Abstract
In this document, strategic analysis of the two selected industries from the London Stock Exchange for the period January 2015 to December 2015 is presented. 530 and 570 that are Pharmaceutical and Energy Exploration Sector. The second part of this report shares analysis and interpretation of the monthly capital using descriptive analytic and trend analysis. Moreover, business forecasting is done using regression analysis. After seeing the trend lines for market capitalization of the both sectors, it can be seen that the pharmaceutical industry had relatively higher market capitalization average during the period. On the other hand, the market capitalization average for Energy exploration and services sector of the oil and gas industry was relatively lower than the pharmaceutical industry. The number of firms in the pharmaceutical industry is relatively are more as compared to Energy exploration and services sector of the oil and gas industry sector. From the results obtained, it can be noted that the market capitalization of both sector shows a different trend. However, there are somewhat similar trends evident during February 2015 to November 2015 of both sectors. It can be said that the both of the sectors have been influenced of the economic conditions that has influenced the purchase and selling of the stocks of the both industries. It is evident that the change in the market capitalization would affect the number of shares being traded in the market. Market capitalization is denoted that the market value of thee firm with the number of shares outstanding. The regression output for the sector Energy exploration and services sector of the oil and gas industry shows that the p-value is higher than 0.05 indicating that there is insignificant relationship between market capitalization and number of shares trading in the stock.
Introduction
In this document, strategic analysis of the two selected industries from the London Stock Exchange for the period January 2015 to December 2015 is presented. 530 and 570 represent Pharmaceutical and Energy Exploration Sectors. The second part of this report shares analysis and interpretation of the monthly capital using descriptive analytic and trend analysis. Moreover, business forecasting is done using regression analysis
Strategic Analysis
PESTLE
Energy exploration and services sector of the oil and gas industry
The energy exploration and service sector is sensitive to political policies that influence at national and international level. The companies listed on London Stock Exchange in the sector undergo a number of challenges because of the different priority of the countries related to energy extraction and exploration. The international relation between the countries has become complex which has raised considerable issues related to the oil market because of the conflicts and economic crisis.
The oil and gas exploration and service sector have a direct impact on the consumption level of energy. The demand for the oil prices is dependent on the supply and demand of the oil process. There is constant fluctuation in the exchange rates, oil prices and economic situation, interest rate and other factors that impact transportation, petrochemical and other industries production and consumption level of energy (Global Data: Oil and Gas Exploration and Service industry, 2016). The decline in the commercial activities is depended on the economic conditions that eventually have suppressed the demand for oil and gas exploration and service sector.
In the sector of oil and gas exploration and service industry that use of the oil influenced related activities (Global Data: Oil and Gas Exploration and Service industry, 2016). The social factors related to the welfare and development has affected the exploration and perception related to oil and gas consumption level. There is more inclination towards pollution free or less polluting energy sources due to which there is more investment done on the substitute energy level that is environmental friendly. The urbanization has a direct impact on the use of energy that may vary to the use and importance of energy extraction in rural and urban areas.
There is constant development in the new technology and equipment that can be used for the energy exploration in the oil and gas. The technological development directly impacts the activities of the organization related to the techniques and methods. Moreover, there are other environmental factors such as management, worker’s protection, repairing activities and other technological factors. There is more focus on the nuclear, hydro electrical, renewable energy and other means of energy.
The environmental factors related to the geographic position, climate, and other factors have an imperative impact on the oil reserves (Global Data: Oil and Gas Exploration and Service industry, 2016). The landforms have a dominant impact on the oil exploration, transportation and establishment of refineries. The exploration cost can have a great negative impact on the flora and fauna that increases the creditability of the firms operating in this sector.
The firms operating in the industry have to face a number of legal factors, such as laws, regulations, and policies dealing with local authority. There is constant moderation in the exploration and exploitation of the transportation, commercialization of oil and gas energies.
SWOT
Strengths
The firms operating in the industry are among the largest energy company by capitalization and size.
