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Essay is about International Business- The Impacts of Globalization on Saudi Arabian Oil Industry

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The Impacts of Globalization on Saudi Arabian Oil Industry

 

Executive Summary

Globalization includes the processes of integration between different countries at various levels, such as economic, political, and social sectors. Globalization has significant impacts on the economic patterns as it affects the introduction of different policies that might be considered relevant under many circumstances.  Saudi Arabia is known for the production of oil products over the past decades. The oil industry is under the OPEC association that determines the affairs of oil production and supply in the industry. Globalization has significant impacts on the oil industry in Saudi Arabia. It has affected the levels of exports and the pricing factors involved in the industry. The driving factors of globalization have also changed the oil industry in Saudi Arabia in significant ways.  The market, costs and governmental regulations are some of the important drivers that have profoundly affected the globalization in the country.

The Impacts of the Globalization Forces on the Oil Industry in Saudi Arabia

Different forces might be associated with the increase in globalization. Such effects are relevant in determining the extents to which globalization factors may be attained. They are the specific agents of globalization that may be considered when determining its causes. These drivers are categorized based on their impacts and influences.

Market Globalization Drivers

The consumers are considered as the major market participants in the global sectors. Consumers have great impacts on the specific needs that may affect their relationships in the market. The globalization factors have been accelerated by the needs of the customers which have been universally developed. The establishment of the standard levels for the consumer needs have shaped the manner in which globalization has changed. The expectation of the customers in the global frontier defines the increase in the success of integration. The existences of global channels have also favoured the integration of the economic sectors. The global channels represent the logistics that are connecting one country to the other. These factors are responsible for the creation of a connection between one country to another regarding the logistics and transportation issues.  Other problems are also associated with transferable marketing which tends to define the extents to which markets can operate within different countries. The lead countries are also integrating with other countries regarding their marketing strategies as a way of achieving ultimate success.

The market globalization divers have had impacts on the Saudi Arabian oil industry. For instance, the industry has developed different standards of the crude and finished oil and petroleum products that are supplied within the global sectors. Moreover, the facts that Saudi Arabia is under the OPEC has implied that the customer needs in the market take the lead in the operation of the industry (Bina, 2006, pp. 12). The industry is no longer a monopoly since there are major participants regarding their policy making with regards to the customer needs. The global customers have specific needs that tend to define their ways of involvement in the market. The existences of global distribution channels have also implied that most of the markets are reachable hence the oil industry in Saudi Arabia has gradually expanded.  The lead Middle East countries have also shaped their global channels and marketing reach of the customers through the standardization of the oil quality offered to the consumers. Such factors tend to shape the marketing responsiveness of the Saudi Arabian oil companies towards the changes imposed through globalization.

The Cost Globalization Drivers

The cost globalization drivers can be defined as the cost related elements that may affect how integration between different countries is established. For instance, it is also relevant to assert that the cost drivers are responsible for the reduction in costs factors that may shape how well industries respond to the global functions on economic matters.  The economies of scale are related to the benefits that are accrued from large production or supply of products within specific markets. These factors initiate globalization since the global sphere allows for a massive supply and availability of market. The decreasing transport and communication costs are also responsible for the increased levels of globalization. The competitive advantages and the steep experience curves are also explicit factors that are responsible for the increased global existence. Moreover, these elements may impact on the Saudi Arabian oil industry in different ways. For instance, these are cost reducing elements regarding the ability to conduct business in the international frontier implies that the Saudi Arabian oil industry.

The Saudi Arabian industry has changed significantly based on the main issues that affect the cost related elements. For instance, the international marketing and integration have increased the existence cost saving plan which makes international business accessible. For instance, since Saudi Arabia is one of the largest oil producing countries in the Middle East.  The ability to perform business in the international levels without much cost has changed the production levels of the country. For instance, the Saudi Arabian oil industry has been in the forefront of oil exports in the Middle East. The cost factors have also enhanced the profitability index of the country to ensure that it maintains the market leadership in the market. The cost globalization factors have favoured the integration of the country in the global market sectors.

The Government Globalization Factors

The change in the government influences and regulation are also responsible for the increasing globalization as witnessed in the current world. The government is a major player in international and local markets.  The governments have established favourable trade policies that may be used in assessing the needs of the industry. Such policies would help in changing the restrictions imposed on doing business with other external countries. For instance, the taxation policies have been changed to ensure that other countries are accommodated. The compatible technical standards are also factors that ensure that organizations have consistent standards used in the technical sectors. The idea makes integration and globalization a possible mission. The compatible marketing regulations also imply that countries have integrated approach towards the marketing criteria.  The government influences on competitors and customers are also significant causes of globalization.

The government globalization factors have influenced the ways in which the Saudi Arabian oil industry has responded to globalization. For instance, the industry’s globalization influence has been based on the OPEC association which has placed uniform standards of regulation which makes the oil production elements more universal for the country.  The control and regulations methods in the oil industry of Saudi Arabia have been greatly influenced through the international integration (Elyas and Picard, 2012, pp. 87). Furthermore, oil is a sensitive product based on the effects that it has on the global economy. The government of Saudi Arabia has had to change the regulations and integration factors to ensure that they collaborate more effectively. The globalization factors have shaped the oil industry in Saudi Arabia as uniform standards and standard have been developed to shape such supplies. Therefore, the Saudi Arabian oil industry has changed by complying with the uniform technical standards that also define its association with other countries. These elements are relevant in explaining the positive influence of globalization towards the market expansion of the oil industry in Saud Arabia.

