Murphy Oil Co. Essay

Executive Summary

In this very challenging world in business, it is important that companies’ tools and processes are properly put in place.  This is not only reliable for the organization in handling common conflicts as customer satisfaction or employee retention, etc. but it is more on how they can monitor their over-all performance and how they can improved it.  But even though there are many challenges that comes in the business, there is still one constant aspect that can actually answers all of these challenges and issues in the business and that is effective governance, for sure it could be something that is easy to say but definitely hard to implement.  Many companies, most specially global companies have been continuing to find some better strategies in addressing these issues, many companies would even invest as much amount of money just to make sure that their products and services are served properly which in the long run, these initiatives resulted to positive outcomes.  While for others since the challenge is more on increasing the investment without better assurance of returns, would still rely on their leaders, which sometimes are not up for the challenge.

In this case it is very clear that for companies that would like to do business in a globally competitive arena, it is important that they have to know that learning the market is not just taking up figures and benchmarking from companies that have performed efficiently in that location or territories.  What is important is for the company to have their own formal study and invest, focus and really provide some better resources, which are only those highly credible ones to have this study for you.  In this way with the people within your organization, they would really give some pertinent and very reliable information on how to target the market itself.

This is the problem with most organization these days, they would think that with the use of latest information communication technology (ICT), and with some findings taken from  research institution which are not categorically within the perspective of the company, they would tend to use that and make their own decisions immediately.  Take for example some of the effective Human Resource Managers of some companies, these people in order to know the standard of living of a country, they will be staying in that country, learn how much is a single meal served on the average, also the cost of schools and even the cost of basic goods like clothing and apartment.  After the study, these HR managers present a report to the top management and with some case studies and analysis, the HR managers is confident enough in presenting how much will be the per diem that can be given to their ex-pats that will be assign to that country.  As confident as the HR managers, that presentation can easily be approved and with a little adjustments and arguments from the bosses still it will be approved as it was based in factual and real life findings.  In this paper, that will also be the main focus for the company Murphy Oil Co., which is also a global company that recently has been struggling in the stock market.  In this paper, it will focus on analyzing the company’s performance and at the same time will look at some of the current challenges that company is facing which is becoming a hindrance for its development.  Formal studies like SWOT analysis, corporate analysis, business strategies being performed, etc. will be the different parts of this study.  The main objective of this paper is simply provide the reader what mainly the company is all about, what products and services it provides, business strategies and other operational processes it applies and what are the main challenges that the business are facing and how the company can overcome or address these issues.  With this findings and careful study and analysis, it will give the reader a clear idea and understanding on how things change for Murphy oil Co.

 

Murphy Oil Co.

Introduction

It is always a common effect for the global economy when oil industry is also affected.  Some of the main reason is that oil is an important component for industries worldwide since it is the one that powered plants which will then used for production.  And if the production line will be affected the demand will also be affected.  With these negative events in the oil industry, consumers and even business owners all over the world are affected and unfortunately does not have the power to change these trends and would just be there accepting the situation as it comes.  Based on the oil exploration and production, the following are the main contributor to these on-going issue in the oil industry, and these are: (1) the demand driven by economic activity, which means that higher and higher demands are currently happening, but the main problem is that due to lack of oil reserve as well as high oil prices, industries cannot produce the right and even the most conservative demand for the consumers, which eventually creates shortage.  (2) population growth, no question about this, as time goes on population cannot be prevented to reduce, it will continue to grow and grow, and the impact of oil on this one is that the greater global public or consumers will need energy and this energy is mostly powered by oil.  Which most of the time powers are not also enough for the consumers.  (3) Energy efficiency for residential, industrial and transportation sector, which are the main problem now, mostly industries like car manufacturers would not anymore produce based on demand due to cost related issues that they are facing during production and this has been a domino effect as well to prime commodities since everything will also goes up and with the prices goes up, both consumers and business entities will be affected, because for consumers they would not have enough buying power and for the business entities, business will be not that attractive since consumers may now be looking at more affordable products, and this is sometimes only favors developing countries where cost of living is not that high, but for the developed countries it will be something that they need to look into.  The over-all result is economic imbalance, where countries now protects their own local economy, or sometime countries like developing ones will now lose better professionals which will now be attracted to foreign work offers which is definitely higher than what is being offered locally.  And there are other issues that this negative oil trend gives.  (Murphy Oil Corporation, n.d.)

Murphy Oil Co. Corporate History/ Background/ Growth

Corporate Information

Murphy Oil Co. main headquarter is at El Dorado, Arkansas where it was originally in Louisiana in 1950 as is that time the company was called Murphy Corporation.  Then it was re-incorporated in Delaware in the year 1964 and immediately changed its name to Murphy Oil Corporation.  At the beginning it was lumber and banking are the main business of the company even during the 1930’2 where oil and gas business remained to be a second priority business by the company and then in 1950 was the time when the company feels that it will the right time for them to focus on the oil business.  Today, the company’s main operation is mainly focusing its marketing operation in the United States and United Kingdom.  Then as the company have already put all their effort mainly on the oil business, leaving the farm, timber and real estate business to some of its remaining and interested shareholders, which is now named as Deltic Timber Corporation.  All the business activities that the company is holding is centrally managed by the Murphy Oil Corporation, which also act as a holding company among the following list of companies: Murphy Oil USA, Murphy Exploration & Production Company, Murphy Oil Company Limited, Murphy Eastern Oil Company, and Murphy Sarawak oil Company Ltd, Murphy Sabah Oil Co. Ltd., Murphy Peninsular Malaysia Oil Co. Ltd. which were all founded in the same year 1999.  (About Murphy Oil, n.d.)

