Business Environment

Weatherford International Ltd (WFT) a New York Stock Exchange (NYSE) listed company is one of the worlds leading oil and gas field service and equipment providers, its products and services span the oil/gas wells life cycle, encompassing exploration, drilling, extraction and production of all forms of oil and gas. WFT employs more than 50,000 people and operates in more than 100 countries worldwide geographically segmented into four global regions that cover all major oil and gas-producing areas, North America: Latin America: Europe/West Africa/ Former Soviet Union: Middle East/North Africa/Asia, with four individual headquarters located, Houston, Moscow, Dubai, and Singapore. In addition, the region operations span many international boundaries and communities that dictate certain trading conditions, customs, legal and government regulation, and environmental policies are met. Legal Environment All business activities, from the establishment of the organisation through to the sale of the product to the customer, are influenced by the law. Worthington and Britton (2009). Business law mainly consists of employment law, health and safety law, contract law, consumer law, and accounting law. Legal proceedings can be issued through public law and/or private law. Public law is between the state and an offender and encompasses constitutional law, administrative law, and criminal law. For example, the United States Department of Justice (U.S. DOJ) in 2001 launched a criminal enquiry into alleged fraudulent financial reporting by the directors of Enron Energy; this led to the introduction of the Sarbanes Oxley Act 2002 to ensure all NYSE Companies accounts, including WFT are now audited and reported accurately to shareholders Hannagan (2008). Furthermore, private law is between individuals or private dealings between citizens and companies and involves contract law, and tort / civil law matters. For instance, under civil law it is possible to claim compensation for ill-health or injury at work by instituting legal proceedings for personal injury. The extent of WFTs business includes its own legal team to monitor pending laws concerning its global operations, and advise on contract issues, terms conditions, and late penalty clauses that may affect the companys operation, its costs, and demand for its products. Nevertheless, WFT is being investigated by the U.S. Office of Foreign Assets Control regarding trading law allegations of improper sales of products and services into certain countries subject to U.S. economic and trade sanctions, Cuba, Iran, Syria, and Sudan. WFT has ceased business with these countries incurring loss of business and investigation costs totalling over $100 million. Moreover, the failure of its code of conduct in this instance has led WFT to augment its legal team, adding extra staff and more rigorous policies, procedures, and training, on Sanctioned Country Import / Export law compliance. (www.weatherford.com). Ethical Environment The UK government define Corporate Social Responsibility (CSR) as, the business contribution to our sustainable development goals. Essentially it is about how business takes account of its economic, social and environmental impacts in the way it operates maximising the benefits and minimising the downsides Specifically, we see CSR as voluntary actions that business can take, over and above compliance with minimum legal requirements, to address both its own competitive interests and

interests of the wider society. (www.webarchive.nationalarchives.gov.uk) WFTs board of directors strives to be pro-active with this and operates a Code of Business Conduct (COBC) and Corporate Governance (CG). policy The governments definition of CSR advocates a companys efforts need to go beyond just conforming to a set of principles of right or wrong that are solely based on minimum legal requirements, Sethi (1975) calls this social obligation, and they are seeking companies to improve its social obligation, by acknowledging the interests not only of shareholders but of all stakeholders, and in doing so contribute to the wellbeing of the environment, this suggests Sethi is social responsibility. For instance, British Petroleum (BP) probably once a company that represented social responsibility, however, BPs Gulf of Mexico oil spill has had devastating effects on the environment, BP itself, which further halved the companys share value, seriously damaged its reputation, incurred numerous costs and loss of business, and ultimately human life, and faces criminal charges. In this instance, it seems BP has fallen decidedly short of social responsibility and for that matter its social obligation. (www.bbc.co.uk/news) (www.shareprice.co.uk/BP/shares). Furthermore, as mentioned above WFT operates both a COBC and CG policy however, the DOJ are investigating allegations of embezzlement of $175,000 of a WFT European subsidiary and improper use of these funds including payments to government officials in Europe and compliance with the Foreign Corrupt Practice law costs incurred $42 million. Nonetheless, an example of what Sethi calls social responsiveness, is perhaps, The Body shop which is operated on the strong ethical beliefs of its founders and this philosophy is perhaps the essence of its success. Whats more, an introduction to the philosophy of social responsibility is available through the International Standards Organisation (ISO) 26000 which offers guidance on the set-up and benefits of a social responsibility (SR) strategy. (www.iso.org/iso/home) Furthermore, the growing awareness of the potential impacts of environmental change by consumers and the public is apparently having more influence on what an organisation should be responsible for, this might well persuade companies to adopt an ISO 26000 strategy to improve their SR behaviour and recognise that sound ethical practice may soon become essential for the bottom line. Technological Environment A simple definition of technology is suggested by Trott (2008), Technology is knowledge applied to products or production processes. Illustrated below is Tim Berners-Lees 1989 proposal, in answer to a problem at work of the constant loss of information within a large research laboratory. The drawing shows the application of his knowledge to improve a production process, in this case the linking of information to build a web pool of data to resolve the companys problem. Several years later this became known as the World Wide Web.(WWW). This proposal concerns the management of general information about accelerators and experiments at CERN. It discusses the problems of loss of information about complex evolving systems and derives a solution based on a distributed hypertext system. Berners-Lee (1989),(1990). www.w3.org/History/1989/proposal. The WWW and the Internet has probably been the most influential technology over the last two decades, from the 24 hour-7 day use of the internet for surfing the web to the activities of electronic business (e-business). The introduction of E-business was the result of merging separate technologies,

