EVALUATION OF WOOD GROUP EXISTING STRATEGIES - AN OIL AND GAS SUPPORT/SERVICES COMPANY BASED IN SCOTLAND THAT OPERATES IN SOME 50 COUNTRIES
Executive summary
Wood Group Engineering Wood group is an autonomous supplier of pivoting tool services and clients who are in demand of the energy of oil and gas markets. The services the GTS provides include industrial designing, architecture, obtainment and construction. They also provide office operations and support, updates, optimization and overhauls of gas and steam turbines, pumps, compressors and other many services. Their strategy and goals work on ensuring that they are a global leader in their callings, hence the main consideration in this paper. The paper is out to analyze the existing strategies and positions in the industry, and postulate the necessary changes that should be adopted by the management (Wood Group 2014).
The existing strategies that relate to the considerations that the current CEO has in put in place have effected a positive growth of the company. The financial statements show an upwards curve, especially in their command of the international markets and realm. However, as any given company, there are always shortcomings in the policies set. The threats that exist in the market may affect the desired targets. The management has a calling to always assess the innovative nature of its market, and embrace technological advancement in its production. The pleas from clients should also be put into consideration in order to realize fast growth and development (Hayden 2005).Introduction
Wood Group Engineering offers a variety of engineering services to the upstream, subsea, as well as pipelines. They also offer their services to the downstream and modern, and clean energy divisions. These involve applied theoretical studies, for example, building, venture and development administration, and control system redesigns. Wood Group PSN also offers life of field support to manufacturing items through brownfield engineering and alterations, creation improvement, operations, administration, training, support administration and other several services. 2014 has been a great year for the Wood Group (Hayden 2005). The manager of the group has worked very hard to maintain the status of the company, and also achieve most of the set goals. He has also been able to neutralize competition through improving the quality of services they are providing to the customers both internationally and locally. The manager was appointed as the CEO last year but has been able to consider the Group's methodology that stays sound and position the Company well in the coming future (Scott 2014).
The methods embraced in line with elucidating on the necessary strategic direction to be embraced by Wood Group include the Ansoff method and BCG. The Ansoff model works on the considerations of the market penetration, market development, product development and diversification. The BCG model on the other hand incorporates the utilization of experience curve and some imagery creatures such as the cow and the star (Darroch 2006).
Wood Group operates in many nations. The political consideration of different nations that the company operates in always dictates its dealings. The economy of the host nations is also a main determinant of the company’s base. Social aspect lies with the way the company is accepted in the society and how it relates to the nations that it has operations. Wood Group has to work on its technological department in order to embrace diversity and innovation and compete favorably. The legal aspect depends on the varied legal norms set in its host nations.
STRATEGIC POSITION
Suitability
The company is well suited in line with meeting its developmental goals and achieving its targets. The Company is overwhelmingly a predominant in line with oil and gas services in the world. The major objective of the Company is to increase and develop the services they normally offer to the clients. The workers have assessed all parts of the Group from three viewpoints (Scott 2014). These include threat profile, present and future financial performance as well as vital fit with the Group staff. The way the company considers its employees is a thing to revere. These parts have brought about various activities in the company including the establishment of Elkhorn and the joint venture with Siemens. In the meantime, the Wood Group is focusing on 2015 as they want to carry out activities regarding the mix of opex and capex. They also want to be committed to the services they are providing to the customers. They deem to maintain their position and always remain the number one company in the world (Bolman and Deal 2008).
Acceptability
Is the company having a place in the society and in the eyes of most consumers? Wood Group is performing extremely well in the markets, being a major producer of oil and gas products. The security of the Company’s workers, and those influenced by what the Company does is their primary obligation. Technically, they had a casualty throughout the year in their Pyeroy business in Wood Group PSN (Hayden 2005). They have surveyed, and are acting accordingly to the lessons they have learned. This shows that apart from the employees being happy at their places of work, the voices of the public show that the company has a high acceptability rate. In 2013, they experienced some change in their overall recordable case recurrence (TRCF. However, their lost work case recurrence (LWCF) remained moderately leveled. In 2014, they secured a Board-level Safety & Assurance panel to bring about improved conceivability and familiarity in line with their performance. Moreover, they have also improved the security for their workers (Hayden 2005).
Feasibility
How is the company performing in line with the prevailing market conditions? Can it fit into other market threats and postulations that may occur? It can only be realized from the financial reports.
