INTRODUCTION to Global business
Global business is the one that consists of different transactions that are devised and also carried out in international boundaries in order to satisfy the objectives of companies, organizations and individuals (Hardi and Buti, 2012). For any business organization, satisfaction remains the key tent for undertaking the global business. This is because; transactions in this form of business might take different forms which might lead to conflicts resulting from different cultures, laws and societies (Bachiller, 2009). REPSOL is an integrated global energy company that has vast sector experience and also carries both up (exploration and production of hydrocarbons) and downstream (refining) activities in the entire world. This report will also undertake the analysis of different current and future strategies of REPSOL that are required for growing in the global market and will also discuss the influence of national government and IMF on the business strategies (Ibrahim, 2008).
It is an energy company that seeks to bring well being to people with the global presence in around 50 nations. This company is active in energy sector from last 8 decades and because of the same, the company has strengthened its qualified and diversely enthusiastic teams (Furlonge and Kaiser, 2010). The history of this organization clearly shows that the one that stays a step ahead and adapt the challenges tend to meet the guaranteed energy supply (Deari, Kimmel and Lopez, 2008).
Characteristics of REPSOL
It is the organization that is world’s largest oil lubricant manufacturer that employees around 40000 people worldwide and has its operations spread vertically in the areas of oil and gas industry, refining, production, distribution, marketing petrochemicals, trading and power generation, etc. This company is also in partners with MotoGP, Repsol Honda, and Honda Racing Corporation (Consolidated management report: REPSOL YPF group. 2011). The organization has a futuristic vision that also upholds its core values which says that, ‘for all of the people those who are part of REPSOL should feel much identified with the company.’ The structure of the company is also such that it also helps in strengthening the corporate areas of the business and also maintains the balance with the company’s major activities (Tverberg, 2013).
Analysis of REPSOL’s strategy
This organization is concerned with achieving people’s well being and also the economic growth in the society and to do so, it has come up with different strategic plans and objectives that it aims to achieve by 2016 (Hitt and et. al. 2014). These strategies of the company are as follows:
- Increase business growth in upstream areas.
- Maximise the returns on downstream operations.
- Generate competitive returns for the company’s shareholders.
- And maintaining financial soundness (Basu, 2008).
The group strategy of REPSOL is based on the four basic pillars and Options that REPSOL has for future growth in the formulation of different strategies so as to sustain successfully in increasing competitive and global economy are as follows:
High growth in upstream areas:
the exploration and production activities of the company are the major elements in the growth of the company and accounts for almost 77% of the total investment of the company (Bachiller, 2009). Thus the organization aims at raising the production of hydrocarbons at an annual rate of 7% leading to 500, 000 barrels of oil each day by the year 2016 (Rodríguez-Domínguez, García-Sánchez and Gallego-Álvarez, 2009). So in order to attain growth in upstream operations, the company has kept the following goals to attain as a part of its future strategy:
- Increase production growth rate by 7%.
- Keep reserve replacement rate 2011-16> 120%.
- Keep average investments in upstream for 2.950 billion€ per year (Ibrahim, 2008).
Maximise returns on downstream operations:
The major priority of business is to be energy efficient, safety and environment and because of the same, they are looking for continuous improvement in their energy resources. It has plans to maximise the profitability of REPSOL’s asset portfolio looking to increase refining margins by 3$/ barrel by 2016 (Furlonge and Kaiser, 2010). Moreover, maximising the overall integrated margins through improvement and excellence in all areas of downstream operations will in return help the company in generating high value added operations (Deari, Kimmel and Lopez, 2008).
For REPSOL, divestments in non strategic assets will enable them to self finance its investments by 2016. This in return will help in reaching to the level of liquidity three times higher at the time of short term maturities (Consolidated management report: REPSOL YPF group. 2011). Thus the options the company has to attain in future are as follows:
- Maintain credit ratings.
- Carry out self financed plans and generate cash of €8.1/8.6 billion by 2016.
- Undertake divestments of sales of treasury share to €4/4.5 billion by 2016 (Tverberg, 2013).
- Competitive compensation to shareholders: REPSOL will also continue to create value for its shareholders with the help of its competitive dividend policies for increasing its future competitiveness by making a payout between 40-55% of profits.The success of REPSOL’s flexible dividend that the company carry out right now has come up as a sign of trust their shareholders has in the company (Hitt and et. al. 2014). Thus keeping in mind the same factor, the future goals of the organization are:
- To script down the dividend options
- Make the payout to shareholders of 40-55% (Basu, 2008).
Thus by looking at all the facts studied, it can be concluded that it is very important for organizations like REPSOL to come up with such global business policies and strategies so that all the issues related to the trade in international markets can be resolved. REPSOL being a multinational organization should use its internal strength to deal with different ethical and global issues that exists in the industry (Furlonge and Kaiser, 2010).
- Bachiller, P., 2009. Effect of ownership on efficiency in Spanish companies. Management Decision. 47(2). pp.289 – 307.
- Furlonge, H. and Kaiser, M., 2010. Overview of natural gas sector developments in Trinidad and Tobago. International Journal of Energy Sector Management. 4(4). pp.535 – 554.
- Hardi, P. and Buti, K., 2012. Corporate governance variables: lessons from a holistic approach to Central-Eastern European practice. Corporate Governance. 12(1). pp.101 – 117.
- Ibrahim, J. M., 2008. Growth prospects of oil and gas abundant economies: the Nigerian experience (1970-2000). Journal of Economic Studies. 35(2). pp.170 – 190.
- Rodríguez-Domínguez, L., García-Sánchez, M. I. and Gallego-Álvarez, I., 2009. Codes of ethics in Spanish corporations: an exploratory content analysis. International Journal of Law and Management. 51(5). pp.291 – 309.