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Course Code : MBAZG611

Topics covered :
1. SWOT ANALYSIS
2. CORPORATE STRATEGY
3. COMPETITOR ANALYSIS
4. PORTER’S FIVE
SWOT Analysis:
Strength:
 Leading technology provider in the oilfield service with the highest level of
customer satisfaction.
 Schlumberger is the only company to provide BOP valves which can prevent
oil leaking even at 25,000 PSI pressure. These are important for crews and
oil well.
 With huge number of patents and technologies, Schlumberger are leader in
their products like Artificial Lift, and completions segments.
 Well established manufacturing and supply chain logistics across the globe.
 Highly talented employees from 100+ countries working across 85+
countries.
 Effective training programs for employee to be competitive in the segment.
 Strong cash flow for new researches and projects
 Successful merging with strong technology providers such as Cameron.
 In downtimes, Schlumberger invested in IT Transformation projects, which
will merge and upgrade their Information Technology to latest. This will
enable them to manage efficiently between Engineering, Manufacturing and
their Supply chain.

Weakness:
 Slowdown in Oil economy has resulted in slow down of projects for
Schlumberger.
 With the US oil market in high has significant reduction of profit from other
geomarket regions.
 With no diversification of business, Schlumberger entire profit is dependable
on oilfield revenue.
 Declining revenue per unit. Competitors in the industry is forcing downward
profit for Schlumberger.
 With so many organization restructuring, Schlumberger is loosing its core
most experienced employees to competitors.
 With US sanctions, revenue from embargo countries are affected, and hence
loss in our revenue.

Opportunity
 With new mergers and acquisition, Schlumberger can increase their
portfolio to carter both upstream and downstream in the oil industry
 With increase in the political tension in the middle east and some European
countries and Russia, there will be huge demand for Oil in future, which will
generate more revenue for Schlumberger
 As a bigger company, it is easier for Schlumberger to adhere with all
government policies and regulation in the offshore country. This has
potential to convert more projects compared to the rivals.
 After BP mishap, costumers are opting for high end products, which
Schlumberger is already specialized with.
 With more and more environmental policies are adopted by countries,
Schlumberger has advantage over the competitors as they have already
developed high efficient products and patented to them.

Threats:
 With the development of alternation energy solutions, Schlumberger profit
will go down quickly.
 With OPEC in control of lower oil price and huge supply of oil from USA,
there are very less new order for Schlumberger
 USA and China war trade can lead to further reduction of revenue for
Schlumberger
 With new entrants like GE, and other local players, competition is high, and
Schlumberger negotiation capacity is taking a huge hit.
 With more stringent trade laws, it is difficult to transfer Schlumberger tools
between countries, can lead to loss of revenue.
 With the reduction of oil price, very less new oilfields are developed recently
in middle east. This has significant impact for Schlumberger eastern
hemisphere revenues.
Corporate Strategy:
Schlumberger is the world's leading provider of technology for reservoir
characterization, drilling, production, and processing to the oil and gas industry.
Working in more than 85 countries and employing approximately 100,000 people
who represent over 140 nationalities, Schlumberger supplies the industry's most
comprehensive range of products and services, from exploration through
production and integrated pore-to-pipeline solutions for hydrocarbon recovery
that optimize reservoir performance.
Guiding Principles
Schlumberger values conduct and behavior
Making the most of our unique assets, Schlumberger is committed to providing
services that enhance and optimize our customers' performance.

Three well-established company Values that focus on people, technology, and


profit underpin our work.

 Our people thrive on the challenge to excel in any environment and their
dedication to safety and customer service worldwide is our greatest
strength.
 Our commitment to technology and quality is the basis for our competitive
advantage.
 Our determination to produce superior profits is the cornerstone for our
future independence of action and growth.
Our commitment to customers
Schlumberger is committed to excellence in everything we seek to do. We aim to
do business in a consistent and transparent way with all our clients and do not hold
equity stakes in our customers' assets. Customers place a great deal of trust in us,
particularly when it comes to handling sensitive and confidential information. Our
reputation for integrity and fair dealing is vitally important in winning and retaining
this trust.

