Pestle analysis of the Wood Group

Pestle analysis of the woodwind instrument GroupThe woodland base was founded in 1912 by Wood and Davison which the accompany used for ship liven up and marine engineering firm to serve the fishing fleet. In 1970s embrocate gas reserves were discovered in the North Sea and presented an type opportunity to convert marine engineering experience into engineering and support work. During the late 1990s Wood Group Engineering (North Sea) became a market attracter in the North Sea providing integ sum upd engineering, operations and maintenance serves to BP, Shell, Talisman, Amerada Hess, BG, Enterprise Oil and ChevronTexaco. The company now is a leading independent services turn inr for the oil gas and causation generation markets. Currently the main focus of the company is on the environment by establishing the re reinvigoratedable nada services multitude and expanding their scope of operations within the alternate(a) cogency diligence.Wood group to a fault known as Joh n wood group is an muscularity services provider. The company is organised into to three divisions1. Engineering and outpution facilities2. Industrial gas turbines overhaul and repair services for oil gas and power generation services.3. Production supportThe core strengths of wood group ar facility operations maintenance, field service of pumps, wellheads and valves clients, procurement construction wariness, deepwater topsides, rotating equipments and power solutions, and renewable dynamism.The wood group operates mainly in Europe and North America. It is headquartered in Aberdeen and employs ab knocked out(p) 29,000 worldwide and operating in 50 countries. In 2009 the wood group preserve revenues of $4,927.1 million, the operating income of $298.5 million and the net profit of $164.2 million.Wood Group vision is to be a leading world-wide energy services provider. The company globular news reports has been reinforced upon decades by offering a broad range of integrate d services across the asset lifecycle and successfully managing the most complex engagements for their clients. They consistently set about to provide services and products that argon recognised as market-leading and attempt to exceed their customers expectations and deliver superior returns. Wood group strategy is to achieve long-term sustainable growth by adding value to their customers operations with world-leading, noblely differentiated products and services.PESTLEPESTLE analysis describes the macro-environmental factors used in the environmental s lowlifening components of strategic management. It mint be use for reviewing a situation, direction of a company, a marketing proposition, or an idea. The analysis is a useful tool for taking advantage of the opportunities and cut back the threats. Without knowing what external factors affect the organisation, it is difficult to manage the business in an efficient manner.Figure 1 Macro-Economic EnvironmentSummary of PESTLEPolitic al populace energy product markets gestate been increasing because of the threat of geopolitics instability.Due to Co2 emission, establishment has set pressure on persistence to improve and produce to a greater extent sustainable form of energyThere atomic number 18 trading polices with certain countriesRestriction to import and export to certain countriesRestriction doing business with certain countries.Fines for industry that pollute the environment. brass taxes and price controlsEconomicsAlternative senior high -quality energy technology increases the companys revenue as customers seek for less greenhouse gas emissionsCompanies get producing certain products from developing countries due to its cheaper labour cost.Market is unstable as world thriftiness is coming out of a world recession world(prenominal) economies are expected to grow within few years and energy demand will grow again. accessible/ tillageLately the nation has give out more than disturb about the environ ment and their view has been more encouraging for renewable energy product.Life expectancy is relevant to the companys labour force. Company return in countries with higher life expectancy.Health workplaces for oil and gas industry services are indispensable for long term success.TechnologicalRenewable energy technologies have been increase to cringe the fossil fuels. E.g. Technologies such as wind power, tidal wave, hydroelectricity etc,Many governments are providing tax advantages and different subsidies to make secondary energy sources more competitive against oil and gas.Lots of question and development have taken place to promote further renewable energy.LegalThe policy includes unattackable new condom standards for offshore drilling including demonstrations of ability to respond to future blowouts.Heavy penalties for galosh violations.Carbon taxes i.e. penalties polluting the environment at a certain take.legislative measures are used in order to force business into behaving in a more environmentally sound mannerEnvironmentalDue to concern over the risk of global warming, a subprogram of countries have adopted regulatory frameworks to reduce greenhouse gas emissionsHigh quality technology been research for better alternative energy mathematical processIndustries been using program to identify ways to reduce carbon bymanaging waste more efficiently, using operate carbon footprint measurements and exploring potential solutions for saving energy.Description and detailed information of PESTLE are found in Appendix (A).5 forces analysis5 forces of model analysis is commonly used tool for competitive environment and its attractiveness of a market.Figure 2- 5 forces of analysis (httphttps://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiOocEk1Mcp80HPF-Hlro4SVYJzZ_h14QRFnrkCyV1PLF6tmgWzUTmJAeI3lup8vOo1H3vXeE6aUOhMvIb1Ut2Bj13ICycpy9l_j19I1_w-0j5RsNLYVHJHcrOgwd-6IMI4kbwm-KK2NmGP/s1600/porters-five-forces2.jpg)Barriers to Entry (High)This force describes the level of entry of other companies to introduce this type of industry. If the entry of the company is high the company w ould lose it profitability. Barrier to entry to these type of industry are high due toLarge access to the suppliers and distributors ensuring widespread energy provision.High