Halliburton is an international corporation that operates in more than 70 countries across the world. It has close to 300 international subsidiaries, brands, divisions, and affiliates. The headquarters of Halliburton Corporation are located in Houston, where the Chief Executive Officer, David J. Lesar, resides and works. As the CEO, Lesar makes sure that plans and policies that are made by the firm’s directors are carried out. Lesar was instrumental in the change from market-share mining to greater diversification in the company. He guided the company’s officials into realizing the importance of outsourcing technology to service companies. As a result, the company was able to acquire new ventures that made it possible for it to enter into the logging, gas, and drilling industries. The company, under Lesar’s leadership, increased its safety, reduced its overheads, and decreased its environmental degradation since he introduced policies that emphasized research and development. The company invested in technology such that, by 2001, it derived 20% of its income from technological accounts (Advameg, 2010, pg 1).
The Energy Services Group (ESG) forms the company’s main business segment across the globe. It operates under two main groups, the Halliburton Energy Services Group, and Halliburton Kellogg Brown and Root (KBR Engineering and Construction). These were separated in March 2002 under Lesar’s direction. The ESG, at the time, brought in 55% of the company’s revenues and more than 80% of its operating income (Advameg, 2010, pg 1).
The ESG deals in pressure pumping services, undersea engineering, drill-bit and down-hole manufacturing, logging, gas and oil equipment, and the enhancement of production. The range of services provided stretch across location of hydrocarbons, well construction, geographical data management, drilling, formation valuation, and production optimization. On the other hand, KBR has deals in the energy and civil engineering industries. It provides services and products that are related to refining and processing, natural gas production, pipelines, and production facilities. Additionally, the KBR subsidiary provides construction and engineering services for civil and government clients. It also maintains and supplies goods for facilities such as prisons, stadiums, highways as well as providing planning and management support for the US military (One Word Trust 2008, p. 1; Advameg, 2010).
As observed, ESG is the business mainstay of the company since it is the superior income-earning subsidiary. This is attributable to its dominant position in the market. It provides many services, partly because of Lesar’s diversification programs, and partly due to the firm’s huge size. As such, the company is one of the most profitable in the energy industry especially when the high cost of energy products in recent times is taken into account (Global Forex Trading 2010, p. 1). However, the company has competitors such as Schlumberger and Weatherford as well as Baker Hughes and Tesco Corporation. The company has also suffered huge losses that were approximated at a value amounting to over $900 million between 2002 and 2004. Its subsidiary KBR continued to be in the eleventh bracket of bankruptcy until the first quarter of 2005 when the company moved into profitability and normal production levels. Despite this increased revenue base for Halliburton from its many contracts in Middle East Asian countries, its overall performance has been in decline thereby bringing about a struggle to regain its former profitability. The continued low performance of KBR led to actions such as attempts to sell it through spin-offs and through initial public offers. These actions were positive in that the company was listed as an independent company in 2007 (Salvatore 2007, p. 56)
Halliburton Company has enjoyed favorable treatments from the US government. This was especially apparent during the Iraq war. This treatment is attributed to the company’s close ties to the former US Vice – President Cheney (2000-2008) who had been the Chief Executive Officer of Halliburton from 1995 to 2000. This brought about allegations of corruption regarding the company’s work in Iraq. Allegations that the company overcharged for its services, in effect overcharging US taxpayers, were made by the US representative Henry Waxman. The allegations were made concerning a contract that was about the restoration of Iraq’s southern oil fields and it amounted to $ 1.2 million dollars (Reuters 2006, p. 1). In November 2006, the KBR subsidiary started separating from The ESG Halliburton subsidiary and by February 2007, the two were separate entities. In the industry, the company as a whole had been the leader in drilling, equipment manufacture, and completion and continuance products for more than 75 years. The company had the expertise and financial might to meet customer demands no matter how specialized the needs of the customer were (The Economist 2009, p. 34).
The company is one of the largest oilfield service providing companies in the world. This means that the firm has little competition. The Egypt manager of Halliburton, Hesham Ismail, said that the firm had no competitor in the region. The firm grew from 36 employees in 1968 to 850 employees in 2006 in the region (Egypt Oil & Gas, 2010, p.1). This may well be the trend worldwide since the firm’s reputation as a service provider is bound to have been carried over from one region to the other. However, there are other companies such as the Worley group of Australia and the Parsons Energy and Chemical Group. In June 2004, the three vied for contracts in Iraq. Halliburton won the top contract although the there was controversy about whether the correct procedure was followed (Phinney, 2004, p.1). In capital hill, at the time, there were sentiments that the government was awarding the contracts unlawfully. This was in light of the fact that the vice president, Dick Cheney, had been the CEO of the company before joining government.
Part of the Halliburton strategy is acquisitions that speed up the company’s growth as well as giving it an already established clientele. These acquisitions do not take on only one form but rather are spread in many areas, both geographical and economic making possible for the company to hedge against any bad outcomes in any of the areas. This diversification has contributed to the success of the company as can be inferred from size. For example, in 2007, the company acquired Ultraline-a division of Savanna energy services Corporation-thereby increasing the company’s ability to provide wire line services in Canada (Business Wire, 2007, p. 1). Therefore, the company is very competitive as is to be expected of a business that manages to succeed in different environments and societies. The company has about 45,000 employees worldwide; a number that further shows how successful and sizeable the firm is.