Corporate Governance

The company has always been very focus on how they provide better governance for the organization, whether it is partners, customers and even employees, they will always makes sure that they provide the best service for their people.  The first important part of their corporate governance is the company’s board members; their main role is to provide direction and vision for the company.  With its CEO and President and its company Chairman, they make sure that everything is well aligned with the important policies and direction that the company wants to achieve.  The second role is also providing top and middle management group of the long-term plan of the company, what the company should look at in the future and how to achieve them with their help and commitment in making it possible.  The board also has six scheduled meetings each year in order to address the issues on hand.  The board are also expected to perform the following functions: (1) Overseeing the work of the CEO, in terms of selecting, evaluating and compensating as well as succession planning, (2) for the senior management, they provide some counseling, and oversight on the selection, evaluation and compensation, (3) major risk assessment that may be faced by the company, which their decision is very important, and lastly (4) is ensuring if all the processes are put in place and at the same time if it is being followed properly.  As the board has a very distinct and very important role in the company and that is more than just providing the essential assistance, guidance for the entire organization, it is also expected to have high degree of qualification.  This means that the board must show highest degree of professionalism, professional ethics, integrity, values and committed to long-term interests in providing only the best service for the company.  Te board also establishes different committees in order to separately address the issue of the company.  These members includes: (1) audit; (2) executive compensation; (3) nominating and governance; (4) public policy and environmental; and lastly is (5) executive committee.  The company also has the Ethics and Conflicts of Interest, this means that the company also establish a common ethical standards that applies to all whether executives, employees or partners.  Typical reporting by each of the committees in the company are handled with respect to authority and processes in the company like in the case of Audit Committee, where companies that has concern with the company’s accounting concern must directly report it to the chairman of the audit committee and not to anybody since this is strictly being implemented within the organization.  The company also has compensation committees and they are being guided by the following principles: (1) compensation should be fairly pay directors, (2) it should align interest of the directors, and lastly (3) the compensation should be simple, transparent and easy.  Other main duties of corporate directors includes: succession plan, annual compensation review of senior management, access to senior management, access to independent advisors, director orientation which all the directors are responsible in orienting new directors about the company and how they can deal with the issue on hand.            Communication with the board, and lastly is attendance at annual meetings of the stakeholders.  These are the main duties and responsibilities of the board.  This only shows how the company is very serious in attending the different issues of the company.  (About Murphy Oil, n.d.).

Murphy Oil Corporation’s Core Business

The first main business of the company involves oil exploration and production.  This is also where the company allocated much of its investment; because this is how the company finds oil and natural gas, and this is primarily done through exploration that is centered on deepwater Gulf of Mexico and other potential international prospect.  This is also the main focus of the company in order to provide much reserve and demand for their global customers which has a regular oil demand.  In 2006, the company has produced an average of 100,000 barrels of oil daily.  And in 2007, the target was between 95,000 and 105,000 per day.  New projects will be added, including the Thunder Hawk and Thunder Bird fields in the deepwater Gulf of Mexico, Malaysia natural gas sales from some of our many discoveries on our acreage offshore Sarawak, and Azurite Marine in the Republic of Congo.

The second core business of the company is refining and marketing of their oil product.  The company also has an average refinery of 125,000 barrel a day at Louisiana which is the main producer of the company’s refine oil products.  And another 35,000 barrel a day at Wisconsin.  And in the United Kingdom, it is performing refinery of 108,000 barrel a day which the company has an effective 30% interest.  What made the company played well against its competitor is its partnership wit Walter Mart which presented in high volume retain gasoline in every stores of Walter mart stores and these gives a better leverage for the company, most specially in greater United States market.  (About Murphy Oil, n.d.)

Social Responsibility

The company main aim is always to strive its best in attaining the highest standards of performance for their customers as well as for their employees.  As the company operates across the world, it needs to attend on the issue of providing only the best and well-trained staffs that are not only technically competent but also has gained highest value of professionalism, culturally adoptable to changes which is very important as the company is operating in s very strategic way of business.  The company also understands the need of its employees with regards to compensation, benefits and recognition.  This has been the social responsibility that the company has been employing for the success of its global operations.  The company also focuses on employee satisfaction which is very important in their operation since they are always looking at this people as the main front liners of the company.

Environmental Commitment

The company knows that the effect of global warning has been starting to alert the world and most companies are putting all their efforts on how to contribute in preserving the environment.  That is why the company also is very serious in providing only the best service not only for its customers but also for the environment.  In this way they are also bringing back the loyalty being given to them by their customers.  This has become a measuring stick for all companies these days, because it does not only give better stability for the company but actually stability and preservation of human lives and that is the most important thing in this world.  The company with its directors has establish a no pollution policy and even always make sure that it pass to all environmental policies and guidelines implemented both by private and government offices.  With this commitment on the preservation of the environment, it gives the company a better leverage on how they can perform well for the greater market and recognize them as not just a company performing for the main cause of revenue.  The company has four main key areas on how their operation preserves the environment: (1) complying with all the environmental regulations, (2) going beyond the regulations of the law, (3) wherever possible, taking the initiative to improve the company’s performance that focuses on the environment always, and lastly (4) making significant and on-going investment in equipment upgrade and new technology that will help improved the company’s operation and at the same time improved in the preservation of the environment.  (Social Responsibility, n.d.).

