CHINESE MULTINATIONALS IN ANGOLA
Angola is the second largest producer of oil on the continent of Africa, after Nigeria. In January of 2007, Angola joined the Organization of Petroleum Exporting Countries (OPEC), reflecting its status as the 13th highest net exporter of oil globally. According to the U.S. Energy Information Administration (EIA), Angola exported 1.36 million barrels per day in 2006. Although it is not among the top 15 overall producers, its limited domestic oil use allows it to export the vast majority of its production. Both OPEC and the EIA agree that Angola's proven reserves are in the range of nine billion barrels.
Given that Angola produces 1.34 million barrels per day, and China imports up to 750,000 of those barrels every day, it is not hard to discern the depth of the two countries' relationship. China has successfully ingratiated itself on the Angolan oil industry using the same strategy it has applied all over Africa: a whirlwind of spending, investment, and preferential loans with no strings attached other than oil rights. In 2007, China pledged no less than $20 billion "to finance trade and infrastructure across the continent over the next three years," according to published reports. Many African scholars and political leaders say Africa has no need for the colonial baggage and paternalism of the West, and they welcome the Chinese approach of cowboy capitalism." What this actually means is that many African governments prefer to be funded by the Chinese because unlike with the West, there is no conditionality on the financing - the money comes with no requirements about human rights, transparency, or democratization.
Sinopec Limited's parent, Sinopec Group, is one of the major state owned enterprises (SOEs) in the Chinese petroleum, energy and chemicals industry. Sinopec is headquartered in Beijing and its business includes oil and gas exploration, refining, and marketing; production and sales of petrochemicals, chemical fibres, chemical fertilizers, and other chemical products; storage and pipeline transportation of crude oil and natural gas; import, export and import/export agency business of crude oil, natural gas, refined oil products, petrochemicals, and other chemicals. In June 2013, Sinopec agreed to acquire Marathon Oil Corp's Angolan offshore oil and gas field for US$1.52 billion.
Each student group is required to analyse the emergence of markets for SINOPEC in Angola. The case describes the growing presence of Chinese SOEs in resource-rich African countries. As energy resources from the Middle East and Persian Gulf region become more expensive and at times difficult to obtain, Africa is increasingly becoming an alternative source of energy for China. Furthermore, Africa is seen as a platform for Chinese SOEs to broaden the influence of China among emerging African countries.
Student groups are required to draw up a business report, analysing the entry of SINOPEC in Angola. Groups are required to address the following:
1. A profile of the Oil Industry in China and in particular a profile of SINOPEC should be developed.
2. A SWOT analysis of SINOPEC and a 5 forces model auditing the Oil industry in China and the global forces pushing for expansion.
3. Use a specific theory of International trade to justify the move of SINOPEC into Angola.
4. Describe the participants (Chinese and/or Angolan) that benefit from this move and how they in turn facilitate Chinese investment in Angola.
5. Carry out a PESTEL audit of Angola and outline the benefits of SINOPEC moving into this country.
6. Summarise the mode of market entry and expansion currently pursued by SINOPEC.
7. What potential obstacles might SINOPEC encounter as it attempts to integrate and expand its international presence? How can it overcome these obstacles?
8. How should SINOPEC implement its expansion? Should it opt for an international expansion or a domestic growth strategy? Provide reasons for your choice.
It is recommended that in order to address the 8 themes, groups should take into consideration the following factors that need to be addressed in the context of the main questions outlined earlier:
(a) What is strategic management and strategic competitiveness? How have the characteristics of the 21stcentury competitive landscape influenced the strategic competitiveness of firms? Discuss these characteristics and the effect they may have had on Sinopec.
(b) What influence does the external environment (EE) have on firm performance, and which elements of the EE have been of crucial importance for Sinopec?
(c) What influence does the internal environment (IE) have on firm performance and which elements of the IE have been of crucial importance for Sinopec?