An Analysis of the Joint Venture Between Petrochina and Ineos : Is It a Competitive Strategy Initiative by Petrochina?

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ABSTRACT:

Petrochina, one of the largest companies in the world, has

established a joint venture with Ineos refining in 2011, with strategic motives to attain competitive advantage and core competence. From the context of corporate strategy and joint ventures, a joint venture is the best way to share and utilize the complementary assets from another company with low risk compared to any other process such as acquisitions. Using the resource based theories such as PESTEL and VRIN , the paper has derived that Ineos will contribute to build a core competence and competitive advantage through its distinctive capabilities. The several issues faced by the firm such as low market demand for oil products, threat of take over and complexities in management structure are also exposed. These issues combined could act as a great challenge for the company. The paper also concludes with the needful recommendations for the several issues exposed above.

WORD COUNT: PRESENTED TO:

3924 Mr. Joe Lafferty

CONTRACT CONCERNING PLAGIARISM
I, the undersigned, have read the Code of Practice regarding plagiarism contained in the Students' Introductory Handbook. I realise that this Code governs the way in which the Centre for Energy, Petroleum and Mineral Law and Policy regards and treats the issue of plagiarism. I have understood the Code and in particular I am aware of the consequences, which may follow if I breach that code. I also authorise the centre to scan the e-copy of my research paper through the Plagiarism Detection Software to detect plagiarism

SIGNED: Date:

11 – 05 – 2012

TABLE OF CONTENTS LIST OF ABBREVIATIONS…………………………………………………………...ii LIST OF FIGURES…………………………………………………………………..…iii 1.0 INTRODUCTION………………...………………………………………...……….1 1.1 Company text…...……………………….……………………….........1

2.0 JOINT VENTURES IN THE CONTEXT OF OIL INDUSTRY…………...…....2 2.1 Objectives of the Joint venture…………………………………...........3

3.0 ANALYSIS OF STRATEGIC FIT OF PETROCHINA'S JOINT VENTURE WITH INEOS GROUP HOLDINGS.................................................................…....3 3.1 The Market Dynamics of Europe………….………….……………......4 3.1.1Consumption trend in Europe…………………………………....4 3.1.2Demand trend in Europe…………………………………………5 3.2 Assessment of Petrochina Joint venture with Ineos using Resource based theories ………………………………………………………………...6

3.2.1 3.2.2

Pestel Analysis………………………………………………...6 VRIN………...……………………………………………….10

4.0 PERPLEXING ISSUE IN THIS JOINT VENTURE….........................................11 5.0 CONCLUSION………………………………………………………………….....12 5.1 Recommendations…………………………………………………….....13 LIST OF REFERENCES

i

LIST OF ABBREVIATIONS

EU GDP JV MMb/d
PC

-

EUROPEAN UNION GROSS DOMESTIC PRODUCT JOINT VENTURE MILLION BARRELS PER DAY PETROCHINA

ii

LIST OF FIGURES FIGURES
Fig. 1 Consumption Trend in Europe Fig. 2 Demand Growth in Europe Fig. 3 GDP Trend in Europe Fig. 4 Increase in Tax rates in Europe Fig. 5 Increase in Tax rates in U.K

PG.NO
5 5 7 7 8

iii

1.0

INTRODUCTION
Petroleum refining is a complex industry that generates a diverse slate of fuel and

chemical products, from gasoline to heating oil. The refining process involves separating, cracking, restructuring, treating, and blending hydrocarbon molecules to generate petroleum products (US dept of energy, 2006). Thus petroleum refining industry plays a major role in satisfying the energy security of this world and a major component in the supply chain optimization of the oil industry. The first main reason for this statement is that oil accounts for the maximum source of energy consumption in the world; second is that Crude oil in its original state or primary form is of less use, it should be converted into secondary forms such as petrol, diesel, jet fuel & other products. The world refining capacity of 2010-2011 topped 90 million barrels per day, in which United States of America (USA) is in the leading position...
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