The investigation above involves income, and EBITA identified within the Wood Group GTS organizations which will shift to the gas turbine joint venture with Siemens. In the respect of the bookkeeping standards, the results from these organizations have been incorporated in ceased operations in the Group Financial Statements for 2014. 2014 will always be perceived as the fortune year of the Wood group. This is because they generated the income of 14% in only a year. Moreover, the revenue of the Company increased by 11% consecutively with the EBITA, that increased by 10%. Mathematically, this reflects the development in each of the three sections which include Upstream, Subsea, and lastly Pipeline (Scott 2014). In the respect of the Wood Group PSN, efficient EBITA development of 18% was propelled by a full year commitment of the Duval and Mitchells acquisitions in the US. However, the project was negatively affected by the Oman government which denied them the right to exist. However, they are currently allowed to transit oil and gas to other countries. In Wood Group GTS, income fell to 11% and EBITA fell 7% simultaneously (Wood Group 2014). Moreover, the maintenance level regarding these two groups had also fallen until the end of 2013. The manager of the Wood Group has currently observed the lower commitment from Power Solutions. Net debt in 2014 was $205 million. The normal net obligation throughout the year was $ 145m. It is worth noting that; Net obligation dismissed a payment at the beginning of the year so that to renew the relationship that was previously terminated. The relationship of these two groups was terminated following the expenses, payments to non-controlling diversions, and the existence of high tariffs (Scott 2014).
Sustainability
Are the practices of the company deemed sustainable, both in the present and the postulated future? The manager since he became the CEO has concentrated on various key issues. He has conveyed a steady message to the workers that the Core Values are essential for the future achievement of the Group. He also urged told them that, together as a team, they might be far and away superior if they improve their efforts over their business in hand. The CEO has been creating their authority group on the Official board and, together, and they have considered the Group's technique. This is the technique remains powerful and positions them for the coming future. They are dominatingly an oil and gas group in the world, and their proposition is to widen and extend the services they can offer in this division (Robbins, Judge, Millet and Waters-Marsh 2008).
They have also inspected all parts of the Group from three viewpoints. These parts include risk profile, present and future financial performance. The manager has formerly highlighted the need to remain a lower risk, prevalently reimbursable business. Throughout the year, they have improved their controls within the group to maintain altered value components. This will guarantee that they maintain their risk profile within worthy levels (Hayden 2005).
STRATEGIC DIRECTION
Ansoff Model
In line with penetrating the given market, Wood Group has not done enough to penetrate the existing markets. One may look at the financial performance of the Wood Group and figure out that there are activities which are not worthy kit in the Group. They do not generate any profit instead of influencing unnecessary losses to the GTS. The manager and the workers inferred that, a failure to meet the client’s expectations parts was not to the greatest advantage of shareholders. They also perceived that, their general activities in line with joint venture slowly bring about profit after the whole term. The staff entered an agreement to structure a JV comprising of the Maintenance and Power Solutions organizations of Wood Group GTS (Wood Group 2014). This will provide post-retail outline, repair and assembling administrations to the shareholders. The JV will be a stronger, better separated business, giving access to certain OEM know-how. The JV is sought to generate yearly net cooperative synergies to Wood Group of almost $10m. In different ranges of the Group, the staff has deployed measures including uniting operations in other foreign countries. The reason behind is to improve the financial performance as well as shape the organization structure in the Wood Group (Hayden 2005). Wood Group
Market development works on ensuring that the already existing market is sustainable. The Wood Group provides several services in line with engineering towards the upstream, pipeline, downstream, industrial and energy sectors. The above figures include a number of studies such as designing, task and construction services. In Wood Group Engineering, income advanced rapidly by 0.8%. At the same time, EBITA advanced by only 0.4%. This reflects the development of each of the three sections, which include Upstream, Pipeline and Downstream. EBITA edge increased about 8.3% to 10.2%. Moreover, Headcount advanced by 3% from 8,100 to 9,500 reflecting augmentations in other local neighboring countries. The Upstream business generated about 30% of divisional income. The Group has made a decent EBITA major contribution in 2014. The group is still carrying out various seaward ventures. However, the progress and performance of the Group was highly affected by the week supervision (Boxenbaum and Rouleau 2011).
Product development calls for ensuring that they give heed to what the consumers of their products say. They should also put into consideration the dynamic nature of the existing markets in a bid to sustain themselves through the tide.
Diversification calls for the organization to consider other areas that they can venture into. Working on the technological realm, especially basing on the market’s rich technological niche would be an added advantage. The Group has been performing so well after putting much focus on these three parts. Specifically, these are the parts which are very crucial as the CEO to consider when taking over the Company. The Company has to be ready to abide with risks and know how to handle them if they emerge. This is the reason the Group has propelled 12% of the earnings in only the first year under new administration. The new CEO is not ready to encounter any loss in the coming year of 2014 as he has made his plans open to the audience, ever worker understands his obligations and if in any case he fails to comply with the pressure, he is allowed to consider his position in the Wood Group (Darroch 2006).
BCG model
The BCG development grid a piece of the model classes every item. It could be in the form of a cow that relates to product offerings that get a high salary requiring little to no effort to the organization. It, therefore, leaves a lot of cash to put to different callings. "Star" product offerings may accumulate a few benefits. However, they require more financing to sustain their postulated market share. In the case of Wood Group, there resources allow them to act as a Star in the market. There are more practices that they need to embrace in a bid to remain sustainable in the market. They also have to incorporate further innovation realms in order to beat the ever existing competition (Mclean 2005).