 

Community Environment

Not only helping the environment is very important these days for a company to give back its service to their loyal customers, but most specially it should focus on how they provide projects or meaningful programs that will help alleviate the problems of the needy.  The company has its own organization that handles these related projects and programs and that is the El Dorado Promise, it is a scholarship program that has helped a number of well deserving children.  This has changed the lives of these children which are very important for them and their family since it has given them the opportunity to give meaning in their lives.  In fact the company’s employees are the main involved group in this program where they give an approximate of 335,000 USD annually and this was raised up to 700,000 USD including some private agencies which has helped thousands of children sent to school.

Employees Commitment

Employees are always the main priority as well of the company and these has become the over-all priority of the company, because they would know that without these employees everything will not be possible.  They have provided all the needed service and products management, as well as the needed engineering expertise in order for the company reach its current goal. Providing them better recognition and right training for these staff are just some of the main priorities for the employees in order for them to perform well in their job.  Providing rewards and recognition are also another important challenges that continuously being addressed by the company.  This was also the main goal of the company, most specially retaining the main core group that manages the most complex task within the organization, like the engineering, technology and the support groups which are very vital in the over-all operations.  But the company also looks on the over-all organization on how they can provide best service and attention for their needs.  In fact the company allocated a 6,000 training hours each year.  Employees are also undergoes many reviews and audits in order to make sure that they are practicing the right processes and standards that the company is expecting them.

Company’s SWOT Analysis

In terms of strength, first it was the company’s attention to its human resources which is very important for the company in order to overcome much bigger challenges.  First the company provides a more rewarding job opportunity which eliminates job dissatisfaction.  Most people tend to see job as just a means of earning a living, it might be true to most of us.  But others do not only see it that way, because for others job is also a way for you to progress and improve your skills.  Like for instance a person who is working for about five years now, may not be satisfied in his current job even though the compensation is good, because one reason maybe he feels that the company does not recognize his potential for having a higher position like a manager, instead he remain to be assign in his current even though he is very much bored.  It is important for every employee to be given the chance to be developed and the only way this can be realized is for the top management group in a company carefully looking at each and every workers current status in the company.  It can be in terms of achievements, years in the current position and most especially the loyalty they showed in the company.  Employee’s satisfaction towards work is really a combination or one amongst these things: management policies, compensation and benefits, and lack of challenges and opportunities given to deserving employees.  The main department that expected to have high expertise of acting on this issue is HR Department or in some called as Personnel Department, this is the group that are supposed to be expected to take care of the welfare of the employees, but sometimes because they are either tied up with the mandate coming from the management, like for instance advise to freeze salary increase due to flat profit last year or even lack of political power from the management to open up some concerns being bear by the employees because they have fear of losing their job if they raise the issue to the management.  These are just some of the probable cause of dissatisfaction pertaining to jobs.  But the key points that will be expected in this research project is first, communication barriers, like in particular defensive communication and cultural diversity, second, are the probable causes of it like lack of Challenges given by the company, lack of Confidence in the Company and Dissatisfaction with co-workers.  Based on Carl Roger’s Humanistic Theory, or what is also called as Person-centered approach is focus more on the understanding the personality of the person and human relationship.  Having a more personal relationship with the person or patient like to help an individual to attain state of realization that they can help themselves is the main focus of this approach.  One of great advantages it gives is that it helps the person to analyze himself and from there be able to identify the things that he can achieve and how he can attain it.  Also in this approach the patient are encouraged to express what they feel and not imposing some change in them, rather provide some advise and let them explore deeply on their current state in life.  And from there, they would eventually see what needs to be done in their life.  Sometimes having somebody whom you trust can really give motivation and the needed answer to your problem.  This is likely the approach that is still best for people that are facing depression and dissatisfaction in our work.  That is why it is important for somebody in the office like your immediate supervisor or your company HR Manager to constantly see the welfare of the employees in the company, because from there they could anticipate issues that might be encounters and from there can formulate solution right away.  Take for example benefits of the employee, these are important to all employees most especially those with families, like one benefits is health insurance, currently just provide only consultation and admission benefits for you and your family which includes children and wife, but this health benefit only covers purely physical admission, pregnancy related admission is not covered another is for single employees, since their immediate family is their parents, they want to have the insurance somewhat be re-structured in such a way that their parents be covered by the insurance.  Having these examples of real situation in a company can really promote dissatisfaction amongst the workers, because they would sometime feel that the company is not looking on the importance of it probably because it could incur cost to them. (Carl Rogers, 2007).          Another, is the McClelland’s Need Theory, in this theory however tells that an individual’s need are acquired are shaped by one’s life experiences.  In this approach or theory, needs may come from (1) achievement, (2) affiliation, and (3) power.  For Achievement, it is types of individual that are constantly looking to achieved and excel in what he does and avoids low and high level of risk.  Achievers would prefer regular feedback on how they progress on their desired achievements.  Most people in this category also prefer to either work by themselves or with a group that are high achievers as well.  For Affiliation, these are people that relationships with other people are important.  Being part of a workgroup with constant interaction is what is important to this kind of individual.  These are people who perform well in customer support or call centers.  Lastly, is Power and this can be of two types, personal or institutional.  In the personal, this type of individual tends to direct others even most of the times it is unnecessary.  In Institutional on the other hand, is governing the whole company as and not specific people in the company, that is why this is more effective than personal power, since it may practice equality to all, most especially if these people are born leaders or highly effective managers, that is why the company must early identify these potentials in the company or be caught unguarded by other company and have the employee be pirated. (McClelland’s Theory of Needs, n.d.).  These theories have been carefully applied in the company which gives the employees a better focus in their job and the result is that they perform well.

