Strategic Steps for Rowan Drilling To Establish Effective Efficient Operations
Introduction
The purpose of this report is to discuss the strategic steps that Rowan Drilling needs to apply to establish effective and efficient operations. Rowan Drilling Company was initiated in 1923 by Charlie and Arch Rowan after they purchased a drilling rig. The company was incorporated in 1924 to be Rowan Drilling. The company specializes in the drilling of oil in the United States, and therefore, effective and efficient operations are necessary for its success. The company’s headquarters is situated in Houston, Texas, in the United States. Rowan Drilling Company, Inc. operates in the Energy sector and offers oil and gas services. The Company provides offshore contract drilling services across the globe. The company operates in a competitive environment that requires the use of strategic management to ensure that it moves in the right direction.
Strategy and Strategic Management
Business strategy is a driving force behind the success of a business because it builds the base for the same. A business strategy is not limited to the management but to the success of a business. Johnson, Scholes, and Whittington (2010) have described strategy as “the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations" (p.3). Thus, a strategy is an action that managers take to realize the goals of an organization. On the other hand, strategic management is the process through which managers choose a set of strategies that could help an organization to realize superior performance. A strategy is composed of a comprehensive master plan used to explain how a firm is expected to achieve its objectives and mission. It is used to optimize competitive advantage and ensure the success of a firm (Johnson, 2008). A strategy could be a functional strategy, business strategy, or corporate strategy.
The essential fundamentals of the strategy process are strategic intent, assessment, and choice. Strategic Intent is described by Hill and Jones (2004) as the driver of the strategy process. Thus, the absence of an underlying intent in a strategy results in an absence of the overall sense of direction. Strategic intent is used to help organization answer the question ‘where do we want to go?' (Hill and Jones, 2004). The important role of Strategic Assessment is to offer relevant knowledge in the context of strategic management. It is used to assess the external environment and the relative capabilities of an organization. The role played by strategic assessment is to ensure future strategies can be used to ensure competitiveness and efficiency. Strategic assessment is applied to answer the question ‘where are we now?' A strategic choice is important to the strategy process because it acts as the linkage to action. The action is applied to determine the most suitable options for ensuring that the organization moves toward success.
Strategic management plays an integral role in the success of an organization. For example, it aids in the strategy formulation process which provides the direction and scope of a company. Macmillan and Tampoe (2000) pointed out that the corporate success of an organization is derived from a competitive advantage founded on distinctive capabilities. The capabilities are associated with the relationships between a firm and its suppliers, employees, and customers (Amason, 2011). To be efficient and effective, Rowan Drilling Company, Inc. is supposed to understand the enterprise's skills and resources available and how they can be applied in the company. Accordingly, the company could manage in a manner that the business is able to deliver superior customer value to the customers at a production cost that results to profit (Amason, 2011). The process of strategic management ensures that an organization can maximize its resources to achieve efficiency and effectiveness in the workplace.
Strategic Steps for Effective and Efficient Operations
The first step is to establish the core competencies of the company. Strategic management can assist the business in the identification and capitalization of its core competencies. Core competencies are the unique abilities used by organisations to differentiate themselves from the rest of the players in the industry (Porter 1985). “They are used to provide a business with competitive advantages while delivering and creating value for money to potential and loyal consumers” (Porter 1980). In reference to Rowan Drilling Company, Inc., some of the core competencies include strong brand recognition coupled by the use of technology. In addition, Rowan Drilling Company, Inc. has core competencies such as skilled and knowledgeable workers and staff, and it can use them to its advantage. The resource-based strategy requires companies to select a strategy that can exploit the competencies and resources by ensuring are fully exploited (Mintzberg, Lampel & Ahlstrand, 2008). This can be implemented through the use of the BCG growth-share matrix. According to Ansoff (1990), the matrix is used to offer a composite picture of the strategic position of the company’s unit in the organization. For example, the BCG Growth-Share Matrix which is composed of stars, question markets, cash cows, and dogs (Ansoff 2007), can be applied to offer a framework needed for effective allocation of resources among various business units. For example, the drilling sector requires the most resources as it enhances the entire production process compared to other units such as marketing.
Capabilities and firm resources according to Michael Porter result in distinctive competencies (Porter 1980). The firm must fully employ its resources to transform some of the undifferentiated production factors such as labor into efficient services. For example, since Rowan Drilling Company, Inc. provides driving services to its clients, the company can invest in modern technology to enable the firm to do each of the activities in a more effective and efficient manner. Accordingly, the company can yield sustainable, as well as above-normal profits. The company could also develop its capabilities to enhance efficiency and efficient production. For example, the company could hire individuals who master the required capability in gas and oil production, improve its reputation through CSR activities, encourage learning activities, and employ an organizational culture that appreciates the efforts of other employees. Reputational resources such as durability, and reliability, reputation with suppliers and customers can go a long way in enhancing efficiency and effectiveness (Porter, 1985).
