In order to identify an efficient strategy for a business, the number of specifics that should be considered prior to make a decision is, by all means, overwhelming. For this reason, it is necessary to dwell on both macro- and microeconomics of a chosen business so it would be possible to evaluate the current trends crucial for growth and relevance. In terms of the present research, a Canada-based oil and natural gas company Pembina Pipeline, which is considered to be one of the largest companies operating oil and energy facilities in Canada, was analyzed. The object of the present research is to identify the specifics of macroeconomics in the Canadian business segment, along with the current trends in the sector level market, in order to identify possible development strategies for the business. The scope of the strategy appropriateness will also be predetermined by such notions as corporate leadership and contrastive analysis of competing oil and energy companies in Canada.
When studying the specifics of any company, it is of paramount importance to place major emphasis on the ongoing opportunities and strengths in terms of macroeconomics, encompassing both state economy and consumers’ perception of retail. Thus, the first opportunity tackled in the research was the gross domestic product (GDP) per capita indicator. Having analyzed the data provided by OECD (2021), it was estimated that the tendency of GDP per capita growth was increasing consistently up to 2020 when the COVID-19 outbreak started. Still, the forecasts anticipate steady growth over the next years once the pandemic crisis is handled, which means that GDP as a major macroeconomic indicator benefits the industry development in Canada.
Another opportunity concerned in the macroeconomics paradigm was the notion of real disposable income per capita, which stood for the financial amounts people are left with after the deduction of state-regulated expenses such as taxes. According to the data released by OECD (2021), Canadian residents’ RDI rates, although disrupted drastically after the pandemic outbreak, still remained relatively high compared to other states. This information is crucial in terms of identifying the extent to which potential consumers are capable of purchasing a product.
Finally, retail sales were considered an opportunity for the chosen segment. The following indicator, calculated by Statistics Canada (2020), exposes the local resident’s average spending patterns on goods and services. Hence, according to the data, Canadians’ retail sales rates were considerably higher compared to other countries, creating a major benefit for Canada-based goods and services manufacturers. Considering the aforementioned indicators, it may be concluded that Canada’s state of macroeconomics is favorable for business development. However, when speaking of threats on the macroeconomic level, consumer price and consumer confidence indexes should be taken into account. Both these factors may serve as an obstacle given the vivid downturn caused by COVID-19.
Sector Level Data
Prior to the discussion of tangible indicators in the oil and gas industry, the weaknesses and strengths of the sector were analyzed. Thus, the opportunity outlined was the commodity price, or oil, which, according to the Federal Reserve Bank of St. Louis, did not lose its relevance drastically over the years (“Crude Oil Prices: West Texas Intermediate (WTI),” 2021). However, as far as oil prices are concerned, the issue may as well serve as a threat to the industry, as oil and natural gas are the major inputs to the industry. Another severe threat for the sector is the overall trend of eliminating oil and natural gas consumption across the state. According to the report released by the Federal Reserve Bank of Dallas, the production of oil and natural gas has outpaced the product demand and consumption (“Oil and Gas Activity Expands Strongly; Outlook Improves Dramatically,” 2021). This leads to a significant price downfall in the US, one of the Pembina Pipeline’s central markets. Finally, the process of capital investment trend in the industry presents a threat to the sector due to the lower investment rates over time.
Thus, in order to identify the potential trends for the industry, it was necessary to analyze the available forecasts that considered the aforementioned macro- and microeconomic peculiarities. The latest report released by the Deloitte University Press included the list of states likely to grow in terms of the oil industry, claiming Canada to be in the top three states expecting aggressive growth. However, when addressing such forecasts, it is of paramount significance to account for the implications caused by the COVID-19 pandemic outbreak.
When speaking of Pembina Pipeline, in particular, it was considered vital to take into account the company’s contributions to the industry and local economy. Hence, the company itself is the owner of the vast majority of pipelines in Canada, which are considered the most beneficial in terms of safe transportation. Moreover, the company also provides a great number of jobs for the local population. When speaking of Canada as a major target market, the state is placed among some of the largest energy consumers in the world.
