Diagnostics of the problems of JSC GAZPROM

The current state of the facility and the control system can be characterized as solid and stable. Gazprom looks to the future with confidence. In 2009, Gazprom’s capitalization increased by 21.18% and amounted to USD 329.563 billion at the end of the year, thanks to which Gazprom entered the top three largest energy companies in the world, second only to China’s PetroChina and America’s ExxonMobil.

Every year Gazprom improves its management structure. The reform is aimed at improving the efficiency of Gazprom as a vertically integrated company. The creation of subsidiaries by type of activity, such as underground gas storage, underground repair, hydrocarbon processing, oil production, has begun.

Along with the strong position of the organization, there are problems that are both strategic and financial in nature:

Rice. 4. – “Tree of problems”

– the growing interdependence of markets, which in the era of globalization leads to the synchronization of the economies of countries and, as a result, to the possibility of a rapid transfer of recessions or crises from one country to another. Such conditions may significantly affect Gazprom’s market positions.

– the problem of international regulation of the industry. Regulation of the energy industry is carried out in various directions. The most important areas are liberalization, customs and tax legislation, environmental legislation and energy security.

The issue of ensuring energy security is to stimulate the efficient use of energy, as well as reduce dependence on energy imports from a single source. Such a policy is actively pursued in Western European countries and is enshrined in the EU Green Book. Since Gazprom is the largest external energy supplier to the region, this reform concerns it first of all. This could result in a decrease in the Group’s share of the European market, which is its traditional export region.

– high competition when entering new regions and new markets. An example is the implementation of investment projects and Gazprom’s entry into the US market, where high competition prevails from suppliers of this type of fuel operating in this market and high liberalization of gas prices.

– geographical conditions and climate. A significant share of Gazprom’s gas production comes from Western Siberia, where the harsh climate complicates production and increases the cost of natural gas. The significant geographic remoteness of the developed West Siberian fields from the main regions for the sale of products requires significant costs for gas transportation.

– changes in exchange rates and inflation. A significant part of Gazprom’s revenues is denominated in dollars or euros, while most of the costs are denominated in rubles. In this regard, the results of financial and economic activity are significantly affected by changes in inflation rates and exchange rates.

– rising costs. Over the past few years, the situation has persisted when unit costs in capital construction in the oil and gas industry are growing at a rate that exceeds the rate of inflation. The determining factors of this growth are the increase in prices for raw materials, materials, components, services, including prices for metal, gas pumping units, well drilling costs, etc. To minimize the risks associated with rising costs, OAO Gazprom uses tenders at the choice of suppliers of goods, performers of works and services, works directly with suppliers. A program for optimizing (reducing) costs has been developed and is being implemented, work is underway to improve management efficiency, transparency and control over spending.

These problems arise in the development path of almost any large structure, however, Gazprom is confidently looking forward, strengthening its position in the global energy market, helping to increase the company’s authority and influence in the global community, as well as ensuring long-term growth in its value.

The current economic situation in the global energy market:

– oil acts as an energy carrier of global importance, gas – mainly regional, coal – local;

– a sharp increase in the consumption of hydrocarbons, which in the foreseeable future will not be replaced by alternative energy sources;

– a sharp increase in the demand of developing Asian countries for energy resources, taking into account the ongoing economic growth, the rapid increase in population and the extremely high energy intensity of national economies;

– an increase in the gap between consumption volumes (growing) and production volumes (decreasing) of hydrocarbons in developed countries;

– limited opportunities for additional growth in production increase the risks associated with a possible destabilization of the market;

– the level of provision of the world economy with oil and gas reserves is decreasing;

– lack (temporary) of oil refining and transport capacities and limited additional capacities for oil production;

– indicates the interest of industrialized consumers to the problems of development of alternative energy;

– the importance of projects for the production and supply of liquefied natural gas (LNG) is growing;

– in a number of countries there is a renewed interest in nuclear energy;

– there are fewer and fewer assets for mergers and acquisitions, so in recent years the main mergers occur exclusively within the framework of one country or a common geopolitical space;

– the growth of political risks in the regions richest in hydrocarbons.

