Introduction
The complexity surrounding the external constitution and configuration of any business organization makes it apparent that keenness is incorporated in mitigation, organization, running, and execution of various organizational roles and principles. It is inevitable to avoid the external segment of business running because of the importance and the confounding effect that this facet has on the business. The internal affairs and the general running of the organizational affairs are directly related and affected by the resulting external affairs. To effectively maximize the external environment for optimal results in the long run of the business plan and success, various business managers should be wary of the various implications that different actions could incorporate. Additionally, the managers should plan for the various extensions in their business or organizational running to incorporate any changes that might come along the way and the impact that the changes will accentuate on the general business environment. In this case, just like any other business outfit, Saudi Aramco Company faces several external issues and factors that directly affect the Company’s standing and the internal running of its affairs. Inevitably, the Company’s current position in the global market and the financial and revenue standing it boosts is a culmination of overtime externalities that have shaped it continually. Thus, it is important to analyze the key external factors that have affected the Company. This write-up aims at analyzing the key factors in the external environment for Saudi Aramco Company and the set of implications that these factors have extended to the Company.
Technological Environment
The technological environment that characterizes the oil and energy industry has for long been a key player in the subsequent decisions and moves made by Saudi Aramco. The current global push, for instance, to introduce additives to fuel, reduce emissions, and make fuel use significantly sustainable has had profound effects on the running and the organization of the Company’s affairs. For instance, the global technological shift into alternative fuels such as ethanol and a wide range of other fuels that the Company did not pay close attention to in the past means that the Company’s internal configurations in production have to undergo a series of changes (Alzahrani and Alammar, 2021). This particular technology (ethanol use) changed the perception, understanding, and execution of the Company’s production.
The global environmental situation has prompted a series of technological advancements, implicating that most oil and energy firms engage in production using technologies that will curb and control the extents of global warming and ecological degradation. This has put Saudi Aramco Company under heavy scrutiny and pressure by various environmental organizations, pushing the Company into adopting environmentally sustainable producing technologies. Owing to this, Saudi Aramco has had numerous investments that have consequently demonstrated the Company’s ability to withstand, incorporate, and engage new production ideologies and criteria to utilize the existing technology to maximize benefits and minimize the costs of such production (Alsuwailem, 2021). Environment-friendly fuels production to curb the environmental problem has been the most active technological input that requires the Company to show high levels of adherence and compatibility. The market shift in the demand for cleaner technology in production has also been a key proponent in pushing for the relevant technological advancements in Saudi Aramco Company.
Legal and Regulatory Environment
In the general business environment, it is apparent that the legal aspect and frameworks under which a specific firm is supposed to operate greatly modify and align the Company’s operations and configuration in the marketplace. This case is not different when it comes to Saudi Aramco either. Saudi Aramco’s legal relations with the major stakeholders in its immediate environment are important in determining the Company’s success and running. Here, it is apparent that the Saudi Arabian rules and regulations play a significant role in the general outcomes of the business (Hess, 2021). The government, in particular, plays a significant role in accentuating the array of factors that can be used to run or impair the Company’s running effectively. The Company has a confounded and well-laid relationship with the Saudi Arabian government. This has been a factor that plays an important role in its general outcomes and success. However, it is important to note that the Company’s good standing with the government is sourced from its founding elements-being an exclusively state-owned Company that runs its operations as a National Oil Corporation (NOC).
The resulting legal standings of the Saudi Aramco company have hence been an integral aspect in the Company’s success and its outcomes in the legal concerns that it has faced. Acting as state machinery in control of Saudi Arabia’s oil resources has been a significant factor in the Company’s organization (Czuzak, 2021). The control of the nation’s strategic oil resources has been entrusted to the Company’s watch. The ability of the Saudi Arabian government to extend autonomy to the Company’s running and operations has extended a great push in its overall success and outcomes. This facet has also affected the amicable relationship between these two parties and the relevant resulting association between the two fronts. Perhaps the most relevant and clear display of the Company’s successful and meaningful legal relationship and outcomes has been exhibited by the tremendous support that it receives from the Supreme Council for Petroleum and Minerals (SCPM) (Al Shabib and Martins, 2021). This is a facet organized and run by chaired by the head of the state and charged with the responsibility of making strategic decisions on the Saudi Arabian energy resources. The resulting effects have thus placed the Saudi Aramco Company in a pole position and advantage in its aspirations for fuel-efficiency.
