Petrobras - Strategic Review

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Petrobras: Strategic Review

Table of Contents

1.0 Introduction2
2.0 Macro Market Analysis 2
2.2 Porters Five Forces
3.0 Micro Market Analysis6
3.1 GE McKinley Matrix
3.2 Competitor Analysis
4.0 Recommendations8
5.0 Conclusions9
6.0 References10

List of Figures
Figure 1: Porters 5 Forces Analysis of Petrobras 5
Figure 2: GE Matrix 6
Figure 3: Oil Production and Consumption 7

1.0 Introduction

As the global population increases and developing nations seek to emulate the consumer consumption of their Western counterparts, demand for fossil fuels and alternative energy sources continues to increase apace (Tracey et al, 2011). OPEC (2012) estimate that there over 200 oil and gas production companies around the world, the majority of which are located in the Middle East where natural reserves are some of the highest in the world. Of course, there are other reserves of oil and other natural sources of energy and this report focuses on the firm Petrobras, a Brazilian based oil and gas conglomerate. Petrobras has a pedigree of nearly 60 years and has long been one of the largest companies in Brazil, renowned for their leading-edge research and development in order to remain ahead of the curve in terms of consumer demand for energy supply (Petrobras, 2010; Bloomsberg, 2012).

Petrobras have responded well to shifts in market demand and to this effect they have invested heavily in deep-sea rock salt extraction as they perceive that this will form the basis of a future shift in the energy futures market (Petrobras, 2010). This report will apply a range of management models and techniques in order to critically examine the strategic position of Petrobras and the likely challenges they will face in the market in the immediate and mid term future.

2.0 Macro Market Analysis

In order to assess the market conditions facing the oil and petroleum market in general, and Petrobras specifically it is useful to apply and contrast two models at a macro level. These are a PESTEL (Political, Economic, Social, Technological, Environmental and Legal) as proposed by Boddy (2007), and also Porter’s Five Forces framework which is useful to assess the relative competition in a marketplace (Porter, 2004). 2.1 PESTLE

According to Boddy (2007), the application of a PESTEL analysis is of value because it provides a holistic overview of the prevailing market and potential drivers of change which a firm may need to react to. Thus table 1 below provides the detail of a PESTEL analysis for Petrobras, based on timely market research.

Table 1: PESTEL Analysis of Petrobras
Dimension| Evidence / Implication|
Political| There are no political restrictions on oil / rock salt extraction in Brazil, or in the majority of nations in which Petrobras undertake their activities (Petrobras, 2011). Political controls such as they exist are restrained to considerations of safety and / or supply restrictions as suggested by OPEC. However despite the size of Petrobras it is still only ranked 20th in terms of global oil and petroleum production. | Economic| As a developing nation the Brazilian government are keen to support the expansion of the largest company in Brazil. 95% of Petrobas' investments are localised within Brazil (Petrobras, 2011) and this supports the economy to a very significant extent creating a symbiotic relationship between Petrobras and the Brazilian Government and national economy. | Social| As growing nation Brazil are keen to take their place as an economically and socially emergent country. According to their most recent census (IBGE, 2011) Brazil are the 5th most populous country in the world and ranked 12th in terms of GDP (Worldbank, 2011). The implications of this are that Brazil is keen to develop and invest in continued growth and therefore wholeheartedly support the expansion of Petrobras....
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