The Eight Step Decision Making Process - 991 Words

1. Outline the eight-step decision-making process, as described in your text. 1. Identify a Problem: †¢ The choice making procedure starts with the presence of an issue: A disparity between a current and fancied situation. †¢ Illustration: An old machine that has created progressing mechanical issues, bringing about breakdowns and higher expenses. 2. Identify Decision Criteria: †¢ Decision criteria characterize what is significant in settling on the choice. †¢ Managers figure out which criteria are applicable in settling on the choice †¢ Examples: Price, rate, force, simplicity of operation, clamor, security, accessibility, dependability and administration 3. Allocate Weights to Criteria: †¢ Establishing needs: If the choice criteria are not similarly imperative, they must be weighted altogether of significance and need. †¢ Normally, numerical weights are appointed, maybe from one to ten. †¢ Different chiefs will appoint distinctive weights to their choice criteria. 4. Develop Alternatives: †¢ All the practical options are analyzed, in view of the choice criteria. †¢ There is no endeavor to assess choices, however just to show them. 5. Analyze Alternatives: †¢ Each option is dissected, by applying the criteria. †¢ The criteria in every one of the choices are totalled, permitting an observational correlation. †¢ Different leaders might diverse choices and measure every option in an unexpected way. Not everybody has the same choiceShow MoreRelatedThe Ethics Of The Graphic Design Shop Essay1169 Words   |  5 Pagesdesigner has a way to â€Å"cheat† and get the resource free without purchasing the license for commercial user. We will be using the eight steps of ethical decision making. Once the steps have been applied, we will compare our original decision to the decision reached by using the eight steps of the ethical decision process. Step One is to gather all the facts about the decision. This includes not jumping the gun about the situation (Douglas R. 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Strategic Management in Oil and Gas Firms

Questions: As the search for rare resources becomes increasingly risky and expensive oil and gas firms have to use different strategies to maintain their place in a competitive sector. 2013 saw a continuation of the growing joint venture trend between NOCs and IOCs for international exploration (Global Oil and Gas Transactions Review 2013, EY Review, 2013)You have been tasked with evaluating a joint venture in the energy sector. In this concisely written report you are required to provide specific information and analysis about the chosen joint venture.The report should be done so in the following way:Introduce your report and provide specific reasons as to why you have chosen this particular joint venture to analyse (20 marks)Critically analyse the drivers for, benefits of, and potential issues with, the joint venture.Provide two key recommendations for the firms who are involved in this joint venture and rank these in order. Give reasons for your rankings Answers: Introduction Oil and gas organizations focusing on adoption of different strategies as exploration of scarce resources are becoming increasingly risk as well as expensive. In order to maintain a competitive position in the oil and has sector, joint venture is considered to be an effective strategy for international exploration. The economy of Russia is significantly dependent on the oil and gas sector. According to U.S. Energy Information Administration (EIA) (2015), it is the second largest producer of dry natural gas of the world. It is the third largest fuel producer of liquid fuel. It has been estimated than the revenue generated from hydrocarbon, oil and gas contributes more than 50% of the federal budget revenue in Russia (U.S. Energy Information Administration (EIA), 2015). British Petroleum (BP) is one of the leading oil and gas organization of the world (Bp.com, 2015). Since 1990s, BP has been operating in Russia for enhancing international exploration activities. Joint ventures assist t he partners with distinct strength and capabilities in achieving a mutual goal through bringing the partners together. BP had entered in the Russian oil and gas market for capturing significant market share and enhancing their production. In 203, BP embarked into a 50-50 joint venture with Tyumen Oil Company (TNK) in Russia. This paper will focus on analyzing the joint venture by identification of the key drivers of this joint venture, major benefits of this venture and discussion of the potential issues in this case. At the end of the study some recommendations have been provided which can assist the partners in resolving the major issue for maximizing the synergy of joint venture (Ekin and King, 2009). Discussion This section will focus on identification of the major reasons and objectives behind the joint venture of BP and TNK in Russia. Joint ventures are one of the most significant and effective way of