International Business Management: ADNOC, UAE ADNOC is an abbreviation that stands for Abu Dhabi National Oil Company, established in 1971. The intended main area of business that the company was meant to serve was the oil industry. However, over the years the company has managed to expand its operations, venturing into new portfolios and establishing subsidiaries that deal in oil refining, exploration of crude oil deposits, oil production and support services, as well as maritime transportation and petrochemicals. Today, ADNOC is one of the renowned global players in the business, with a strong and enhanced competitive advantage that is sustained by upstream as well downstream activities, such as transportation, shipping, and marketing operations.
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ADNOC has particularly shifted its focus towards exploring and producing oil deposits and reserves that have largely remained undiscovered. Recent growth and achievements have seen the company venture into the gas industry so as to meet the increasing demand of gas in the market. The company has also committed itself to sustainable developments which, in part, have achieved a harmonious balance in the social front and the earth’s natural resources. Some of the subsidiaries that fall under ADNOC’s flagship include Al Hosn Gas, GASCO, ADGAS, ZADCO, ADCO, and ADMA-OPCO. Others are IRSHAD, FERTIL, BOROUGE, TAKREER, and ADNATCO-NGSCO. The President of the UAE, who is also Abu Dhabi’s ruler, His Highness Sheikh Khalifa Bin Zayed Al-Nahyan, chairs the country’s Supreme Petroleum Council which is the body that is charged with the responsibility of formulating and overseeing the country’s petroleum policies. The company also has a corporate social responsibility policy that has seen it sponsor and establish quite a considerable number of institutions that also train and nurture careers in the oil sector and industry (ADNOC, 2012, para 2). ADNOC’S need for international business Like all global companies in the world which venture outside their territorial boundaries to establish additional opportunities and business, ADNOC has also entered into the international market in a bid to expand its market and make even bigger profits. The company has an established distribution agency which markets oil and oil products manufactured by the company on the international market. By going global, ADNOC has an enhanced chance and opportunity of serving domestic markets in other countries. The increased market outreach has the potential and benefit of increasing the company’s profit base as it exerts its presence in a wide area. ADNOC’s need for international business is also for purposes of expanding its resource base as a way of ensuring that the company has a stable and sustainable future. Oil resource gets
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depleted over time, particularly if its exploration has been carried out continuously for long periods. Thus, ADNOC’s decision to venture into the international platform is to seek additional oil reserves, which is their main resource that keeps them in business. This is a strategic business plan that focuses on the future existence of ADNOC and is a way of ensuring a sustainable future. Resources, such as crude oil, are scarce and can easily be depleted particularly if they are ever on high demand. International business also offers a perfect opportunity for businesses and companies to acquire some of the best and most competent human resource from around the globe. By opening up subsidiaries in various international locations, ADNOC increases its chances and possibilities of attracting some of the finest personnel skills. There is a general perception held by potential workers and employees that international firms offer better chances and opportunity for growth than those that operate nationally. Thus, going global or international is itself a strategy for the company to attract some top range talent and skill that is hard to find back at home (Coviello, 2006, p. 713). ADNOC’S International business activities ADNOC has an elaborate portfolio of business which is conducted both locally in the United Arab Emirates, UAE, and internationally through various subsidiaries established by the company. Some of the subsidiaries have specialized in only one area and provide the services whenever an opportunity arises. Among the many business ventures that are being exploited by the company include exploring and producing oil and gas where such a venture proves to be viable. The Abu Dhabi Company for Onshore Oil Operations, abbreviated as ADCO, Zakum Development Company, ZADCO, and Abu Dhabi Marine Operating Company, ADMA-OPCO, are the companies that exclusively carry out the exploration and production activities on behalf
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of the parent company, ADNOC. The subsidiaries also develop the oil and gas, through refining, and export the products from their sources on the onshore oil fields. ADNOC also processes oil and gas once they extract crude oil in its natural state. This produces products such as the liquefied petroleum gas which is used domestically as a source of energy. The processing also results in condensate of crude oil, as well as the production of sulphur and other liquid hydrocarbons. These products are later marketed and exported to different destination to service market demands. Some of the subsidiaries dealing in the processing of oil include National Drilling Company, NDC, ESNAAD, and Abu Dhabi Petroleum Ports Operating Company, IRSHAD. Other international ventures undertaken by the company also include the distribution of its refined products to its various international markets, maritime transportation which mainly deals with the shipping of products, and the manufacture and production of chemicals and petrochemicals which are mainly found in crude oil. The main subsidiaries dealing in maritime transportation are Abu Dhabi National Tanker Company, ADNATCO, and National Gas Shipping Company, NGSCO (Shenkar, 2004, p. 161). Changes in the international business and their impact on ADNOC The global financial crunch that begun around 2007 has generally slowed down business for ADNOC. Many economies that depend on oil to a very large extent had no options but to cut down on their expenditures. The amount of crude oil exported reduced as the demand was contained by almost all the governments in an attempt to manage production costs. As the market for crude oil and related products shrunk, ADNOC suffered great losses as the cost of operations remained imbalanced to the revenues collected. Big economies in the world that are also industrialized, majority of them from Europe cut down on their expenditures and their economies were in a shaky situation.