The firms have skilled labor, technology, equipment and resources
Strong brand loyalty and management
Weaknesses
Risk of explosion near the refineries and exploration that impacts the nearby flora and fauna
Increase in the responsibility, laws, and regulations related to the industry
Opportunity
Investment in the different alternative energy resources, such as natural gasses, hydrogen, nuclear and other
Extension of oil and gas reserves and regions in the Northern reign
Flexible policies and regulations to compete with other rivals
Threats
Increase in the accountability related to environment related concerns
Deal with the ecological activities
Shift in the energy consumption level
Political conditions may affect the operations in the other regions of the world
Financial losses that may occur because of the poor economic conditions
Pharmaceutical Industry
The policies of local and domestic government greatly influence the pharmaceutical industry. There is a monopoly at domestic level played by the government that impacts the industry that impacts the operation of UK pharmaceutical companies in the different region of the world. The economic conditions have an imperative impact on the currency exchange rate. The change in the social conditions has implicit on the health of the community (London Stock Exchange, 2016). Therefore, there is constant change in the trends and other related factors that impact the local and national pharmaceutical industry’s activities. There are constant advancement needs required in the research and development because the field of medication is being upgraded with the new research and development taking place. Thus, the firms operating in the industry need to make an additional investment in the research and development to remain competent with the trends of medicines (Global Data: Oil and Gas Exploration and Service industry, 2016). Moreover, there are greater challenges faced by the firms to adopt advanced technology and scientific methods for accurate characterization.
Market Analysis
Trend Analysis
The market capitalization of the sectors 530 and 570 is calculated taking averages for the firms operating in the industry during the period January 2015 to December 2016.
Figure 1 Market Capitalization
After seeing the trend lines for the market capitalization of the both sectors, it can be seen that the pharmaceutical industry had relatively higher market capitalization average during the period. On the other hand, the market capitalization average for Energy exploration and services sector of the oil and gas industry was relatively lower than the pharmaceutical industry. The number of firms in the pharmaceutical industry is relatively are more as compared to Energy exploration and services sector of the oil and gas industry sector. During January to February, the market capitalization of the Pharmaceutical industry peaked. Also, in an upward trend is observed in the Energy exploration and services sector of the oil and gas industry sector. Pharmaceutical industry rapidly declined during February to March that gradually increased after April 2015. In the ending of the year, it is noted that the Energy exploration and services sector of the oil and gas industry closed down with the declining trend; whereas the moderate upward trend is observed in the Pharmaceutical sector.
The above-provided table indicates the fluctuation of the two sectors individual. The numeric figures are helpful in understanding the actual fluctuation in the market capitalization of the two sectors. If an observer ignores the sudden increase in value in February for sector 530, he would be able to recognize that a slight increase is observed in rest of the months except June. However, there are many ups and down in the trend of sector 570. The forecasted value for the sector 570 shows a declining trend in the trading values of the stock for the next five years. However, in the sector 530, a slight decline in the second estimated year is predicted which would again increase in the third year.
530 Regression Analysis
Market capitalization is denoted that the market value of the firm with the number of shares outstanding. The regression output for the sector Energy exploration and services sector of the oil and gas industry shows that the p-value is higher than 0.05 indicating that there is an insignificant relationship between market capitalization and a number of shares trading in the stock. The R-value obtained from the output of tableau for the industry of energy exploration and service 0.20. It indicates that there is very negligible variability of response data around its mean. It can be predicted that the number of stocks trading in the market would influence the change in the market capitalization. The change in the market value of the stock is dependent on the number of shares outstanding in the market.
Regression Analysis 570
The regression output shows that the market capitalization of the Pharmaceutical industry and trading of the stock is insignificant. It can be noted from the p-value which is higher than 0.05. The R- value is 0.20 that shows that the trading of the stocks would slightly change with the trading and the market capitalization is changed by one unit.
Conclusion
References
Global Data: Oil and Gas Exploration and Service industry. (2016). Retrieved from http://store.globaldata.com/market-reports/publishers/marketline
London Stock Exchnage. (2016, December 12). Retrieved from http://www.londonstockexchange.com/statistics/historic/aim/aim.htm