technology costDominated by major playersMature marketStrict government policy and environment regulation requirements to operate in oil and gas services industry.Large economies of exfoliation required to achieve cost leadership which is essential in energy provision.Large capital requirements to set-up operationsImportance of ethical brand identity because of nature of market (loyalty as a barrier).Existing players have close customer relations .e.g. from a long-term service contacts.High proprietary learning curve due to technological focus on alternative energy industry.Competitive Rivalry (medium)This force describes the intensity of arguing between existing companies. Within the oil gas and energy services provider the competition rivalry between existing players are medium because ofHigh exit barrier s.Not many major players in this type of industry.High capital costCompanies with similar strategiesHigh industry growth as alternative energy is vital for the long term future of the industry. discordant rivals in rationale for strategies to institutionalize and enter industry.High switching costThreat of substitute (low)Threat of substitute exists if there are alternative products with lower prices of better performance parameters for the homogeneous purpose. This would reduce the demand for a particular product and therefore would be a threat of consumers switching to alternatives.Threat of substitute is low because lack of alternative renewable energy and only commodiousr industry can afford the renewable energy products.Threat of substitute would be high if a company provides the latest technology and specialised services. bargain power of buyers (low)Bargaining power of customers determines how much customers can impose pressure on margins and volumes. The buyers for en ergy service industry hunt for excellent quality product but with lower prices and for a better contract term. Bargaining of power for these industries is low becauseThe brand loyalty is highAvailability of substitutes is lowBuyer incentives is high, in terms of tax breaks and energy provider buy-backsBuyers volume are lowLow bargaining force of buyersDepends service standardsLow elasticitySwitching to alternative product is difficultBargaining power of suppliers (high)Bargaining of supplier is the input required in order to provide the redeeming(prenominal)s. The bargaining power of suppliers is high becauseThe market is dominated by few gigantic suppliersThe switching cost are highThere is not much substitute for providing field service of pumps, wellheads, rotating equipments, power solutions, renewable energy etc.The energy services are loosely dominated by major companies. For these industries large amount of capital investment required significantly to reduces the number o f companies and increase the power of existing players in the industry.The suppliers in UK are threatened by large companies able to source their product abroad at cheaper deals.Appendix (A) -PESTLEPoliticalThe oil and gas services industry has to follow a string of some(prenominal) provincial and federal government regulations when it comes to the production of energy resources. There are potential fines and sanctions that can be set by various governmental.Wood group operating in a globalized environment with industries around the globe (now operates in 46 countries globally in continents such as Australia, Europe, Middle East and the U.S.) its performance is highly influenced by the political and legislative conditions of these countries when it comes to production of energy resources.Their operations can adversely affect by political or regulation developments which areAccess limitations A number of countries limit access to their oil and gas resources, or may place resources off-limits from development on the whole. Many countries also restrict the import or export of certain products based on point of origin.Fines There could be potential sanctions and fined by the governments if they dont follow their legal procedure. Government wants to make sure their product is environmentally friendly.Restrictions on doing business As a British company, wood group is subject to laws prohibiting British companies from doing business in certain countries, or restricting the kind of business that may be conducted.Regulatory Even in countries with well-developed legal systems where Wood group does business, they remain candid to changes in law that could adversely affect their results, such as increases in taxes or government royalty rates (including retroactive claims) price controls or other laws that increase their cost of compliance.EconomicsEconomic factors are of concern to wood group, because they are likely to influence demand, costs, prices and profits. One of the most influential factors on the economy is the global oil market prices that are primarily influenced by demand and supply forces. Supply shortage causes an upward movement in the price pressure. This may perhaps be due to factors such asUnplanned refinery shortageUnexpected demand increasesPipeline problemsCompanys revenue will increase if they provide good quality sources of alternative energy as government seeks environmentally free energy source. Market is unstable as world economy is coming out of a world recession and lower oil and gas prices contributed to a reduction in global E P expenditure of around 15% in 2009. However global economies are expected to grow within few years time and energy demand will grow again.Social/culturalThe company involves in many countries where population age, health and attitude vary. By identifying differences and similarities in culture to gain a better understanding of the culture issues related to the industry. Lately the nation had become more concern about the environment and their view has been more encouraging for renewable energy product.Health and safety are one of the main goals of wood groups business principles. Achieving and maintaining high standards of performance in health and safety plays an integral role in the sustainability of their long-term reputation and success. As health is part of wood groups vision, their goal is to improve the quality of occupational health management byMaintaining a healthy