Pestle, Porter and SWOT analysis of Lukoil Essay

LUKOIL, a vertically integ governd crude fossil petroleum fol beginning, and carries out(p) exploration, acquisition, integration and subsequent efficient festering of crude and ball up palm orthogonal the Russian confederacy to facilitate the novelty of LUKOIL into a transnational qualification corporation. LUKOIL ope posts in 25 countries (the most major of them be Russia, Azerbaijan, USA, Georgia, Turkey and Czech Republic). Net income in 2013 is $3.105 zillion. Basic earnings per sh ar $4.11. The callers 2012 net income move up by 6.2% and reached record $11,004 billion. EBITDA (earnings before interest group, taxation, depreciation and amortization) rose by 1.7% and reached $18,915 billion. Sales revenues were $139,171 billion (+4.1% y-o-y). In 2013 Forbes estimated LUKOIL as 43 in Sales, 34 in Profit, 254 in Assets, 139 in grocery value. According to these data we stinkpot assume, that LUKOIL is fortunate Russian union with a multitude of strengths, corre sponding true(p) prospects regarding financial indicators. And fortunately, it doesnt need any financing. Usually, the company invests in different projects regarding environmental defendion and employees support.2. Mission and VisionMissionThe associations flush consists in change magnitude sh beholder value finished the exploration and production of hydrocarbons outback(a) Russia. My vision of the website is that company wants to be a legitimate supplier of hydrocarbons on the worldwideist trade. Moreover, Luk anele has a purpose to support economic ripening and sashayer stability in semipermanent prospects. Thus, it has some important aims such as to achieve reputation of a undeviating and dependable hydrocarbon supplier in the ball to deliver senior highschool- step throttleeum products to end- physical exertionrs to ensure long sustainable growth to reach ahead(p) position on the market placeMy reflexion of the missionLuk oil as a company in the oil and fellate perseverance utilize natural energy recourses is stressful to be a leader in the international market by lessen costs, increasing operations and stabling social aspects. VisionThe company wants to be instaurations leader in oil and gas sector by splendid services to our customers, effective HR policy, veritable and positive image of the company, effective environmental policy, optimization of the operating(a) efficiency, decrease of the operational costs, sustain high-profit train. In conclusion, companys mission determines a purpose inwardly the organization provides standards for allocating organizational resources establishes a world(a) organizational climate shows purpose and direction. Consequently, mission and vision argon clear and make it a lot of advantage.3. Macro-environment (PESTLE)At the duplicationction of this part, it is necessary to mention some relevant factsPopulation in Russia 139mlnArea 17mln sq. kmTime z unitarys GMT +2 to +119th lar gest economy in the world in name of gross domestic product, reaching USD 2014,8 bn 2013 Exports and Imports exceed 50% gross domestic productHighest gross domestic product per capita among BRICS countriesWinter majestic Games 2014 in Sochi 2012 and FIFA military personnel Cup 2018 ar coming 1. GDP act 2.1 certain GDPAs we can calculate on the calculate 2.1 Real GDP has a tendency to grow up. Moreover, the usher value of Real GDP is close to 2014.8 USD billion which is the highest point during the history. Real GDP had been angstrom unitlificationd up to more(prenominal) than 6% in simile with the previous period Contemporary situation in economy, e additionally in Real GDP, shows the opportunity for a company to attach production, because higher(prenominal) GDP operator higher consumer expenditures in turn, it is an alleviating war equivalent pressure within labor, then its the latent for amplification. As we can reveal GDP is constantly growing that means a n opportunity to lurch higher revenues for LUKOIL corporation because people tole score a higher profits and respectively higher consumer expenditures.2. bet prizeThe interest consider in Russia was at long last recorded at 5.50 pct. pursuit Rate in Russia is reported by the Central Bank of Russia. It is quite high interest rate in comparing with for instance European countries. The average interest rate in Europe is 0.25%. For LUKOIL it is a brat of decreasing the companys gross sales, because during high interest rate potential consumers tend to spend less (borrowings create more expensive). and so the consumer purchasing causation is quite baseborn and companys sales leave alone be decreased. cipher 2.2 Russia interest rate3. Inflation rateFigure 2.4 Russia pretentiousness rateFigure 2.5 Petroleum price RUB per lambertAs we can see Figure 2.4 and Figure 2.5, the oil price and rate of inflation  ar connected straightaway when oil price goes up, the inflatio n follows in the same direction. We can explain it by that the oil is the major input in economy (oil is used for manufacturing and transportation). The inflation rate in Russia was recorded at 6.30 percent in October of 2013. It has a positive collision on fossil oil and Gas industry. LUKOIL can estimate future profit more accurate and eliminate several risks which established by the oil price and inflation rate. 4. Unemployment rateFigure 2.5 Russia unemployment rateAt the moment the rate is 5,5%. And the tendency has a declining character. Thus it could be opportunity to abide by high-qualified employees. There is a rivalry on a labor market.5. Reservoirs of oilRussia is the scratch line country in the world in crude oil production. Its sh ar is 12%. This indicator makes the country inviting for the investors. Consequently, LUKOIL could use positive investment climate of Russia as the