Global Energy Solutions Company in the Hydrocarbons Sector

Introduction

TenchipFMC was founded in 2017 following a merger of FMC Technologies, an American corporation, and TechnipFMC, a French company. The company headquartered in London, United Kingdom as legal domicile with operation headquarters in Paris, France, and Houston, the United States. It a leading company in energy sector providing solutions for production and transformation of hydrocarbons (petrochemical, crude oil refinery) with operations in 48 countries. The company has three divisions, namely Subsea, Surface Technologies, and Technip Energies. With employee bases of approximately 37,000 in 2020, it specialise in provision of services under subsea processing, field architecture, project management consultancy, maintenance services, drilling, gas treatment, installation, and flow metering within oil and gas industry (Statista, 2020). For business dissertation help, exploring TenchipFMC's strategic mergers, international operations, and industry specialization could offer the most valuable insights. In the 2020 financial year, the company announced having revenue totalling $13.05 billion and inbound orders of $10.1 billion over the same year (TechnipFMC, 2021). TechnipFMC has rich history in energy sector primarily in oil and gas exploration and extraction dating back to 1958, when Technip was established to carry out engineering, construction, and project management within energy industry while FMC Technologies focused in production of hydrocarbon exploration and production equipment. In 2019, the company had announced plans to split into two independent entities but suspended the plans citing market conditions due to novel COVID-19 pandemic.

Strategic Position of the company

In undertaking strategic position analysis, the focus will be categorised into internal and external factors, and analysed based on the concept highlighted by SWOT, PEST, Poster’s 5 forces, and Poster’s value chain. Both internal and external analysis factors are analysed to determine the position of the company based on such factors as strengths, weaknesses, opportunities, threats, political, social, economic, and forces influencing its current and future operations. In the case of TechnipFMC limited, strategic analysis captures its strengths that gives it its competitive advantages, weaknesses faced, opportunities that would see its market and financial growth, threats, which, if not well addressed would lead the company going out of business, geopolitical factors, the socio-economic factors informing its internal and external operations, and influence of changing demands and technologies to its growth, performance, and survival.

TechnipFMC is a global leader in exploration (subsea, surface, and onshore/offshore) and production in energy industry. The company has a global outreach with operations in 48 countries across the 5 continents. It has built a strong supply and distribution networks that ensure efficient and effective supply of the products to its consumers (Forbes, 2021). With rich experiences in the field, exploration and manufacture of production and exploration equipment, the company has built around extensive workforce experience and skills as well as investing heavily in training and motivating the employees. Moreover, TechnipFMC employs its employees mostly from host country, different background, and culture diversifying the workforce bringing in diverse perspective and ideas as well as better solution to local challenges (TechnipFMC, 2019).

TechnipFMC Ltd has centred its operations around technology and innovation such as automating operations as well as innovating systems and production all aimed at enhancing efficiency, proficiency, delivery time, customer relations, and quality (Lewis, 2021; Nasdaq, 2021). It has integrated technologies that reduce energy consumption and reduces greenhouse emission (Business Wire, 2021). It has integrated Fluid Catalytic Cracking (FCC) that provides feedstock and flexibility in refinery. Additionally, the company has diversified its operations ranging from management services, survey, exploration, engineering, hydrogen production, gas monetization, to production and refinery of oil and gases as well as offering comprehensive and flexible concepts and project management in energy markets (Jiang, 2021; Industry Projects & Technology, 2021). It is a leading engineering and construction company in refinery industry while also offering expertise in refining modelling and integration of petrochemicals.

The company merger brought together operations, complimentary markets leaders, talented employees, and respective market share. In addition to the company building on individual strong brand portfolio in exploration and production sectors, it has a reputation of successful entry into new markets (Hampton and Nair, 2019). Moreover, the company has developed strong relationship with other key players in the industry such as to advance research and development, shared information, and engineering findings, design studies, and modelling techniques (Patsy, 2021). It also focuses on achieving high consumer satisfaction through engagement and having dedicated customer relationship management as well as strong brand equity.

Compared to competitors in the field, TechnipFMC spend less in research and development. In 2019, the company’s spend $162.9 billion on research and development, above industry average, it has fail to compete with other players in innovating and adoption of better systems and approaches (Macrotrends, 2021). The company does not have a specialised and specific focus in products and services it offers, and thus failure to segment its products in terms of positioning and uniqueness reduces its brands equity, and arguably, overall company’s bargaining power.

The company’s decision-making process is highly centralised where operations and ideas have to pass through and be done by a central leadership structure (Businesswire, 2021). Moreover, overreliance on local workforce can make integration of a shared organisational culture difficult and leading to loss of talent. The company has faced number of challenges in attempt to diversify with some new products and services failing in entering the market.