electronic data interchange (EDI), and electronic fund transfer (EFT), together these enable computer-to -computer exchange of structured data and account information, with no manual intervention through secured private networks, the type used by banks and financial institutions, additionally, electronic point-of-sale (EPOS), smart cards, the application of electronic technology by a memory chipped card inserted into a reader or the card account details can be manually given at time of purchase. E-business is now used to network existing business processes, for instance, the exchange of products, services, information, and for creating new business at cross-functional stages of the value chain, from supply, to wholesale, distribution, and customer. The relative ease of e-business communication has led to a huge increase in working from home, according to Hannagan (2008), the United States Labour department reported in 2001 19 million people worked from home online, and that by the end of 2002 over 100 million people would be working outside traditional offices. The online buying and selling activity of electronic commerce (e-commerce) has created a wealth of opportunity for business, simply by the amount of consumers that are within easy reach together with the number and variety of products that can be offered, and the relatively low start-up costs. The cost of a business transaction using the internet is reported far less now than trading pre-technology, according to Slack, et al (2010), the reduced cost for business of a typical banking transfer over the internet is 50% of the cost of using a cash machine transaction, 25% of the cost of telephone, and 12% of the cost of going into the branch. By comparison these technologies have greatly reduced manual processing times which in turn have reduced costs; this is also visible in the manufacturing industry. WFT utilise information technology systems (IT), now the norm in organisations for collecting, storing, sharing, and processing data, in addition, the intranet a private version of the internet set-up and maintained by a company to share business information throughout its operation. Furthermore, computer integrated manufacturing software has synchronized the whole manufacturing process, from computer aided design (CAD), component machining by computer numeric control (CNCs) to final assembly by automated guided robot vehicles (AGVs). Additionally, todays manufacturers utilise materials requisition planning systems (MRP) that co-ordinate initial sales order entry, through engineering, planning, sourcing materials, manufacture /assembly, quality documents, and dispatch to the customer. WFTs products and services are used to find and extract oil and gas from the well, and with the worlds reservoirs maturing production rates are declining which requires working to increased well depths resulting in higher temperatures to increase production, and squeeze out every last gallon of oil. As a result new technology has become increasingly critical to the market place and is an important aspect of WFT products which budgets an average $200 million per year to its R&ump;D budget centres, (2% gross annual revenue) over the last three years to develop new technology,(average spend 2.1% Design Council manufacturing survey 2008). R&ump;D uses Pro-engineer CAD engineering, finite research and design R&ump;D modelling software, and operates through 34 R&ump;D centres strategically aligned to global markets, which enable local market demand conditions to input new ideas for technologies customized for that market, Hannagan (2008). WFT also collaborates on some major research projects to minimise cost and risk, and accelerate commercialisation of the product. For example, with Exxon Mobil in 2009 developing a patented oil sand screen system, and ENI S.P.A a large Italian oil company to develop advanced sub-sea drilling techniques.WFT currently has 4,000 international patents and over 1,500 patents pending. WFTs main competitors are three companies of similar size and profile, Halliburton, Schlumberger, Baker Hughes and together the four companies are the worlds leading oil

and gas service and equipment providers, with WFT ranked in fourth position. However, WFT intends to gain pole position by expanding its global infrastructure having made 250 acquisitions into emerging markets and new technologies and is now consolidating having adopted the four headquarters system which involves establishing headquarters and reporting functions in the four main oil regions of America, Middle East, Far East, and Europe to support its 34 R&ump;D centres and exploit the strengths of being a worldwide producer, Hannagan (2008), by offering customers integrated packages that cover exploration, drilling, completing and production/flowing of the well. Potential new competitors in the near term are few with very high barriers to market entry existing due to substantial investment costs, establishing supply chain, and proprietary technologies required. However, a major threat to oil companies is the recent growing awareness in society of the consequences of climate change, and the future use of hydrocarbons as an energy source. On top of this further government intervention and regulations are likely. All of this will influence demand on drilling activity and products required, which is directly related to worldwide oil and gas consumption. A green energy transition is taking place and is expected to span the next 10 - 20 years stimulating technology in renewable energy generation, Technology and Innovation Futures (2010), some from natural sources, wind, sun, water and tide, and geothermal heat sources to generate electricity, others from super batteries, fuel cells, carbon capture and re-use, and smart grid electric using digital technology, and the ever-increasing likelihood of widespread use of hydrogen as fuel.

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