companys benefit.6. TaxesNowadays on that point are three main taxes which hurt influen ce on economic in Russia a) Corporate tax rate 20%b) Personal income tax rate 13%c) Sales tax rate 18%Accordingly to these indicators the corporate tax rate is quite low in comparison with Japan 38,01%, United Arab Emirates 55%, US 35%. Therefore, it is opportunity to increase a profit (low taxes increase net profit). We are analyzing oil and gas industry in Russia. Fortunately most of deposits are set(p) in cold geographical areas like Tyumen Region, called Extreme North or farthermost North. Government gives a lot of benefits like people who work thither are used to receive an extra path of salaryment, referred to as the Northern Bonus, as well as other benefits, including extra vacation, extra disability benefits, extra hideaway benefits, and housing benefits. LUKOIL wont increase outflow of money into pension monetary resource etc.4. Technological factors (PESTLE) new technologies are an important competitive advantage of LUKOIL Group. detect technological aspec ts1. The company conducts R&D to develop new technologies and fire the existing ones. 2. Cooperation with national projects is actively developing, including the Skolkovo origin project and the RUSNANO Corporation. 3. Great attention is compensable to developing information technologies and improving strain processes. 4. The total financing of scientific and adept works in 2012 measureed to US$ cl million. It is opportunity to use own engineering and ability to exclude costs for using technologies from elsewhere.5. Environmental factors (PESTLE)Waste disposalRussia drowns in 60 million tons of drool a year. It is monstrous problem in waste disposal issue. Today, only 11% of the whole volume is recycled. Unfortunately, it is substantial demonstration of contemporary problem and the threat for environment. LUKOIL uses chemicals for production, which could be statutory restrictions by the government for environmental protection. It is the threat for company of activities re striction.PollutionOil and Gas industry vilifys nature by pollution. piecey risks occur like spilling of oil into the sea or into the ocean. In this case LUKOIL will pay damage to nature and spoil its reputation. Consequently, LUKOIL should behave into placard all risks and try to avoid them. climeThere is the dominance of the continental climate on the territory of the country. Russia faced to one serious problem during springs. It is flood. For oil industry it could be a relevant threat because it directly depends on transportation, for instance if roads are damaged it is becoming composite to transport oil to different regions.6. policy-making factors (PESTLE)Strictly speaking, two of the most sedate threats are the high level of decadence and terrorism.High level of corruptionRussia is be 127th out of 175 countries in hydrofoil Internationals Corruption Perceptions mogul in 2013. This score indicates the perceived level of public sector corruption in a country or te rritory. terrorist actThere is a terrorist war aimed at destabilizing Russia policy-makingly and economically. Few weeks ago on that point was the 3rd terrorist attack in Volgograd during last 2 months.Membership in World apportion OrganizationIn solemn 2012, Russia officially became a World Trade Organization member. Moreover, European Union contributes half(a) of Russia job flows. It is opportunity of simplified international market access with the purpose of trade and it is opportunity of hiring professional and administrative mental faculty on fixed term contracts. mightiness of sparing FreedomIndex of Economic Freedom in Russia is 51.3 out of snow and it ranked as mostly unfree. These rank means that the country is not attractive to do occupancy and indicates a low possibility of obtaining investment. Thus, it is a threat for LUKOIL, it will be uncorrectable to attract distant investors.Protection of property rightsIt is an opportunity to protect LUKOILs innovatio ns and to get patent.7. Legal factors (PESTLE)The chase laws of the Russian Federation form the main legal framework of the oil and gas industryConstitution of the Russian Federation. national rightfulness On Subsoil (Subsoil legal philosophy).federal official fairness On Gas put out in the Russian Federation (Gas show Law). Federal Law On inbred Monopolies.Federal Law On the Continental Shelf of the Russian Federation. Federal Law On nothing Saving and Energy Efficiency.Federal Law On employment Sharing Agreements.The following federal laws are also relevant to the legal framework of the natural resources industry of the Russian Federation The Codes of the Russian Federation, including the Civil Code, Land Code, water system Code, Forest Code, Tax Code, Code on Administrative Violations and Criminal Code. Federal Law on Environmental Protection.Federal Law on Ecological Expertise.Supreme Council Regulations on the Procedure of Enactment of the Provisions on the Procedure of Licensing of the Subsoil put on of 1992 (Subsoil Use Licensing Regulations). The fundamental rights that are guaranteed to each Russian citizen are e rattling last(predicate) people shall be equal before the law and court.The allege shall guarantee the equality of rights and freedoms of man and citizen, disregardless of sex, race, nationality, language, origin, property and official status, place of residence, religion, convictions, membership of public associations, and also of other circumstances. All forms of limitations of human rights on social, racial, national, linguistic or religious grounds shall be banned. Man and woman shall enjoy equal rights and freedoms and have equal possibilities to exercise them. That means that Lukoil should take into number all this rights and keep it in mind when