STRATEGIC MANAGEMENT

Business Environment and Strategic Management

Business Environment and Strategic Management

Introduction

Oil refinery is considered to be the vital component of the petroleum industry. However, due to the variety of factors the oil refineries are being disintegrated from the petroleum industry. Most of the refineries have either been sold or outsourced by their owners. Some of the leading group such as Exxon Mobil, Shell and Total are either outsourcing their oil refineries or selling them altogether. Most of the oil refineries are being bought some of the former commodity groups who still consider this investment as profitable. In this paper, the restructuring of the petroleum industry and particularly the disintegration of the oil refineries will be analyzed with the help of the PESTEL and Porter's five forces model. Furthermore, there will also be the discussion of sixth force which is defined as the complements by former chairman and CEO of Intel.

PESTEL Analysis

The PESTEL analysis is used to determine the effectiveness of an industry. The political factors include the tax policy, labor laws, tariffs, political stability, environmental laws and trade restrictions. The economic factors that might impact the businesses include the inflation rate, economic growth, interest rate and exchange rate (Hitt et al., 2012, p. 18) . The social factors and include career attitudes, age distribution, and safety and growth rate. The technological factors take into account the environmental and ecological aspects like automation, technology incentives, rate of technological change and R&D activity (Hitt et al., 2012, p. 20). The environmental factors include some the weather and climate which might affect some specific industries such as insurance, farming and tourism (Hitt et al., 2012, p. 21). The legal factors include the employment law, consumer law, antitrust law, discrimination law and consumer law (Hitt et al., 2012, p. 22). Now there will be discussion of the disintegration of the oil refineries from the petroleum industry by taking into account each factor of PESTEL analysis.

Political factors

The political factors have a very strong impact on the petroleum industry. The countries which have the oil reserves have greater impact on the international oil companies. As different governments control the hydrocarbon reserves they sell concessions to the different companies which give them the right to explore oil in certain geographical areas. Many companies also favor the national oil companies instead of the international oil companies (Longwell, 2002, p. 38). As OPEC controls 75 per cent of the oil resources, it has great control in the industry. Some of the other political factors that impact the petroleum industry include regulatory environment, instability, and nationalization of property, acts of wars, terrorism and civil conflicts (Longwell, 2002, p. 40). All these problems are very common in the oil rich companies of the world. The OPEC nations are considered to be the major producer's of the world's crude oil. Therefore, all the important decisions pertaining to the crude oil prices are taken by these countries (Longwell, 2002, p. 39). As the petroleum companies operate in different countries of the world so ...