Competition in the market
To capture the wide international market, Halliburton has gone beyond the market competition in all its markets across the world. In the international oil fields, the company is considered as the only one with the capacity to perform a turnkey performance drilling and completion of any project from start to end. This gives them a higher comparative advantage in production, drilling and marketing thereby commanding a larger international market share and market area size. Despite stiff competition from other major gas and oil companies in the international front, Halliburton has developed a wide capability to deliver services with the requirements stipulated in good time and proper conditions. Another strategy that the company exploits is its massive size and the vast resources it enjoys. With the rapid increase of oil prices per barrel, small and medium sized companies are gradually exiting the market while large companies like Halliburton are able to meet the market requirements due to large-scale production (Brooker 2007, p, 34).
The strategic positioning of the company in all the countries it operates with government authorities offers an opportunity for the company to exploit its potentials fully. This eases the environment of doing business and the managers besides other employees have sufficient time to concentrate on other productive and innovative activities. The large capital base of Halliburton gives them an opportunity to persevere hard economic times like global recessions where they opt to utilize their profits in any expansion and operating expenses when the financial crunch and money supply in economies is minimal as shown by the data below.
Source: Thomson Reuters 2010, p.1
During seasonality in the global market, credit availability becomes a challenge for many companies without a strong capital base especially in the highly volatile energy industry. However, Halliburton mitigates these challenges by using the wide capital base it enjoys thereby weathering the changes that occur and having enough time to react to changes in the market. In the law of demand and supply, if the demand of a commodity is raised, the product will definitely increase in price if other factors are held constant (Salvatore 2007, p. 33).
Decision making process
The company is managed by 10 to 14 directors who are elected during the company’s annual general meeting. The board of directors is composed of not more than two members who are company employees and two thirds of the directors must be independent parties. There also is a corporate and a nominated governing committee that is responsible for nominating board members. The committee, in conjunction with the board of directors, makes decisions on the direction to be taken by the company. In Iraq, Nigeria, Iran and the Balkans the company has been accused of being unethical which has been fully ascribed to the leadership of the company (Buffa & Chatterjee 2005, p. 1). On the company website, it states that its personnel are supposed to avoid any intent and appearance of unethical behavior (Halliburton, 2010). Therefore, the company’s leadership, if it is leading it astray for profit, should seek to mend their actions since the company depends on their direction. If the whole company were to become corrupt, it would lead to a situation where the company would be robbed of its assets leading to decline and possible bankruptcy.
The company may also suffer since other reputable firms may cease to transact business with it. Businesses would be afraid of losing money to the unreliable company leadership therefore avoiding any transactions with it. Additionally, reputable companies would not want to be associated with a corrupt entity and as such, the company would decline because of loss of business. Therefore, the allegations of corruption from other quarters may be hurtful to Halliburton’s business as well as its image. The company chose to relocate its management team to Dubai in 2007 and the official reason was that the business had vast interests in the Middle East and they were only getting closer to their business. However, the move may have been caused by negative sentiments against the management in the US. Part of the US legislature was particularly insistent on the fact that the leadership was greedy in its decision-making and corrupt in its dealings.
Marketing in Halliburton
Marketing is an essential pert of any firm and Halliburton, with its wide interests and global range is no exception. Stiff competition has entered all business types as more business people venture into business enterprises that are more diverse. As a result, stiff competition has emerged in the oil industry as more players seek to capitalize on its rising value and demand. To capture its market, the company has adopted an all-inclusive program through which it organizes itself strategically in the market by working on a project itself without any outside company’s involvement. Consequently, the company is able to lock out competitors, have work to do, and increase its profitability. Diversification is another market strategy and approach adapted by the company in its quest for market leadership. This is not just for the American market but also for the international market (Jean & Truett, 1998, p. 84).
To enhance the company’s performance, the subsidiaries are granted the autonomy to perform all market operations in their respective jurisdictions guided by profit optimization without interference from any quarter including the company headquarters. This is demonstrated by their marketing strategy in Egypt where the company works independently in relation to marketing and production. The company’s strategy of networking key players in the market has greatly boosted the company’s marketing strategy. Networking can be demonstrated in the annual meeting of 3000 executives who chart the way forward and share ideas on the management of the company. The company’s success is evident from the tenders it obtains from the drilling and fueling fields by prominent players and government agencies across the world. This is a fact that has boosted its credibility and offered it a market advantage over other companies in the same industry (Salvatore 2007, p, 75).
Costs and Production
Oil and energy products are a vital part of civilization and they will no doubt continue to be. Consequently, the company is likely to continue earning well if it is strategically placed to exploit this fact. With its leading position and financial might, the company can afford to do intensive research in the energy field and therefore be a leader if alternative energy sources of energy are found. Research would also ensure that the company saves resources in its dealings since it would be relying on technology rather than brute force and old methods in its activities. Production would also benefit from research since it is reliant on technology. Technology often makes work easier such that the company would have less people on its payroll. The cost of production would decrease, as would the demand on those working for the company thereby creating a workplace atmosphere that is conducive for high productivity.
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