hiring the employees.8. Socio-cultural factors (PESTLE)Age structure0-14 geezerhood 15.7% (male 11,498,268/ pistillate 10,890,853)15-24 old age 12.4% (male 9,031,057/female 8, 662,557)25-54 years 45.8% (male 31,894,116/female 33,432,996)55-64 years 13.1% (male 7,926,184/female 10,711,347)65 years and over 13% (male 5,622,464/female 12,847,828)Most of population is in unfastened of working age. There is a competition on labor market. It is an opportunity to cause employees corresponded to thestandards of the company.Main religion ChristianityNo requirement in the organization of labor. Thus, it is opportunity for LUKOIL to conduct manufacture easily. High level of readingOpportunity to attract well-qualified personnel.9. gatekeepers 5 Forces1. Threat of New Entrants (Low)The LUKOIL is protected by high parapets to unveiling. Therefore the threat of new entrants is very low Huge amounts of capital expenditure are needed to perform the activities, for example the cost of refinery is almost $7 billion, the price of petrol station is $600 000. Large amounts of fixed are require for the development of oil fields and the installation of production facili ties Costs for move into the industry drilling costs, oilfield services, skilled labor, scientific research, materials and energy Only companies that operate economies of casing can survive, for example LUKOIL has been searching for oil since 1991. They invest a huge amount in up-to-date technologies making it difficult for new entrants to compete. Russia allows only national companies (or contradictory companies in partnership with the national company) to endeavor oil reservoirs, because it is owned by the state. It is barrier to entry.2. Power of Suppliers (High)There are more then 100 suppliers in Russia OAO Gaztrubinvest, in like manner KST Steel, OAO Severstal are some of them. just now their products are unique tubular products, voltaic centrifugal pumps, oil cable, spurt leaf blade framework. What gives them high bargaining power to place conditions. Moreover there are no substitutes, because the equipment needed for oil industry is special and impossible to repla ce.3. Power of Buyers (Low)The main buyers are government and car owners. Product specialisation is low and customers dont have opportunity to choose, only to buy. The market donation of LUKOIL is almost 17% and it has contracts with government, because they have a big chain of petrol stations. Consumers willingness to pay is the only power buyers have. Only very large buyers of oil such as big countries like US whitethorn influence oil price. Overall the buyer power is low4. Threat of Substitutes (Low)At the moment customers can not switch from using oil and gas for other sources of energy. Only some European countries introduced renewable sources of energy instead of gas and oil. merely there are many alternatives of energy coal, solar, and wind power. Instead of this fact, we notice the posit for oil increases every year and there is no chance of decreasing in consumption.5. Industry Rivalry (High)LUKOIL has 4 serious opponents Rosneft (22% share of market), TNK-BP (14%) , Surgutneftegaz (12%), Gazprom neft (6%). Even though there is a very strong rate of growth in oil and gas sector the rivalry remain piffling due to large switching costs, undeniable investments for a new entrance, size of competitors, and political barriers. There is no place for broken companies because of few market leaders. Also there is no possibility that competitors will passing a lower price. LUKOIL is second company that operates in Russia. The leader is Rosneft and its main competitor. LUKOIL has 17% share of Russian market, Rosneft 22% respectively.10. SWOT analysisStrengthsWeaknesses 1st among the largest cloak-and-dagger oil and gas companies in the world. 1.3% oil militia of total reserves of oil worldwide and second in terms of volume proven hydrocarbons reserves close 2% of total global reserves addition in oil index price in the world. High entry barriers in the market, which eliminates small competitors. Very competent technology of research and expl oration. Geographical business diversification (30 countries). Large amount of oil reserves(17%) Superior oil related technology. fully vertical and horizontal integrated. Well support by Russian government. Constant increase in penury for gas and oil in Russia. Constant research and innovation. product costs are relatively high compared with levels achieved by its main competitors. The companys communication both inside and outside is slow and bureaucratic. Cost of environmental hazards.OpportunitiesThreats Increase in oil and gas demand in Russia. New exploration projects. enthronement into new businesses. Iraq oil project. Corruption. Terrorism. Floods. Decrease sales (high interest rate). Competition on the marketInternal analysisRevenue $139.2 billionEmployees 150.000RecommendationsDespite having a relatively good position in the regional market of Central and Eastern Europe, LUKOIL faces strong competition. In this context, LUKOIL should increase its market share through an offensive strategy of territorial expansion and to attract new customer segments. In addition, LUKOIL should ensure implementation of new technologies for modernistic and efficient production in terms of cost and continues its efforts to improve product quality and competitiveness, in order to meet international standards, including API and ACEA. Another important trend is the natural covering of marketing strategies on the downstream, taking into account the factors influencing consumer choice of stations location, value for money, image, service, the instauration of ancillary services. These strategies are reflected in the mix of marketing, in which both product and furtherance play a central role.