Mark W



Environmental ComplexityMaria JohnsonUniversity of Alaska FairbanksProfessor CundiffMBA F617: Organizational Theory for ManagersOctober 1st, 2017Environmental Complexity HandoutHow turbulent is your company's environment and how well do you believe that they adapt to it?Halliburton operates in a volatile market where oil is a high-demand global commodity. The volatility of the oil and gas market is often dictated by many factors. These influences range from geopolitical events to daily production. Often, these sudden fluctuations are unpredictable and potentially threatening. When the price of oil decreases, Halliburton and its competitors are the hardest to be hit. Halliburton’s customers focus on the cost per barrel which drives prices down. Halliburton adapts quickly to such change. In 2015, the company said it incurred a charge of $192 million on writing down assets and laying off people because of the downturn in the market (Oyedele, 2016). This may seem like a huge loss, but Halliburton outperformed its peers that same year. When the market nose dives, customers focus on price optimization and extraction efficiency; both of which give promise to Halliburton as their reputation for industry leading technology and lower prices has held fast throughout their history (Oyedele, 2016).#1: List out as many elements affecting your company as you can for each of the sectors below. Be sure to support your assertions and reference sources.IndustryCompetitors: Schlumberger, Baker Hughes, and Weatherford International (Halliburton SWOT Analysis, n.d.)Industry Size: The oil market is bigger than all raw metal markets combined. With today’s prices, the oil market is valued at over $1.7 trillion per year. It is estimated that humans use 94 million barrels of oil per day worldwide (Desjardins, 2016). Crude oil resources exist all over the world and inevitably influence geopolitical events. The petroleum market is a giant industry needed in every country impacting all people. Competitiveness: Major oil and gas companies such as Halliburton and its major competitors are relatively equal in size, power, and capabilities. This increases the intensity in rivalry especially if one competitor tries to influence prices (Hokroh, 2014). Although the oil industry itself can be very competitive due to major players having control of the market, Halliburton is fortunate enough to control most of the North American market. Related Industries: The energy industry encompasses both alternative sources and fossil fuels. The growth and demand for renewable energies has increased as renewable sources for power generation and transportation grew 300% from 2004 to 2014 (Lewis, 2016). For now, renewable energy and traditional sources like fossil fuels (crude oil) will coexist. Other related industries include construction, healthcare, agriculture, transportation, distribution, and logistics. Essentially all industries use petroleum based products. Raw MaterialsRaw Materials: Halliburton deals directly with raw materials. Their services provide customers with the ability to identify, extract, and produce crude oil. Along with crude oil, several other raw materials may be produced, such as methane and ethane. They do not provide services for transportation, storage, or refinement of crude oil and its byproducts (Halliburton, n.d.).Suppliers: Halliburton uses an array of suppliers and manufacturers for tools, chemicals, parts, and distribution. Unfortunately, the information as to which suppliers they use is not public information.Real Estate: Halliburton has operations in approximately 70 countries- Africa, Asia, Australia, Oceania, Eurasia, Europe, the Middle East, and the Americas (Halliburton, n.d.). Services: Halliburton focuses on four segments of energy services: drilling, evaluation, completion, and production. Within these segments are a collection of sub-segments such as consulting, software development, project management, monitoring, and chemical services (Halliburton, n.d.)Human ResourcesLabor Market: Currently, Halliburton is in need for new employees. They are in the process of recovering from the mass layoffs in early 2015. The company is adding 100 new workers every month this year. They have even begun to branch out and are actively recruiting “commuter” hires since areas of current recruitment are saturated with oil (Grant, 2017). The market is high in demand for new workers and with growing worker availability.Employment Agencies: Job openings appear directly on the Halliburton website as well as several search engines. Job openings range from management, engineering, to hourly laborer. They also conduct job fairs and recruitment events in areas with oil and gas activity such as