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Emerging trends in the oil industry in Russia

Tyumenskaya Neftyanaya Kompaniya, Tyumen Oil company (TNK-BP) is a major

integrated Russian oil company headquartered in Moscow (Oil and Gas Eurasia, 2011).It is

Russia’s third largest oil producer and among ten largest private oil companies in the world.95%

of the company is owned by Rosneft and 5%by public markets (e-financial news,

2011).However no buyout of minority shareholders has been held in the recent past. In k2008

disputes arose as shareholders BP and AAR had 0differing visions for the company corporate

structure (Financial Times,2008). CEO stepped down and president was installed as an interim

CEO. Since then an independent CEO was appointed and took officially as the director of the

companies.

I. Reasons for many alliances in oil industry (Industry-based view)

Industry based view focuses on the need to consider = within the industry during strategy

formulation. Access in the oil industry in Russia requires number of considerations. Innovation

and technology advancement are key factor. Exploration has more to do with technology.

Through this product of oil will be of high quality. Research is also done to identify new sites of

exploration. Investment in technology is costly and thus alliances help in sharing these costs.

Globalization has been on rise in the past few decades. It only accommodates companies

that are specialized. This requires formation of alliances that to create one strong company to

control the market and reduce competition that only results in loses too many players.

Duplication of products in this sector was predominant. Market conditions changed

significantly and this made companies to come together so as to form alliances. This was
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pressurized by the fact that differentiation is difficult in this sector. Many alliances ware formed

and this promoted customer satisfaction.

Access to regulatory bodies was another factor. In the time Russian officials were very

corrupt as they paid tax inspectors so as to give a positive report. Many players in the industry

who were weak and could not afford the bribe were at risk of elimination. This forced the

companies to come together and form alliances.

II. Contemporary resources and capabilities in TNK-BP (Resource based view)

Resources are superior in the firm performance. This way they are able to gain and

sustain competitive advantage (Barney J.B., 2012). Tangible and intangible resources are equally

important in this regard. Various materials in oil industry should be costly to make so as to keep

away competitors which would make this industry at risk. Imitation should also be regulated.

This is to reduce Duplication of products. Resources should be organized to capture value and be

rare. Such a move will make resources be costly and difficult to enter the industry. These

measures will make the industry reduce wastage of capital by the firms in trying to outdo each

other.

III. Formal and informal rules governing completion in the oil industry (Institution

based)

This proposes for supplement of industry and resource views with accounting for relevant

societal differences. Many barriers exist in the industry. This is a measure that regulates the

number of players in the industry. Administration and economic barriers are largely influential.

Need for experienced and expertise in the running of firms hinders many potential players.
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Authorities in the oil sector have come under increasing pressure to make reforms in the

industry. Tax royalty regime has been changed where increase in taxes makes capital for

entrance high discouraging firms to enter in the industry. Licensing has become a long and strict

process. This bureaucratic process has acted as a barrier to many firms. Health, safety and

environmental measures have also been put in place. Such restrictions have played a greater role

in promoting stability in this sector. Production has also been regulated so as to reduce pollution

and other side effects to the society.

IV. Ethical advice to BP

Business policies and practices regarding potentially controversial issues should be

formulated in a way that does not compromise morality. (Jones Parker & et al, 2005)

Transparency and integrity should always be a driving force. Without this bribery, insider

trading and discrimination will be a major problem. Top management should be the first to

administer this. AAR complies with all the applicable laws, avoids conflict of interest with the

company, deal ethically with customers as maintaining accurate records of the company

transactions. Such policies need to be implemented properly so as to evade costs that occur due

to unethical behavior.

Four-year conflict of BP and AAR based on the corporate governance was an indication

of costs of negative morals in leadership. Stakes of the companies in the Rosneft should be made

equal for both parties. Doing this will have solved their wrangles.

V. If you were an arbitrator in Stockholm, Sweden, which side would you

support in both episodes?

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