The second strength is with regards to its better and efficient management style applied in the organization.  Most specially these days where emotional quotient is much important than just intelligent quotient and management style is very important for the company and this has been proven applied by the company.  And this is one of the main qualities of a Level 5 manager.  Company recognizes that it is not only technical expertise is needed for the company to succeed or just intelligent quotient (IQ) but it is also emotional quotient (EQ) most specially for Intuit, where most people are expert already in what they do, So for the managers the focus is on how to combine this team and have a single objective to be successful in everything they do.  It was also seen found out that with this approach it will not only improve the current operation of the company but more importantly it will improve the professionalism amongst the employees as well.  (Collins, J, 2001). (See Figure 1).

Figure 1

Three effective strategies were also shown applied by the company that has been very effective in improving the EQ are: (1) Valuing employees contribution and giving them credit on their contribution, (2) managers has shown ideal personal attributes that helps employees not only to challenge themselves to do their best but also motivates them as well, and last (3) always focus on teams goal and not personal goal.  Another relevant theory that contributed to the success of the company was the openness to among the staff.  The four unexpected leadership that were used in this case are: (1) selectively reveal their weaknesses to their staffs, (2) heavy reliance to intuitions which is sometimes much better to be used than timing, (3) managing staffs with tough empathy and compassion, this helps a lot for staff most specially those that are needed to be motivated and with weak personality, ad lastly (4) they capitalize on their differences, which instead of eliminating it, they used it for positive purposes.  (Goffee, R. & Jones, G, 2000).

Another obvious approach that were applied in the company was with regards to his leadership style, he tends to practice just a single style and based from studies, different style of leadership should be applied, depending on the situation.  The different leadership styles are as follows: (1) Coercive leaders are those that needs immediate actions, (2) Authoritative, mobilize people towards a single vision but with strong authority, (3) Affiliative, creates emotional attachment with the employees, (4) Democratic, gives enough liberty for users to do his task without much restriction, (5) Pacesetting leaders, leaders expects excellence and self direction and last, (6) Coaching leaders, which is in this case is more of Steve’s way of leadership, and very dangerous in the long run most specially if the work will continue to increase and that will be a question on time.  (Goleman, D, 2000).

In addition to these findings the company also provides some great success in leading the company and has been one of the main strength of the company.  Like based on other studies that has greatly impacted most industries which is not focusing on empowering its CEO and letting them played the role they are expected in the company.  Studies show that mmaintaining a highly effective manager or finding a well vision leader is not an easy thing to do, because this type of individual may not come very often to a company.  Many companies would even wonder why for some, it is worked that is not initiated from the top management or executive level but also has provided a success even from the staffs that have re-defined the meaning of better work inside their company, because with their leaders whose primary concern is not only to make money for the company but also look after their welfare and always being there to address their needs.  In this paper it will focus on how a company can solve its succession crisis, wherein like the CEO position has to be taken a better consideration.  Like a question that, “where can we get or prepared our next CEO?”  This is in cases that the current one leaves.  Most, companies would not mind taking this topic on the table, as it was for the people in operations, where they require middle managers to prepare a succession plan for their teams, in order the operations not to be affected by the sudden living of a staff, most especially those who are assigned to lead roles.

With the current trend of operation where customers are starting to be more difficult to pleased, since cost and end product are well scrutinized.  There would always be a need for effective leaders to better formulate a strategy that can address both.  Most especially are you seeing trends such as 5% annually markets are growing as well as 15% market returns.  That is why it is also not that good to see for other companies when they faced cost-related issues, it usually ended up cutting resources like manpower, and this usually happen from outsider leaders, which eventually would result to more problems in the next years.  There are actually four important skills that a new CEO must have, (1) judge where the world and company markets are, (2) identify and if needed recruit talented individuals that can turn the vision into reality, (3) understand, in a deep and substantive way, the problem currently faced by the company, and last (4) know how the company really works.  Therefore, as based from the previous information presented, in order to have a well prepared CEO or future leader for the company, it should be coming from the inside, with their well skilled and efficient understanding of the processes as well as the preparing them on how to look for the outside and be able to developed a well vision is necessary.  Like in the case for instance of an individual who will be appointed to be the CEO of the company, most of his time will be devoted in the headquarter of the company, where he can have a better feel of the global operations and not just one geographical zone, like only for Asia, instead it is the entire operations.  The needed assistance and mentoring from the senior leaders may also be important as well as top notched consultants from the outside will also be a big help.  But what is important is that companies must always have a careful and practices a non-biased way of finding these potentials in the company and not just immediately looking at the outside.  Because it is still proven that developing a new staff to learn the current operation in order for him to establish well, would take a lot of time, rather than having an insider potential, which do not have any issue of running the company as based form the achievements and efficient work shown in the company and jut guiding him to see how global competitiveness and operations would look like, will only take much of an effort.  As a leader you should also look into the people which leaders are known for, which are more on encouraging them to look at the same vision.  And this is again the advantage of the insider leader, because the quality and the way he approach his work and the people are known in the company and with that the people can easily adjust.  In other words, insider leaders are the most reliable and effective decision to prepare as CEO, just consider the needed assistance and preparation that the company must give and that will be enough in order for the success to continue to work in the organization.  This is also one of the strategies that were applied by the company and that was shown on how they give focus on the job of the CEO in letting him perform according to the vision of the company and also empowering the employees as well.

