Saudi Aramco is among the largest companies producing oil in the world, with operations in oil and gas fields, with Ghawar oil field being its largest oil field. Headquartered in Dahran, East of the Arabian Peninsula. The company’s heart is in oil production, end employing a significant number in terms of workforce, among some of its employees being engineers, mining professionals, and geologists. The company has had a distinguishing factor that has propelled it in terms of research, on establishing better ways of exploring its oil and gas reserves, with the operations being streamlined by an operational, well monitored computer system. The company also has a well-structured management team which helps it in resource utilization. Lately, It has achieved unprecedented growth rates, with the supporting factor being the operational strategy put in place by the firm. Operational strategy refers to the set of decisions that are made in order to formulate specific activities that support the firm’s business strategy (Badenhorst et al, 2008). The operational strategy used by Saudi Aramco, has distinguished its position as a leader in oil production, with direct contacts with the Saudi King, one of the special attributes that has made the company to achieve its goal. Its relationship with top government leaders has enabled it to operate smoothly without political interference, hence greatly enhancing its independence, in terms of operations and management. This independence has made the company achieve a lot in terms of operations, with high strategic decisions solely being made by the government, which forms part of the shareholding, in the National Oil Company, the largest shareholder of Saudi Aramco (Marcel & Mitchell, 2006). The company’s involvement in major joint ventures has enabled the company to scale its
operations, with large quantities of crude oil being processed every day, highlighting one of the operational strategies in focus. Its operations, on the other hand is mainly enhanced by the upstream available commercially viable quantities of crude oil and petrochemical segments (Dow, 2011). This has hence maximized its income and enhanced a sustainable measure. The company in its quest to remain competitive has extensively constructed refineries and other distribution facilities, which helps in stocking large quantities of industrial fuel stocks. Saudi Aramco also has an excellent network that uses modern extraction techniques, which helps in the extraction of petroleum components. It uses technology to extract oil and gas that helps it in reducing its extraction and developmental costs, compared to the other oil companies, and has then remained at the heart of the company’s operations. The continued use of technology in its well extraction, such as the use of smart wells and remote geo-steering techniques, has also enabled the company to excel in its operations, thereby increasing its oil fields and reservoirs. The modern technology is also used to extract cleaner fuels, through the use of modern energy efficient equipment, with large extraction capacity. Saudi Aramco has a number of oil rigging equipment, with modern and special engines designed to increase oil production rates, which has worked to sustain its oil production business making it remain at the helm in the oil industry. The company on the other hand, has diversified its interests, by expanding globally to other markets where there is great potential, making it achieve its goals in global expansion, enabled by a robust infrastructure that helps to deliver crude oil and refined products to the major
markets of the world. Its infrastructural capacity has also enhanced its shipping capacities hence remaining at the forefront of the global fuel industry. The company also uses innovation in its quest for a unique operational strategy. Innovation is used at Saudi Aramco as a sustainability measure, to achieve growth while and outperform its competitors. It incorporates new oil production methods, coupled with extensive research, through its research and development centers, the exploration and petroleum engineering and advanced research center. This is used in nurturing talent to help it remain competitive by internally acquiring professionals for its oil and gas business. Saudi Aramco achieves its operational excellence, by offering world class reliability, in terms of product distribution, and safety performance measures. This enables it to achieve minimal operational efficiency, while at the same time improves its decision making, which is a key factor in measuring performance, of business processes. Saudi Aramco also being located in an Islamic state, distinguished as an Arab state, has benefited from this. This has been used as a strategy of penetrating the entire Middle East market, hence building its portfolio, by growing its presence in most Middle Eastern countries. This has seen it grow phenomenally in the Arab gulf, with trends likely to rise in the coming years. This highlights the operational strategy used by Saudi Aramco, majorly focusing on systems and processes, research and development as well as innovation. Saudi Aramco success factors are attributed to a strong external presence, which has enabled the company to outweigh its competitors. These includePOLITICAL FACTORS The company success has been based upon a stable relationship with the political leaders. Saudi Aramco’s success is attributed to a stable relationship with political leaders, who are influential in making strategic decisions, which positively impacts on the company’s operations. The company enjoys much from the policies that are effected by political leaders, which stabilizes its operations. Most of the company’s strategic decisions are influenced by government rules and regulations, which favor its operations in the oil industry. The company’s geographical location plays an important role in the success of the company, owning to stability in the country’s political system. It's great geographical location has helped it build its profile, as the company with the largest oil reserves, giving it a wider edge in the oil industry in terms of sustainability, reliability in crude oil and gas production. The company’s mature oil fields, also give it an edge in oil production, within the mainstream Saudi oil reserves, hence increasing sustainability in its operations, which is a fundamental aspect, which enables the company to supply oil to the global markets.
