Transocean Strategic Management

Transocean Strategic Management

1.0 Introduction    2
1.1 Company background    2
1.2 Mission    3
1.3Values    3
1.4 Strategic Goals    3
2.0 Industry Trends    4
3.0 Ansoff Matrix:    4
4.0 Porter’s Five Forces    5
4.1 Competition    5
4.2 New entrants    6
4.3 Substitute    6
4.4 Purchasing power    6
4.5 Suppliers’ power    6
5.0 STEEPLE    7
5.1 Social    7
5.2 Technological    7
5.3 Economic    7
5.4 Environmental    8
5.5 Political/Legal    9
6.0 Ethical standards    9
7.0 Recommendations    10
8.0 Conclusion    11
9.0 Bibliography    11

1.0 Introduction

The paper will evaluate the position of Transocean, a major player in global offshore drilling services in the oil and gas industry. Various models such as STEEPLE, Ansoff and Porter’s Five Forces will be used to paint the company’s strategic position when it comes to, macro-environmental review, competition, diversification strategy, market development, product development and market penetration. To wrap up, the paper will make recommendations regarding the direction the company has to take to remain sustainable.
1.1 Company Background
Transocean is a prominent global provider when it comes to offshore drilling services for energy establishments. The company owns and operates the world’s most multipurpose flotillas that concentrate on deep-sea and extremely harsh environment drilling (Deepwater.com, 2016). With a fleet of sixty-one portable offshore drilling components, the company offers powerful rigs for deep sea drilling. Transocean helps clients to establish and develop oil as well as natural gas stockpiles. The company offers an exceptional drilling performance that is anchored in a solid experience that spans more than a half a century. Transocean shares are listed on the New York Stock Exchange under the acronym RIG and Swiss Stock Market under the acronym RIGN.
Transocean operates more than 140 offshore rigs in almost all main marine markets. Apart from offering drilling services offshore, the company offers drill management services globally.  Founded in 1953, the company is headquartered in Houston Texas. Transocean administrative division has since shifted to Vernier, Switzerland for tax and client servicing reasons. Transocean operates not just the largest extreme-deepsea flotilla of drill ships global, but it is also the largest offshore fleet worldwide. The company hires more than 20,000 employees with the technical expertise that is the envy of their business rivals (Deepwater.com, 2016). Moreover, Transocean provides management and accomplishment services for assessment and production firms regarding offshore drilling schedules.
1.2 Mission

To be a leading offshore drilling organisation that provides rig-based services with a global reach, by incorporating a highly dedicated workforce, state of the art machinery and ultra-modern technology, while concentrating on technically demanding environments (Transocean, 2007b).
1.3Values
The company is dedicated to values that represent its focus, innovativeness, safety, trust and reliability. The company promises to surpass not just the anticipations of the client, but employees and shareholders as well (Deepwater.com, 2016).
1.4 Strategic Goals
Transocean’s strategic goals include getting aligned with its customers when it comes to supporting and ensuring delivery of clients business objectives.  The company conducts its operations with distinction which is characterized by safety and efficient offshore solutions (Deepwater.com, 2016). In addition, Transocean keeps on enhancing its corporate culture and processes to optimize returns. Lastly, the company not only attracts but also nurtures and retains the industry’s best employees.

2.0 Industry Trends
Drilling oil and gas was previously dependent on backlogs. Contract bores alter their rates based on their rig charges relative to retailing oil and gas prices. Usually, contract bores tend to wait on the day down, and speedily adjust their prices upwards depending on how the markets are performing (Redall, 2012). There has been a widespread pattern of extreme deep sea rig business with strong daily charges. However, there has been a downward trend in mid-water rig markets. The most lucrative market lies of the Gulf of Mexico and West African coastal line, down to the south of Africa. The demand for deep-sea rigs is anticipated to remain jerky in the short-term (Helman, 2015).  As of now, approximately 206 floaters are operating under contract across the industry (Deepwater.com, 2016). A large percentage of the total number is idle for completing major contracts.
3.0 Ansoff Matrix:

Existing Markets

Market Penetration

Product Development

New Markets
Market Development
Diversification

Existing Products
New Products

Transocean is a dominant player in a market that is not highly saturated. However, to remain at an edge over its closest business rivals, the company has adopted different approaches. Based on the Ansoff matrix, Transocean has been using a low pricing model to penetrate the market. When it comes to market development, Transocean has been offering ultra-deepsea drilling and management services in various parts of the world. What makes the company the envy of its business rivals is the fact that Transocean’s product development strategy works magic. Apart from ultra-deepsea boring services, the company offers rig and deep sea drilling consultancy services which is certainly some form of diversification hence competitive edge. In short, Transocean operates in the same market by adopting a horizontal strategy in terms of expanding the product line. Lastly, Transocean has a predominantly diversified portfolio. To diverse risks, the company has necessitated mergers and acquisitions when it comes to financial management and technical expertise. The company operates in various regions such as the United States, the Gulf of Mexico, the North Sea, West Africa, and Southeast Asia, Middle East and the Arctic.
4.0 Porter’s Five Forces
4.1 Competition