Another strength that was shown is the company’s ability to adopt change and applying international strategy.  International Strategy, it is very common nowadays and it even used in many ways, take for instance like from the United States, International Strategy on terrorism, which focuses more on how to formulate a network of powers with the other big powers in order to achieve peace in the world.  Or it can be International Strategy applied by most Universities, where the main goal is on how they could entice international students to come to enroll in their university, and this is more on taking up courses on-line.  But, international strategy applied in business is far more different and more difficult.  Embarking to global business is not easy way to do, it takes more study and research that needs to be done.  Like, it may include the political stability of the country or the region, economic status, competition and customer preference these are just some of the factors of concern.  There is no question that almost all businesses are affected by the global economic change.  Take for instance changes in the price of crude oil in the global market, it also follows a sudden increase in the prices of main commodities, which is hard to accept but since raw material, crops increase because it all runs in the production plants and these production plants runs oil in its operation and that is just the simple reason why these increase cannot be prevented. The relevance of International Strategy to Business depends on the three opportunities and outcomes International Strategy gives to business.  There are: First, Identify International Opportunities, the result of this opportunity, is to increase market size, return on investment, economies of scale and advantage in location.  For the business to explore in the global market, it is obvious that its main objective is to maximize the company’s income at the same time extends its market share.  Second, Explore resources and Capabilities, here the main result of this outcome is to be able to experience the International business-level strategy, which will be helpful to get familiarize with the process in the global scene, another is multi-domestic strategy, this means that the business can apply superior domestic approach, since the experience brought out by the global strategy will be used, next is global strategy, at this point the importance of getting into the global market and applying global strategy is enough to make the business grow even though it would be tough during the first stage of it, and lastly is applying transnational strategy, multiple strategy applied in the different countries and with these strategies there will be experience and maturity that will be imparted to the business.  Third and last, opportunity for the business opportunities and outcome in applying International strategy is using, core competence, it includes, exporting, licensing, strategic alliance, acquisitions or establishment of a new subsidiary.  But in this last benefit, the business must carefully select what best and suitable core competence to be used, like in the case of exporting, the company may have high cost and at the same time low control while licensing, it may have low cost but it can also provide low returns, for strategic alliance, at this point having a partnership with the owner of the existing business will happen, and the result of it, is that there will be shared cost and shared returns, the only problem here is that there is very slim control over the business unlike you own the business by yourself, you can easily see the financial results.  While for acquisition, it may be quick access to new market, because it will transfer automatically the ownership to the person who will acquire the business, the problem here is that sometimes the company if not carefully studied is already facing bankruptcy or losing competition.  With this, it must be carefully do transaction before acquiring the business.  Lastly for newly owned subsidiary, it is definitely complex, often costly, time consuming, high risk, and above-average returns. Since most investor from another country are easily being given priority by most country.  But the result of this one also costly but sometimes not that much since, other countries would provide better tax management for these investors.  Because, the main reason here is to entice other investor as well to enter in their country.  Again, the result of this business venture would be incur high cost and definitely be more complex negotiation, since there are a lot of presumption that foreign investors have much funds than local.        Like n the case of most companies these days they have focused on the global market by looking at how they can performed well in the challenges they faced.  Global Strategic Planning Process means that products are standardized across national and global market.  The quality of the product or service must be the same across all branches whether it is locally or globally.     In terms of weaknesses, still the main problem was more on the political issues that is continuing to disrupt business all over the world.  Conflicts that resulted to inflation and economic imbalance have still been the main weakness for the company since it was unable to address the issue instead it was not given much attention.  The company must look into the issue as it will affect the performance of the company and at the same time will lose its competitiveness in the market. The second weakness of the company is due to the rising cost of manufacturing materials.  Not only the company itself, but already becoming a global problem as well, which the company must look at it on how it can provide much more affordable products and should be able to adjust on how they company can overcome this weakness by finding more cost efficient cost of materials in other sources like in China and other countries which can help maximize profit and at the same time reduce cost.  That also resulted to another weakness and that is the company’s finding growth without direction.  The company is obviously expanding its growth but does not look at the real direction of the company which most probably looking at not only improving oil reserved or innovate the way it finds oil.  But more importantly is on how it should market the oil for the public is still the main focus because how can the company sell or provide these products if that is expensive or unaffordable for the market.  That is the main key areas of weaknesses that need to look at.

In terms of Opportunities, there are many opportunities that may be exploited by the company.  The first opportunity is to expand its core business, the company must introduce now products in the market, and because in this way it can help the company will have a fall back just in case it fails to produce good results to the other product.  Having a wide variety of product to offer in these days are very important for companies to have.  This is very evident to most global companies, they offer as much as possible many products in order to target much greater market and the company can also achieve stability in the long run since most customers would have create loyalty to one brands while for the others it would also address picky customers as they can also try other products.