The firm's competence in the management of its capabilities is limited by three external factors: profits, technological opportunity, and the size as well as the growth rate of market demand (Porter, 1980) in regard to Rowan Drilling Company, Inc, the company needs to invest more in technology in order to meet the challenges and demands in the energy market. In addition, the company could invest in training and development to improve the skills and knowledge of its employees. Subsequently, it could manage its capabilities effectively to produce what the market demands. From a strategic point of view, competencies coupled with its resources could play a major role in effective production. The resources used in traditional production factors, such as capital, labor, and land are unique assets (Porter 1980). Unique resources can be used to provide strategic value to the firm. For example, Rowan Drilling Company, Inc could make its resources valuable, rare, non-substitutable, and costly to imitate, hence creating a competitive advantage (Porter, 1985).
Strategic management can is a combination of decisions, and actions undertaken by a manager to establish the firm’s performance. Thus, thorough knowledge and analysis are required in general to assess the competitive organizational environment and to make the right decisions. Rowan Drilling Company, Inc. must conduct a SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats) to establish the internal and external factors that affect the company. Subsequently, Rowan Drilling Company, Inc. is expected to make the best possible use of strengths, reduce organizational weaknesses, capitalize on the available opportunities from the business environment, and address the threats (Johnson & Scholes 2008). The table below is a SWOT analysis for Rowan Drilling Company, Inc. and its purpose is to heal the company understand itself better and establish areas that must be improved.
Table 1: SWOT Analysis
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Strengths § Financial strength and experienced in the industry § Reputable organization § Clear corporate governance structure § Operates a CSR program § Has a clear mission and vision part of its business strategy. |
Weaknesses § No Enough Employee Training § Most of its revenue comes from the Oil and Gas Service |
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Opportunities § Expansion to Africa and Middle East where there is oil and as § Provide New Products and Services § Entering Manufacturing Sector |
Threats § Competition from other companies in the energy industry § The company lacks Enough Promoting of its services § Market demand for Oil and gas continues to increase § Oil crisis in Middle East and terrorism in areas of operations. |
The other approach is for the firm to undertake strategic planning Sadler (2003) strategic planning pointed out that strategic planning is a systematic procedure that is applied to develop a strategy for an organization. For Rowan Drilling Company, strategic planning plays is important because it can be used to provide the direction required for effective production goals. In strategic planning, the core issues involved are both internal and external factors (Johnson, Scholes & Whittington 2011). For example, training its employees on modern drilling techniques is more likely to improve its production, while investing in state-of-art drilling materials and technology could create a competitive advantage over its competitors.
Porter (1985) provided generic strategies that can be used by companies to remain competitive and they are Cost Leadership, Differentiation, and Focus. Differentiation strategy comprises an attempt by an organization to differentiate its services from its rivals and competitors (Daft & Marcic 2011). The company could differentiate its services from those of its competitors by making use of the SWOT analysis findings. For example, given that Rowan Drilling Company focuses on offshore drilling, it could invest in unique drilling tools and machinery to provide unique services to its clients. This can be supported by Ansoff’s Matrix – market penetration, market development, and product development in Figure 1 below (Ansoff, 2007)
A market penetration strategy is applied to enter the existing market through the use of existing products. The strategy is applicable in the Rowan Drilling Company and can be applied to the company’s increased market share in areas in U.S. and Mexico not present. For example, Rowan Drilling Company could acquire small drilling companies in order to penetrate those markets (Ansoff, 2007). Product development entails the introduction of a new product into an existing market. For instance, Rowan Drilling Company could introduce a new type of service such as oil transporting to the destination or production of drilling machines to its competitors. This strategy could be effective in Rowan Drilling Company, as it could increase its market share and profitability in the long –run. The market extension is composed of expansion into markets for growth purposes. For instance, Rowan Drilling Company can extend its market into Africa and the Middle East and where there is plenty of oil, and use its reputation to acquire new deals (Johnson et al. 2010).
Conclusion
A corporate strategy can be applied to ensure for the Rowan Drilling Company creates value for stakeholders and can be used to promote effectiveness and efficiency to realize its objective. To be more productive, Rowan Drilling Company must undergo successive incremental strategic changes and employ its unique and core competencies and resources for successful strategic decisions. For example, Rowan Drilling Company’s resources, capabilities, and core competencies can be used to provide a basis for creating strategies and a sustainable competitive advantage. SWOT analysis is a tool that can be used to establish the internal and external factors affecting Rowan Drilling Company, Inc. to reduce the organizational weaknesses capitalize on the available opportunities from the business environment, and address the threats in the market such as competition. Investing in resources, continually, leveraging resources, rapid redeployment of resources, upgrading resources, acquiring new resources, and finding alternative resources are all new approaches that can be used by the company to improve its production efficiency and effectiveness. The differentiation strategy is most effective as the firm could gain a competitive advantage, increase market share and profitability, and effectiveness in production. It could increase its presence in new emerging markets
References List
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