Colorado, Texas, and North Dakota (Halliburton, n.d.).Financial Resources Stock Markets: Halliburton is traded publicly as NYSE: HAL and as a S&P 100&500 component. The price of Halliburton stock is currently $46/share (Halliburton, n.d.). On average, their stocks have steadily increased since the American oil boom in 2008. This boom, as with all others, was subsequently followed by a steep crash and Halliburton stock follows the same pattern (Halliburton, n.d.).Banks: Halliburton created the Employees’ Federal Credit Union (HEFCU) in 1960 for employee’s and immediate family members. The credit union is federally insured by the NCUA and offers a full range of financial products for its members. Halliburton currently has over 5000 shared service centers nationwide (HEFCU, n.d.)Market Customers & Clients: Halliburton provides services to leading oil and gas producers. Their major clients include ExxonMobil, Chevron, Dow Chemical, and ConocoPhillips (Halliburton 's Customers Data, 2017). Potential users: Although Halliburton already operates internationally, there is still a huge potential for growth in that market. They are second in size and profit globally similarly to another industry giant, Schlumberger. Both companies provide similar services and technology, but Halliburton holds much of the market share in North America while Schlumberger dominates foreign operations.Technology Techniques of productions, computers, and information technology: Landmark Solutions has been providing exploration and production software and solutions to the oil industry for over 30 years. Halliburton acquired Landmark in 1996 and has been utilizing their software ever since. They have created plans for drilling and production optimization. Landmark also successfully manages exploration and production data from acquisition to decision (Landmark, n.d.).E-commerce: Halliburton created the Halliburton Supplier Net (HSN) to allow for electronic transaction between the company and its suppliers. It is a free service designed for the procurement of materials that requires no additional software for the supplier. It allows for private communication, advanced orders, and technical assistance (Halliburton, n.d.).Economic ConditionsRecession/Inflation: In an economic recession, Halliburton stands to weather the storm well. They can rely on their international operations to continue spending on oil and gas exploration and production. During the 2008 recession, their profit rose 6% as their customers in the Middle East and Asia continued operations (Khanna, 2008). With increasing activity during an inflationary period, particularly in North America, Halliburton can take risks associated with increasing prices to generate substantial profit.Unemployment rate: The unemployment rate in the company will fluctuate with oil prices. At the end of 2014, oil prices experienced a steep and sudden decline. The company cut 6,400 workers—8% of its headcount—in early 2015 as it scrambled to reduce costs (Zillman, 2015).Growth: As the price of oil begins to bounce back from the 2014/2015 decline (or atleast remain steady) Halliburton analysts project that the boom for onshore North American operations will continue to recede. This poses a huge threat to the company as they make the majority of their profit in North America. Along with the price of oil, rig count is also beginning to plateau and Halliburton suspects U.S. producers will begin to pull back their investments (Trefis, 2017). It will be slow growth, if any, for Halliburton in the coming years. Government City, State, and Federal Laws: Conducting oil and gas operations in America and worldwide is subject to serious local and federal laws. The federal government owns and controls oil and gas rights on lands owned by the United States. On state-owned lands within the geographic boundaries of the applicable state, oil and gas rights are owned by the individual states (Gibbs, McAuliffe,?Snare,?Gordon,?Miner,?McCall, and Gatti, n.d.). However, this industry is unique in that deals with surface and subsurface rights. The owner of the mineral rights is legally allowed to extract and produce oil even if that same party does not own the surface estate. Granting the right to access oil in the U.S. is through a lease. Use of these leases on federal and state land is done through regulations (Gibbs et al., n.d.).Regulations: According to the EPA, oil and gas extraction is considered part of the mining, quarrying, oil and gas extraction sector (NAICS 21) (Oil and Gas Extraction Sector, 2016). They enforce restrictions on air (emissions), waste, and water. OSHA has also published general industry standards as well as guidance aimed at identifying, preventing, and controlling