The four major threats that the company are facing now are: increase in foreign competition, change in consumer taste, rise in new or substitute market, and lastly is the rising labor cost.  To start with the in crease in foreign competition, it will still be the top one in the list because as the middle east still the owner of the top spot, the company will still bigger challenge regarding foreign competition, this also includes local competition, where companies like Exxon and shell are starting to gain more advantage over the company.  This will remain the main key for this competitive world in the oil industry.  Most special at this point where expected oil depletion is coming.  With regards to global oil status, it is important first to understand what some big developments that are happening are in the global economy.  One of the important facts to consider is the rapid economic growth of China and India, which is now part of the highly developed and industrialized countries like US and Europe, which might have big effect in the global oil demand.  In other words an increasing demand of oil is needed in their production.  But based from sources like BP, they have conducted a review that oil supply are continuously increase faster in the past five years, than what they have found out in the second half of the 90’s.  Currently, based on the conservative estimate made by the International Energy Agency, we are consuming 85 million barrels daily and will continue to rise and it will reach 113 barrels daily by 2030.  Two thirds of the oil reserves are coming from the Middle East and the world knows that massive increase must come from these regions.  Joining Saudi Arabia is South Africa, which they are much known for as MENA or Middle East and North Africa, the Russia, North and South America, Asia and Europe.  (Howden, Daniel, 2007).  Where in this case it is important to understand that the world population covers 80% from the developing world, while 20% are from the developed world.  But, in the developed world they have over consumption which covers 80% of the world’s resources, while for the developing it only has 20%.  It is clear that this is more of the high level impact in the economy, since there is mismanagement in the resources.  The following are the major causes of world oil depletion, first is rate of inflation, although the price of oil tends to be more unpredictable than the Rate of Inflation, there is a correlation. Inflation rates will be highly unpredictable as periods of oil shortage alternate with months of surplus.  Unemployment, is another drivers of oil depletion, because the impact is that there will be a decrease in consumption and with that there will be less transportation and the decrease in capital spending.  Last, are global impact and all countries in the world having no escape for it.  Like if the global prices of oil in the global market increase, the world will just follow it.  And this is most likely the major causes that the world is facing right now and with that it creates a lot of panic in the global financial market and most especially big impact to global productions.  (Cooked, Ronald, 2006).  Even though there are some developments like The International Energy Agency has presented key moves on how to handle the issue by looking at the Global Oil Outlook particularly in the demand and supply.  It is important that some organization like IEA.  Even though they see that the world is slightly recovered from a big drop in economic crisis during the first half of 90’s until the latter part of second half.  But how to sustain it is one important step to do.  The following key messages that IEA are, first accelerating investment, means that there is no way of not moving business must be the main driver of development and not oil, second, improving public awareness of the need for energy infrastructure, and lastly is moderating consumption growth, since there in imbalance as it was described earlier in this paper, where developed countries have over consumption.  Other key areas that needs to be address, which is also very important, first technological progress in exploration and development activities, this means that it needs to provide efficiency in the industries using technological advancement, and the last one is international cooperation, because with this countries and regions around the world will need to find best means in allocating oil resources in order to achieve dramatic progress in the world economy.  (Mandil, Claude, 2007).  Still what the company needs to understand is that they have to anticipate these issues and provide better solution on it in order for their operations and business not to be affected.  In other words the company must also focus not only on innovating its operation but also must learn the market well and some of its political effects.

Industry Analysis – Analyzing the External Environment

With regards to the industry analysis that brought about by external environment, it is clear that political policies and trends are still the main cause of the issue in the external environment.  This is also has made the company play difficult y for the company in its major operations and project expansions.  This is the main key that they are focusing and with the right direction and observation that the company is conducting, it will expected that it will provide a major turn around for the company.  But the company also knows that these is not within their hands and the political issues still continues to affect them and what the company must do is to provide a counter-action that will address these political issues.

SWOT Analysis Evaluation

As the result of the study, the following are the strengths that were effectively performed by the company.  These advantages are the following: human resource competencies, appropriate management style, ability to manage strategic change, and well-developed corporate strategy.  In other words the company has provided much focus in helping the people within the organization.  On the side of weakness, the company’s too much focus only in their core business and not looking on developing or introducing new products which would somehow help them overcome current economic problems.  But, the main weaknesses are: rising manufacturing costs, high conflict and politics, growth without direction, and high conflict and politics.  The company has not focus more on the political issues and how they can counteract on the issue is the main weakness of the company.  In terms of opportunities, these includes: expand core business, expand into foreign markets, and make profitable new acquisitions.  And the last result of the analysis is the threats and this includes: increase in foreign competition, change in consumer tastes, rise in new or substitute products, and the rising labor costs.  In the future this will be the main problems that the company might face.  That is why for the company, it should provide early attention and initiatives in addressing these issues.

Corporate Level Strategy

In terms of its corporate strategy, the company was mainly focus single business concentration strategy.  This is the simplest corporate level strategy, they have enriched and focus mainly in some of the known profitable market.  They were not able to focus and try to be aggressive in other new market which would somehow help the company in overcoming its current problem.  This type of strategy is less risky but if effectively performed can also produced better results for the company.   While on the vertical integration strategy or open market strategy, the company was unable to penetrate well on this one, but not including UK where it performs well.  But some new markets which could somehow would help them improved their current financial status.  It is important for the company to see all the other inter-related factors such as marketing, technology, raw materials, and most specially financial management.  For the company, it has provided come prioritization in these areas but the main problem was that they lack focus on the political side.

Business Level Strategy

In the main business level strategy, the company has been forming some partnership with other companies like with Walter Mart, where in each stores of Walter mart, there is Murphy’s gasoline station which customers easily find it accessible and it adds convenience for them as well.  Even Walter mart has also reportedly benefited from these partnerships and it was good for the company since it gives them much customer awareness.  (Otte, T, 2007).

Structure and Control System Analysis

The main structure of control and analysis is greatly lies upon the direction that is given by the directors of the company.  This top management and middle managers are given direction and they perform it in their teams.  The company has performed in a more structured type of organization and always keeping their directors work for the company and even sometimes are expected to have visibility in some major projects.  With the current trend of matrix type of organization, these has been a different  way of presentation which makes the company perform differently with some of the more modern global companies where more of a matrix type of organization is applied.

Financial Analysis

In this part of financial analysis, it will provide the latest 10K and 10Q report of the company which will give the readers of this paper a look on how financially the company is doing.  To start with the 10K report of the company which the 2006 report was the latest taken report was last 2006.  For the financial highlight for 2006, it was a good year for the company even there was a serious competition faced by the company in the US market.  (See Figure 2 to 5).

