Gulf Oil Middle East Ltd Change Management Case Study

Case Study

Background of Gulf Oil Middle East Ltd

Gulf Oil Ltd has transformed from a small company marketing unpretentious scarce commodity to a holding company providing exclusive services. Nowadays it is a great trade-diversified industrial holding company with multiple businesses.

The company was founded by a group of investors in 1901, in Texas (USA) and it was named Gulf Refining Company of Texas. The main activity of the company was development of a modern oil refinery. In 1907, it merged with number of oil companies, thus, Gulf Oil Corporation was founded. It was distinguished by its vertically integrated structure and has been active in the oil industry (exploration, production, transportation, refining and marketing) and in related industries such as petrochemicals and manufacture of automotive components (MacLeod 1977). The development of the company was so active that at the end of 1930 Gulf Oil Corporation became the largest corporation in the US, with its private oil companies, network of oil pipelines and refineries, corporate vehicle fleet (including tanker and barge fleet), lots of gas stations and service stations (Friedman 1953).

After the Second World War, Gulf Oil expanded its operations and started operating outside North America. First of all, the company used its vast experience in the exploration and development of oil and gas fields due to which it got an access to cheap raw materials from deposits in Kuwait, Venezuela (from 1943) and Canada (Friedman 1953).

Cheap oil and gas provided from Kuwait formed a solid economic foundation for the Gulf in Europe, the Mediterranean, Africa and India. A retail network, formed through the acquisition of private networks of filling stations in different countries, allowed to market fuel and lubricants very quickly (MacLeod 1977). Significant funds had been invested in the development of new technologies and specialized products, particularly for marine aircraft and aeronautical products (Vassiliou 2009).

In January 2010, Gulf Oil Limited Partnership began actively working to develop a network-branded gasoline stations and to promote lubricating products. Between 1980 and 2000, the company was transformed from a Gulf monolithic, vertically integrated multinational corporation in the alliance partners united by common business interests. This was a reflection of fundamental changes in the economy of international business, as alliances are another step in the development of economic business models with organizational hierarchy. After more than 100 years since its founding, brand Gulf remains focused on quality, innovation and attention to changing market needs. The idea of a global "customer focus" is an integral part of world philosophy of Gulf Corporation. One of its branches now operates in the UAE (Gulf Oil Middle East Ltd. Official Site, 2015).

Greiner Model

In order to evaluate Gulf Oil Middle East Ltd change management strategy, we should use Greiner`s model of development and find out the stage of Gulf Oil Middle East Ltd according to the model.

Greiner identifies five stages of development of organizations, each of which is characterized by its crises (Kingston 2003):

• Creativity;
• The direction of growth;
• Growth through delegation;
• Growth through coordination;
• Growth through

According to Greiner`s model Gulf Oil Middle East Ltd is on its fifth stage of development. This means that in order to solve its problems Gulf Oil Middle East Ltd has to strengthen interpersonal cooperation (Peck 2007). Social control and self-discipline take precedence over formal control. A considerable emphasis is placed on teamwork and the ability to manage interpersonal conflicts. The fifth phase or stage of growth through cooperation generates more flexible behavioral approaches to management (Christopher 2010).

Kurt Levin Model

Kurt Levin identified three stages of the change process (change management) (Levin 2012):

• Unfreezing;
• Movement;
• Freezing.

Unfreezing is the stage when actions of a manager are aimed at making people recognize the need for change. In 1513 Machiavelli wrote: "The Innovator has for enemies all those who have done well under the old conditions and lukewarm defenders in those who may do well under the new" (Marriott 1908).

Regarding Gulf Oil Middle East Ltd. we can say that the company is currently at the second and moving to the third stage of management. Thus, the second phase is the movement, or the practical implementation of the changes, which requires careful planning and wise management. According to Levin, the final step is to "freeze". This means to set the new standards of behavior. At this stage, changes may be required by the control systems (Levin 2012).

Gulf Oil Middle East Ltd. Strategies

Gulf Oil Middle East Ltd is one of the branches of Gulf Oil Ltd, which specializes mainly in the research activities: development of formulas, compositions, new production technologies, obtaining official approvals and permits from manufacturers of automobiles, machinery and equipment, as well as providing licenses to conduct business under the brand Gulf. The company Gulf Oil Middle East Ltd unites producers of fuels and lubricants. It is also involved in oil and gas production (Peck, 2007).

The company's goal is to become a socially responsible company with the quality of goods and services being at the level of world leaders. The company's strategy is based on provision of comprehensive customer services throughout the territory of the UAE and the development in the form of a single corporation. The company's activity is based on five-year and annual plans of strategic development and it pursues 3 main goals (Peck, 2007):

• Promote growth by achieving concrete results, particularly in relation to profit by investing funds in amounts that provide long-term growth.
• Increase dividend per share as part of its
• Return free cash remaining after reinvestment in the business and pay dividends to shareholders.