exposure to hazards.Taxes: The taxes and fees for U.S. companies in the oil and gas extraction business are federal income tax, federal alternative minimum tax, federal withholding tax, state income tax, state severance tax, and state sales and use tax (Deloitte, n.d.).SocioculturalAge: The company has around 50,000 employees but there is no published data on the average age (Halliburton, n.d.). Halliburton does not target potential customers based on age.Values/Beliefs: Halliburton’s mission statement is “To achieve superior growth and returns for our shareholders by delivering technology and services that improve efficiency, increase recovery, and maximize production for our customers” (Halliburton, n.d., p. 1). And their vision is “To deliver a customer experience second to none, as globally competitive, creative, and ethical thought-leaders,” (Halliburton, n.d., p. 1). They value integrity, safety, collaboration, competition, creativity, reliability, and respect.Education: Halliburton has created a workforce development program with training centers all over the world. They have training centers in the U.S., Mexico, Malaysia, Egypt and Russia (Halliburton, n.d.). This training is designed for the growth of an employee’s career and to contribute to the development of talent within the company.Religion: The code of conduct prohibits unlawful discrimination against race, color, age, sex, religion or national origin (Halliburton, n.d.).Work Ethic: Halliburton is known for their blue-collar workforce. One employee reported working over 100 hours/week and employee reviews warn of poor work-life balance and extended periods away from home (Halliburton, n.d.). Consumer and Green Movements: Halliburton has created a Clean Energy campaign to focus efforts on geothermal energy, water management, and carbon capture and storage (Halliburton, n.d.). They have already shown the renewable industry that they have proven eco-sensitive solutions and expertise. International Competition from and acquisition by foreign firms: As mentioned in the potential user’s section, Halliburton operates internationally but their greatest threat overseas is their biggest competition Schlumberger. With its great success and steep profits from North America operations, Halliburton has acquired ten companies since 1988 (Halliburton – Acquisitions n.d.). This has allowed Halliburton to expand and grow operations. In 2016, Halliburton announced the acquisition of Baker Hughes. Baker Hughes is another major oil services provider and would stand to add to Halliburton’s massive hold on the North American market (Dalby, 2014). Entry into overseas markets: Halliburton took the initial steps toward becoming a worldwide company in 1926 (Halliburton, n.d.). Halliburton entered into the overseas market in 1940 with operations starting in Venezuela (Gale, 2006).Foreign customs and regulations: Just as Halliburton is subject to U.S regulations, they obey the specific customs and regulations of the country they are conducting business in.#2: Is the organization internationally diversified? Yes/NoIf yes, where are they currently (regional or by country, could be broken down by product distribution or brick and mortar locations, etc...? Who are their major competitors? What markets should they expand to?Yes, Halliburton is internationally diversified with operations in approximately 70 countries (Halliburton, n.d.). Their brick and mortar locations are dictated by natural resources. Overseas oilfields are generally mature fields. Mature fields are reservoirs that have been in production for many years and have depleted in natural energy (Mature Fields. n.d.). Because of this, Halliburton should focus their attention on bringing new technology into these mature fields. Their work in North America is unconventional. Unconventional oilfields are those that require innovation and new technology to extract and produce oil (Mature Fields. n.d.). Halliburton has led the U.S in technological advancements for drilling, completions, and production (Trefis, 2014). Their focus should be on implementing these strategies into foreign assets. However, their biggest competitor, Schlumberger, currently holds most of the international market share.