Figure 2
Financial Highlights for 2006

;

Figure 3

Estimated Net Proved Hydrocarbon Reserved from 02 to 06

;

Figure 4

Exploration and Production of Statistical Summary for 2000 to 2006

Figure 5

Refining and Marketing Summary for 2000 to 2006

;

;

For the company’s recently presented 10Q, these are presented in the following figures below.

Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED BALANCE SHEETS

(Thousands of dollars)

;

(September 30,

2007

December 31,

2006*

ASSETS

Current assets

Cash and cash equivalents

$
789,665

543,390

Short-term investments in marketable securities

59,821

Accounts receivable, less allowance for doubtful accounts of $7,834 in 2007 and $10,408 in 2006

1,079,609

995,089

Inventories, at lower of cost or market

Crude oil and blend stocks

276,101

73,696

Finished products

254,146

224,469

Materials and supplies

132,354

112,912

Prepaid expenses

80,347

136,674

Deferred income taxes

24,544

20,861

Total current assets

2,696,587

2,107,091

Property, plant and equipment, at cost less accumulated depreciation, depletion and amortization of $3,375,953 in 2007 and $2,872,293 in 2006

6,336,567

5,106,282

Goodwill

51,758

44,057

Deferred charges and other assets

446,032

225,731

Total assets

$
9,530,944

7,483,161

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current liabilities

Current maturities of long-term debt

$
5,246

4,466

Notes payable

10,982

2,659

Accounts payable and accrued liabilities

1,424,374

1,240,977

Income taxes payable

79,079

63,003

Total current liabilities

1,519,681

1,311,105

Notes payable

1,493,275

833,126

Nonrecourse debt of a subsidiary

3,159

7,149

Deferred income taxes

779,467

621,329

Asset retirement obligations

293,988

237,875

Deferred credits and other liabilities

533,683

327,964

Minority interest

27,116

23,340

Stockholders’ equity

Cumulative Preferred Stock, par $100, authorized 400,000 shares, none issued

Common Stock, par $1.00, authorized 450,000,000 shares, issued 189,522,070 shares in 2007 and 187,691,508 shares in 2006

189,522

187,692

Capital in excess of par value

532,236

454,860

Retained earnings

3,813,431

3,349,832

Accumulated other comprehensive income

352,278

131,999

Treasury stock, 264,405 shares of Common Stock in 2007 and 119,308 shares in 2006, at cost

(6,892
)

(3,110
)

Total stockholders’ equity

4,880,575

4,121,273

Total liabilities and stockholders’ equity

$
9,530,944

7,483,161

Table 1

Balance Sheet

;

Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF INCOME

(Thousands of dollars except per share amounts)

;

Three Months Ended
September 30,

Nine Months Ended
September 30,

2007

2006*

2007

2006*

REVENUES

Sales and other operating revenues

$
4,773,039

4,147,706

12,815,223

10,932,857

Gain (loss) on sale of assets

224

432

1,032

(941
)
Interest and other income

7,469

5,284

12,988

11,687

Total revenues

4,780,732

4,153,422

12,829,243

10,943,603

COSTS AND EXPENSES

Crude oil and product purchases

3,909,009

3,275,816

10,288,096

8,580,267

Operating expenses

320,037

282,251

926,472

790,660

Exploration expenses, including undeveloped lease amortization

42,531

35,970

121,035

129,406

Selling and general expenses

65,591

52,237

173,309

139,160

Depreciation, depletion and amortization

114,289

87,181

337,016

286,745

Impairment of long-lived assets

40,708

Accretion of asset retirement obligations

4,197

2,614

11,461

7,690

Net costs associated with hurricanes

27,160

105,933

Interest expense

19,837

17,021

52,447

39,262

Interest capitalized

(12,419
)

(11,284
)

(43,664
)

(29,912
)
Minority interest

(448
)

(424
)

Total costs and expenses

4,462,624

3,768,966

11,906,456

10,049,211

Income before income taxes

318,108

384,456

922,787

894,392

Income tax expense

118,573

160,314

362,376

338,093

NET INCOME

$
199,535

224,142

560,411

556,299

NET INCOME PER COMMON SHARE

BASIC

$
1.06

1.20

2.99

2.99

DILUTED

1.04

1.18

2.94

2.94

Average common shares outstanding – basic

188,239,267

186,211,753

187,716,385

185,948,743

Average common shares outstanding – diluted

191,193,266

189,238,922

190,764,460

189,067,278

Table 2

Income Statement

;

Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Thousands of dollars)

;

Three Months Ended
September 30,

Nine Months Ended
September 30,

2007

2006*

2007

2006*

Net income

$
199,535

224,142

560,411

556,299

Other comprehensive income, net of tax

Cash flow hedges

Net derivative gains (losses)

3,329

(5,508
)
Reclassification adjustments

6,646

15,598

Total cash flow hedges

9,975

10,090

Net gain from foreign currency translation

102,088

1,985

211,845

73,514

Retirement and postretirement benefit plan adjustments

1,461

7,089

13

COMPREHENSIVE INCOME

$
303,084

236,102

779,345

639,916

Table 3

Statement of Comprehensive Income Statement

;

;

;

;

;

;

Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Thousands of dollars)

;

Nine Months Ended
September 30,

2007

2006*

OPERATING ACTIVITIES

Net income

$
560,411

556,299

Adjustments to reconcile net income to net cash provided by operating activities

Depreciation, depletion and amortization

337,016

286,745

Impairment of long-lived assets

40,708

Amortization of deferred major repair costs

15,894

13,465

Expenditures for asset retirements

(4,642
)