On the other hand, another aspect that favors Saudi Aramco, is the government regulated oil prices. This initiative carried out by the government to regulate oil prices is beneficial to the company, since most government regulations aim to establish a favorable market price This enhances the company’s global outlook.
Another aspect at the heart of the company’s operations is the Kingdom’ s rule in Saudi Arabia, which benefits the company, due to the shared ideologies between the government and the company. This is the controlling factor in Saudi Arabia’soil industry, which has hence contributed to the vibrancy that has been achieved in the oil industry, as a result of political commitment to the oil industry, hence attributing to the success of Saudi Aramco.
ECONOMIC FACTORS Saudi Aramco operations being based in Saudi Arabia is economically attractive due to the country’s dependence on the oil industry, which accounts for a greater percentage of the country’s economy. The country’s economy is dependent on oil production, with over 90% of revenues being derived from oil and oil based products such as gas (Albqami & Mathis, 2012), which has market potential in international markets. The company also enjoys controlling large stable reserve bases, due to its location which is important, and on the other hand can sustain the well established oil reserves, which accounts for about a fifth of world's oil reserves (Mann, 2012). This hence makes the company control the world’s oil prices, which is an influencing factor in the international monetary system (Sharshar, 1977). The favorable external economic outlook is dependent on oil production that is a major factor contributing to Saudi Aramco success, a key player in the Oil Producing and Exporting Countries (OPEC) block.SOCIAL FACTORS Saudi Aramco also benefited immensely from social attributes as regards to justice. Saudi Arabia being an Islamic country, which is governed by strict Islamic morals, promotes a transparent ideology, which favors better social development.TECHNOLOGICAL FACTORS Saudi Aramco continued efforts in the use of innovative principles have spurred technological development within the company. The company uses advanced drilling methods and equipment. The availability of technological capacity has also led to its use of efficient processes, in terms of workflow, distribution processes heavily relying on technology, to drive its core business. On the other hand, technology-based solutions dependent on knowledge, have also spurred the use of technology at Saudi Aramco. This has largely been driven by government involvement, especially through the establishment of the New Science and Technology Policy, which has contributed to the company’s capacity in terms of technological development.LEGAL FACTORS Saudi Aramco has been able to abide by the regulatory efforts placed on oil companies regarding environmental protection. The company has established a comprehensive policy towards environmental protection. It has continued to commit itself, after the deepwater horizon oil spill in 2010. These measures have been carried out by the company to prevent lawsuits that hamper the production processes.ENVIRONMENTAL FACTORS The company also has benefited a lot by receiving awards due to efforts it has placed to reduce carbon emission (Aleidan et al, 2012). This has enabled it to grow the business in various locations, especially in current times where global warming is a global threat. This enables the company to operate in other countries, with strict laws concerning the environment, hence an attribute that has made it successful. Saudi Aramco’s use of technology in its operational strategy clearly distinguishes it from other oil producing companies. This is evidently seen in the company’s quest, after the establishment of a technology, research and development center (Aramco Opens R&D Center in Boston Area, 2013), to spur innovation, research and technology. This has resulted in the innovative use of gas and oil extraction methods. The company also benefits immensely from a stable relationship with political leaders, at the same time abiding by the country’s environmental regulations, enabling it to produce oil consistently. These factors have contributed immensely to
the success of Saudi Arabia’s most influential oil company, Saudi Aramco.
References
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Aramco Opens R&D Center in Boston Area - Aramco Services Company. (n.d.). Retrieved November 25, 2014, from http://www.aramcoservices.com/news-events/aramco-opens-rd-center-in-boston-area.aspx
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Marcel, V., & Mitchell, J. V. (2006). Oil titans: National oil companies in the Middle East. London: Chatham House.
Mann, Y. (2012). Saudi Arabia's Policy Toward non-OPEC Countries. Diplomacy & Statecraft, 23(2), 381-391. doi:10.1080/09592296.2012.679496
Meshari, A., Muhaish, F., & Aleidan, A. (n.d.). Saudi Aramco's Carbon Management Program. Retrieved November 25, 2014, from http://www.spe.org/jpt/article/6455-saudi-aramcos-carbon-management-program/
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Sharshar, A. (1977). OIL, RELIGION, AND MERCANTILISM: A STUDY OF SAUDI ARABIA'S ECONOMIC SYSTEM. Studies In Comparative International Development, 12(3), 46.