#3: How complex and unpredictable is the organization's environment? Definitions:Complexity: measured as the number of factors in an org’s environment and their interdependency (Reliant on each other (e.g., supplier/buyer or strategic alliance). Environmental complexity increases as the number of factors increases and/or the interdependency increases. Ex/ If a firm has two major competitors it faces low complexity; numerous conditions – competitors, prices, labor pool, new products- high complexity. Unpredictability: lack of understanding or ignorance of the environment in terms of the nature of the factors and their variance; greater variance means less predictability. The higher the environmental unpredictability, the less accurate the forecasts are and the more uncertain management can be about the future. Ex/ Recent financial crisis in the US has made the US market less predictable.Which environment does your organization exist in? Halliburton operates in an extremely complex and unpredictable environment. Differing customer and market needs,?increasingly specialized products and technology, evolving markets, and?raw materials globalization all contribute to the challenges (A.T. Kearney, n.d.). However, the environment is not unpredictable. Financial and business analysts can estimate oil prices, because oil prices fluctuate so much, however, it will be impossible to be accurate (Mufson, 2011). There is an understanding of the environment and its factors but the difficulty in correctly forecasting the market leaves Halliburton the subject of great vulnerability.#4: Does your organization’s strategies and goals fit their environment?Circle one of the types in the following categories that you have found your company to portray: environment, strategy type, and organizational goals.Type 1Type 2Type 3-197485-2857500Type 4EnvironmentCalmVariedLocally stormyTurbulentStrategy typesReactorDefenderProspectorAnalyzer with innovationOrganizational goalsNeitherEfficiencyEffectivenessEfficiency and Effectiveness#5: Did your organization align across environment, strategy type, and organizational goals (i.e., all goals, if not then the correct response is NO)? Yes/NoIf yes, where do you think the organization should go now? Do you predict changes in their environment?If no, should the organization align on these factors? If so, how should they do it?Halliburton can align these factors by placing more emphasis on efficiency. Efficiency focuses on inputs, use of resources, and costs. This can be very difficult for Halliburton given the volatility of their environment. When the price of oil drops, service providers are first to respond to maintain balance between expenses and revenue. In such a volatile environment, Halliburton can only try to prioritize efficiency but it is difficult to prioritize something you can’t plan for.ReferencesA.T. Kearney. (n.d.). Retrieved October 01, 2017, from , C. (2014, November 19). Retrieved September 19, 2017, from , J. (2016, October 17). The Oil Market is Bigger Than All Metal Markets Combined. Retrieved September 29, 2017, from , T. (2006). Halliburton Company. In International Directory of Company Histories. Retrieved September 30, 2017, from , K. (2017, June 10). Halliburton Launches Hiring Spree to Keep Up With Fracking Demand. Retrieved September 30, 2017, from - Acquisitions. (n.d.). Retrieved October 01, 2017, from 's Customers Data [Advertisement]. (2017). Retrieved September 30, 2017, from . (n.d.) Retrieved September 29, 2017, from . (n.d.). Retrieved September 30, 2017, from SWOT Analysis | USP & Competitors (n.d.). | BrandGuide. Retrieved September 29, 2017, from , M. (2014). An Analysis of the Oil and Gas Industry’s Competitiveness Using Porter’s Five Forces Framework. Global Journal of Commerce & Management Perspective, 3(2), 76-82. Retrieved September 29, 2017.Khanna, S. (2008, April 21). In midst of recession, Halliburton rakes in billions. Retrieved September 30, 2017, from Solutions - E&P software. (n.d.). Retrieved September 30, 2017, from , M. (2016, May 31). Can Alternative Energy Replace Fossil Fuels? . Retrieved September 30, 2017, from Fields. (n.d.). Retrieved October 01, 2017, from Lewis & Bockius LLP -Kirstin E. Gibbs,?Christopher J. McAuliffe,?Jonathan L. Snare,?Paul A. Gordon,?Matthew S. Miner,?Duke K. McCall, III and Margaret M. Gatti. (n.d.). Oil and gas exploration and production laws in the USA. Retrieved October 01, 2017, from , S. (2011, July 01). The unpredictable forces behind oil prices. Retrieved October 01, 2017, from and Gas Extraction Sector (NAICS 211). (2016, October 11). Retrieved September 30, 2017, from , A. (2016, January 25). Halliburton reports a quarterly loss and continues to expect pain in the oil industry. Retrieved September 29, 2017, from Trefis (2014, June 09). Unconventionals, Mature Fields And Deepwater Key To Halliburton's Growth. Retrieved October 01, 2017, from (2017, July 25). Halliburton Beats Expectations, Expects Shale Boom To Recede In 2018. Retrieved September 30, 2017, from We Are :: Halliburton Employees FCU. (n.d.). Retrieved September 30, 2017, from , C. (2015). The 10 biggest layoffs of 2015, so far. Fortune. ................
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