Читаем без скачивания Английский язык. Практический курс для решения бизнес-задач - Нина Пусенкова

«Achieve market leadership from the black forest (Schwarzwald) to the Black Sea,» Austrian market leader, OMV, has further focused its market strategy. The future expansion of OMV’s downstream presence should especially target Eastern Europe. OMV could become a major catalyst of the East European market consolidation.

But what should be the strategy of East European oil and gas companies to stay in or enter the global premier league? A.T. Kearney study reveals that consolidation trends follow a distinct logic. East European oil and gas companies need to understand in which stage of the consolidation lifecycle they are positioned to survive the consolidation threat and even dominate the endgame.

Understanding the Consolidation Curve

Economically, it makes common sense that most new industries are fragmented and consolidate as they mature. But what about the fact that all industries have similar lifecycles as indicated by A.T. Kearney study of more than 29,000 listed companies over the recent 14 years? Once an industry forms or is deregulated, it will move through four stages of consolidation. Thus, an understanding of an industry’s position within this cycle should be the cornerstone of a company’s long-term strategic plan.

Stage 1– Opening. The first stage generally begins with a single start-up or with a monopoly just emerging from a newly deregulated or privatized industry. But this 100% industry concentration quickly drops off. Soon the combined market share of the three largest companies drops to between 30% and 10% as competitors quickly arise to create the frontier of industry consolidation. For oil and gas, the dissolution of Rockefeller’s Standard Oil monopoly in 1911 was such a trigger point as well as the privatization of the state-owned East European oil and gas companies in the 1990s.

Companies in Stage 1 should aggressively defend their first-mover advantage by building scale, creating a global footprint, and establishing entry barriers. They should focus more on revenue than on profit, working to amass market share.

Stage 2– Scale. This stage is all about building scale. Major players begin to emerge, buying up competitors and forming empires. The top three players in Stage 2 industries will own 15% to 45% of their market, as the industry consolidates rapidly. Typical Stage 2 industries include airlines, hotel chains, automotive suppliers, banks, and pharmaceuticals. Also oil and gas downstream stays in Stage 2. Due to the large number of acquisitions in this stage, companies must hone their merger-integration skills. These include learning how to carefully protect their core culture as they absorb new companies and focusing on retaining the best employees of acquired companies.

Stage 3– Focus. Companies that are in Stage 3 focus on strengthening their core business and continue to aggressively outgrow the competition. The top three industry players will now control between 45% and 70% of the market. By this time there are still generally five to twelve major players. This is a period of mega-deals and large-scale consolidation plays and the goal is to emerge as one of a small number of global industry powerhouses with a well-defined business. Typical focus-stage industries include steel producers, automotive companies, shipbuilders and distillers – and oil and gas upstream as well as integrated oil and gas.

Companies in Stage 3 industries need to emphasize their core competencies, focus on profitability, and either shore up or part with weak business. The well-entrenched competition at this phase will attack underperformers. Recognizing start-up competitors early on allows focus-stage players to decide whether to crush them, acquire them, or simply emulate them. Stage 3 companies should also identify other major rivals that will likely survive into the next stage and avoid all-out assaults.

Stage 4– Balance and Alliance. Here the titans of industry reign, from tobacco to soft drinks and defense. The industry CR is at its peak and can even dip a bit as, at this stage, the top three companies claim as much as 70 to 90% of the market. Large companies may form alliances with their peers as growth is now more challenging. Companies do not move through Stage 4: they stay in it. Firms in these industries must defend their leading positions. They must find new ways to grow their core business in a mature industry and create a new wave of growth by spinning off new businesses. They must be alerted to the industry regulation and the danger of being lulled into complacency by their own dominance.

Global Titans about to Emerge

Looking at oil and gas, the industry seems to be at consolidation Stage 3. Major M&A activities have been experienced in the recent years. Exxon’s acquisition of Mobil (1999), BP acquiring Amoco (1998) and Arco (2000), the merger of Chevron and Texaco (2001) as well as the recent Philips Petroleum and Conoco merger are the most eye-catching events. The three major players in the oil and gas industry – ExxonMobil, Royal Dutch/Shell and BP – today own roughly 50—55% of the entire industry.

However, an even deeper study of the industry reveals that oil and gas sector is at different stages of its consolidation, depending on the major value chain segment. To analyze the oil and gas industry, three industry segments can be differentiated:

Oil and gas downstream is situated in the scale phase. For downstream players regional closeness, and fulfillment of market and customers specifics is crucial. That is why some local downstream players scale up to create regional leaders. A leading geographical position accompanied by strategic advantages or regional specialization arising from the closeness of the downstream business to its local customers is perceived by these companies as the winning strategy to withstand the increasing consolidation pressure of global majors.

Orlen or MOL are good examples for downstream-driven companies in Stage 2. Orlen’s acquisition of BP’s North German retail network has to be seen in this context as well as the expected initiation of regional partnership in downstream, enabling Orlen, MOL and OMV to capture and defend a leading regional position in the mid-term.

However, future success of all three companies will depend on their ability to compete against global industry leaders. A survival of focused downstream players is more than unlikely as they mark most attractive targets for global industry leaders to further sweeten their global oil and gas portfolio.

