StrategicManagement- Rev 11 Feb, 2012

7/28/2019 StrategicManagement- Rev 11 Feb, 2012

1/77

STRATEGIC MANAGEMENT

1


2/77

SESSION ORGANIZATION

Strategy What is strategy Strategic managementWhat do we mean by

it.

ONGC Structure & how it functions. How do we go for Strategic management

Various Approaches with reference to

ONGC

What do we get out of Strategic

management- Benefits

2


3/77

STRATEGY

Dictionary meaning

Strategy a plan of action toaccomplish a specific goal

3


4/77

Strategy in corporate perspective

"Strategy is the direct ionandscopeof an organisation over thelong-term:which achievesadvantagefor the organisation

through its configuration ofresourceswithin a challengingenv i ronment, to meet the needs ofmarketsand to fulfil stakeholder

expectations.(Johnson and Scholes, ExploringCorporate Strategy)

4


5/77

Where is the business trying to get toin the long-term (direction)

Which markets should a businesscompete in and what kind of activities

are involved in such markets?(markets; scope)

How can the business perform betterthan the competition in those markets?

(advantage)?

5


6/77

What resources (skills, assets,finance, relationships, technicalcompetence, facilities) are required inorder to be able to compete?

(resources)? What external, environmental factors

affect the businesses' ability tocompete? (environment)?

What are the values and expectationsof those who have power in andaround the business? (stakeholders)

6


7/77

PORTERS MODEL FOR BUSINESS STRATEGY

FIVE FORCES

7


8/778

8

Corporate-Level Strategy:

What business are we in?Corporation

Business-Level Strategy:

How do we compete?

Exploration Overseas

Business

Diversification

Functional-Level Strategy:

How do we support the business-level

strategy?

Drilling a well R&D HR Info Tech

Levels of Strategies


9/77

ONGC BOARD

Chairman & Managing Director

Functional Directors ( Full time) 6

Exploration, Offshore, Onshore, T&FS, HR,

Finance,

Independent Directors - 5

Government Nominees - 2

Special Invitees 1

MD, OVL

9


10/77

10

ONGC

Assets(11)

Offshore - 4 Onshore -7 Plants - 3

Basins(7)Institutes - 12

Services - 8

Support - 6

Corporate

Functions - 8

ONGC - Functional Structure


11/77

Assets :

Basins (7):

11

Mumbai High,

Neelam Heera,Bassein,EasternOffshore

Offshore

(4)Ankleshwar,

Mehsana,Ahmedabad,Karaikal,Rajamundry,Tripura, Assam

Onshore

(7)Uran, Hazira,C2-C3

Plants

(3)

Western Offshore,

Western Onshore,

Cauvery, KG & PG, MBA

& CBM,

A&AA , Frontier


12/77

KDMIPE, GEOPIC,IDT, IOGPT, IEOT,INBIGS, IPSEM,ONGC Academy,SMP, CEWELL,

ONGC Energy Centre

Institutes

(12)Geophysical, Drilling,Logging, WellServices,Engineering,Logistics, Technical,

HSE

Services

(8)

12

HR/ER, Finance, MM,Legal, Medical,Security

Support(6) Planning, E&D,

Infocom, Vigilance,Audit, Marketing,Communications,JV&BD

Corporate

functions

(8)


13/77

WHAT IS STRATEGIC MANAGEMENT?

13


14/77

STRATEGIC MANAGEMENT

A continuous, iterative process aimed at

keeping an organization as a whole

appropriately matched to its environment.

(Samuel Certo, Strategic management:

concepts &applications)

14


15/77

STRATEGIC MANAGEMENT(CONTD.)

Strategic management is keeping thebusiness in tune with management andmarketing forces both outside and inside the

firm.

Management componentfirms operations, financialposition, labour situation, management structure.

Marketing componentfirms marketing strategy( i/cpackaging, advertising, customer service, qualitycontrol etc), outside competition and inside conflicts

between departments 15


16/77

HOW TO GO FOR STRATEGIC

MANAGEMENT?

16


17/77

5 STEPS TO STRATEGIC MANAGEMENT

Environmental analysis

Establish organizational direction

Strategy formulation

Strategy implementation

Strategic control

17


18/77

1- ENVIRONMENTAL ANALYSIS

- Starts with SWOT analysis

Process of examining the organizations

environment to determine:

Strengths (S)

Weaknesses (W)

Opportunities (O)

Threats (T)

18


19/77

ENVIRONMENTAL ANALYSIS

Strengths

Positive internal factors that contribute toaccomplishing companys mission, goals,

objectives Weaknesses

Negative internal factors inhibitingaccomplishments

These are controllable factors within organization

19


20/77

ENVIRONMENTAL ANALYSIS (CONTD.)