entering to the international market. Moreover, the major advantages obtained from this joint venture will be included in this section. Additionally, the potential issues confronted by the BP TNK joint venture will be discussed. Drivers of Joint Venture In 2003, BP entered into a formal contract by signing an agreement for investing 6.15 billion USD in a joint venture for producing oil and gas in Russia (KISHKOVSKY, 2015). BP is the third largest company in the international oil and gas sector and adopted joint venture as business expansion strategy (Zahra, Ireland and Hitt, 2000). The joint venture of BP with TNK has been approved by the Russian government. The deal focused on creating a new oil producer and becoming the largest multi-national company in Russia. This joint venture had included the existing Russian assets held by BP (TIMMONS, 2003). One of the major driving forces of this venture is BP focused on expanding its business activities in the international market and joint venture with the company based in the target foreign market will helps in better insight regarding the market. Additionally, in case of joint venture, BP can easily get an access to the new market and its distribution network. Equal participation of the partners in the joint venture capitalizes unique capabilities of the partners for achieving mutual goal (Hill, 2009). Both the organization had focused on the idea of capitalizing synergy which will significantly contribute in growth of both the organization. In this joint venture, BP had shared its technical knowledge along with market power. On the other hand, TNK significantly contributed through identification of the large oil reserves in the Siberia (Ekin and King, 2009). This joint venture also has an important political implication which must be considered as one of the most important driving forces of the BP TNK joint venture. In Russia, Britain has become the largest source of foreign investment after this strategic move of Britain (Macalister and Hollingsworth, 2003). Former Prime Minister of Britain, Mr. Tony Blair had referred the deal as a concrete testimony to the long term confidence of UK in Russia. BP had identified that the energy sector of Russia is an attractive area of investment. Moreover the enhanced accounting transparency and firm corporate governance practice in Russia has led to the joint venture (Macalister, 2003). If Russian perspective is considered, it can be found that, the nation requires significant foreign investment for tapping large reserve and building the pipelines as well as other infrastructure and facilities in the oil and gas market (TIMMONS, 2003). Advantages of Joint Venture of TNK BP Joint venture of BP and TNK can be critically analyzed by considering various aspects. Different studies have indicated that the joint venture of TNK BP has been beneficial in various aspects. On the other hand, it is evident that TNK BP had encountered various issues in operating in Russian oil and gas sector. This section will focus on highlighting the major advantages of joint venture in case of TNK BP. The operational activities of TNK BP had been effective and it generated substantial profit. TNK BP had become third largest vertically integrated oil and gas Company of Russia. During the period 2003 to 2012, the joint venture had been able generate more than 55 billion dollars. Hence, it can be stated that the joint venture of TNK BP has been successful (Bp.com, 2015). According to the analyst Michele della Bigna from Goldman Sachs, the joint venture has provided ample opportunity to BP for gaining access to a prospective new frontier area. BP could not get a direct access for undertaking exploration activities in Russia as a non-Russian company. Hence, this venture has provided significant growth opportunity for international expansion of BP (the Guardian, 2011). Significant risk is associated with international business expansion. However, selection of joint venture as the entry mode strategy in the international market assists in minimizing various risk factors. When a company considers integrating its business operation in the foreign market, it must consider the political risk. It is associated with the changes in political power which has considerable impact on the operational activities in the business. Implication of policy change and change in legal framework must be considered by the foreign investor. As TNK has been operating in the domestic market, it will be beneficial for the joint venture. The political and legal issues can be better dealt by the Russian partner. Additionally, joint venture of BBP and TNK has contributed in growing the business faster through enhancing productivity as each partner shared its unique expertise and strengths for maximizing the synergy (Killing, 2012). The joint venture has offered BP, better access to the Russian market as well as the distribution network. In this joint venture capability of BP and TNK has been capitalized which assisted in enhancing the