The company has low levels of current assets in relation to liabilities caused mainly and leading to overdependence on renting operational property. These model has two major implication to the company, first, it result in paying huge amount in the long term, and secondly, limits the company’s operations (Macrotrends, 2021). TechnipFMC has one of the highest workforce attrition rate causing it to spend more in training and motivating its employees compared to its competitors while facing an increasing cost of operation (R&D, refining, operational) but declining oil reserves

Although pushed forward due to the pandemic, strategic plans for the company to spit into two companies (RemainCo and SpinCo) would position the company in pure-plays and capitalise on the changing energy sector such as benefiting from downstream market and positioning for future growth opportunities that include renewables as alternative energy sources (Hampton and Nair, 2019; YahooFinance, 2020). Through RemainCo, the company aims to focus in technology-driven service provision in development and production sector in the industry. Lower inflation rate has stabilise the market resulting in lower interest rate that gives both the company and consumer higher spending rate. Prior to 2020, global economic growth enabled customers spend more, and after a turbulent 2020 following the novel COVID-19 pandemic, will give the company an opportunity to capture new markets and reach to consumer base (NS Energy, 2021).

The energy sector is experiencing a changing consumer behaviour, particularly increasing call for green-oriented consumption (eco-friendly awareness) by consumers can threaten both its business model and established supply chain (Flowers, 2021). Additionally, environmental regulations aimed at curbing greenhouse emissions primarily from energy sector has pressurise the entire industry to invest more and innovate coming up with better approaches. Substitute products particularly renewables and biogas has significantly impacted the entire industry by taking a huge market share from traditional oil and gas energy sources. Compared to conventional energy sources, renewables are increasingly becoming attractive sources.

Part 2: Strategy Formulation

The company being international entities faces a myriad diverse challenges linked to political, economic, social, and technological factors, which affects the external operations of a business entity. For TechnipFMC, the strategy formulation explores ways in which changes in external factors influence its operations, performance, growth, and survival, and can be coined to cushion against these changes. TechnipFMC is a multinational entity operating in 48 countries meaning having facing different geopolitical environment. Therefore, the company is sensitive to changes and stability in political environment of different nation. For instance, political changes in the US recently accomplished pulling out and re-entry into Paris environmental accord that has direct impact on the company’s operations (Burke, and Stephens, 2018; Szulecki, 2018). It is worth noting that different geopolitical environment have different perspective on regulating energy sector and adopting eco-friendly alternative aimed to curb climate change (Urwin, 2019). However, having operations in different geopolitical environment cushion the company from changes by spreading the risk but it has to multifaceted strategy and culture to adapt to different environments. Other factors affecting operations in different political environment are related to governance systems, bureaucracy, corruption, taxation, trade restrictions, and intellectual property protection.

Increasing adoption of government green drive has opened new markets for the company particularly in renewables and alternative biofuels. Recent rapid evolution in technological development disrupts the market both introduction of new operating approach, and consumption (Kitzing et al., 2012; Strunz, Gawel, and Lehmann, 2016). For instance, shifting towards electric cars by consumers is a disruptive to oil industry. Economic instability caused by novel COVID-19 lead to consumers reducing expenditure on nonessential products and services but also shift to cost-effective approach (alternative energy sources), while other prioritise in sustaining the market rather than investing on innovative approaches in addition to limited environment of doing business (Eroğlu, 2020; PWC, 2020).

For the company, economic external factors determine and estimate projection of growth of both the industry, oil and gas as well as the larger energy sector, and the organisation. Globally, GDP and income have been growing gradually over the last decade meaning consumers have a higher spending power. According to Emir and Bekun (2019), a higher income society has a higher energy consumption, intensity. Although the novel COVID-19 has derailed economic activities and hampering growth, the impact on energy sector almost grounded the sector with crude oil and natural gas prices going negative but it has gradually stabilised. Moreover, the company’s business performance has been significantly affected by the pandemic and will be influenced by extent to which host governments will focus and invest on infrastructure development (Thomas, 2021). The pandemic erased nearly completely the economic progress that had been made following the 2008 economic crisis, which includes employment, GDP growth, income rate, and inflation (Barua, 2020; Nicola et al., 2020). For TechnipFMC, operating in a lower GDP economy with low income per person means lower motivation and productivity in addition to low spending. Additionally, being a multinational organisation, TechnipFMC need to have a deeper understanding of the labour markets, labour laws, unions, flexibility, and availability of skilled workforce because collective affect its productivity, efficiency, and performance.