Economic Environment
The world energy demand in oil products has been a great factor in the Company’s success, outcome, and overall organizational efficiency. One of the essential aspects that set the Company on this trajectory is the high level of elasticity in the global prices for oil and fuel products. Most researchers acknowledge that the Company’s future on this front is assured due to the fact that oil prices are set on an indiscriminate and consistent rise in the current and future settings. This is due to the anticipated consequential rise in the demand for oil products in the world. Being the leading state-owned and run organization in a specifically oil-rich state paves the way to its imminent success.
Regarding this, the current rise in the price of oil and the related products in the global market has set the Company on the success trajectory accentuating the firm with unique sources of surplus revenue. This has enabled the Saudi Aramco company to have a strategically incepted investment plan by using the funds to achieve relevant expansion (Qar and Attia, 2021). However, the World Trade Organization has been in constant negotiations with the Saudi Arabian government to maintain and incept relatively low oil prices for its domestic consumers to offer significant competitiveness for domestic firms. Additionally, the economic standing in the corporate world means that the Company has been engaged in various economic-oriented talks in specifically being the 2005 access to the overseas market with the British and US governments being involved.
However, the shifting domestic demands for Oil in Saudi Arabia has extended an existing and potential risk in the shortage of gas supplied within the country by the firm. Here, the economic outcomes in the country have played a major role in modifying the oil prices within the country. For instance, the high growth rate in the Saudi Arabian economy has led to higher rates of inflation, meaning that the demand for Oil has also increased (Aldubyan and Gasim, 2021). This has extended inflation in the domestic oil prices in the country, a factor directly affecting the Saudi Aramco Company. The outcomes of these proceedings mean that the supply of liquefied petroleum gas has also faced a major decline contributing to the general shortages.
Competitive Environment
The competitors and the resulting competitive environment for Saudi Aramco play an integral role in the outcomes and the success of the firm. Being a state-owned company, however, saves the Company from numerous or any significant competition. Basing on this, the Company’s main competitors include Apple, Marathon Oil Company, and BP. However, the competitors do not offer significant competition to the Company as it still ranks first in the culture score when compared to its competitors (Hess, 2021). The Company’s state position gives it a competitive advantage over its competitors, making it difficult for them to mount or keep up a significant level of competition on the firm. Being the largest oil company in the Middle East, Saudi Aramco has been able to garner a large following in the commercial environment in this region and globally as well. Besides, the Company has a high production capability and scale, which makes it possible for them to enjoy several benefits in the Middle East coupled with its strong foundation and marketplace solidarity. Low cost, high volume of production, the strategic control of the state equipment, and the high level of research that the firm engages in have made it possible for them to enjoy this competitive advantage over its competitors.
Labor Environment
The labor rules and regulations in Saudi Arabia extend to the totality of the operations of its major firms. With a similar stance on MNE’s and other establishments, foreign labor rules in the country mean that the Company faces the same fate as the rest of other oil establishments in the country. The general labor understanding of Saudi Arabia makes the working conditions difficult for the minority groups and foreigners, risking the Company falling into serious labor crises in case they need to hire specific experts (Kim, 2021). These experts are normally turned away by the country’s labor rules which treat the foreign workers unequally as compared to the natives. Additionally, the country faces unending disparities in the labor treatment that is extended to women and men. In short, the gender imbalance that rules the country’s employment sector is so explosive that it affects the running of various businesses such as Saudi Aramco Oil Company.