Opportunities

Positive external factors that company can useor exploit to achieve its missions

Threats Negative external factors inhibiting ability of the

company to achieve desired objectivesaccomplishments

These are largely beyond control of a company

20


21/77

SWOT ANALYSIS - ONGC

21


22/77

SWOT ANALYSIS - ONGC

22

STRENGTHS:

Dominant Indian Leadership

Most valuable Public SectorEnterprise

Large proved reserves &geographic diversification

Excellent oil & gasInfrastructure

Efficient and professional

management team. Applied R&D for E& P

activities

Adequate resources andcapital to invest.

WEAKNESSES:

Declining production frommature fields

Procedural Constraints

Product Pricing Security of personnel &

property especially crude oil

Limited autonomy foroverseas ventures


23/77

SWOT ANALYSIS ONGC(CONTD)

23

OPPORTUNITY:

Growth in overseas market(OVL)

Incremental recovery fromproducing assets

Unexplored domesticacreages

Alternative energy sources CBM, Shale, Wind energyetc

THREATS:

Growing Competition

Crude price volatility Govt. policies, regulatoryframe work etc

Aging assets &Infrastructure

Geopolitics


24/77


- After SWOT, Environmental Analysis carried out at threelevels:

General environment - Factors related to firms location(country level) to be seen in broader perspective

Social characteristics of society like literacy rate

Economic how resources are distributed

Political related to govt. affairs

Legal legislation for environment, worker safety

Technical technology scenario 24


25/77


Operating environment Factors havingimmediate impact on the firms operations andprofitability

International Related to international

implications of organizations operation

Supplier who provide resources for organization

Labour who perform organizational tasks

Competition with whom business must compete

Customer who buy goods & services 25


26/77


Internal environment Factors having immediate and specificimplications for managing the organization.

Organizationalwhat is companys organizational

structure

Marketing marketing strategies employed by company

Financial financial status of company

Personnel Personnel policies of company

Production production targets & methodology followed to

achieve them.

26


27/77


28/77


29/77

29

To be global leader inintegrated energy businessthrough sustainable growth,

knowledge excellence andexemplary governance

practices

Visionstatement

of ONGC


30/77

30

-Doubling reserves(i.e. accreting 6 billion

tonnes of O+OEG) by2020.

-Improving averagerecovery from 28 percent to 40 per cent by2020.

ONGCStrategicVision -

2020


31/77


32/77

32

Unit Excellent V.Good Good Fair Poor

MOU

Target

2012-

13

MOU

Target

2011-

12

i) Crude Production MMT 28.03 27.54 26.16 24.79 23.41 27.54 27

ii) Gas Production BCM 26.245 25.731 24.444 23.158 21.871 25.731 25.5

iii)

Value Added

Products KTON 3500 3410 3240 3069 2899 3410 3358

iv)

Reserve Accretion -

3 P MMToe 84.5 83 78.85 74.7 70.55 83 78.5

2 P

MMToe

58.32 57.23 54.37 51.51 48.65 57.23 54.5

MOU 2012-13PERFORMANCE EVALUATION TARGETS & CRITERIA

Mi i St t t f ONGC


33/77

33

World

Class

Dedicated to excellence by leveraging competitive advantages in R&Dand technology with involved people.

Imbibe high standards of business ethics and organizational values. Abiding commitment to safety, health and environment to enrich quality of

community life.

Foster a culture of trust, openness and mutual concern to make working astimulating and challenging experience for our people.

Strive for customer delight through quality products and services.

IntegratedEnergy

Business

Focus on domestic and international oil and gas explorationand production business opportunities

Provide value linkages in other sectors of energy business.

Create growth opportunities and maximize shareholder value.

DominantIndian

Leadership

Retain dominant position in Indian petroleum sector and enhance India'senergy availability.

Mission Statement of ONGC


34/77

34

ONGC - Objectives

Optimize exploration & production of hydrocarbons.

Self-reliance in technology.

Promoting indigenous efforts in oil and gas related

equipments, material and services.

Assist in conservation of hydrocarbons, more efficient use of

energy and development of alternative sources of energy.

