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A. Case Abstract
“Our vision is to be the leading oil company in Kuwait and the Middle East, providing
impactful and diverse contributions to the support and development of the Kuwaiti
economy.”
“As one of the world’s leading oil companies, KPC’s mission is to manage and operate
our integrated worldwide activities focused on petroleum exploration and production,
refining, marketing, petrochemicals, and transport in the most efficient and professional
manner, in addition to growing shareholder value while ensuring the optimum
exploitation of Kuwaiti hydrocarbon resources.”
1. Customer
2. Products or services
3. Markets
4. Technology
5. Concern for survival, profitability, and growth
6. Philosophy
7. Self-concept
8. Concern for public image
9. Concern for employees
D. External Audit
The Competitive Profile Matrix (CPM) identifies a firm’s major competitor(s) and its own
particular strengths and weaknesses in relation to its strategic position. KPC’s relative
strengths and weaknesses based on the case details are portrayed in the weighted
scores. As KPC is an international player, and the leading monopoly oil producer in
Kuwait, no local competitors have been identified in the case; however, the case
mentions a slew of competitors from various continents. Therefore, three foreign
competitors who are ranked above KPC (rank: #15) are featured herein, and will be
considered as representative of the overall foreign competition faced by KPC. These are:
Aramco (rank: #1 - Saudi Arabia); ExxonMobil (rank: #5 - USA); and, PetroChina (rank:
#12 - China). Their weighted scores are estimates based on their strengths and
weaknesses in terms of the critical success factors explicitly or implicitly reflected in the
case.
It can be seen that there are several areas in which KPC is able to compete well with the
overseas competitors: in terms of global expansion, KPC has an extensive reach into
Asia, NW Europe, USA, and Arab countries. Similarly, KPC is internationally competitive
in technology, product lines, management, and price competition. As for customer
loyalty and advertising, unfortunately, KPC is lagging behind Aramco and ExxonMobil.
However, KPC’s mandate to excel in technology, management, product quality and
image, will enable redressing of these sensitive areas. The company’s strong position in
the domestic market and its significant contribution to the Kuwaiti economy, should lend
long-term viability to the Kuwaiti monopolist. Therefore, the Critical Success Factors
score of 3.84 for KPC can be considered commendable for a Middle-Eastern player.
Rating
ScoreWeighted
Rating
Rating
ScoreWeighted
ScoreWeighted
Rating
ScoreWeighted
Weight
Critical Success Factors
Price Competition 0.10 4 0.40 3 0.30 4 0.40 3 0.30
Global Expansion 0.12 4 0.48 3 0.36 4 0.48 2 0.24
Management 0.08 4 0.32 3 0.24 4 0.32 2 0.16
Technology 0.09 4 0.36 4 0.36 4 0.36 3 0.27
Product Lines 0.10 4 0.40 3 0.30 4 0.40 3 0.30
Customer Loyalty 0.10 3 0.30 3 0.30 3 0.30 2 0.20
Market Share 0.09 4 0.36 4 0.36 4 0.36 2 0.18
Advertising 0.06 3 0.18 3 0.18 4 0.24 1 0.06
Product Quality 0.10 4 0.40 3 0.30 4 0.40 2 0.20
Product Image 0.08 4 0.32 3 0.24 4 0.32 2 0.16
Financial Position 0.08 4 0.32 4 0.32 4 0.32 3 0.24
TOTAL 1.00 3.84 3.26 3.90 2.31
Opportunities
1. The Kuwaiti economy depends largely on its oil industry – the performance of
KPC is therefore critical
2. KPC has access to 29 producing oil fields, and 1,045 producing oil wells. East Asia
is now witnessing significant economic growth and an increasing demand for oil
and its distillates
3. KPC has the technology to meet high product standards for the most stringent
future quality specifications in the world
4. Developing countries that do not currently seek high product standards due to
substandard infrastructure may be good targets for market penetration
Threats
1. The environmental concerns and global warming trends with the concomitant
development of alternate energy sources and new technologies may have an
adverse impact on the oil industry
2. Although global oil demand has been increasing in recent years, the oil industry
is characterized by intense competition, especially for value-added end-use
products
3. Competition seems to be increasing with the appearance of new companies from
emerging economies
4. In recent years, environmental pollution has dominated as a major concern all
over the World, and will impact oil companies
5. Governmental regulations in many countries and the trend towards tightening
product specifications make it difficult to market the current production slate
An External Factor Evaluation (EFE) Matrix allows strategists to summarize and evaluate
economic, social, cultural, demographic, environmental, political, governmental, legal,
technological, and competitive information. KPC is in a comfortable position as the
industry leader in Kuwait with a high reputation for quality; and this provides the
necessary capability to harness opportunities in the external environment because of a
favorable climate for non-oil producing businesses (represented by several of KPC’s
subsidiaries) that the Kuwaiti government encourages, in order to diversify the
economy.