Table 3 – SWOT ANALYSIS

Potential internal strengths Potential internal weaknesses
1. Efficient management (cost minimization, production intensification process) 1. The need to develop a sales network
2. Large gas reserves in Russia 2. The need to invest heavily in the development of new fields
3. Diversification of routes and increasing the reliability of gas supplies to Europe 3. Insufficient financing of projects aimed at diversifying gas supplies
4. Ability to meet the growing demand for energy resources every year 4. lagging behind the growth rate of production from the growth rate of gas consumption;
5. Leading market capitalization growth rate among European companies 5. Gazprom shares still undervalued
6. High R&D costs; 95% of the technologies used meet modern requirements 6. The problem of modernizing the existing system of main gas pipelines
7. Development of production and sea transportation of liquefied natural gas (LNG) 7. Inability to meet the growing demand for energy resources every year through LNG supplies
8. Compliance with all requirements of the Conventions of the International Labor Organization ratified by the Russian Federation 8. The outflow of qualified personnel to other organizations of the fuel and energy complex
9. Best advertising companies, sponsorship and charitable activities 9. High advertising, sponsorship and branding costs
10. Rigidity in upholding corporate interests 10. Other
11. total savings of fuel and energy resources (FER)
12. Other
Potential external opportunities of the organization Potential external threats
1. Maintaining the achieved positions in the European gas market 1. The policy pursued at the state level to prevent foreign companies as operators of the development of the most promising objects (Yamal, Shtokman field)
2. Geographical diversification (access to the markets of North America and Asia-Pacific countries) 2. Preservation of transit risks
3. Gas resources of Central Asia provide an opportunity to enter new sales markets while maintaining the reliability of supplies to traditional consumers 3. Betting on purchasing Central Asian gas instead of investing in upstream projects;
4. Recognized market leader 4. Low profitability due to domestic regulated gas tariffs
5. Opportunities to expand the product range 5. Entry into the market of foreign competitors with lower costs associated with the production and export of oil
6. Control over all competitors within Russia 6. The organization has serious competitors in the face of countries with large gas reserves
7. Independence in the choice of gas supplier 7. Weakening of Gazprom’s position in the Central Asian market due to increased gas supplies from Turkmenistan and Uzbekistan to other countries
8. Leading position in gas distribution 8. Unsettled many issues within the EU
9. A sharp increase in the world’s demand for energy resources 9. Reducing the level of provision of the world economy with oil and gas reserves
10. Interest of the state in the development of the gas industry in the country 10. Growing political risks in the regions richest in hydrocarbons
11. Absence of a political element in gas pricing in the external market; market pricing 11. Regulation by the Government of the Russian Federation of internal gas tariffs; sale of gas at reduced prices
12. Vertically integrated company 12. Other
13. Other

Using the matrix of the Boston Advisory Group (USA), we determine the position of the main types of products (services) produced by the organization in the market. This matrix allows you to quickly assess the position of the product in the market and the stage of its life cycle.

Table 4 – Initial data (domestic market)

Main products Sales volume in billion rubles Market share, %
Gazprom Lukoil
1.Gas 356.1 399.5
2. Oil and gas condensate 434.4 529.7
3.Synthetic rubbers 5.6 4.9
4. Tires 51.2 54.3
5.High pressure polyethylene 12.9 14.8
6.Polypropylene 17.6 18.2
Total: 1021.4

Table 5 – Problem Matrix

Problem sum of reasons
1. Contradictions between line and headquarters units
2. Growth of production, which does not allow the development of infrastructure
3. Lack of awareness of middle managers
4. Weaknesses in the work of the strategy development team
5. Inconsistency of the plan with production capacities
6. Shortcomings in the preparation and conduct of meetings
7. Isolation of the development stage from the strategy implementation stage
Sum of Consequences

Fig.5 – Graph of problems

1- Lack of awareness among managers.

2- Partial disinterest in affairs and actions.

3- Disagreements among staff when making decisions.

4- Rare proposals to introduce innovations into production.

5- Disorganization of meetings.

6- There are no incentives for workers to attend refresher courses.

7- Lack of new material suppliers.

Horizontally, estimates show what the quantitative relationships between causes and effects are. To the question: “Which issue should be addressed first?” helps answer graph problems. The diameter of the circle expresses the importance of this problem as the cause of other problems. The connecting arrow indicates the direction of the causal relationship.

Fig.6 – Logic modeling (Ishikawa diagram)

Demand: b – large, m – small, o – lack of demand;

Costs: b – large, m – small, o – no costs.

Rice. 7 – Decision Tree

Conclusion

Based on the research carried out, the following conclusions can be drawn.

To form, select and implement an innovation strategy, an enterprise must:

– Assess internal and external environmental factors;

– Strengths and weaknesses, both their own and potential competitors;

– Develop the necessary program and stages of implementation of the innovation strategy;

– To carry out the development of the budget of innovation activities;

– Attract the required amount of investment;

– Carry out the necessary control of innovative activity at the enterprise.

Innovation strategy is one of the means to achieve the goals of the organization, which differs from other means in its novelty.

Strategic innovation management is an integral part of innovation management and addresses issues of management, planning and implementation of innovative projects, deals with the process of foreseeing changes in the economic situation of firms, finding and implementing large-scale solutions that ensure its survival and sustainable development due to identified future success factors.

The innovation strategy involves the acquisition of competitive advantages by creating fundamentally new products or technologies, or by satisfying existing conscious or unconscious needs in a new way.

Firms that choose this strategy seek to build a competitive advantage through radical innovation in various areas and are able to create windfall profits through a jump in sales margins or through the creation of a new customer segment.

The choice of an innovative strategy depends on many factors: the market position of the company and the dynamics of its change, the production and technological potential of the enterprise, the type of goods produced by the company, as well as external factors.

The development of an innovation policy involves the definition of goals and strategies for its development in the near and long term, based on an assessment of the potential capabilities of the enterprise and the availability of its appropriate resources.

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