Resource Environment
In terms of resource environment, the Saudi Aramco Oil Company does not have specific or profound issues that may halt or slow down its production. The Company is state-owned in a country that is richly endowed with Oil and petroleum reserves (Oxford Analytica, 2021). This puts the Company in an integral position of controlling the production of Oil without facing any relevant shortages in the supply of the resources. Here, Aramco comes out as the largest Company in Saudi Arabia and the Middle East in general. The Company has more than 270 billion barrels of oil in its reserves.
Customer Environment
Aramco, due to the general high demand for petroleum products in the world, has a huge and ever-increasing customer base. The Company has the biggest customer numbers in Asia, where it sells over 70% of its exports. Saudi Aramco serves as the biggest supplier to the major markets of the Asian continent, such as China, India, Japan, South Korea, and the Philippines. Here, the Company supplies over 1.7 million barrels on a daily basis to China. To strengthen its customer base, the Company has been effectively creating subsidiaries outside Saudi Arabia to enhance its distribution and increase the efficiency that it incommodes in the distribution channels (Savio, 2021). Aramco China is one of these subsidiaries, based in Beijing and being an active refinery and petrochemical production outlet for Aramco. Additionally, the Company has extensive markets in South Korea and Japan. In Japan and Korea, Aramco’s Tokyo and Seoul outlets offer logistics, IT services, and development through its subsidiary company, S Oil.
Global Environment
The recent globalization trends extend various and confounding effects on the Company’s effect, control, market, and control of on the global scale. Saudi Aramco has been actively engaged in improving its global position and reputation basing on the importance of petroleum in the global economy. Through this initiative, the Company has taken several steps to solidify its global position and reputation. One of these factors has been the Company’s 2017 move to attain global expansion of its services with the subsequent launch of its operations in New Delhi, India. This was followed by Bangladesh, Pakistan, Sri Lanka, Nepal, Bhutan, and Maldives (Al-Fattah et al., 2021). This was followed by the necessary changes in the West to improve and maintain the Company’s 860,000 barrels and North America’s 607,000 barrels on a daily basis.
Interpretation and Discussion
Main Opportunities
The Legal and Regulatory Environment and the economic environment form the most important aspects that accumulate the most success for Saudi Aramco Company. It is apparent that the Company’s legal backing, for instance, as the National Oil Company for Saudi Arabia, gives it a great competitive advantage over its main competitors on the global and domestic scale as well (Hess, 2021). The good rapport it has established with the government extends immunity, standard equipment, and operational efficiency to its operations. Forging international contracts and expansion into various global scenes has been made easier since the Company can sometimes use the diplomatic ties of Saudi Arabia to make its way in the competitive marketplace. Additionally, the economic environment accentuates several benefits to the Company’s running, sustainability, and profitability. The global prices in oil products play an important role in the overall profitability enjoyed by Aramco.
Main Threats
One of the main threats that the company faces is the risk of climate change on the overall oil market. The global hydrocarbons effect could have a negative demand on the petroleum products thus threatening the standing and the profitability of the company in the future and current markets. The existing environmental demands and rules in relation to the utilization of these products could lead to a shift in demand for the products. Additionally, the increase in electric vehicles and ride-sharing are seen as sources of threats for the profitability and continuity of the company’s operations (Kimm, 2021). Electrification of transport is seen as one of the most potential issues that will eventually stall and slow down the company’s progress as the most profitable firm in the world. Operational risks such as fires and explosions also present issues to production and the handling of the oil products.
Conclusion
Several factors enhance Aramco’s position in the domestic market and the competitors that it has. However, several factors act to enhance the firm’s market standing and control. Aramco’s external factors aid in boosting the Company’s performance and profitability. These factors also shape how the Company is internally structured, managed, and run.
References
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Oxford Analytica. Saudi Aramco planned sale to China might face obstacles. Emerald Expert Briefings, (oxan-es).
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Savio, R. (2021). IKTVA and Saudi Arabia Vision 2030. Eximia, 2(1), 1-7.
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