclusive, obviously must be investigating on what and how the shell group runs its operations. Because of this, there is a higher probability that the Total oil group must be matching with the fast cycle markets because it is striving to top. So, it will try to think of strategies that they view to be more powerful than those that the shell group, the leading company is using and apply them with a belief that they will achieve within a very short period of time. (Hitt, Ireland & Hoskisson, 2007).
The three strategies, corporate level, business level and functional or departmental level are very important in all organizations, firms or corporations. If wisely applied, companies can yield a lot or the operations can run efficiently and effectively, hence success. Without the strategies, all firms, especially the international ones, cannot make any prosperous step in emerging to be successful. Strategies help firms to compete and survive. It is true when you hear people say or argue that corporations don’t compete, it is products which compete. Products are developed by business units and so it is important that every corporation manage its business units and products to make them competitive hence, meeting the corporate purposes or objectives.
The impact of environmental competition to a corporate is to way traffic, as in it can impact corporations positively or negatively depending on the concrete foundation a firm lays to herself. Competition can make a weak business to fail. It attacks businesses from all corners, for instance; technology, customer service, promotions, culture and so on. One cannot compare a company that uses advanced technology to the one that still uses the traditional systems. Consequently, if an organization provides attractive services and advertises itself well, it is most likely that it can do much better than the one that doesn’t use any of those. A competitive environment is important to both the businessmen and the consumers, because it enhances technological advances hence improves both the quality of goods and the performance of firms or corporations.
Oil companies are among the leading top 10 companies worldwide. Currently, the Royal Dutch Shell is the Leading oil company in the world. Total, a French oil company takes position six worldwide. The business covers the entire oil and gas chain ranging from crude oil and natural gas exploration and production to power generation, transportation, refining, marketing of petroleum products and international crude oil and trading of products. For this reason, the companies involved cut down cost that they could have incurred while providing revenue. These companies employ all the three strategies while running their operations in order succeed.