Develop scientifically oriented and technically competent

human resource through motivation and training.

Observe 100% safety in work.

Environmental protection.


35/77

3- STRATEGY FORMULATION

Strategy to be in line with mission &

objectives.

To know the Current status of organization.

How it is performing at present.

Address identified Internal as well as

external critical environmental factors.

Formulation of strategy aimed to achieve

organizational objectives more effectively

assessing likely influencing factors during

im lementation sta e 35


36/77

FACTORS TO BE KEPT IN MIND DURING FORMULATION

36

Cultural Issues:

Organization structure, culture

Change Resistance:Reluctance for new concepts

Conflict Management:

Inter department clash of interests.


37/77

4 - STRATEGY IMPLEMENTATION

Various Approaches:At organizational level

Organizational change approach

Collaborative approach Cultural approach

At department level Commander approach

37


38/77


39/77

COLLABORATIVE APPROACH

Top management involves senior functional managers, divisional

heads, business unit general managers to help develop and committo a good set of goals and strategies.

Group wisdom is the goal

Improves quality and timeliness of information in view of involvementof operations personnel.

Improves chances of effective implementation in view of

collaborative approach

Contributing managers have different points of view and goals. If

not handled properly by top management, may, sometimes, result

in poor strategy.

39


40/77


41/77

COMMANDER APPROACH

For strategy implementation in smaller area e.g a section,

group or department

Manager in charge develops strategy for his business

area .

Manager in charge is basically the thinker/planner and

gets the plan executed through younger managers good

at quantitative & objective.

41


42/77

BENEFITS OF STRATEGIC


43/77

BENEFITS OF STRATEGIC

MANAGEMENT (GREENLEY)1. Helps in Identification of Opportunities

2. Enhances Objective view of management problems

3. Helps in Improved coordination & control

4. Minimizes adverse conditions & changes

5. Helps in taking Decisions that better support objectives

6. Helps in Effective allocation of time & resources

7. Improves Internal communication among personnel8. Helps in Integration of individual behaviors

9. Helps to Clarify individual responsibilities

10. Encourage forward thinking 43


44/77


45/77


46/77


47/77


48/77


49/77

49

Organizational strategies (in context ofrequirement)- Examples:

Geographic expansion

Diversification

Acquisition

Market penetration

Hiring and Retrenchment

Joint venture


50/77


51/77


52/77

122,76

9

150,18

5

FY'1

1

FY'1

2

22,45

6

28,144

FY'1

1

FY'1

2

114,53

1

135,26

6

FY'1

1

FY'1

2

Turnove

r

PAT Net Worth

` Crore

22

%

25

%

18

%

GROUP FINANCIALS FY12

52

Highest-ever Turnover; up 22% Highest-ever PAT; up 25% Highest-ever Net worth; up18%


53/77


54/77


55/77


56/77

Subsidy sharing (`

Crore)

Impact on PAT (`

Crore)

2,6904,104

11,95

8

17,02

5

22,00

0

28,22

6

11,55

4

24,89

2

44,466

25,535

FY04 FY05 FY06 FY07 FY08 FY09 FY10FY11

FY'12

1,5962,553

7,21

0

10,33

3

13,24

1

15,79

8

6,55

1

14,24

7

FY04 FY05 FY06 FY07 FY08 FY09 FY10 FY11FY'12

UNDER-RECOVERY

56

Highest-ever subsidy sharing: ` 44,466Crore; up 79%

Total subsidy up toFY12:

` 1,66,915 Crore

Total impact on PAT up toFY12:

` 97,064 Crore


57/77


58/77


59/77

Transcendin

g

Boundaries

30 projects

in15 countries

10

producing5

discovered14

exploration1

pipeline59


60/77

MEDIUM TERM


61/77

MEDIUM-TERM

61

Exploratio

n Conversion of nomination PELs toMLs.

Development/

Re-development

Development of 37 fields through 13projects Rolling re-development of major fields.

Unconvention

al

& alternates

CBM, UCG, Shale gas andalternates.

Integratio

n

Commissioning of on going projectsOPaL, OMPL, OTPC, SEZs.

EXPLORATION


62/77

EXPLORATION

62

Expeditious conversion of nomination PetroleumExploration Licenses (PEL) to Mining Lease (ML)

28

nominatio

n

exploratio

n

acreages

Validity of nomination blocks to expireby FY14.