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Apart from the negative growth that the company has suffered as a result of the international business situation, there are continued worries on the future prospects of the oil market and global prices as the situation continues. ADNOC might be forced to cut down on its expenditure and even consider reducing the amount of oil barrels it produces on a daily basis. Business is poised to remain at its lowest and uncertain for the unforeseeable future and these further compounds the already bad situation for ADNOC (Kaptein, 2004, p. 13). Globalization and its impact on company policies As technological advancement continues to take effect with every passing day, global companies are facing numerous challenges as they attempt to incorporate these technologies into their systems and strategies. ADNOC has attempted to incorporate these challenges by formulating policies that effectively make it possible for the firm to continue with its operations both efficiently and effectively. ADNOC subsidiaries that are located in different countries employ nationals of the host country as a way of making it possible for the company to execute its activities abroad and to realize its objectives and goals. Globalization has thus forced the company’s management to look critically into the management of culture as a way of achieving harmony in its operations. Thus, the country has been forced to consider some cultural practices that are common in the host countries as a way of making the working environment for its workers more acceptable. It is important that workers have a feeling of belongingness where they work and hence ADNOC has integrated some cultural and ethical values in its operations to make them conducive (Fan & Phan, 2007, p. 1113). With the integration that globalization brings about, it is more practical and realistic for the company to employ individuals from very different backgrounds but who posses talent and skill. In other words, ADNOC has not only opened up opportunities for employment to UAE
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nationals but rather it has an open door policy which welcomes everybody with the right qualification to apply for consideration. These policies have been structured such that it is more flexible and accommodative for individuals with varied cultural backgrounds and beliefs to work together in the organization and achieve the overall objective of ADNOC. Workers are not dealt with separately on the basis of their origins and backgrounds but rather they are all subjected to the same policies, rules, beliefs, and organizational culture (Amit & Zott, 2001, p. 493). Impact of culture on ADNOC Culture is the average belief, practice, and general way of life that is exhibited by a people in an organization. Being a global corporation, ADNOC is subjected to different cultural practices and beliefs reflective of its widely diverse workforce. Accommodating these cultures together to an extent where the company has attained harmony implies that there have been structures which have been set up to sustain the communal coexistence among the workers. Policies have particularly been formed that ensure workers are distributed evenly and fairly across all the departments. However, it is worth pointing out that the United Arab Emirates is an Islamic nation whose majority population confesses to the doctrines and teachings of Islam. As such, the company’s practices and policies have been modeled on Islamic culture and teachings. As a result, the practices have seen the number of women employees being far too little as compared to those of their counterparts. This is because the Muslim faith does not believe in according men and women equal rights, and instead looks at women as a fairly weak sex. It is almost impossible to have women managers at the company however much they might be qualified. It is difficult for Muslim men to submit to women and therefore having a woman as a superior at ADNOC may not achieve any predetermined goals or objectives (Peng, 2004, p. 99).
