Saudi Aramco Company’s Marketing and Competitive Strategies

Introduction

The world has 1,148 billion proved oil barrels; an estimated 77% of this is controlled by National Oil Companies (NOCs) with Western international companies controlling a meager 10 % of the global oil and gas resources base (Kobayashi, 2007). Moving from a privately-owned company by American oil companies to a national monopoly controlled by the King of Saudi Arabia, Saudi Aramco gradually rose to become the world’s largest producer of oil contributing over 10% of the global demands. To maintain its top position in global ranks, the company employs a number of marketing strategies and capitalizes on its competitive advantages. This paper takes a focus on the marketing and competitive strategies of the Saudi Arabian oil company, Saudi Aramco.

Marketing Strategy

Global operation; the company operates in over 70 countries worldwide with more than 55,000 employees. Internationally the company specializes in refining and marketing companies that are situated in the important markets of the Asia, North America and Europe (Kobayashi, 2007).

Variety of products: the company affiliates in oil exploration, exports of refined products, crude oil, hydrocarbons, international shipping and distribution. Its market for crude oil comprises; Asia 60%, USA 19% and Europe accounts for 21%. Of its refined products, 83% are consumed in Asia, 11% in Europe and 6% in the USA (IEEJ, 2005).

The company has increased its activities in the US increasing the capacity of its affiliate company Motiva JV in Texas in production of large volumes of heavy Arabian crude oil and seeking other investment opportunities in the land (IEEJ, 2005). The company continues to stamp its presence in Asia by focusing on China and Japan as their major markets while closely monitoring the rapid growth of India’s market for potential investment opportunities. It has increased its refining capability to cater for the increased domestic and international demands by setting up more export refineries. It capitalizes on the strength of the Saudi Aramco brand in winning international markets specifically in Europe, USA and Asia and has launched new market campaigns so as to be less depended on specific markets.

Competitive strategy

Its greatest competitive strategy arises from the fact that it has monopoly rights over oil exploration in the Kingdom of Saudi Arabia (Company Monitor , 2010). This makes Saudi Aramco the only producer, refiner and distributor of oil products in the region. Oil production cost is cheaper in Saudi Arabia compared to any other country across the world. This is articulated to the Saudi Arabian oil wells that flow freely to the ground due to reservoir pressure making pumping unnecessary for extraction of oil to the surface (Kobayashi, 2007).

The company enjoys good rapport with the Saudi Arabian Government since it is a fully-owned government property. Contrary to other NOCs, the duties of the company and responsibilities of the government are clearly demarcated making its relationship with the authority exceptionally amicable, ensuring operating autonomy and with minimal political interventions in its operations. The company enjoys the privilege of being the only company with a spare production capacity to meet the global oil demands in case of crisis. The company boasts of oil fields that are predictable to last the next 90 years. During the global oil crisis at a time when Iraq invaded Kuwait, the USA mandated Saudi Aramco to produce oil in surplus to compensate for Iraq and Kuwait.

Conclusion

The Saudi Arabian Oil Company, Saudi Aramco, has been rated as the world’s number one producer, refiner and distributor of oil and petrochemicals. To maintain its top position, the company employs various marketing and competitive strategies outlined above. With these strategies being implemented, the company is on track to maintain its top position presently and in future.

References

Company Monitor. (2010). Saudi Arabia Oil & Gas Report. Business Monitor International Ltd , p. 53.

IEEJ. (2005). Saudi AramcoDownstream Investment Strategy. Asian Energy Forum (pp. 10). Saudi Aramco.

Kobayashi, Y. (2007). Corporrate strategies of Saudi Aramco. Japan: Rice University.