The Competitive Drivers        

The competitive drivers are elements of competition that may define how globalization is created. Moreover, the change in competitive influences and access to different markets may impact on the global activities. When top competitors in the market change their ways of actions in the competitive market, other companies may have to follow the direction to ensure that they conform to the standards stipulated by the competitors. Moreover, such changes tend to affect the patterns of operation within the global markets. Therefore, the competitive elements have been relevant in contributing to the rising globalization factors as companies are focusing on the competitor actions as the best way to base their strategies.

The existing globalization patterns have impacted the Saudi Arabian economy.  Saudi Arabian oil industry is one of the top competitors in the world. However, the globalization has granted access to the influences of other countries. For instance, the global market place has changed the ways in which other participants may impact the industry. Other countries including most of the Arab nations in the Middle East have affected the Saudi Arabian oil industry based on the success of their integration in the global market.  The competitive forces by other industries tend to affect the influences of the Saudi Arabian oil industry (Al-Yousif 2011, pp. 112.). For example, the price issues and the quality of oil supplied in the market by the Saudi Arabian oil industry must always match that of the competitors.  The globalization has impacted on Saudi Arabia as it has increased more international competition standards that would change the ways in which the oil industry in Saudi Arabia would operate. The interdependence of countries has also changed the manner in which the competitive forces are viewed. The possibility of the influence of policies from one country to another would change the ways in which Saudi Arabian oil industry would be affected by such changes.

Forces Impacting On the Localization

The local sectors are highly affected by the existence of the globalization issues. The local sectors in the case of Saudi Arabia would be the economic sectors that use oil as part of their on-going progress. It is important to assert that the local sectors are major players in the position of the industry in the global sectors. Therefore, globalization comes along with localization effects on the country. The local sectors tend to respond to the globalization elements that may affect the industry. Therefore, the local sectors are responsive to the globalization effects within Saudi Arabia.

The consumer tastes and preferences are one of the localization factors associated with the effects of globalization elements. The consumer tastes and preferences are not much sounding in the oil industry. The oil industry in Saudi Arabia is responsible for the provision of the necessary resources needed for the transport and other sectors. The petroleum products are unique and have universal usage in the industry. Moreover, it is also relevant that taste and preferences in this industry would be determined by choice of the relevant machines that would use the oil products (El-Said & Harrigan 2006, pp. 32). For instance, the types of the cars and the engine system are designed to either use petrol or diesel depending on the manufacturer’s specification. The local sector would not be affected from the perspective of the tastes and preferences. The openness of the market would not affect the local response to issues relating to the oil preferences and tastes.

Saudi Arabia is a country that is affected by cultural issues. The integration through the global activities would influence the changes in the cultural elements that define the traditional settings of the country.  The differences in infrastructure may also increase the supply to the outside countries while the domestic markets would suffer from a low supply of oil products. The differences in distribution channels are also some of the essential factors that may impact on the Saudi Arabian local settings. For instance, the global sectors would introduce appropriate channels that would make supply easy to the outside countries as compared to the domestic markets. Such factors may affect the manner in which the local economy may be impacted. The local government in Saudi Arabia may have an impact on the local settings.  The host government has regulations and standards that may guide the internal and external business activities. The host government tends to affect the manner in which the domestic business is conducted and a number of exports and imports which also affect the business environments.  The demands of the host government would determine the number of the products that leave and come into the country depending on the needs of the host country.

The impacts of globalization have been felt throughout Saudi Arabia. For instance, the local sectors and the performance of the oil companies in the Saudi Arabian companies have changed significantly. Since Saudi Arabia is one of the Middle East countries that are considered as the highest producers of oil, the country has increased its levels of exports based on the opening of the distribution channels and the reduced costs of transport and communication. The performance of the Saudi Arabian oil companies has also increased as a result of globalization (Fairooz & Hamdi 2013, pp. 13). There are also increased numbers of companies. For example, The Saudi Aramco Mobil Refinery Co. Ltd is one of the businesses that existed before globalization while others existed after the globalization.

 

Recommendation for the Future Globalization of the Country

One of the recommendations for the future globalization of the Saudi Arabian oil industries would be based on the increased regulations of the markets. The supply of oil is rising at a tremendous rate in the global spheres. The oil producing countries are losing their profitability based on the access and massive production of oil.  The country should moderate the supply of the oil products in the market to remain relevant in the market. Moreover, it is important that market control strategies be implemented to ensure successful maintenance of business activities in the domestic market of Saudi Arabia. Another recommendation that can be made on the future of globalization in the oil industry should be based on the development of associations between the oil manufacturing countries to ensure that oil producing industries have universal regulations that may assist in ensuring the success of the oil market stabilization (Rogoff 2006, pp.87). Therefore, stabilization and control is a primary recommendation in providing positive market performance.

 

Conclusion

 Saudi Arabia is one of the largest oil producing countries in the world. Globalization which involves the integration between nations has impacted on the oil production of the country. Moreover, globalization has impacted the industry based on the drivers that shape the integration. For instance, the competitive forces imply that the Saudi Arabian industry would be impacted based on the prices and the competitive forces that would force the industry to adjust appropriately to the market pressure. Some of the recommendations that can be made in the industry would be based on the control and stabilization of the market through different strategies such as price control.

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