Transocean threat of competition is moderate to high. For example, following a merge in mid-2007 between Rig and Transocean’s chief rival Global Sante Fe, this attempt reduced competition particularly, in ultra deep-water segments. Also, Transocean has almost a monopoly in ultra deep-water drilling. It the firm is likely to enjoy less competition in ultra deep-water, especially in harsh climates that require technical personnel. In fact, this contributed to the need for anti-trust lawsuit following the merger between RIG and GSF. Nonetheless, the firm has exposure to different offshore markets such as jackup segment that is associated with intense competition in various regions globally as well as pricing (Porter, 2008). By and large, the organisation has less competition in ultra deep-water segments, with a somewhat intense competition in mid-water floater and also jackup segments.
4.2 New entrants

Transocean enjoys a low threat of new entrants. With respect to offshore contract drilling sector, it requires huge investment in fleet and rigs before getting inflows from gas and oil organisations (Porter, 2008). This makes nearly impossible for new firms to enter this sector.
4.3 Substitute
The main threat of substitute is the changing the energy source from hydrocarbon to renewable sources across the world, which is not likely in the short-run (Turner, 2007). Therefore, the threat of substitute is low.
4.4 Purchasing power
Transocean’s purchasing power is moderate. Exploration and production firms have power when it comes to negotiating, especially in mid-water floaters and jackup segments, which have sufficient ability and provision of idle rigs. In essence, the buyers are in a position to negotiate low daily rates in the contracts while ultra deep water segments maintain stringent rates (Schlumberger, 2008).
4.5 Suppliers’ power
The supplier power is moderate. Transocean providers have some degree of power. For instance, suppliers like National Oilwell Varco take part in the decision making in constructing Transocean’s rigs and other essential parts. Luckily, this is crucial for Transocean since National Oilwell Varco has a few plans of increasing the fleet of drillships. In general, benefits from pricing since they are the main clients to the majority of their specialised providers (Porter, 2008).
5.0 STEEPLE
5.1 Social

The organisation takes part in various social activities, including charitable contributions to developing environmental initiatives to increase its reputation.
5.2 Technological
Technology is necessary for drilling sector as such Transocean gets its strength in technological development. While oil drilling and the ecology are related, so is technology and demand. Drilling in deep water is more and more vital from drilling organisations since they are considered to be more profitable. The firm is positioning itself to capitalize in this segment. For instance, in 2007, Transocean acquired a drillship worth USD 470m to take advantage of deep-water drilling, which allows the firm to drill up to ten thousand feet. Due to advanced underwater drilling, there has been a decrease in jackup rigs demand (Associated Press, 2007). This presents Transocean with the opportunity to beat their rivals like Noble Corporation in the struggle for innovation. Currently, the firm is leading in deep-water exploration (Katsaros & Christy, 2005).
5.3 Economic
Cost is a major challenge for drilling organisations. As oil price rises, the cash flow increases too, which makes organisations invest considerably in drilling activities? Furthermore, the new techniques of recovering oil though they are essential in the growth of petroleum production, are leading to an increase in the gasoline price. Implicitly, the high price of oil is required to make drilling firms profitable. High global investment drives drilling. With great interest to drill in foreign regions, global investors are significantly investing, hence leading to expansion of oil and gas sector (Maksoud, 2007). Even though raising oil cost will adversely influence Transocean, in reality, it will be beneficial in the long run. Oil cost is inelastic. In other words, a fluctuation will insignificantly affect demand. Therefore, increasing oil prices will boost cash flow for Transocean, which means additional business like funding new drilling projects.
5.4 Environmental

On environmental protection, Transocean is committed to enhancing its stringent police on Environmental management system (EMS). Transocean’s EMS visitation is conducting its operations in a standardised manner that fulfills the high levels of stipulated laws to drive continuous enhancements while instilling ownership across its facilities (Transocean, 2007a). The organisation is environmentally sustainable by way of using green products and assessment is utilized as part of routine operations. The firm also focuses on recycling. Additionally, Transocean has set up a recycling plan, where recyclables are sorted and compressed in rigs. After compression, they are transported to Tech Oil Products and donated to a recycling hub in the ARC of Iberia.
Transocean has collaborated with different oil and gas firms such as Subsea 7, and BP in the SERPENT project. This entails necessitating access to the installations, in partnership with their customers to present scientific knowledge to experts in the SERPENT project (Dictionary.Cambridge 2012). In turn, the analysts conduct various projects including assessing biodiversity and effects of drilling on the environment. The analysts also work on the company’s rigs to study marine species (Transocean, 2007a). By and large, Transocean protects the environment in which it operates to demonstrate that the company recognises the consequences of natural demand shifters.
5.5 Political/Legal

