Introduction
The purpose of this paper is to develop a comprehensive analysis of the internationalization strategy for local companies in the gulf region. In particular, the paper analyzes the case study of Renaissance Services SAOG, an Omani corporation that specializes in a wide range of services to companies operating in the oil and gas industry in the Gulf as well as other parts of the world. An inductive analysis has been developed for the case study. Therefore, this paper attempts to develop an inductive analysis that will highlight some existing disparities between the existing theory and empirical evidence from the case study.
The paper will address a number of issues related to the company’s internationalization strategy as it moves from a local company to a global corporation.
Review of the Case study
Khan, a professor of management at the Sultan Qaboos University in Oman, has developed an article that provides a comprehensive presentation of the strategies that Renaissance Company has been using to achieve growth at the international level. According to the Khan (33), the company has moved from a small family-owned business to an international corporation that is providing a wide range of services related to oil and gas industry. In addition, the company has used mergers and acquisitions to own a number of companies in the Gulf region. In addition, it has been attempting to list in foreign stock exchange markets in order to enhance its strategies for globalization. These and other strategies for internalization are worth analysis in order to determine their validity and effectiveness in helping the company achieve its goals.
The company provides various services to other players in the oil and gas industry. The company operates in more than 39 countries and has offices in more than 20 countries located in various parts of the world. Thus, it is evident that the company has diversified its operations to go beyond the oil and gas sector to include other services. In addition, the company has successfully moved from a local company to an international corporation that diversifies its operations in multiple countries throughout the world.
Therefore, the internationalization strategies used at the company are the main issues that need an in-depth analysis. What issues and trends are addressed at the company? What strategies are used to address these issues and trends? How effective are these strategies?
Issues and trends at the Renaissance Company
The empirical issue quest for diversification is an important aspect of the case study. According to the company history, the initial organization was a single, family-owned business specializing in a few services, especially in oil production. In the modern context, it has grown from a family-owned business to a global conglomerate offering a wide range of services in various parts of the world. The quest for external growth is an important issue for the company. In addition, the company was seeking to expand its coverage beyond the gulf region, seeking to invest in foreign nations.
Secondly, the psychic distance is an important issue addressed in the case study. In this context, psychic distance is a term used in reference to the perceived similarities and differences in various aspects that have an impact on a company. The issue of market selection is important in this case.
The issue of internationalization is an important aspect of the company’s growth trends. The company has been seeking to cover other areas beyond Oman and the Gulf region. The models applicable to initiate, implement and enhance internationalization are diverse, but companies tend to choose the paths that fit their situations. The company’s gradual expansion of a local business to an international conglomerate is an indication that the internationalization model is effective.
The impact on the country of origin in expansion to foreign markets is also an important issue that needs be addressed using the strategies applied for internationalization of a company’s service. The country of origin determines a company’s ability to penetrate some foreign markets, especially due to the different social, political, beliefs and legal systems between the country of origin and the company’s target markets. People and institutions in different countries tend to have different perceptions and beliefs about various issues, which are likely to affect a company’s ability to penetrate, establish and grow in foreign markets.
What are the strategies used to address these issues at Renaissance Company?
Renaissance Corporation has attempted to employ a number of strategies to address these issues and enhance its ability to penetrate, grow and expand in foreign markets. First, the company’s growth was based on the experience of the founder, Samir Fancy, a young entrepreneur whose business career started in Saudi Arabia. With the entrepreneur’s prowess in managing multicultural human resource, the company was set to work with diverse employees from a wide range of backgrounds. Therefore, the entrepreneurs’ international experience helped steer the company’s entry into foreign markets. The global ambitions possessed by the founder provide evidence that the company was set to go global right from its foundation. After returning to Oman from Saudi Arabia, the founder had the ambitions to establish a regional corporation that would provide services to various corporations in the Gulf region.
Secondly, the company embarked on various strategies to diversify its operations. The formation of mergers and acquisitions has been one of the main strategies that have steered the growth and diversification of the company. The acquisition of Topaz Energy and Marine Company in 2005 remains one of the major steps and achievements the company has made since it was established. This marked the first step toward globalization and diversification of the company’s products and services. From its headquarters in Dubai, UAE, Topaz had been growing rapidly, penetrating these markets within a short time. In addition, it had an established workforce of more than 5,500 individuals. In addition, it had a wide range of services and products, including ship repair, ship operation, production of stainless steel and fabrication of oil and gas. In addition, Topaz Marine services, a sister company to Topaz energy, was involved in the provision of marine services in the region.