An alternate segment of the BCG model proposes an "experience curve" that charts the expanded benefit as an organization increases encounter and piece of the pie with a specific item. The model postulates that each one time an organization's yield grows so it delivers twice to the extent that a particular item as it used to, the expense to make every unit goes down by 20 to 30 percent. This diminishing is because of specialists expanding creation speed as they get acquainted with the methodology. This hypothesis depends on keeping up a low turnover in the work forces and no postulated increases in the materials costs. The regular message on expanding cooperation among the firms has brought about business opportunities from workers who are normally working together. Wood Group Mustang and Wood Group PSN together have cooperated to secure a topside itemized engineering, as well as procurement aspect in the country. They are also working together with the US, Australia as well as other countries. The aim of this cooperation or business relation is to increase the performance and also awareness of workers in the firm. The cooperation is also believed to enhance the income of the group. The CEO and the staff are progressively concentrating on advancing the client relationships at a Group level. This is surely bringing about various potential fortunes (Blenkinsop and Burns 1992). In 2014, the Group invested $246m in acquisitions which the group is quiet sure they will enhance their budgetary performance and more important maintain their position. At the end of the year, the group procured Elkhorn for an amount of about $295m. Elkhorn is a Wyoming based architecture services supplier which upgrades the income of the Wood Group.
The CEO also procured Pyeroy in the middle of the year to advance the services provided in by the Group. Moreover, the Group also procured Intetech in July (Mclean 2005). The knowledge of capital structure is provided by the evaluation of cash flows system, investments, and also the risks in the business. The Company would significantly anticipate that the net debt is around 0.2 xs to 0.4x maximum, and 1.1x minimum. Until the degree that the Group is financially stable to comply with all costs, The Group would look to give back this to shareholders through share purchase backs (Blenkinsop and Burns 1992). The Group keeps on embracing a dynamic profit policy considering its capital prerequisites, cash accounts and profit. The Wood Group has so far increased the profit of almost 18% annually. The executives have suggested a final profit of 12.7$ for every transaction which brings about a total of 22.0 cents a year, which is an increase of 24%. In the respect of the certainty in future development of the Group, the Board currently anticipates the profit increase in 2015 to be around 23%. The goal of the Wood Group is to build the US dollar value for every share paid from 2016 onwards by a double-digit rate (Blenkinsop and Burns 1992).
Conclusion There is need for embracing better strategies that would ensure Wood Group commands the global market with ease. They should work on ensuring that the competition that exists does not throw them out of the industry. As their financial reports indicate, the company has a bright future, and hence has to embrace policies that will not only work on improving their relationship with the customers but also other stakeholders in the business. In 2014, Wood Group’ income increased for about 10%. The Group continued to grow for about 20% in the following years. The company is anticipating advancing more in 2015 and becoming one of the finest groups in the world. They surely understand that, and they can significantly improve the income through the reduction of the Upstream. In general, the Group has made positive endeavors improve the income rate, but they are yet to achieve their long term objectives (Justo 2009).
The performance of the Wood Group cannot only be determined in only a year but for the series of years. The manager and also the staff members have to be committed and dedicated to the goals set by the Group. In the meantime, the progress of the Wood Group is astonishing but still need more efforts to sustain it. The Wood Groups has to do anything possibly well to raise earning's rate and maintain its position as the number one Company. Most of the Groups have been observed developing and after a while decline due to the lack of consistency and plans. This is not expected to happen to Wood Group as they had learnt from such examples and worked on the loopholes available. It is a belief of every staff member as well as the CEO that the Group will move forward and reach where they want to be. However, this can only be possibly if they will comply with the strategies they have set to nourish the positive progress of the Wood Group engineering (Hayden 2005).
Recommendation
The accomplishment of leadership responsibilities and obligations are very crucial to the organization. This is clear in line with the strategies embraced by Wood Group. The company has a calling to increase its ventures in the North American region, which will ensure that they have a great market base. In line with the calls for diversification, the company can ensure that most of its products embrace unique stances that would match the market demand and competition. Waging away the competition from other players in the industry may be extremely tedious for the company (Bolman and Deal 2008).
Market penetration is an area that Wood Group has not fully considered in line with commanding the market. Despite the fact that they have several bases in different nations, they still have a great ground to cover. They have to get to other markets that have either been tried or are yet to be explored. They can embrace effective research in the African markets, despite the fact that it may be costly. However, once they can find a niche that they can exploit, they could stamp their authority and ensure it becomes their stronghold.
Their prices should also be in line with the market conditions. They should set reasonable process, not only on their products but also on their shares. There are many investors who may be willing to be part of the Group but fail due to the share prices set. This would ensure a stable performance by the company that would not affect their client base (Bolman and Deal 2008).
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