capacity of the new organization. Cost as well risk of international business integration can be shared with the partner. This is the major advantage for both BP and TNK (Child, Faulkner and Tallman, 2005). The energy sector of Russia has been achieving significant growth and it has large oil and gas reserve. In order to tap the reserves, Russia needs assistance from the foreign investors who can invest in developing infrastructure and facilities for the oil and gas sector of Russia. The joint venture also allowed foreign currency inflow which has a positive implication for the Russian economy. Thus, the joint venture has significantly contributed in the energy sector of Russia. Russian government has provided support to BP for making the joint venture success. This joint venture is a political move that has made significant contribution in the economy of the nation. Joint venture of TNK BP has enabled the growth of the firm by ensuring greater access to huge resources which include skilled labor, experts, advanced technology, relevant experience and finance. It has been reported that the company has been able to perform successfully during 2003 to 2012 and the production of this joint venture enhanced by 40% in 9 years of operation. It had proved that SEC reserve had grown by 30% during this period. The technical specialization of BP has been capitalized by the joint venture that helped in achieving excellent result. It has been reported that the joint venture has been able to pay net dividend of 19 billion USD to the shareholders of British Petroleum. The company has paid more than 190 billion USD as tax and duties to the Russian Federation (Bp.com, 2015). The financials of the joint venture clearly depicts the operational excellence and the powerful partnership of BP and TNK. Potential Issues Though TNK BP has experienced significant growth and success during 2003 to 2012, it had encountered major issues relating to the expansion as well as employment policies. In 2012, BP has sold its share of TNK BP to Rosneft. This decision has been triggered by various factors. This section will focus on discussion the potential issue that led to the break up the joint venture in the Russian oil and gas sector. In case of joint ventures there is a significant risk of internal conflict and difference in opinion between the partners. In case of BP and TNK, the joint venture did not work as conflict occurred regarding the operational activity. Currency Risk: Potential risk is associated with currency due to fluctuation in the exchange rate. It is crucial in case of BP as it would require investing lump sum in the project. Political and Legal Issues: In 2011 BP had decided to establish a strategic partnership with Rosneft which is a state oil company in Russia. The strategic alliance focused on the Arctic development. TNK was unhappy about it and it was stated that the activities of BP led to conflict of interest. However, the deal was blocked as it has been claimed that BP had breached the shareholder agreement of TNK BP. Moreover, Russian government focuses on getting greater control over the oil and gas sector. It has been found that the companies not having more than 50% foreign capital could develop new fields (Sorbello and Grandi, 2013). Hence, TNK BP did not have the right to develop new fields. However, BP insisted the Russians to own 50% for developing new field. But the Russians did agree which led to managerial conflict. Therefore, Robert Dudley was forced to step down. The moral hazards and legal conflicts in TNK BP led to the end of the joint venture by selling the share to Rosneft. Internal Conflict: The management of BP had decided to end the partnership due to the bitter public dispute with the oligarch partners (Hulbert, 2012). A confidential source had revealed that the core of the problems was the major disagreement regarding the purpose of new ventures (Amos, 2012). If perspective of BP is considered, it can be found that TNK BP is viewed as a Russian subsidiary of the British oil and gas firm. On the other hand, Alfa-Access-Renovaconsidered TNK BP as an organization with global ambition which reflects that in near future it will compete with BP (Gosden, 2012). The partners have encountered major issues in decision making. Moreover, it has been observed that BP was losing its control over the day to day management. However, temporary peace was achieved when three independent directors were appointed in TNK BP. various events forced BP to take a defensive position. The Yukos affair had influenced the British Petroleum to assume that the business environment in Russia was cha nging in favor of the stated owned business units (Sorbello and Grandi, 2013). Starting from that time, the misunderstanding of the business environment led the joint venture in Russia into an increasing uncertain discontinuity in the activities of British Petroleum along with the major international trials. It has been found that whenever, Alfa-Access-Renovaconsidered expansion