Indian Oil Corporation Case

The case discussed Indian Oil Corporation (IOC), which ranking 18th in top petroleum corporations and 105th in largest corporations globally with a tuner over of more than 48 billion Euros. The case discussed in detail IOC’s problem in profit decline due to borrowing money and line of credit issues. The case reveled the root and causes of these problems, which turned out to be the intervention of the Indian Government through its subsidies policy. These subsidies adjusted oil prices to suit the general public regardless of how it may negatively affected the oil corporations.
General environment’s seven segment include: Economic, Physical, Sociocultural, Global, Technological, Political/Legal, and demographic. Economic segment includes: inflation rates, interest rates, trade deficits or surplus, budgeting deficits or surplus, personal savings rate, business saving rate, and gross domestic product (GDP). Physical segment incorporates: natural resources (finite supply), sustainable technologies, advocacy groups, increasing demand (conflict of interest), waste reduction, and environmental risk management. Sociocultural segment includes: women in the workplace, workforce diversity, attitudes about the quality of work life, concerns about the environment, shifts in work and career preferences, and shift in preferences regarding product and services characteristics. Global segment: important political events, critical global markets, newly industrialized countries, and different cultural and institutional attributes. Political/Legal segment involves: Anti-trust laws, taxations laws, deregulation philosophies, labor training laws, and educational philosophies and policies. Finally, the demographic segment: population size, age structures, geographic distribution, ethnic mix, and income distribution. In the case the applicable segments are Economic due to the people of India’s personal savings rate as well as policies from the government that implement the subsidies but also the high cost subsidies are burdening the Indian national budget. Another segment is the Global due to the fact that India is a newly industrialized country in which large amount of petroleum is use daily. Also the political segment is relevant due subsidies policies and government intervention. Lastly, the demographic applies through income distribution and population size. The segments with the least influence are most likely sociocultural, physical, and technological segments. If the subsidies are lifted from the oil corporations, including IOC, the corporations’ income will increase and they will no longer be suffering from losses and heavy debts. Although the corporations will benefit from this lift of the subsidies, the general public of India will be affected negatively. With the lift of subsidies the government will no longer regulate prices of oil, but the cooperation in the oil industry will decide on them. This may be a bad thing for the members of the low-income working class, if prices are to be higher. However when the Indonesian and Malaysian governments noticed the budget spiraling they decided to remove subsides. The five competitive forces include: threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products, and rivalry among competition firms. The force that is primarily responsible for the current levels of profitability is bargaining power of buyers. Since the buyers in this case are the people of India who are backed up by the government who for their interest implemented the subsidies. Strategic groups are a set of firms that emphasize similar strategic dimensions. These dimensions are technological leadership, product quality, pricing policies, distribution channels, and customer service. The more similar the strategy is between firms, the more rivalry among them. Competitors in the private sector like Essar Oil and Reliance Petroleum began a major rollout of filling station through which their higher, unsubsidized prices lead them to lose and close down. Which means there is barely and competition among the main players in the Indian oil industry. But with the lifting subsidies in India will make room for competition with the oil industry’s private sector. The firm needs to know what is their competitor’s drives and future objectives, their competitor’s current strategy, what the competitors belief and capabilities, and their strengths and weakness. Obtaining this competitor intelligence will allow the firm an insight into the competitor’s future objectives, current strategies, assumptions, and capabilities. For future objectives, the firm needs to know how their competitor’s goals compare to their own? And where will the emphasis be placed in the future? What’s the attitude towards risk? For current strategy the questions the firm must know are: How are we currently competition? And does the competitor’s strategy support changes in the competitive structure? Meanwhile for assumptions the firm must know whether we assume the future will be volatile? Are we operating under a status quo? What assumptions do our competitors hold about the industry and themselves? For the area of capabilities, the firm must have an understanding in the strength and weaknesses and the firm’s rate compared to competitors. Coming about this information must be done through industry guidelines ethically and legally. The firm must obtain the information through publicly available information; such as website or published documents. Other legal ways the firm can obtain information about their competitors is by attending trade fairs, shows, and exhibitions. However the firm must completely avoid obtaining the information illegally through blackmail, trespassing, eavesdropping or theft.