Apart from mergers and acquisitions, Renaissance has employed a number of other strategies for internationalization. For instance, it has invested in foreign stock markets using the Topaz brand name. In addition, the company indicated its interest to list on the LSE in 2011. The aim was to increase its presence in foreign markets. Since the Topaz name has been accepted in various nations, it was necessary to list in the leading European bus using the Topaz name. The purpose is to ensure that the company gains the advantage of Topaz’s popularity in foreign markets and its position as a leading corporation in oil, gas and marine industries.
The company’s penetration into hospitality and catering industry is an important strategy that has allowed it to diversify its products and penetrates foreign markets. For instance, the establishment of Contract Services Group (CGS) was a major step towards internationalization. With this project, the company was able to diversify its operations. The company is using this venture to provide a number of services, some of which are beyond hospitality and catering sector, including accommodation, laundry, maintenance, leisure, cleaning, and real estate management. In addition, this new venture has been used in the company’s entry into foreign markets such as Norway, Kuwait and Qatar.
In the recent times, the company has used a number of additional strategies to enhance its internationalization process. For instance, new acquisitions and joint ventures were established to ensure that the company is present in various markets, with little efforts made to fight off the competition at the local levels. For instance, its bid to acquire the entire Norsk Offshore Catering was successful. Norsk was a Norwegian company that has been specializing in providing drilling and production services. In this way, the Renaissance company was able to enter into the vast and competitive European market with less capital, which spared it from using huge amounts of resources to establish its direct entry.
The establishment of a joint venture between Topaz and Gentlas limited, a Saudi Arabian company, was another important strategy that promoted Renaissance’s internationalization process. For instance, Gentlas was operating fleets of vessels in Saudi Arabia. It was specializing in oil and gas industry. Thus, the project became the company’s strategy of diversifying its services beyond Oman. The venture has helped the company venture into a number of businesses in Saudi Arabia, a country that has a booming economy due to oil and gas, industrial development and other aspects.
Finally, the company’s acquisition of Doha Marine services has proved important in promoting its ability to internationalize its services. Doha Marine Services was involved in the offshore provision of fleet services in Qatar, with a number of other outlets outside the country. Thus, Renaissance became the parent company to a number of regional organizations, which steered its internationalization.
A theoretical view of internationalization strategies at Renaissance
From this analysis, it is evident that the company has embarked on mergers, acquisitions, joint ventures and diversification of products and services to enhance its internationalization. The theory of mergers and acquisitions prove that the projects provide a number of advantages to the company. For instance, it has been shown that a company that acquires an already existing company, especially in a foreign market, is likely to take the advantage of the acquired organization’s prowess and experience in the market. In addition, the company acquires the target company’s assets and other features. In this way, the incoming company avoids the unnecessary costs of establishing its own outlets. In addition, the company avoids competition, given that the target company in a merger or acquisition is likely to have some strategies to enhance its competitiveness.
In cases where a company is seeking to enter a foreign market, the cultural differences between the country of origin and the destination country affects the performance of the incoming organization. However, with mergers, joint ventures and acquisitions, the foreign company enjoys the experience of the local market. In most cases, the foreign company continued to use the already established labor in the local market. In this way, it avoids cultural conflicts likely to occur between the foreign managers and local workers.
Renaissance’s move towards diversification of services and operations is based on the theory of product and service diversification. According to this theory, companies tend to gain from venturing in multiple industries for a number of reasons. For instance, over relying on one industry is likely to pose threats, especially when factors such as change in laws, industrial crisis and change in regulations affect the performance and profitability of one industry. In such a case, a company with diversified services and products can easily switch to another profitable industry and avoid losses.
Conclusion
The inductive analysis developed in this paper for examining the case study provides an in-depth understanding of the process of internalization used by the company and the differences between the case study evidence and theoretical underpinning. The case study provides evidence that the growth of the company was achieved through intensive mergers and acquisitions strategies, which resulted into the company’s global presence. It is evident that mergers and acquisitions at the local, regional and international platform were involved. Despite the difficult economic and financial conditions, the company emphasized on these two strategies as opposed to organic growth. Secondly, the case study has shown that the company’s strategy has refuted some claims placed within the theories of distance theory because the company did not involve intensive following of business as claimed in the theory. Secondly, the impact of the country-of-origin theory did not affect the company’s growth, which shows the theory’s failure to accommodate evidence from reality. Therefore, this study has shown that the existing theories in internationalization of business do not accommodate fully the realities and facts that are observed in real life when modern companies are going global.
Works Cited
Khan, Golam. “Internationalization of an entpreneurship’s services company from the Arabian Gulf: The case of Renaissance Services SAOG”. International Journal of Business and Management 7.8 (2012). Print.