Schlumberger strives to maintain the trust and confidence of our customers and
shareholders, as well as all others affected by our operations. When we are clearly
seen to behave in an ethical manner we enhance our reputation for integrity,
which in turn helps us attract and retain both customers and employees.
Corporate Governance
Schlumberger Limited is committed to adhering to sound principles of corporate
governance and has adopted corporate governance practices that promote the
effective functioning of our Board of Directors, its Committees and our company.

The Board’s primary responsibilities are to oversee and counsel the Company’s
Chief Executive Officer (the “CEO”) and other members of the senior management
team. Some of the Board’s precise responsibilities include:

 Reviewing the Company’s major financial objectives, critical strategies and


long-term plans, including major allocations of capital, significant proposed
business acquisitions and divestitures, operating performance, sustainability
and stockholder returns.
 Overseeing the assessment of major risks facing the Company, determining
the extent to which such risks are appropriate and, to the extent the Board
deems it appropriate, evaluating options for their mitigation.
 Overseeing the processes for maintaining the integrity of the Company with
regard to its financial statements, internal controls and public disclosures,
and compliance with laws and ethics.
 Appointing, regularly evaluating the performance of, and approving the
compensation of the CEO and other senior executives.
 Overseeing succession planning for the CEO position.
 Nominating director candidates for election by stockholders to membership
on the Board, based upon the recommendations of the Nominating and
Governance Committee.
 Monitoring the effectiveness of the Company’s corporate governance
practices and making changes as necessary or appropriate for the Company.

The Science and Technology Committee (the “Committee”) of the Board of


Directors (the “Board”) of Schlumberger Limited (“Schlumberger”) shall oversee
and advise the Board and management on matters involving Schlumberger’s
research and development (“R&D”) programs, including:

1. R&D portfolio;
2. Location and distribution of R&D resources;
3. Interaction with academic institutions;
4. Information technologies and systems;
5. Manufacturing technologies; and
6. Acquisition of new technologies.

Competitors Analysis:

Few competitors of Schlumberger are

 Weatherford
 Bakers Hughes, GE
 Haliburton

Weatherford

Weatherford is a top competitor of Schlumberger in the Oil & Gas Equipment &
Services industry. Compared to Schlumberger, Weatherford generates lesser
revenue. They are the closest competition to Schlumberger. Merging with Baker
Hughes put on hold had a severe impact for them.

Haliburton:
Haliburton and Schlumberger have major stakes in North America geo market.
Fracking has bought down the oil price in North America, which resulted in huge
loss for Haliburton. Schlumberger has benefitted through other segments outside
North America region. Because of limited budgets with these clients in the region,
acquiring new customers is becoming difficult at these times for both
Schlumberger and Haliburton.

Bakers Hughes, a GE Company:


While both Baker Hughes and Schlumberger should benefit from the eventual
recovery in the oilfield service market, Baker Hughes' stock price might lag its
peers. That's because beleaguered industrial giant GE has a controlling interest in
the company that it's looking to unload. GE which recently sold part of its holdings
in the oilfield service company, which includes 92 million shares to the public and
65 million shares back to Baker Hughes, which reduced GE stake from 62.5% to
around 50%. That showed just how desperate the industrial giant is for cash. In
light of that, there's a concern that it could continue selling off shares of Baker
Hughes in the coming year at less-than-ideal times, which could put additional
downward pressure on the stock price.
Both Schlumberger and Baker Hughes would benefit from this eventual
improvement in the oil market, Baker Hughes has an additional weight that could
hold it back in the near term in the form of GE's desire to exit its position in the
company. The less-encumbered Schlumberger could outperform its rival in the
coming year, making it the better buy right now.