Expeditious exploration & Presently 340 mining leases (30,758Sq.Km)

Field Development


63/77

Field Development

Projects Presently 13 projects under implementation to monetize 37fields

C-

SeriesB-22

Cluster

B-193

ClusterNorth Tapti

D-1

(additional)Cluster-

7BHE & BH-35WO-16-

ClusterSB-14

fieldB-127

Cluster

B-46

Cluster

G-1 & GS-

15C-22, C-24, C-39-1, C-39-

A

B-22A, BS-13A, B-

149A

B-193A, B-23AA, B-127A,B- 178A, B-179A

North Tapti

D-1

B-192-1, B-192,5, B-

192-8,WO-24

BHE & BH-35WO-5, WO-15, WO-16, B-

119/12

1SB-

14

B-127, B-157, B-

55-5

B-46, B-48, B-105, B-

188

G-1 & GS-

15

Monetizing>280mtoe

reserves

Investment:

> ` 31,000

Crore

Production:

Oil : ~ 40

MMT Gas : ~

64 BCM

Starting from FY13 all

the fields to be on stream

by 2014

C-26cluster

C-26, C-23, B-12-1 63


64/77

CB


65/77

Operating in 4 blocks FDP submitted for all the blocks Current incidental production

8,000- 10,000 scmd from Jhariablock

Farm-in opportunities for fasterexploitation of CBM resources

Planned investment = ` 5,000Crore

Production to increase to 6mmscmd

in 10 years

CB

MIncidental CBM production commenced in

2010

65


66/77


67/77

VL

PP2030


68/77

VLSeeking new horizons

Aspirations

Fold production growth in E&P

Fold growth in Revenue & EBITDA

Fold growth in Market cap

Shaping moves to be launched

Fold growth in international E&P

production

PP2030

68

VL

PP2030


69/77


1. Grow overseas E&P to source 60

mmtoe/year of O+OEG by 2030

2. Secure alliance for new resource

types

PP2030

69

3. Unlock 450+ mmtoe from domestic

YTF (yet-to-find) reserves

4. Accelerate 300-400 mmtoe of

(re)- developments

5. Build non-E&P business to 30% of

group

revenue

Shaping

Move

s

VL

SHAPING MOVE-1


70/77


Grow overseas E&P to source 60 mmtoe/year of O+OEG by

2030

SHAPING MOVE 1

70

5 Global activity hubs

All resource types of

interest

Conventional

Shale

oil/gas Heavy

oil

LNG, mid-stream &

other ventures also

on tar et


71/77


72/77

VL

SHAPING MOVE-4


73/77

Seeking new horizons

Accelerate 300-400 mmtoe of (re)-

developments

SHAPING MOVE 4

73

Yet-to-develop discoveries &

future redevelopment of

existing fields to add morethan 300 mmtoe of

production by 2030.

10 fields identified for priority

accelerated development.

A rigorous stage gate

process for project

evaluation and monitoring.

VL

SHAPING MOVE 5


74/77


Build non-E&P business to 30% of group

revenue

SHAPING MOVE-5

74

Investments willinclude: Further expansion in

petrochemicals at MRPL

LNG re-gasification,

Commercialization of stranded

gas Capacity in alternative

energy Solar, wind,

Nuclear, etc.

ONGC to selectively investin the non-E&P sector,

leveraging integration

benefits from its existing

portfolio and its balance

sheet for competitiveadvantage.

VL

PP2030


75/77


1. Strengthen OVL processes &

technical

systems

2. Continued regulatory engagement

on prices & policy

PP2030

75

3. Strengthen staffing & capabilities in

focus areas

4. Improve services delivery under

new operating model

5. Align R&D with 2030 technology

priorities

Supportin

g

Initiatives

VL

PP2030


76/77

Seeking new

horizons

PP2030

76

1. Sustained production growth 4-5%

2. > 130 mmtoe production in 2030

(50% international)

3. 1,300 mmtoe proved

reserves

4. 6.5 GW alternate energy, 9

MMTPA LNG

5. Full downstream value capture in

petrochemicals

ONGC

2030

VL

PP2030


77/77


Investment > ` 11,00,000 Crore during 2013-

2030

11,00,000

2,65,000

PP2030

`Crore

51 00 IX

22,70

0

PP-

2030

74,00

0

170,00

0

X

XI

Plan

XI1

Plan

Documents

StrategicManagement- Rev 11 Feb, 2012