Marketing and Sales
Although Pembina Pipeline is currently one of the fastest-growing oil companies in Canada, it is necessary to examine its average sales patterns in order to estimate the potential growth strategy. When speaking of the market share, it was estimated that while obtaining over 10% of the local oil industry share at any given moment, the company finds itself in a challenging environment of well-established enterprises. For this reason, Pembina Pipeline cannot allow itself to reduce the marketing expense even when acquiring a respectable position in the field. Having compared the marketing expense rates with other competitors, t was estimated that Pembina Pipeline invests almost twice as much money in marketing, with the percentage increase over the years. Such a tendency indicates that the company’s management considers marketing one of the most efficient strategies to attract new sales.
Arguably the most significant indicator of the company’s success is the sales trend, which stands for profits made annually. Thus, according to the comparative data provided by the competitors, every enterprise in the oil industry happened to lose profits over the past three years, with major emphasis placed on 2020. However, even though the company finds itself in an environment of decline, Pembina Pipeline’s losses are alarming when considering the figures that it operates. When speaking of marketing trends in terms of actual financial investments, it was estimated that Pembina Pipeline spent more money each year for marketing purposes because such a trend was relevant for all the industry representatives. Having examined the aforementioned aspects, it was estimated that one of the major strengths of the company was its ability to abide by the strategy of cost and expense minimization, which led to minimizing losses. However, such an advantage was not able to cover the drawback of not making enough sales in order to keep the sales trends.
As far as corporate leadership was concerned, there were several aspects to examine in order to outline a working business strategy. To begin with, it was estimated that the average number of years of experience was relatively lower compared to the average indicator of 15 years. Thus, it was necessary to dwell on the more accurate indicators to define whether such a tendency affected the company’s outcomes. Thus, the notions considered in the context of leadership included:
- Major metrics, encompassing return on invested capital (RIC), earnings before interest, taxes, depreciation, and amortization (EBITDA), and growth rate;
- Share price analytics;
- The quick ratio, or the company’s readiness to pay its current liabilities;
- Market capitalization, or the company’s dollar worth in the stock share market;
- Metrics used for CEO evaluation, encompassing revenue, net income, and earnings per share.
Having closely analyzed the company’s current position in the context of the aforementioned concepts, it was estimated that Pembina Pipeline finds itself in a relatively safe position in the short-term perspective. However, as far as long-term functionality is concerned, the company should pay more attention to its relevance and sales rates. When speaking of the company’s strengths in the corporate leadership paradigm, it should be outlined that the entity’s management has secured development and progress on various fronts. Moreover, even when taking into account declines in sales and annual consumption, the revenue is still considered sufficient for the company to function. However, the overall decline trend, the notion of market capitalization suffers drastically by losing the company’s worth in the stock market.
Speaking of the current company’s trends in terms of strategic approaches, Pembina Pipeline considers a focus generic strategy to be the most efficient to secure professionalism and growth. Indeed, such an approach may be extremely beneficial when it comes to competition within the market. However, having analyzed the market contributors on the levels of both macro- and microeconomics, it was defined that having one strategy might not be productive for an international business operating at times of global crisis. For this reason, such strategies as cost focus and global strategy were analyzed as alternative ways to promote one’s position in the market. The former implies finding a niche product and defining the ways to become a leading entity in terms of service provided, Pembina Pipeline, while having an exceptional level of expertise in the field, may have the chance to become a leading company in the oil industry and increase the sales trends. However, it was established during the analysis that generic strategy adoption was the most efficient way to operate the business and lead it to the place where it might be found today.
The oil and gas industry has now become one of the most complex business niches due to the major shift in terms of consumer perception and the stock market’s approach to the industry. However, the companies operating in the field today manage to remain relevant in the market to the maximum extent. To analyze the issue, Pembina Pipeline, a Canada-based oil company, was closely examined through the prisms of both macro- and microeconomics. Thus, it was estimated in the research that by applying a focus generic business strategy, the company managed to make sufficient revenue to stay relevant during the era of oil industry decline. Moreover, the approach chosen by the company makes it possible to expand financially and geographically over the next years.
“Crude Oil Prices: West Texas Intermediate (WTI) – Cushing, Oklahoma.” 2021. Web.
“Oil and Gas Activity Expands Strongly; Outlook Improves Dramatically.” 2021. Web.
OECD. 2021. “GDP and Spending – Gross Domestic Product (GDP) – OECD Data.” The OECD. Web.
Statistics Canada. 2021. “Retail Trade Sales by Industry (X 1,000).” Statcan.gc.ca. Government of Canada, Statistics Canada. Web.