of the business activities of the joint venture TNK BP, British Petroleum had used its power or majority in board for opposing it (White, 2011). Recommendations The above sections have clearly identified the reason behind joint venture of TNK BP. It solely focused on capitalizing the synergies for enhancing the performance of partner organization. It has been observed that TNK BP has operated successfully during the period 2003 to 2013. However, ultimately the joint venture did not work and in 2012, BP had sold its share to Rosneft. Some recommendations can be provided regarding the indentified potential risks. BP can adopt an effective strategy for dealing with the currency risk in Russian investment. For counteracting currency risk price hedging will be appropriate (Rugman and Hodgetts, 2003). Political and legal risk seemed to be the major issue in the TNK BP joint venture. It has been found that political interference and breach of agreement has affected the partnership. As it has been affecting the independent business operation of BP, it has two options. First of all, BP can lower its share in TNK BP by partial withdrawal of capital. It will enable BP to develop new fields as the stake will be less than 50%. Major advantage of this strategy is BP will have an access to the oil and gas network. Or else, BP can completely withdraw its stake from the joint venture. However, there will be no scope for negotiation in future (Venkateswaran, 2012). Internal conflict between the partners can be resolved by negotiating. However, it must be considered that negotiation might not work as an effective strategy depending on the severity of conflict. As TNK has reported that there is a conflict in interest, it will be difficult to establish mutual trust and work together. Partial investment will be a suitable decision for British Petroleum. Conclusion This paper has provided an insight to the joint venture of British Petroleum and Tyumen Oil Company in Russia. Analyzing the driving forces of this joint venture, it has been found that BP considered it as a strategy for international business expansion. Russia has large source of oil and gas reserve and in order to undertake exploration activity, Russia requires foreign investment in order to develop infrastructure. It has been observed that in joint venture risk is minimized as both cost and uncertainty of the project is shared between partners. Additionally, joint venture helped BP in having access to the market and distribution network. It has been observed that the operational activities of TNK BP had been effective and it generated substantial profit. TNK BP had become third largest vertically integrated oil and gas Company of Russia. During the period 2003 to 2012, the joint venture had been able generate more than 55 billion dollars. Moreover, some significant issues have bee n identified in case of this joint venture. Potential currency risk, internal conflict between partners and political as well as legal issues has been encountered by TNK BP. Recommendation have been provided at the end of the study which indicates that partial or complete withdrawal of share in the joint venture. References Amos, H. (2012).TNK-BP Denies Owner Conflict's Impact on Production | Business. [online] The Moscow Times. Available at: https://www.themoscowtimes.com/business/article/tnk-bp-denies-owner-conflicts-impact-on-production/462803.html [Accessed 20 Mar. 2015]. Bp.com, (2015).BP at a glance | About BP | BP Global. [online] Available at: https://www.bp.com/en/global/corporate/about-bp/bp-at-a-glance.html [Accessed 20 Mar. 2015]. Bp.com, (2015).BP in Russia | About BP | BP Global. [online] Available at: https://www.bp.com/en/global/corporate/about-bp/bp-worldwide/bp-in-russia.html [Accessed 20 Mar. 2015]. Child, J., Faulkner, D. and Tallman, S. (2005). Cooperative strategy: Managing alliances, networks, and joint ventures.OUP Catalogue. Ekin, A. and King, T. (2009). A struggling international partnership: TNK-BP joint venture.Int. 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(2003).BP Signs Deal With Russians For Venture In Oil and Gas. [online] Nytimes.com. Available at: https://www.nytimes.com/2003/06/27/business/bp-signs-deal-with-russians-for-venture-in-oil-and-gas.html [Accessed 20 Mar. 2015]. U.S. Energy Information Administration (EIA), (2015).Russia - U.S. Energy Information Administration (EIA). [online] Eia.gov. Available at: https://www.eia.gov/countries/country-data.cfm?fips=RStrk=m [Accessed 20 Mar. 2015]. Venkateswaran, N. (2012).International business management. New Delhi: New Age International. White, G. (2011).TNK-BP Russian Partner Relishes Conflict. [online] WSJ. Available at: https://www.wsj.com/articles/SB10001424052970203503204577036000854767804 [Accessed 20 Mar. 2015]. Zahra, S., Ireland, R. and Hitt, M. (2000). International expansion by new venture firms: International diversity, mode of market entry, technological learning, and performance.Academy of Management journal, 43(5), pp.925-950.