Also for oil and gas upstream the industry is still relatively dispersed. Risk sharing in E&P as well as high investment requirements in this segment are expected to further trigger consolidation and to focus on highly attractive assets and resources. Access to strategic resources as well as financial and technical capabilities are the key prerequisites in this segment.

Gazprom has already been identified by global integrated industry leaders like Royal Dutch/Shell as one of the most attractive acquisition targets in this region. First negotiations between the Anglo-Dutch industry leader and Russian authorities are underway. The sale of major stakes in Gazprom to the external investors would further open the Russian market.

Integrated oil and gas entered Stage 3 of the consolidation curve. In this segment, the titans of the industry emerge. Only few East European companies like YukosSibneft or LUKOIL are expected to compete on equal terms. Here, the consolidation is not so much a question of mega-mergers as the selective exchange of business units. However, being successful in the past does not mean to be on the winning side for the future. The East European market leaders are already identified as preferred targets for some global industry leaders.

Consolidation Strategy

To grow companies and thus raise the companies’ stock value, A.T. Kearney has developed the Value Building Growth method. Central levers of this method are revenue growth and value increase. They form a matrix with four quadrants in which companies of a sector can be positioned according to their stock market performance.

The position within the matrix gives a rough orientation of the relative competitiveness of a company and the strategic and operational improvement requirements. Accordingly, the position in the matrix gives four major thrusts.

Simple Growers face the question as to further focus core activities and competencies and develop them above average. The goal of Profit Seekers is to build on realized profits. Underperformers have to undergo a substantial process and organizational restructuring and portfolio optimization. For Value Growers the challenge is the sustainability of success and the preparation of the next step for growth.

YukosSibneft and LUKOIL are identified as Value Growers from 1997 until 2002. However, this should be seen as an honoring of both companies’ activities in the near past. For both it is now crucial to carefully evaluate their next steps in the market: compared to their global competitors both are still small players in the game.

Other East European players like Gazprom, Orlen or MOL have under-performed in terms of value and revenue growth. Restructuring their businesses and an even clearer business focus is the key message for these players.

Conclusion

To survive consolidation, East European oil and gas companies must take into account their specific positioning in the global consolidation curve. While business and portfolio restructuring as well as a consequent focus is the appropriate strategy for local players only few are in the position to compete against global industry leaders today. However, even these East European industry leaders may find themselves targeted by global majors; oil and gas is further moving towards an industry consolidation.

All companies have to quickly align the strategy to their relative industry position; otherwise they are running the risk of being taken over by industry leaders and becoming part of the oil and gas history. The urgency for East European companies to decide which future strategies they should pursue in the consolidation game is underlined by the fact that foreign companies have already defined their strategies and are on the way to implementing them.

Source: Oil and Gas Eurasia, october 2003, pp. 36—41

Essential Vocabulary

1. exploration and production (E&P) – геологоразведка и добыча (в нефтяной и газовой промышленности)

2. penetration n – проникновение

penetrate v – проникать

3. state-owned – государственный

4. consolidation n – консолидация (реинвестирование дохода, полученного от продажи акций, в менее рискованные ценные бумаги; конверсия краткосрочной задолженности в долгосрочную; укрепление рыночной конъюнктуры; объединение отчетности компаний группы)

consolidate v – консолидировать

5. major n – зд. крупная международная нефтяная компания

6. rumor n – слух; непроверенная информация, которая может повлиять на рынок

7. privatization n – приватизация

privatize v – приватизировать

8. frontier n – граница, рубеж; новая область

9. dissolution n – роспуск (компании или товарищества): юридическое прекращение деятельности компании в добровольном или принудительном порядке

dissolve v – распускать, прекращать деятельность

10. trigger n – курок, механизм; условие соглашения, невыполнение которого автоматически влечет определенные действия

trigger (off) v – приводить в движение, начинать, вызывать

11. first-mover – первопроходец

12. footprint n – след, отпечаток

13. powerhouse n – электростанция; очень энергичный человек; мощная и динамичная компания

14. emulation n – соревнование, состязание, соперничество, подражание

emulate v – соревноваться, состязаться, соперничать, подражать

15. alliance n – союз

ally n – союзник

ally (to, with) v – соединять(ся), вступать в союз

16. risk sharing – разделение риска

17.authority n – власть; орган власти; полномочие

18. restructuring n – реструктуризация (кредита или компании); пересмотр сроков выплаты долга

restructure v – реструктуризировать

Exercise 1. Answer the following questions.

1. What is the risk that the East European oil and gas companies currently face? 2. What is the policy pursued by the oil and gas majors in Eastern Europe? 3. What is the industry lifecycle according to A.T. Kearney? 4. What are the characteristics of the Opening Stage? 5. What are the main features of the Scale Stage? 6. What do companies in Stage 3 focus on? 7. Why is the Stage 4 named «Balance and Alliances»? 8. Where is the oil and gas industry located in the consolidation curve? 9. What is the essence of the Value Building Growth method developed by A.T. Kearney? 10. What are the challenges faced by Growers, Profit Seekers, Value Growers and Underperformers, respectively? 11. What Russian oil and gas companies can be included in these four categories? 12. What should East European do to survive consolidation? 13. Do you agree with the conclusions of A.T. Kearney’s experts and have their forecasts come true with respect to the Russian oil and gas sector?