Opportunities
1. The Kuwaiti economy depends largely on its oil
industry – the performance of KPC is thus critical 0.10 4 0.40
After markets have been segmented so that a firm can target particular customer
groups, the next step is to find out what customers want and expect. Many firms have
become successful by filling the gap between what producers see and customers
perceive, as good service. Product positioning entails developing schematic
representations that reflect how a firm’s products or services compare with their
competitors’ regarding dimensions most important to success in the industry. Two such
matrices are presented below for KPC and the representative foreign competitors
Aramco, ExxonMobil, and PetroChina indicated above.
Technology (High)
KPC Aramco
ExxonMobil
PetroChina
Global Expansion Global Expansion
(low) (High)
Technology (Low)
As depicted in the Product Positioning Matrix above for Global Expansion vs. Technology,
KPC is quite competitive with Aramco and ExxonMobil, and ahead of PetroChina on the
technology dimension, but behind them in global expansion as it is focused only on parts
Product Lines
(High)
ExxonMobil
KPC
Aramco
PetroChina
Product Image Product Image (High)
(low)
Product Lines
(Low)
It can be seen from the above Product Positioning Matrix for Product Lines vs. Product
Image that KPC is in a strong position on both dimensions – thanks to its high
prioritization of unremitting quality in its products, and the patronage of the Kuwaiti
government in maintaining a high public and international image. Aramco and
ExxonMobil are also strong on both dimensions with their extensive international clout
and public image. PetroChina is seen to be lagging somewhat behind the other three
players on both dimensions.
Strengths
Weaknesses
1. KPC needs to improve its production efficiency by enhancing the technology of the
production process
2. KPC refinery products need to meet better quality specifications to more
stringently satisfy customer needs
3. The monopoly hold of KPC in the Kuwaiti oil and gas market may result in
increased pricing and reduction of quality
4. KPC lacks joint venture partnerships upstream or downstream that could promote
technology transfers and international market viability
5. The KPC exports of refined products to neighboring Arabian Gulf are far less than
its exports to South-East Asia, Europe and the U.S., which can be logistically
uneconomical
Strengths
1. KPC is a highly profitable and performance-
driven company 0.12 3 0.36
2. KPC has a world-class reputation for all of the
company’s products 0.12 4 0.48
Regardless of how many factors are included in an IFE Matrix, the total weighted score
can range from a low of 1.0 to a high of 4.0, with the average score being 2.5. Total
weighted scores well below 2.5 characterize organizations that are weak internally,
whereas scores significantly above 2.5 indicate a strong internal position. In light of this,
KPC’s position with a score of 3.00 reflects a somewhat strong internal position,
consistent with its world-class reputation, integrated upstream and downstream
activities, and moderate international presence and expansion capabilities.
F. SWOT Strategies
ST Strategies use a firm’s strengths to avoid or reduce the impact of external threats.
KPC could invest in the development of alternate sources of energy, and could acquire
newly entering competitors from emerging economies by availing of its world-class
reputation and extensive upstream and downstream resources.