(3,137
)
Dry hole costs

37,570

41,885

Amortization of undeveloped leases

20,811

16,717

Accretion of asset retirement obligations

11,461

7,690

Deferred and noncurrent income tax charges

31,599

17,226

Pretax losses (gains) from disposition of assets

(1,032
)

941

Net increase in noncash operating working capital

(199,639
)

(306,331
)
Other

64,867

(7,084
)

Net cash provided by operating activities

915,024

624,416

INVESTING ACTIVITIES

Property additions and dry hole costs

(1,279,470
)

(884,144
)
Proceeds from sales of assets

18,751

19,796

Purchases of marketable securities

(59,821
)

Expenditures for major repairs

(9,304
)

(10,005
)
Other – net

(9,069
)

(8,417
)

Net cash required by investing activities

(1,338,913
)

(882,770
)

FINANCING ACTIVITIES

Increase in notes payable

668,323

183,989

Decrease in nonrecourse debt of a subsidiary

(4,886
)

(4,667
)
Proceeds from exercise of stock options and employee stock purchase plans

33,837

15,354

Excess tax benefits related to exercise of stock options

21,069

7,057

Cash dividends paid

(91,802
)

(70,056
)
Other

(759
)

Net cash provided by financing activities

625,782

131,677

Effect of exchange rate changes on cash and cash equivalents

44,382

10,697

Net increase (decrease) in cash and cash equivalents

246,275

(115,980
)
Cash and cash equivalents at January 1

543,390

585,333

Cash and cash equivalents at September 30

$
789,665

469,353

SUPPLEMENTAL DISCLOSURES OF CASH FLOW ACTIVITIES

Cash income taxes paid, net of refunds

$
249,057

372,277

Interest capitalized in excess of interest paid

5,090

3,066

Table 4

Statement of Cash Flow

;

;

Murphy Oil Corporation and Consolidated Subsidiaries

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Thousands of dollars)

;

Nine Months Ended
September 30,

2007

2006

Cumulative Preferred Stock – par $100, authorized 400,000 shares, none issued

Common Stock – par $1.00, authorized 450,000,000 shares, issued 189,522,070 shares in 2007 and 187,150,783 shares in 2006

Balance at beginning of period

$
187,692

186,829

Exercise of stock options

1,798

322

Issuance of time-based restricted stock

32

Balance at end of period

189,522

187,151

Capital in Excess of Par Value

Balance at beginning of period

454,860

437,963

Exercise of stock options, including income tax benefits

55,038

9,720

Restricted stock transactions and other

3,794

(7,464
)
Amortization, forfeitures and other

17,759

17,169

Sale of stock under employee stock purchase plans

785

409

Reclassification from Unamortized Restricted Stock Awards upon adoption of SFAS No. 123R

(16,410
)

Balance at end of period

532,236

441,387

Retained Earnings

Balance at beginning of period as previously reported

2,744,274

Cumulative effect of adopting FASB Staff Position No. AUG AIR-1

59,051

Balance at beginning of period as adjusted

3,349,832

2,803,325

Cumulative effect of changes in accounting principles

(5,010
)

Net income for the period

560,411

556,299

Cash dividends

(91,802
)

(70,056
)

Balance at end of period

3,813,431

3,289,568

Accumulated Other Comprehensive Income

Balance at beginning of period as previously reported

131,324

Cumulative effect of adopting FASB Staff Position No. AUG AIR-1

2,029

Balance at beginning of period as adjusted

131,999

133,353

Cumulative effect of change in accounting principle

1,345

Foreign currency translation gains, net of taxes

211,845

73,514

Cash flow hedging gains, net of taxes

10,090

Retirement and postretirement benefit plan adjustments, net of taxes

7,089

13

Balance at end of period

352,278

216,970

Unamortized Restricted Stock Awards

Balance at beginning of period

(16,410
)
Reclassification to Capital in Excess of Par upon adoption of SFAS No. 123R

16,410

Balance at end of period

Treasury Stock

Balance at beginning of period

(3,110
)

(22,990
)
Exercise of stock options

13,345

Sale of stock under employee stock purchase plans

812

501

Awarded restricted stock, net of forfeitures

6,712

Cancellation and forfeitures of performance-based restricted stock

(4,594
)

Balance at end of period

(6,892
)

(2,432
)

Total Stockholders’ Equity

$
4,880,575

4,132,644

Table 5

Statement of Stock Holders Equity

;

With this report are clearly shows that the company is not that poorly performing, it is just that the company’s income is sliding a little and that is the main focus of the company.  This only shows that they need to look into how they can improve market share and also product positioning.  (Murphy, 2008).

Recommendations

In this case study it is very obvious that the company is facing great challenges in its current operations.  The first and most important recommendation is for the company to move forward in performing in a more global approach.  This can be improved by focusing on how to adjust on the changing world of business, and should not always rely on current profitable markets.  The main reason is that eventually this will pull down by the ineffectiveness of the other products; unlike if the company provides a wide variety of choices, it could help the company in maintaining a different kind of market and at the same time would help in its performance since more and more market will be targeted.  Second recommendation is to enhance its innovativeness in terms of studying the global market; it should not only focus on innovating its operation but also focus on marketing studies which will be important for the success of the company.

Conclusion

In this paper it is very clear that the company has shows less prioritization on understanding the market well.  Instead they have focus on the current market and also improved its innovativeness as well as enhancing the skills of their people.  This is definitely very important but the main issue is also finding and studying the market well is more important.  Market studies are more important because in this way the company would know what and how exactly the real situation and how they can address the issue.

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