Gulf Oil Middle East Ltd Change Management Policy

Gulf Oil Middle East Ltd has become one of the leaders in the production of high quality lubricants and wide range of products - from standard products to special customized lubricants. Gulf Oil Middle East Ltd. offers its customers a wide range of consulting and service programs aimed at optimizing the use of lubricants (Kotter 2011). The range of the company is several thousand types of products for metallurgical, mining, construction industry, engineering, agriculture and others.

Constant dialogue with clients is the impetus for innovation. As a result of research work carried out at Gulf Oil Middle East Ltd., the company daily creates from 3 to 4 new products (Gulf Oil Middle East Ltd. Official Site 2015). Gulf Oil Middle East Ltd. involves special laboratories, equipped with modern equipment and advanced technologies. 70% of all products are lubricants produced within the last five years.

What and Why?

The main implementation that happened within the last years was acquisition of a new plant in the UAE. Now both Gulf Oil Middle East Ltd plants are located in Jebel Ali Free Zone, just 500 meters from each other (industrial, storage area relating to international commercial port of Jebel Ali). The UAE government has already given permission to make a purchase. New plant has an area of more than 4 acres (16 187.44 m2). Its warehouse capacity is over 7200 tons, while the production capacity is over 2 million liters per month. Two pipelines (adapted for cleaning pistons) go directly to the Port Jebel Ali. It has additional automated, self-leveling and filling lines. The plans of Gulf Oil Middle East Limited include a plant for the production of industrial lubricants (including motor oils for engine oils or construction equipment) and several storage tanks for domestic purposes. New technologies and equipment allow producing products of a higher level. It will aim at ensuring and improving customer services. Acquisition of the plant Al Daheera demonstrates the increasing business activity of Gulf Oil Middle East Limited in Jebel Ali Free Zone and reflects further expansion of the company`s plans (Gulf Oil Middle East Ltd. Official Site 2015).

Secondly, nowadays a company focuses mainly on oil refinery, where a high level of production is ensured by the scope and flexibility of the process, as well as high quality. It is planned to expand production of aromatic compounds and acetylene using high technology and construction of a new plant for the production of purified acid (Gulf Oil Middle East Ltd. Official Site 2015).

Thirdly, in the field of marketing, Gulf Oil Middle East Ltd expanded the product range. In the retail market, the company seeks to achieve competitive advantage through better organization of supply with attractive offers to customers and efficient value chains. Gulf Oil Middle East Ltd continues to invest in those areas that have strong leading positions. The company aims to strengthen its position in key markets that grow and increase the efficiency of its own production and sales sector (Gulf Oil Middle East Ltd. Official Site 2015).

Fourthly, the company is being in a constant process of development. The crucial moment in Gulf Oil Middle East Ltd development was a release of SAE 5W-40, which is the number 1 engine oil for Formula G engines. An updated recipe is visually different and darker. The changes were done due to the need of lengthening the official admission of MB 229.3. It was confirmed that now Gulf Oil Middle East Ltd has a new recipe. In addition, the oil received official authorization for Porsche oil category A40. One more innovation was approval of renewed oils, known to be semi-synthetic motor for Gulf Superfleet XLD 10W-40 vehicles for commercial usage. In addition, the transmission of oil for manual gearbox, hypoid and machinery trucks and axles was approved (Gulf Oil Middle East Ltd. Official Site 2015).    

Fifthly, Gulf Oil Middle East Ltd focuses on collaboration with other well-known world leaders. Thus, RENAULT has extended the duration of its admission (admission RN0720-09-04) to the oil RNX 5W-30 Gulf Formula. MTU prolonged admission MTU Oil Category 2 on the mineral engine oil for commercial vehicles Gulf Superfleet Supreme 15W-40 (Gulf Oil Middle East Ltd. Official Site 2015).

Finally, at the end of 2010, two new classes of motor oils API SN and ILSAC GF5 were obtained. Already in October 2010 it started licensing. The products with new classes appeared on the market at the beginning of 2011.The main difference between API SN previous classifications API is phosphorus levels. It is compatible with modern exhaust systems and comprehensive energy conservation. Thus, oil classified by API SN will approximately meet ACEA C2, C3 and C4, without correction for high-temperature viscosity. For a new category of API SN, Committee on lubricants offered to use the same pattern of development as with the earlier categories of API and ILSAC. This means that performance of oil for engine, such as API and ILSAC, is the same. These tests are important benchmarks for the oil. It has to comply with ILSAC GF-5 requirements. The main difference between ILSAC GF-5 and the previous classification (GF4) is the ability to work with biofuels. This improved protection against wear and corrosion, greater fuel efficiency, improved compatibility with sealing materials and improved protection (Gulf Oil Middle East Ltd. Official Site 2015).