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Expansion of cross-boarder operations ADNOC is one of the largest players in the international oil industry owing to its global presence that extends beyond the company’s country of origin, the UAE. The National Drilling Company, NDC has been carrying out research in conjunction with the US government’s Geological Survey to evaluate underground water resources of Al Ain and Abu Dhabi. Another of the company’s subsidiary, Borouge, extended its operations to China’s Shanghai and Guangzhou provinces in a bid to explore opportunities and seek to expand on business. There are immediate future plans being explored by ADNOC on improving on the health, safety, as well as environmental degradation that could be resulting from the company’s operations. These programs have particularly been looked at for consideration in Africa and the Middle East. The company realizes its ethical responsibilities in tackling the issue and has been putting plans in readiness for the execution of the whole program. However, these might require some additional time as the company still carries out its feasibility studies to determine whether or not such a program could be viable or not (Dawson & Bartholomew, 2003, p. 127). Role of language on the company The official languages adopted for use at the company play a very crucial and critical role of creating a community that can corporate and integrate in harmony. ADNOC attracts and employs workers with different cultural and language backgrounds who might be very difficult to integrate and form a united organization. It would be difficult to achieve organizational objectives and goals for such a multi-cultured organization in which individual practices and beliefs are wide and apart. Language thus effectively plays the role of unifying the members regardless of their cultural diversity. It makes it possible for communication and understanding to take place in the company. Language also plays an external role of enabling the organization
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to communicate affectively with its clients and suppliers. Language, in summary, could be looked as a unifying factor that enables communication to take place in the company and a symbol of hope as well (Kellow, 2002, p. 177). Social institutions linked to ADNOC ADNOC involves itself in numerous social corporate responsibilities which aim at improving the UAE community at large. These responsibility acts touch on virtually all the areas of society, including educational, economic, and social areas. In particular, ADNOC has established the Petroleum Institute as well as Achiever Oasis Program as perfect avenues of enhancing training and qualification needs. Through its operations, the company has studied the trends and has been able to document professional practices which are practically used at the petroleum institute to teach. The educational programs have also been thoroughly researched on and the quality of education they eventually offer help in improving those who study them. The company also makes direct contributions and sponsorships to such educational organizations as Zayed University, the Abu Dhabi Educational Zone, as well as the Higher Colleges of Technology. Apart from education related issues, ADNOC collaborates with the UAE government through the Labor and Social Affairs ministry to provide assistance to needy children in the society. These children are offered special care and attention as a way of making them see and realize that they are also bona fide members of the larger UAE society. For sports lovers, ADNOC has been sponsoring events, including the camel race and athletics in general. The cultural clubs have also been receiving support that aims at sustaining their activities and promoting talent (Cooper, Frank & Kemp, 2000, p. 83). International organizations and their role on the company
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Other global organizations have continued to cooperate with ADNOC in various ways and capacities thus influencing its operations. Some of the organizations are corporate client firms that directly obtain oil from the global marketer for their own use. These contracts and decisions to associate together in business are offered through tenders and they present the company with a chance to make additional revenues and profit. Other international bodies and organizations are watchdog companies which ensure organizations follow on conventions and international practices that are universally accepted and agreed upon. Such companies play a role of influencing the company to adapt to practices and operations that are environmentally friendly and which discourage against the dumping of potentially harmful deposits. Some international companies also deal in the exploration, production and exploration of oil products as well. Such companies pose business competition between the rival players which also includes ADNOC. As a result, they cause the organization to rethink of its quality standards and undertake plans to enhance and sustain competitive advantage. In other words, the company seeks for ways of winning and retaining customers through constantly working on its customer quality plans (Morrison & Roth, 1992, p. 399). ADNOC and the developing countries The company’s operations particularly in the African continent and in the Middle East basically focused more on health and safety, as well as observing management practices that protects the environment against pollution. Oil is potentially destructive both to human health and the environment at large owing to its chemical composition. The majority of the third world countries in Africa and in the Middle East lack proper facilities and preparedness to tackle such hazardous products as oil.
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It is against this backdrop that ADNOC’s management deemed it fit to indulge in safety practices that would protect individuals from being harmed by petrol and petroleum products, as well as exploring on ways of protecting the surrounding. The company has an elaborate policy on environmental matters which provides for a clean and safe surrounding. There are also safety standards and measures which the company’s workers are taken through in order to adequately equip them with the necessary information and knowledge that they require (LeCount, 1999, p. 11). Impact of respective governments where ADNOC operates Governments often have set rules and regulations that particularly address matters about the operation of businesses and companies at large. ADNOC, like all global companies, is faced with the challenge of reviewing its corporate policies continuously in order that they may fit with the rules of their host country. Such rules and policies on minimum age, for instance, vary between countries and the company specifically alters this policy so as to apply it accurately in their host country. The issue of tax and tax regimes also varies between countries and the management at ADNOC has to ensure their adherence to such legal requirements. In such instances, it might even get to a point where the company revises its prices in some countries either upwards or by lowering so as to earn profits. Some governments set out quotas which dictate on the percentage figures of nationals and foreigners who can be employed at any given time in an organization that is established on their soil. These rules would obviously affect the policies and, to some extent, the structure of the company because it has to adhere to and accommodate the requirements. Some of these legal requirements that are enshrined in a country’s constitution
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could have adverse effects, sometimes even occasioning loses to the overall performance of the company (Shaffer & Hillman, 2000, p. 175).
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