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Read the closing case entitled “Emerging Markets: BP, AAR, and TNK-BP” (also see Emerging Markets 7.1) on pages 215-217 in your Global Strategies textbook, part of the assigned reading this week.
From an industry-based view, why are alliances a frequent mode of entry for the Russian oil industry? How does the global environment surrounding the oil industry in general change a firm’s interest in cooperating?
Remember to use in-text citations and list APA style references to support your response.
Respond to at least 2 other students’ original posts .. 50 words, Add value and ask question.
Considering the industry based view the main key task in this case is carry out a close examination of the forces which have a competitive effect on the industry and the main focus is on the available opportunities and also the threats to the industry. Considering the case of the oil industry in Russia, when BP and AAR collaborate, they form TNK-BP which is found to be of great importance to BP.( Hallberg, 2017) BP operates an industry in gas and oil and it is the third largest company. It operates by exploring, producing, refining, distributing and marketing petroleum chemicals and at the same time it also deals with generation of power. Investments in Russia are faced by risks which are both political and economical. Investors in the foreign markets are so much attracted to the good oil and gas products provided by this industry. Russia has an investment law which makes it easy for the companies from the foreign countries to form an alliance with oil companies in Russia with an aim of exploiting the oil resources. According to this law, the companies from the foreign countries have a mechanism of establishing themselves in the country by either using the offices issuing licenses, as a limited liability company or as a branch from the suppliers in the foreign countries. According to (Norman 2012), the countries from the west as well as the foreign countries they are allowed to enter the market using a Russian entry mode. Considering the industry point of view, it is much more logical and safe to work with a local partner as form of entity from the foreign country.
Russia developed this strategy of globalization as a means of controlling both commercial and financial flows internationally. Globalization was meant to enable Russia to manage its international market processes by enabling a strong link between Russia and it’s the world markets.
Thus globalization was key in shaping the world markets for Russia especially in the oil industry because it assisted in bringing a good link with the international markets which so much helped in bringing in foreign companies to help in exploiting the oil market and at the same time it also assisted in getting market for its oil products and this assisted in enabling the economy of Russia to grow better.
Norman, J(2012). The oil card: The Global economic warfare in the 21st century. Irwin, McGraw-Hill.
Hallberg, P., & Virkkunen, J. (2017). Freedom of speech and information in global perspective. In Christiansen, B., & In Koeman, J. (2015). Nationalism, cultural indoctrination, and economic prosperity in the digital age.
Van, . M. J., Taylor, I., & Arkhangelskaya, A. (2016). Emerging Powers in Africa: A New Wave in the Relationship?. Cham: Springer International Publishing
Alliance or a strategic alliance refers to when two or more companies come together to share certain aspects, such as resources and insights for a cause that will benefit the duo or more companies which are involved in the alliance. Common examples of alliances include the alliance between KFC and Pizza. Overall, alliances serve to bring mutual benefits to all the involved parties (Considine & Kerr, 2002)
Why are alliances a frequent mode of entry for the Russian Oil? Industry?
As stated above, alliances are formed in order for the involved companies to be able to benefit from each other in terms of resources and so on (Moore & Longenecker, 2008). Oil drilling and extraction usually involve a lot of funds coupled with sophisticated machinery and equipment. When Russia seeks alliances for the oil industry it is usually due to the gaining of resources which would ultimately make it exploit the oil industry much deeper (Culpan, 2002). The alliances hence provide an easier way of getting hold of needed equipment in the country.
How does the global environment surrounding the oil industry in general change a firm’s interest in cooperating?
The global environment affects all of the oil operations. One of the major factors taken into account is the availability of a market for the oil produce. Other countries may generally mine the same oil but sell it at much more lower prices (Grace, 2005). The demand for the oil is also a great factor worth noting about the external environment, all of the above-said factors need to be taken into account thoroughly. Currently, the world market for oil has proved a worthwhile investment (Austin, 2000). A firm should therefore arrange to seek alliances since they have proven to be a good investment, more so if there is sharing of resources (Özel, 2014).
Austin, J. (2000). The Collaboration Challenge: How Nonprofits and Businesses Succeed through Strategic Alliances. Hoboken: John Wiley & Sons.
Considine, J. I., & Kerr, W. A. (2002). The Russian oil economy. Cheltenham: Edward Elgar.
Culpan, R. (2002). Global business alliances: theory and practice. Westport, Conn: Quorum Books.
Grace, J. D. (2005). Russian oil supply: Performance and prospects. Oxford: Oxford University Press for the Oxford Institute for Energy Studies.
Özel, I. (2014). State-Business Alliances and Economic Development: Turkey, Mexico and North Africa. Hoboken: Taylor and Francis. Moore, C. & Longenecker, J. (2008). Managing small business: an entrepreneurial emphasis. Australia: South-Western/Cengage Learning
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