Analysis

Gulf Oil Middle East Ltd. SWOT Analysis

The choice of strategies is influenced by many factors known as the sources of exposure. The effect of some of them can be controlled by decision-makers. This characteristic is an important factor in assessing the identification feature of the existing policies. The factors affecting the outcome of policies and their impact correlate with a set of targets and evaluate the degree of controllability. Controllable factors depend on the likelihood of achieving the target risk level and the chosen strategy.

Analysis of the micro-environmental impact aims at assessing the impact and urgency of the trends and developments that underlie each strategic uncertainty. A key result of external analysis is to identify strategic uncertainties. Analysis of the impact is an assessment of the relative importance of strategic uncertainty (Kotter 2011).

External environmental analysis of Gulf Oil Middle East Ltd. leads to the appearance of dozens of strategic uncertainties. One of the main objectives of the external analysis is to range strategic uncertainties and identify opportunities for management in the future. The problem is that there are an enormous number of strategic uncertainties (Skelsey 2013).

The below table presents the internal and external analysis of Gulf Oil Middle East Ltd.

Micro-Environmental Analysis

Macro Environmental Analysis

Lean Production Concept

All above mentioned facts show that the company has decided to implement the new methods and technologies in the production and management processes that can improve competitiveness, reduce costs and increase productivity. This will enable the company to meet international standards, as well as increase the efficiency of the business as a whole. The main method that the company has chosen was lean manufacturing (Anderson, D. & Anderson, L 2013). The advantage of lean manufacturing is in its structure: 80% of the institutional arrangements and only 20% of investment in technology. Experience of implementing lean production at UEA enterprises suggests that the methods of lean production have organizational and economic advantages over the traditional systems of planning and control (Pfeffer 1972):

• Reduction in the production level of inventories and finished products, which generally harmonizes production system and reduces storage costs;
• Improved quality of products, minimizing waste and rework, which leads to increased loyalty among consumers;
• Shortened period of production and supply of the products to the consumers, thus preventing an artificial shortage of products;
• Provision of high performance and efficiency; it indirectly increases the rate of return for the enterprise;
• Reduced amount of unproductive work associated with the movement and storage of goods thus leading to the reduction of production costs;
• Reduced production space and reduced fixed costs of the enterprise.

The method is a set of actions aimed at creating order in the workplace. This systematic approach increases efficiency:

• Visual inspection is an instant visual identification of any employee not meeting specific production standards;
• Special marking equipment (color coding, marking motion direction  and rotation direction);
• Disciplinary standards.

This explains the significant growth within the last 5 years.

Gulf Oil Middle East Ltd. Change Management Procedures

However, Gulf Oil Middle East Ltd. has to implement change management strategies to guarantee its well-being in the future. In order to evaluate possible changes, let us analyze the implementations that have been already done and its influence on the change management process and the future strategies (Gulf Oil Middle East Ltd. Official Site 2015).

The main criteria that characterize management of a corporation are:

• external environment (Gulf has the changing environment);
• product (Gulf`s product is relatively complex and standardized);
• relationship with customers (Gulf has developed positive relationships with its customers);
• nature of work (Gulf`s work is complex and uncreative);
• power (Gulf`s power is decentralized);
• structure (Gulf has multi-dimensional hierarchy);
• type of manager - leader (Gulf has a leader who can see the future image of the company and formulate it as specific and clear objectives);
• corporate culture (It is regulatory and procedural).

In order to control the managers, Gulf Middle Eat Ltd passed from the stage control instructions to the stage of management. Change management process is oriented on the objectives, which are necessary, first of all, to understand not tactical, but strategic challenges facing their organizations.

The great example was to expand the product range. In the retail market, the company seeks to achieve competitive advantage through better organization of supply with attractive offers provided to customers and efficient value chains. This helped in fighting competitors and resulted to strategic collaborations with such partners as Porsche and Formula (Gulf Oil Middle East Ltd. Official Site 2015). As a result, Gulf Middle Eat Ltd has constant partners and loyal customers.

In short, the main criteria that distinguish change management strategies of Gulf Oil Middle East Ltd are: external environment - dynamic; product - complex made "for a particular client"; relationship with customers - partnership; nature of work - complex, creative; power - distributed; structure - hierarchy, project-oriented; attitude towards the future – “the future is uncertain - and this is the source of development"; type of manager - leader - a coach who cares about the achievements of his team and fellow employees; corporate culture - creative; terminology - "strategic vision", "systematic approach", "core competence", "effective communication skills", "creativity"; basic way to implement power - a procedure or enshrined in the partnership agreement (contract) (Barmash 2004).

With regard to the internal environment of the Gulf Oil Middle East Ltd, the distribution of power is established in an effective system of monitoring, control through training, encouragement of initiatives, motivation of staff in the creation of new ideas etc. Currently, the strategic partnership in Gulf Oil Middle East Ltd is virtually non-existent. Motivation and incentives of each employee do not coincide with those of the organization. They are often diametrically opposed. For example, the goal of the Gulf Oil Middle East Ltd is to reduce the expenses, and the employees` goal is to get high salary.