workplace commanding more effectively the health risks arising from their activitiesPromoting the benefit of healthy lifestyles for their employees via campaigns and health fairsLife expectancy is relevant to the companys labour force. In developed countries their life expectancy are high and therefore the work force labour would be greater compare to the developing countries.TechnologicalRenewable energy technologies have been increase to reduce the fossil fuels. Many governments are providing tax advantages and other subsidies to make alternative energy sources more competitive against oil and gas. Governments are also promoting research into new technologies to reduce the cost and increase the scalability of alternative energy sources. Wood Group delivers solutions to maximize the availability of wind turbines, wave energy systems and other renewable energy projects. Wood Group is expanding its reach into the renewable energy industry and offers a dynamic set of specialized technical consultancy services to meet the needs of their global customers.Wood Group is the worlds leading solution-independent engineering and management services provider for subsea developments and pipelines. Their reputation is built upon strong technical excellence and efficient project delivery. Wood group are technology leaders in several areas such as cryogenic pipelines, remote sensing, pipeline stabilisation and flow assurance.LegalVarious government legislations and policies have a direc t impact on the performance of Wood Group. National governments are concern with the environmental issues so therefore legislative measures are used in order to force business into behaving in a more environmentally sound manner. The policy includes strong new safety standards for offshore drilling including demonstrations of ability to respond to future blowouts and heavy penalties for safety violations.EnvironmentalDue to concern over the risk of global warming, a number of countries have adopted regulatory frameworks to reduce greenhouse gas emissions. These include carbon taxes, increase efficiency standards and incentives for renewable energy. These requirements could make Wood Group products more expensive and reduce demand for hydrocarbons, as well as shifting hydrocarbon demand toward relatively lower-carbon sources such as natural gas.Wood group has move to minimise adverse environmental impacts for their operations. In 2009, they introduced a carbon footprint pilot progra mme to help a better understanding of carbon management and identify ways to reduce carbon use throughout their operations. The program includes managing waste more efficiently, piloting carbon footprint measurements and explore potential solutions for saving energy.http//www.economywatch.com/energy-economy/crude-oil-prices.htmlhttp//www.investegate.co.uk/Article.aspx?id=20100302070000P5044APPENDIX B 5 forcesBarrier to entry (high)There are many oil gas industry services companies in the world, but barriers to enter to these types are enough to prevent the serious companies. Barriers to entry are high due to the high capital cost, significant regulatory environment and existence of scale economies are required to operate within the industry.Recently an oil and gas service industry is growing at a very strong rate which is attractive to new entrants as alternative energy is essential at this time of the world. However due to present economic difficulty has contributed a large decli ne in attractiveness in these industries which deterrent the potential entrants. To maintain with the leading players in the industry strong research and development capability is required.http//energybusinessdaily.com/power/barriers-of-entry-into-the-energy-industry/Competitive Rivalry (medium)Analyzing an energy company it is really important to look at the particular region in which the company operating. The customers can choose their product by companies services standard and speed of delivery of their product. Technology can change the nature and the basis of rivalry among existing competitors in several ways. It can dramatically modify the cost structure and hence affect pricing decisions. The role of technology in product differentiation and switching costs are also important in rivalry. Another potential impact of technology on rivalry is through its effect on exit barriers.Wood group rivalries are Aker Solutions, AMEC, KBR, Technip, Worley Parsons, and Baker Hughes. Wood Group is the leading oil and gas services in the North Sea. (ref). Wood Group global reputation has been built by successfully managing the most complex engagements for their customers, offering a wide range of integrated services across the asset life has noticeably change magnitude the profitability of Wood Group business.http//www.woodgroup.com/about-us/doing-business-with-us/pages/default.aspxThreat of substitute (low)The threat of substitutes for energy services are low as they are generally gas, wind power, solar power, coal and hydroelectricity. Therefore they are not much substitute for renewable energy and only big company can have those products due to a very high capital cost. The threats of substitute of these types companies are commonly with those who offer better technology and specialised services such as directional drilling. (http//www.investopedia.com/features/industryhandbook/oil_services.asp)Bargaining power of buyers (low)The bargaining power of buyers for W ood Group has increased by developing strong relationships by providing reliable project delivery and cost-effective. Their success in these areas is established by the continuing relationships with the integrated operators, national oil companies, independent operators and power companies throughout the world.http//www.woodgroup.com/about-us/doing-business-with-us/pages/default.aspxBargaining power of suppliers (high)The energy services are mostly dominated by major companies. For these types of industries large amount of capital investment required significantly to reduces the number of companies and increase the power of existing players in the industry. The oil and gas services suppliers in UK are threatened by large companies able to source their product abroad at cheaper deals.