G. SPACE Matrix
FS
Conservative +7
Aggressive
+6
+5 K
P
+4 C
+3
+2
+1
CA IS
-7 -6 -5 -4 -3 -2 -1 +1 +2 +3 +4 +5 +6 +7
-1
-2
-3
-4
-5
-6
Defensive -7 Competitive
ES
The directional vector of the SPACE Matrix above indicates that KPC is in Quadrant I of
the SPCE Matrix. Therefore, according to the results of the SPACE Matrix, it is
recommended that KPC embark on an Aggressive Strategy on a growth trajectory in
the promising oil and gas business in Kuwait and in overseas locations through its
subsidiaries. The company should thus balance all extant external and internal realities
impinging on it. According to the SWOT profile, the company could avail of horizontal
integration (acquiring similar firms towards oligopoly or monopoly) through selective
joint venture partnerships with strong foreign firms. KPC is already forward integrated
(taking ownership of distribution channels and nodes such as warehouses and retail
store chains), and backward integrated (acquiring firms providing raw bitumen) through
its subsidiaries. It appears from the overall strategic thrust of the various analyses
including the CPM, EFE, IFE, SWOT, and Product Positioning Matrix, that KPC is unlikely
to adopt an unrelated diversification strategy, but a related diversification strategy, as
the company’s mainstay is the production and refining of oil and gas from its ownership
of highly productive oil and gas fields. It can therefore acquire firm(s) that could help in
innovating and cost-cutting to establish KPC’s presence in Kuwait and around the world
with competitive pricing. KPC will thus need to embark on a market penetration and
market development strategy, together with product development to meet quality, price,
and demand for various market segments in Kuwait and in existing and evolving global
markets.
All organizations can be positioned in one of the Grand Strategy Matrix’s four strategy
quadrants. The Grand Strategy Matrix is based on two evaluative dimensions:
competitive position and market (industry) growth. Any industry whose annual growth in
sales exceeds 5 percent could be considered to have rapid growth. KPC’s sales growth is
unknown based on information provided in the case, but its market leadership,
monopoly, government patronage, and high market share puts the company in a healthy
annual growth trajectory. Appropriate strategies for an organization to consider are
listed in sequential order of attractiveness in each quadrant of the matrix. Firms located
in Quadrant I of the Grand Strategy Matrix are in a strong strategic position with
rapid market growth. For these firms, continued concentration on current markets
(market penetration and market development) and products (product development) is
Rapid Market
Growth
Quadrant II Quadrant I
KPC
Weak Strong
Competitive
Competitive
Position Position
1. Market development
2. Market penetration
3. Product development
4. Backward integration
5. Forward integration
6. Horizontal integration
7. Related diversification
The only analytical technique in the literature designed to determine the relative
attractiveness of feasible alternative actions is the Quantitative Strategic Planning Matrix
(QSPM), which comprises Stage 3 of the strategy-formulation analytical framework. This
technique objectively indicates which alternative strategies are best. The QSPM uses
The left column of a QSPM consists of key external and internal factors (from Stage 1),
and the top row consists of feasible alternative strategies (from Stage 2). Specifically,
the left column of a QSPM consists of information obtained directly from the EFE Matrix
and IFE Matrix. In a column adjacent to the Critical Success Factors, the respective
weights received by each factor in the EFE Matrix and the IFE Matrix are recorded. The
top row of a QSPM consists of alternative strategies derived from the SWOT Matrix,
SPACE Matrix, and Grand Strategy Matrix. These matching tools usually generate similar
feasible alternatives. However, not every strategy suggested by the matching techniques
has to be evaluated in a QSPM. Strategists should use good intuitive judgment in
selecting strategies to include in a QSPM.