Oil presents this organisation with a strong political force. Because oil is the primary source of energy internationally, thus, the supply of oil is related to power regarding politics; oil firms leverage authority over regimes (Dictionary.Cambridge 2012).   With no oil organisations, United States is likely to lose its dominance in developing nations remarkably. Though oil drilling firms are fundamental in giving regimes the authority, they are still regulated and work as per government laws, such as prohibiting drilling in particular regions like the Gulf of Mexico to protect the environment. In 2007, the Congress was promoting the closure of a quarter-century ban on the production of offshore energy. This decree banned 85 percent of all drilling in United States’ continental shelf, greatly affecting oil drilling firms including Transocean (Kamalick, 2007). Furthermore, the Congress were supporting the opening of additional shorelines, which was associated with renewable sources of energy, as such they sought for support from environmentalists. While regimes exercise their authority on oil and gas providers, these providers, in turn, have authority over the very regimes.
6.0 Ethical standards
Transocean aspires to ensure financial discipline in their disclosure, honesty and candor in all their engagements with clients, a high esteem for employees, customers and suppliers, the safety of employees, property and the ecosystem and technical leadership. Loyalty to these core values demands the company to execute its operations in tandem with the law and the utmost standards of business ethics. In advancing that objective, the company embraces the Code of Business Conduct and Morality, the firm’s environment is also a corrupt free zone and an Anti-Corruption and Business Conduct Policy takes care of that. Again, directors and employees are not allowed to enhance the culture of inside trading. Nonetheless, all employees should adhere to the privacy policy.

7.0 Recommendations
Since oil is directly associated with international authority, oil drilling organisations have authority over regimes, nevertheless, with another alternative, Transocean should continuously go this direction to maintain the lead if the primary source changes. Much as the company has advanced drillship tools, it should take a notch higher by researching new products in comparison to its rivals. When it comes to maintaining competitiveness in oil and gas industry, Transocean should use differentiation strategy that will be vital in developing clients’ feedback and service delivery. The differentiation strategy should focus on quality rigs, particularly deep-water drilling and ability to survive environmental disasters such as hurricanes.

While this threat of substitute is low, in future it may reduce the demand for oil. For that reason, Transocean should create awareness among clients about the benefits of oil in comparison to other energy sources. This can be carried out through advertisements. For instance, the organisation should use ads that demonstrate even with the use of alternative sources such as ethanol, which is considered environmentally sustainable compared to oil. Ethanol requires a considerable quantity of biomass. In the even that US, ethanol from corn is employed on a large scale, then it will contribute to increased costs of corn. The prices of beef will also skyrocket remarkably as cows feed on corn products. On the other hand, if Brazilian corn is used that is produced from sugar; rainforests in the region will be cut to provide land to grow sugar. Creating awareness through ads will help Transocean increase the demand for oil while increasing the demand for petroleum products from the company.

The prices of beef will also skyrocket remarkably as cows feed on corn products. On the other hand, if Brazilian corn is used that is produced from sugar; rainforests in the region will be cut to provide land to grow sugar. Creating awareness through ads will help Transocean increase the demand for oil while increasing the demand for petroleum products from the company.

8.0 Conclusion
The study set out to evaluate Transocean position in the offshore drilling services. The company’s background, values and strategic goals were highlighted at the outset. To understand the company’s product and market development; market penetration and diversification, the Ansoff Matrix was used. The Porter’s Five Forces were employed to establish the intensity of the competition. However, STEEPLE model was used to evaluating the company macro-environment. In the end, the paper touched on the best practices as assured by ethics codes. Recommendations were made regarding the corporation’s future.

9.0 Bibliography

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Berman, A. 2007. Drilling advances. World Oil, 19. Retrieved March 17, 2016 from Business Source Premier Database

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Katsaros, J. & Christy, P. 2005. Getting It Right the First Time: How Innovative Companies Anticipate Demand. Westport, CT: Praeger

Kamalick, J. 2007. Untitled. Chemical Business Americas, p. 26. Retrieved March 17, 2016

Maksoud, J. 2007. International investment pours into Africa. Pipeline and Gas Journal,pp. 42-44.

Porter, M. 2008. The Five Competitive Forces That Shape Strategy. Harvard Business Review, 15 January 2011.

Redall, B, 2012. Reuters.com, Retrieved March 17, 2016 from http://www.reuters.com/article/us-fieldservices-powerstruggleidUSBRE8AC05S20121113#y2LttEqUfwzf4Kja.97

Schlumberger 2008. Day rate. Oilfield Glossary.Retrieved March 17, 2016 from http://www.glossary.oilfield.slb.com/Display.cfm?Term=day%20rate

Transocean, Inc. 2007a. Responsibility. Retrieved March 17, 2016 from www.deepwater.com

Transocean, Inc. 2007b. Our company. Retrieved March 17, 2016 from www.deepwater.com.

Turner, H. (2007). Conversation about Transocean and alternative fuels.

By admin in Essays on April 8, 2016