case write> You have just taken over as the new CEO of Stratton Oil Company, Int
ID: 450087 • Letter: C
Question
case write>
You have just taken over as the new CEO of Stratton Oil Company, International, an exploration and drilling firm under contract to a major multinational oil company. Your enterprise has experienced its share of “ups and downs” over 2010-2015 because of the fluctuation in international oil prices and complications with overseas operations.
Many of the operational problems stem from difficulties with Stratton’s offshore oil drilling rigs. Maintenance and equipment costs have skyrocketed. You have received several reports of strained labor relations on the platforms. One incident caused such an uproar that the rig manager haltedoperations for more than a week. In addition, there have been a number of complaints from conscientious shareholders concerned with the environmental impact of these rigs, especially following the BP platform explosion and disaster in the Gulf of Mexico in April, 2010. as a CEO how do you solve the issue??
WRITE A CASE ABOUT IT INCLUDING THE FOLLOWING STEPS
Step 1 Situation Audit. Step 2 Problem/Decision Statement
Step 3 identification of Alternatives
Step 4 Critical Issues To Evaluate Alternative
Step 5 Analysis
Step 6 Recommendations
Explanation / Answer
Situation Audit: Stratton Oil Company is mired in problems. The company is not well placed from an operational perspective at the offshore oil drilling rigs. This is compounded by the strained labor relations on the platform.
Problem/Decision statement: The main problem appears to be twofold. Firstly, there are problems with the overseas operations. The offshore oil drilling rigs have equipments that require expensive maintenance work on a regular basis. Secondly, the platforms are plagued with strained labor relations. The offshore oil drilling rigs have a negative impact on the environment and this is troubling several conscientious shareholders.
Identification of alternatives: In terms of alternatives, we should start considering the option of replacing some of the existing equipments and machinery at the offshore oil rigs. The cost savings each year from the maintenance costs avoided will help us recoup our investment in buying these new equipments.
Secondly, HR team at the head office should consider options to stem the labor relations problem at the platform.
Lastly, the organization should look into the environmental aspects of its operations and seek out ways to make its operations more sustainable.
Critical Issues to Evaluate Alternative: For replacing the old equipments, the cost of new machinery will be critical. We will also have to consider the cost of the annual maintenance contracts AMCs). The alternative of replacing the equipments will be evaluated using a net present value method.
Secondly, the impact on employees will have to be considerd due to the strained relation at the platform and how this impact can be turned into a positive dynamic by improving the relation.
Analysis: The advantage of replacing the old equipment is that the unnecessary repair and maintenance cost will be avoided. In terms of disadvantage, the employees will have to be trained again to operate the new equipments.
The advantage of improving the strained labor relations is that the work atmosphere will become positive and more conducive for working in a productive manner. There seems to be no disadvantage for this alternative.
Lastly, for controlling the environmental impact of the rigs, the advantage is that it will satisfy the conscientious shareholders. The disadvantage is that it will result in an increase in costs.
Recommendations: I would recommend the replacement of existing machinery. This recommendation is on the basis of the fact that the cost saved in the form of maintenance costs avoided will help the organization recoup the initial investment to buy new machinery. Secondly, the organization should consider improving labor relations. Lastly, the environmental damage should be minimized, keeping in mind our greater responsibility as an organization towards the society.
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