Social factors goes beyond the organisational cultural setting to include the social norms, values, and traditions as well as consumers’ patterns and shared beliefs held by immediate communities in which a company operates. Operating in different geography locations means dealing with diverse social setup, beliefs, traditions, and culture. It is important for the company to align its organisational beliefs and culture to those of the community it has operations in (Bai, Yao, and Dou, 2015; Ferraro, 2021). For instance, studies show that young consumers tend to be more concerned with environmental degradation and climate change and inclined to consume eco-friendly products. However, they tend to have lower purchasing power. Additionally, in terms of socio-economic hierarchy (power distance) and income parity, different societies have perspective and acceptance of hierarchy structure that include patriarchal, family-based structure, or authoritarian social setting as well as inequality based on social factors (Buheji, 2018). Therefore, TechnipFMC need to identify and restructure its operations to meet the social accepted structures and beliefs. Moreover, the social stratification influence attitudes and behaviour of consumers where they can perceive some products as luxury hence affecting purchasing patterns

TechnipFMC need position itself as a technology-driven organisation where it has structured its mission to offering services based on innovative approaches as well as developing revolutionary technologies in the industry. That being said, energy environment in which it operates in is marred with rapid evolution in technology similar to any other industry and current business and social environments. Broadly, technology has form a bedrock of any business decision making, strategy development, and operations to the point that organisations have to conduct in-depth analysis of technological trends in order to gain business advantage in operations efficiency, innovation, enhancing innovation process, and impacting business performance (Verkerk et al., 2015; Amshoff et al., 2015). The company should be up to data in both innovating and adopting innovative approaches in its operations. It is paramount that it stays ahead of competition in quality of products and services delivered and its operational efficiency. In addition to integrating data analytics, Virtual Reality (VR), Augmented Reality (AR), Internet of Things, and Geographic Information Systems (GIS) technological innovation in operations, drones and unmanned aerial vehicles and Bockchain technologies are making their way into the industry (Majumdar et al., 2018; Valkokari et al., 2018). These technologies such Blockchain are increasingly becoming core aspect in supply chain industry particularly for international company, where they can accurately and timely monitor and trading products distribution and record keeping. Given its international presence, integration of Blockchain demonstrates a huge potential for TechnipFMC in monitoring and tracking its operations and products (Frizzo-Barker et al., 2020). Moreover, the company need to invest more in these technologies on a micro and macro levels towards enhancing value chain and cost structure. These disruptive technologies have been poised to be core in future organisation operational efficiency as well as centre of exploration, mining, engineering works and design, and refinery processes.

Part 3: Strategy into Action

The plan will be structured into four subsections covering activities and processes to be taken systematically. The implementation will be perceived based on two approaches, first expansion of current operations through brand development, and secondly entry in to new market.

Brand development

The planning stage involves locating resources require for the strategy implementation. The resource include the human capital, financial, essential skills, and knowledge of key social, economic, political, legal, and environmental attributes affecting entry and implementation of objectives. Before rebranding under brand development it products, the company need to develop deep understanding of particular products informed by consumer attitude, perspective, purchasing power, consumer intension and actual buying, and general belief about the products and company (Bagozzi et al., 2017). As mentioned, the company products line of products is relatively wide where it offers a variety of products and services ranging from engineering designs works, exploration, to refinery and production of hydrocarbon products. By developing a brand, the company will position itself in a unique segment enabling a focused approach on product differentiating attributes such as quality, consumer engagement, and consumer loyalty.

Entry into new markets

TechnipFMC should enter a business partnership with companies in such field as technologies, renewable energy, and engineering services. The collaboration with companies with prior experiences respective field particularly renewable, VR, AR, and Blockchain would give the company competitive advantage by combining unique experiences, market shares, and strategic positioning (Frizzo-Barker et al., 2020). As mentioned before, energy section in moving towards renewables such that hydrogen, wave energy, wind (on and offshore wind energy), and geothermal energy (Sammut‐Bonnici, 2015). The company need to reposition it business operations by entering into partnership with established entities in respective fields. Additionally, although the acquisition done by the company has had mixed performance, TechnipFMC can acquire companies in these fields to cushion itself and embrace disruptive technologies while growing into these markets. Additionally, this will allow the company to reinvent itself in the energy sector that in increasingly becoming decarbonised, demand-driven, and digital-based.

Remodelling Workforce

Thirdly, the company need to build the workforce of the future through training and advancing individual and group skills. The fast changing energy industry will be more volatile, greener energy driven, consumer centric, and demand for energy efficiency induces a big challenge to the conventional and matured technologies in the sector (Al-Maamary et al., 2016; Kolloch, and Dellermann, 2018). In order to adequately brace for the changes in the field, the company has restructure modernising its workforce by recruiting younger workforce with digital and technology based skills that would enhance proficiency and optimising productivity.

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