STRATEGIC CHOICE AND EVALUATION

Strategic Choice and Evaluation Adeyemi S. Akanbi STR/581 February 1, 2012 Steven Knabe

STRATEGIC CHOICE AND EVALUATION

Strategic Choice and Evaluation It is imperative to evaluate the various alternatives Saipem must consider to realize growth in Remotely Operated Vehicles (ROV) business particularly in the United States. Generic Strategy Saipem generic strategic will be solely differentiation. By differentiating its product from other manufacturers will strategically position Saipem as the leader in the ROV business locally and eventually globally. Pearce and Robinson (2011) asserted that Strategies dependent on differentiation are designed to appeal to customers with a special sensitivity for a particular product attribute. This implies that for Saipem to capture the ROV market business market in the 21st century, it must equip its vehicles with many attributes that will differentiate it from other manufacturers. Essential features such as multiple cameras, broadband Internet cable, webcam, scissors, metal saws, wire cutters, pliers and hack saw (Saipem S.P.A). Moreover, Saipem manufacture two types of ROVs, 250 horsepower, and 150 horsepower ROVs. The ROVs are designed to handle a suite of support tools and large intervention packages, thus expanding capabilities of the vehicles. Besides oil and gas industries, ROVs are also used for the purpose of exploration and research. The deep ocean is full of secrets therefore; the application of technology will promote scientific underwater research in the deep water. As a result of the importance of these attributes, competitors often face perpetual barrier to entry thereby increasing Saipem market share and profit margin. Value Disciplines Customer intimacy is the first value discipline that Saipem must concentrate on; hence the company will be able to respond quickly to almost any need from customizing a product to fulfilling special requests to create customer loyalty. To fulfill this value, Saipem must be willing to invest to build customer loyalty for the log term. The goal is to guarantee customer satisfaction with low regard to initial cost (Pearce & Robinson, 2011). Once the customer loyalty

STRATEGIC CHOICE AND EVALUATION

is secured lifetime relationship will be established. For instance Saipem own and operates many ROVs on BP platforms in the Gulf of Mexico. The masters service agreement has been in place for several years. Saipem was able to keep and maintain this agreement because the company has consistently satisfied the client request and has secured lifetime relationship. This relationship must be improved by constantly delivering quality products and services that will in turn attract many major operators. Product Leadership Pearce and Robinson (2011) proclaimed that (companies that pursue the disciplines of product leadership strive to produce a continuous stream of state of the art products and services. Furthermore, to attain this goal, the company must meet three main challenges: creativity, innovation, and improvement. Saipem ROV business has been focused on Oil and gas industry; however, by reaching out to the scientific world overtly will expand the companys scope and customers. More discoveries are been made in the deep sea and faster and efficient ROVs are in demand to achieve this goal. Saipem ability to mitigate the problem will further increase it market share and stakeholders wealth. Creativity is recognizing and embracing ideas usually originating outside the company (Pearce & Robinson, 2011) Saipem must be creative by continually scanning the environment for new ideas. By avoiding bureaucracy, business, and management processes are engineered for speed. Furthermore, this will also facilitates commercialization of ideas and shorten the cycle times. Continuous improvement is vital to maintaining strong market in face of competition, this will prevent competitors from challenging obsolete products with an improved ones. To this end, Saipem must strive to improve its ROVs capabilities so as to compete effectively. Grand Strategies Grand strategies predominantly focus on achieving long-term objectives. Thus, a grand strategy is a comprehensive general approach that guides a firms major action (Pearce & Robinson, 2011).

STRATEGIC CHOICE AND EVALUATION

Product development is one of the major grand strategies that overtly will facilitate the implementation of the Saipem new strategy. This strategy is based on the penetration of existing markets by incorporating product modifications into existing ones (Pearce & Robinson, 2011). As discussed above, by improving the ROVs features and capabilities will further re-position the company in the local and global market. Additionally, manufacturing the ROVs that specifically meet and exceed the needs of the scientific world will also increase the companys market share. Innovation is another grand strategy that can add to Saipem value and increase market share. Saipem currently produces two kinds of ROVs, 250 and 150 horsepower. The underlying rationale of the grand strategy of innovation is to create a new product life cycle and thereby make existing products obsolete (Pearce & Robinson, 2011). Thus, Saipem must be prepared to introduce dramatically new or improved ROVs that meet the challenges of the 21st century. To achieve this, the company has to invest in research, development, and marketing and the costs of investment will pay off in the long run. Horizontal integration will be vital to the achievement of Saipem goal in the ROV business. This strategy is based on growth through the acquisition of one or more similar firms operating at the same stage of production marketing chain (Pearce & Robinson, 2011). The advantage of this strategy is that it eliminates competitors and provides the acquiring company with access to new markets. Similarly, the strategy will provide Saipem with critical resources that it need to improve profitability. SeaBotix is a typical example of company that Saipem may acquire. SeaBotix target customers are the governments and the nuclear industries. Key Alliances Saipem key alliances are Oceaneering ad Subsea 7. Oceaneering is the worlds largest work ROV operator and the leading provider of ROV to the oil and gas industry. The company is also the worlds largest manufacturer of ROV systems (Oceaneering international, 2012). Merging with Oceaneering will boost Saipem strategic action. On the contrary, Subsea 7 has fleet of more than 150 ROVs. This range from the smallest observation class ROVs to purpose built drill support vehicles and heavy duty construction class systems (Subsea 7 Inc, 2012).

STRATEGIC CHOICE AND EVALUATION

Recommendation It is apparent that a combination of product development and innovation strategies will yield undoubtedly better results. The author is aware of the costs implication of the innovation, which will be offset in the long-run. The costs of research and development incurred at the initial of the development may affect the companys profitability but as time goes on, it will gradually reduce as employees become more efficient and cost of production begin to reduce. The effect of marginal costs will be analyzed in the company forecast budget. Moreover, the budget will compare the expected revenue against costs. In summary, the author has clearly highlighted the fundamental strategies that Saipem need to implement to expand it market share in the ROV business. This strategy has to be planned well and strategically executed so as to yield the positive results. ROV business is a growing business that Saipem must prepare to advantage of in the nearest future.

STRATEGIC CHOICE AND EVALUATION

References Pearce, J. A., & Robinson, R. B. (2011). Strategic management: Formulation, implementation, and control (12th ed.). New York: McGraw-Hill/Irwin. Saipem SPA (2012) ROV Business; retrieved from http://www.saipem.com Subsea 7 Inc (2012). ROV retrieved from http:/www.subsea7.com Oceaneering International (2012). ROV retrieved from http://www.oceaneering.com/rovs/