Strategies For Turbulence

Abstract The turbulence within the petroleum industry over the past decade continues to challenge Canadian oil companies in unpredictable and disturbing ways. Although the corporate community has been aware of the value of strategic planning, the reality is that most organizations have simply "muddled through" with their planning efforts. Much of the strategic planning has been on an act-hoc, incremental basis with correspondingly disorganized adjustments. Thus many companies have been forced to close down, sell out, merge or accept radical and painful recovery dictums (the latter often administered by their erstwhile "friendly bankers"). Rapidly fluctuating competitive environments require "new business and Financial strategies that emphasize flexibility, fast responses and diversification of risks" (Malmgreen, 1983, p. 6). It is a more turbulent world, buffeted by rapid inflation and more rapid disinflation: oil price shocks, major swings in exchange rates, the emergence of new competition, and rapid advances in technologies. Governments have increased their intervention by regulating prices, controlling ownership while ironically providing exploration and production incentives. The uncertainty of the past is expected to be compounded by the next few years. In facing this future, four well-known areas of uncertainty must be taken into account in order to achieve effective corporate strategic planning.The first deals with the extent and nature of the economic recovery, especially the interaction among and between interest rates, borrowed capital, government protectionism and budget deficits.Structural uncertainties, the second, include regulatory, price and tax policies, the effect on demand of a world-wide economic upturn; political developments and their ideological ramifications, and technological changes changes.Thirdly, there is uncertainty in the financial markets resulting from international debt servicing and defaults, rising loan-loss provisions and more cautious lending policies.The fourth area of uncertainty, and the one that could be the most amenable to effective strategic planning is the management of human resources. Government policies are not clear with regard to manpower development, training and educational demands in light of the economic and technological uncertainties. Motivation and employee development needs remain unclear. Strategic Planning This article reviews the concepts and techniques associated with strategic planning and provides examples of various tools available to strategic planners to assist them in coping with their turbulent environment. Although there is little hard evidence of the specifics of strategies planning applications in certain firms, (especially regarding the return on the corporate investment in the planning techniques), it has been demonstrated that strategic planning of some kind should lead to business stability and growth (Eadie, 1983). Traditional long-term planning, (with its focus simply on five- or even ten-year forecasts) has proved increasingly less useful as political, environmental and social uncertainty have escalated. This "Age of Discontinuity" (Drucker, 1968) requires planning that is aware of and responsive to, the environment within the planning framework. Understanding and interpreting an organization's environment is a basic characteristic of strategic planning, with its product being change.