Schlumberger Limited Porter Five (5) Forces Analysis


Threats of New Entrants
Schlumberger is put in to pressure by new entrants in Oil & Gas Services bringing
innovation, and new ways of doing things. These new entrants put burden through
lower pricing strategy, reduced costs and providing new value services and
technologies to the customers. Schlumberger Limited must overcome all these
challenges and shape effective barriers to protect its competitive edge.
How Schlumberger Limited can tackle the Threats of New Entrants
 By revolutionizing new product lines in their existing segments and services.
These new products bring new customers and give old customer a reason to
buy Schlumberger’s products.
 By actively creating economies of scale so that they can lower the fixed cost
per unit.
 Building facilities for new products and spending more money on research
and development. New entrants are less likely to enter a dynamic industry
where the established players such as Schlumberger Limited keep defining
the standards regularly. It significantly reduces the window of extraordinary
profits for the new firms thus discourage new players in the industry.
Bargaining Power of Suppliers
Most of Oil & Gas Services organizations buy their basic raw material from various
vendors. Vendors in upper position has higher negotiation power against
Schlumberger which can decrease the margins Schlumberger can get in the
market. Most influenced vendors have higher bargaining power in Oil and gas
industry. Thus, this higher bargaining power of suppliers are impacting the
profitability of Oil and gas services companies.

How Schlumberger Limited can tackle Bargaining Power of the Suppliers


 Schlumberger can create effective supply chain.
 By having alternate components and alternate suppliers. By this when the
supplier increases the price, they can go to alternate components and
suppliers.
 Like some bigger companies Schlumberger should invest in creating
dedicates suppliers whose products are only sold to Schlumberger. By doing
this, suppliers will have less negotiation or bargaining opportunities.

Bargaining Power of Buyers


Customers are kings who can demand the price of finished products or services.
They want to negotiate with the competitors and get the best for less price. This
put unnecessary burden on Schlumberger’s revenue. If organization has smaller
customer base and if they are powerful, then organization will be impacted by
bargaining power of customers.
How Schlumberger Limited can tackle the Bargaining Power of Buyers
 Schlumberger should invest in Marketing and acquire more customers. They
should invest in retaining the existing customers by providing more value for
lesser costs. This will decrease the negotiating power of customers and will
give Schlumberger a chance to streamline its sales and production process.
 Schlumberger should develop new and innovative products rapidly in the
market. By being a first mover, they can acquire more and more new
customers.
 Additional value to existing products and new products which are more
efficient will also reduce the movement of existing customers of
Schlumberger Limited to its competitors.

Threats of Substitute Products or Services


When a new product or service meets a similar customer needs in different ways,
industry profitability suffers. For example services like Dropbox and Google Drive
are substitute to storage hardware drives. The threat of a substitute product or
service is high if it offers a value proposition that is uniquely different from present
offerings of the industry.
How Schlumberger Limited can tackle the Treat of Substitute Products / Services
 Schlumberger should concentrate on their services from their knowledge
and expertise on the field rather than the selling their products.
 By building more robust products ahead of the competitors and having
strong patent for same.

Rivalry among the Existing Competitors


Revenue of the organizations are quickly brought down by the competition in Oil
and Gas Services industries. As we operate on these tough environment,
Schlumberger should quickly adapt to changing environment and keep innovating
to stay ahead of competitors.
How Schlumberger Limited can tackle Intense Rivalry among the Existing
Competitors in Oil & Gas Equipment & Services industry
 Schlumberger should invest to create product differentiation among the
competitors.
 Reduce the profit margin and increase the scale to capture the market and
reduce the bargaining power of customers and competitors
 By working closely with various governments and adhering to local geo-
political, acquire more projects.
Implications of Porter Five Forces on Schlumberger Limited
By following these Porter five competitive analysis Schlumberger Limited should
develop strategies to gain expertise of what impacts the profitability of the
organization in Oil & Gas Services industry. They should identify the quickly
changing dynamic environment and learn to adapting them quickly. By using these
principles Schlumberger can improve their profits.

References:
Porter Five forces of Schlumberger: http://fernfortuniversity.com/term-
papers/porter5/analysis/431-schlumberger-limited.php

Schlumberger Corporate Strategy: https://www.slb.com/