Opportunities
1. The Kuwaiti economy
depends largely on its oil 0.10 -- -- -- -- -- --
industry – the performance of
KPC is thus critical
2. KPC has access to 29
producing oil fields, and 0.12 3 0.36 4 0.48 2 0.24
1,045 producing oil wells
3. East Asia is now witnessing
significant economic growth 0.08 -- -- -- -- -- --
and an increasing demand for
oil and its distillates
4. KPC has the technology to
meet high product standards 0.10 3 0.30 3 0.30 4 0.40
for the most stringent future
quality specifications in the
world
5. Developing countries that do
not currently seek high 0.12
product standards due to 3 0.36 2 0.24 1 0.12
substandard infrastructure
may be good targets for
market penetration
Threats
1. The environmental concerns
and global warming trends 0.10
with the concomitant -- -- -- -- -- --
development of alternate
energy sources and new
technologies may have an
adverse impact on the oil
industry
2. Although global oil demand
has been increasing in recent 0.10
years, the oil industry is 2 0.20 3 0.30 3 0.30
characterized by intense
competition, especially for
value-added end-use
products
3. Competition seems to be
increasing with the 0.10 3 0.30 2 0.20 2 0.20
appearance of new
companies from emerging
economies
4. In recent years,
environmental pollution has 0.08 -- -- -- -- -- --
dominated as a major
concern all over the world
and will impact oil companies
5. Governmental regulations in
J. Recommendations
Strategy #1:- It is recommended that KPC should focus its exports on the nearest
countries such as those in the Arabian Gulf, Europe, and South Asia to avail of logistical
economies.
K. Epilogue
KPC’s top management had directed the company’s “strategic planning team” to review
the company’s current operations and develop a strategic plan taking into account the
expected future trends that will impact the oil industry in general, and KPC’s operations
in particular. This case analysis has delved into the strengths and weaknesses of KPC,
together with the opportunities and threats facing the Kuwaiti oil and gas giant. Future
oil industry trends and geographical realities have also been taken into account to
provide a more holistic picture.
To bolster its business interests, KPC has several subsidiaries covering both upstream
and downstream activities. Each subsidiary operates a different oil service activity: from
onshore and offshore exploration and production through refining, petrochemicals, local
and international marketing, and retailing and marine transportation. These are:
(1) Kuwait Oil Company (KOC) – Oil & Gas production and exploration
(2) Kuwait Gulf Oil Company (KGOC) – Oil production from joint operations with AGOC
(3) Kuwait National Petroleum Company (KNPC) – Oil refining & products marketing
(4) Kuwait Petroleum International (KPI) – Petroleum products production and
marketing
(5) Kuwait Petrochemical Industries Company (PIC) – Petrochemical production &
exports
(6) Kuwait Oil Tanker Company (KOTC) – Oil Transportation through owned marine fleet
(7) Kuwait Aviation Fueling Company (KAFCO) – Supply of plane fuel at Kuwait Airport
(8) Kuwait Foreign Petroleum Exploration Company (KUFPEC) – Oil & Gas excavation
(1) KPC should focus its exports to the nearest countries such as those in the Arabian
Gulf, Europe, and South Asia to avail of logistical economies.
(2) KPC should develop the lucrative Arabian Gulf, European, and U.S. markets.
(3) KPC should enter into joint venture partnerships for its upstream and downstream
activities.
KPC ranks seventh in world crude oil production with 2,500,000 bpd. It ranks a
respectable 12 out of the top 100 oil companies. The destruction of Kuwait’s oil industry
during the first Iraqi occupation (1990–1991) was extensive, but damage to exploitable
reserves was estimated at only about 2 percent. Several hundred oil wells and gathering
stations required replacement. All three domestic refineries were beyond operation. By
mid-1994, however, nominal production capacity of crude from Kuwait and its share of
the Neutral Zone was around 2.4 million bpd, and the refineries’ capacity was back to
pre-invasion levels. KPC‘s rise from the ashes to being a world-class player in the highly
lucrative and competitive oil and gas industry is indeed laudable for a relatively small
country in the Arab world.