Case study for Statoil ASA

Eastern Macedonia & Thrace Institute of
Technology
Dept. of Petroleum & Natural Gas Engineering
M.Sc. in Oil & Gas Technology
Course Assignment for Strategic Management:
"Case Study: Statoil ASA"
Team Members:
F. Zachopoulos, S. Kosteroglou, S. Kyriakidis
E. Michailidi, A. Mitsis
Kavala, November 2014

TABLE OF CONTENTS
INTRODUCTION................................................................................................................ 6
THE BUSINESS VISION & MISSION...................................................................................... 7
EXTERNAL ASSESSEMENT..................................................................................................9
External Audit Process...................................................................................................9
Economical Factors....................................................................................................9
Technological factors............................................................................................... 11
Competitive............................................................................................................ 11
Social, Environmental Factors .................................................................................. 13
Governmental factors.............................................................................................. 13
Construction of EFE matrix .......................................................................................... 15
Construction of CPM................................................................................................... 16
Porter’s Five Forces..................................................................................................... 16
INTERNAL ASSESSEMENT................................................................................................ 18
Internal Audit Process................................................................................................. 18
Culture ................................................................................................................... 19
Management.......................................................................................................... 20
Marketing............................................................................................................... 21
Finance & Accounting.............................................................................................. 22
Liquidity, Growth and Financial Health ..................................................................... 24
Production & operations.......................................................................................... 29
Reasearch & Development....................................................................................... 30
Information Systems Management........................................................................... 31
Value ChainAnalysis ................................................................................................... 31
Upstream Activities................................................................................................. 33
Downstream Activities............................................................................................. 35
Summarized Activities............................................................................................. 36

Construction of IFE matrix........................................................................................... 36
STRATEGY FORMULATION............................................................................................... 38
Construction of SWOT matrix ...................................................................................... 39
SWOT Matrix Results............................................................................................... 41
Strategy Analysis......................................................................................................... 42
Construction of Grand Strategy Matrix......................................................................... 44
Construction of IE Matrix............................................................................................. 45
Decision Stage: Simplified Methodology....................................................................... 46
CONCLUSION.................................................................................................................. 46
REFERENCES................................................................................................................... 47

TABLE OF FIGURES
Figure 1: Map Statoil’s international exploration and production areas........................6
Figure 2: Porter's Five Forces ......................................................................................17
Figure 3: Statoil's Upstream Net Operation Income ....................................................34
Figure 4: Statoil's Upstream Total Revenues...............................................................34
Figure 5: Statoil's Downstream Total Revenues..........................................................35
Figure 6: Statoil's Summarized Activities....................................................................36
Figure 7: Grand Strategy Matrix..................................................................................44
Figure 8: IE Matrix ......................................................................................................45
TABLE OF TABLES
Table 1: EFE Matrix for Statoil ...................................................................................15
Table 2: Competitive Profile Matrix............................................................................16
Table 3: Liquidity & Financial Health.........................................................................24
Table 4: Growth...........................................................................................................25
Table 5: Statoil ASA Exploration And Production Statistics FAS69 Upstream Data.26
Table 6: Reconciliation Of Statoil ASA Reported Amounts With Standard & Poor's
Adjusted Amounts (Mil. NOK) ...................................................................................27
Table 7: Statoil ASA - Financial Summary.................................................................28
Table 8: Norwegian State Upstream Section Income Statement .................................33
Table 9: International Upstream Section Income Statement .......................................33
Table 10: Downstream Section Income Statement......................................................35
Table 11: IFE Matrix....................................................................................................37
Table 12: SWOT Matrix ..............................................................................................40
Table 13: Decision Stage - Simplified Methodology ..................................................46

Case Study: Statoil ASA | INTRODUCTION 6
INTRODUCTION
Norwegian company Statoil was established in 1972 operating today in 34
countries while also having exploration and production activities in 15 of them. The
company is one of the world's leaders in upstream, downstream and midstream
although the bulk of its revenues derives from upstream sector activities. Holding a
strong position in the supply chain of Natural Gas in the European market, Statoil
followed a sustainable development strategy several years ago and is well known for
its environmental awareness. Its main objectives are to ''create value for their owners
through profitable and safe operations and sustainable business development without
causing harm to people or the environment'' (Statoil ASA 2007a).[1]
Figure 1: Map Statoil’s international exploration and production areas.

Case Study: Statoil ASA | THE BUSINESS VISION & MISSION 7
THE BUSINESS VISION & MISSION
Declaring a properly defined vision statement is of vital importance for
providing the foundation to answer the question “What we want to become?” and
visualize the company’s long term goals.[2]
The declared vision statement of Statoil ASA, is according to the company, the
following:
“Imagine we’re on a journey. Our vision tells us where we
are heading. It reminds us what we’re aiming to achieve. It
brings us together. It motivates us and drives change. Our
vision tells the story of a trusted pioneer.”
“Crossing energy frontiers” [1]
Based on the detailed study of the company’s strategic plans, priorities, goals and
actions, the following mission statement is proposed:
We generate and serve a guide for people who seek to
cross new borders. We are crossing energy frontiers,
providing a sustainable well-being for future generations.
According to Drucker, the question “What is our business” is synonymous to the
question “What is our mission”. The mission statement’s purpose is the declaration of
the organization’s existence reasons. A business mission is the foundation for
priorities, strategies, plans, and work assignments. It is extremely important for the
designing of managerial jobs and managerial structures. [2]
The declared mission statement of Statoil ASA, is according to the company, the
following:

Case Study: Statoil ASA | THE BUSINESS VISION & MISSION 8
“Our mission is the reason why we exist as a company. It’s
why we go to work every day. It’s what we have to do to
achieve our vision:
To accommodate the world’s energy needs in a responsible
manner, we apply technology and create innovative
business solutions. Our approach is founded in a values-
based performance culture, a belief in cooperation and a
striving for continuous operational improvement.” [1]
Based on the detailed study of the company’s strategic plans, priorities, goals and
actions, the following mission statement is proposed:
Our mission is to keep a strong position within the global
energy market, concurrently incorporating our values and
ethical codes. We are considered to be the pioneers on the
Norwegian continental shelf and contribute significantly to
the global market. The innovative technology we use
epitomizes our philosophy for cost effective and
environmentally-friendly operations.
We shed light on issues which are important for the
company’s future, concerning both financial stability and
social awareness. Our company strives to ensure safe
operations that protect people, environment and material
assets. We emphasize on the psychosocial aspects of the
working environment and promote the well-being of all our
employees by making systematic efforts to design and
improve the working environment, aiming to prevent
occupational accidents and work related diseases. Statoil
thrives to be the global leader in energy supply, crossing
frontiers while visualizing a sustainability, concerning the
environment protection for the future generations.

Case Study: Statoil ASA | EXTERNAL ASSESSEMENT 9
EXTERNAL ASSESSEMENT
External auditing aims to underline the macro-environment, identifying
potential opportunities and threats. By assessing the external environment, the
company is able to proceed to the declaration of the most appropriate strategies. [2]
EXTERNAL AUDIT PROCESS
Through external audit, the company is able to evaluate, examine and recover
several threats coming from the macro environment, as well as benefit from
opportunities arising.
The key external factors can be divided into the following categories:
 Economic
 Social/ cultural/ environmental
 Political
 Technological
 Competitive
Each of the above forces can be recognized in both opportunities and threats,
facilitating the adoption of an efficient strategy for the company’s sustainable
development. [2]
ECONOMICAL FACTORS
Economic factors play a substantial role in the assessment of the external
environment. They include facts regarding among others, availability of credit,
propensity of people to spend, and market trends indicating possible opportunities or
threats. [2]
In the examined case, the following facts were identified: [3]
 Growing population in emerging economies represent a strong long- term
driver of economic development and energy demand. Global oil demand grew

by 1.2 million barrels/ day in 2013 while natural gas is expected to grow faster
than total energy demand.
 Russian oil and gas majors have allowed access to western companies like
Statoil enabling the company to derive up to 5% of the global sales of the
Russian market..
 The development of offshore oil field ‘’Gina Krog’’ is estimated to give 225
million barrels of oil and gas. It is considered to be a major new development
for Statoil and a giant opportunity economically- wise.
 Statoil has a significant position in the Azerbaijani gas industry through its
15.5 per cent interest in the Shah Deniz gas field and in the South Caucasus
Pipeline. Gas sales agreements with Turkish and EU buyers and gas
transportation agreements with SCP(South Caucasus Pipeline), TANAP and
TAP have been concluded and entered into force following Final Investment
Decision for Shah Deniz Stage 2 in December 2013.
 Gas demand to power, is expected to recover due to tight European climate
policies
 Statoil's strong position in unconventional sources of energy, like in Alberta
Canada oil sands. Alberta's oil sands has proven reserves of about 168
billion barrels-the third-largest proven crude oil reserve in the world, after
Saudi Arabia and Venezuela. Every dollar invested in the oil sands
creates about $8 worth of economic activity; with one-third of that economic
value generated outside Alberta - in Canada, the U.S. and around the world.
 Tight fiscal conditions and taxes on both CO2 emissions and NOx emissions.
Tax rates are as high as 78%.
 Lowering prices of oil due to OPECS demand to accommodate Iraq’s supplies.
 High operating cost due to exceeding salaries compared to average industrial
salaries.
 Increase gas supply in Northeast Asia could be considered as an opportunity
but general, political, social uncertainty in the region provides a quite strong
threatening environment. Statoil process a substantial amount of oil production
there.
 Global social instability as house – hold and banks weak balance sheets, and
unemployment put pressure on governments.

 Natural benefit in regional oil and gas reserves had initially boosted capital,
but in the following years, reliance on capital expenditure for the replacement
of depleted reserves has brought a “Financial risk’’ and is regarded to be a
wide challenge.
 High costs have cut down the potential return from new projects and
management has proceeded in delaying long- term production target.
TECHNOLOGICAL FACTORS
Technological factors play an important role in the whole assessment case, as
innovations along with current and efficient ''know-how'', can establish company's
position. [2]
In the examined case, the following facts were identified: [3]
 Participating in projects that focus on other forms of energy such as offshore
wind and carbon capture and storage. All the above, in a time when
unconventional energy demand is expected to grow faster than total energy
demand.
 Statoil is the world’s largest off shore oil and gas operator naturally leaning
towards offshore wind power. At Norfolk Coast (south- east of England),
Statoil has its first full- scale commercial offshore wind development. It is
considered to be the first stepwise growth in development as it is owned 50%
by Statoil and 50% by Norwegian energy producer.
 Statoil oil sands operations is one of the largest oil reserves in the world, even
with the small share that can be developed with today’s technology.
Specifically, Statoil and the partners in Johan Sverdrup field have decided on a
concept for the first developed phase. The partners have agreed on a field
center consisting of four installations and power from shore.
COMPETITIVE FACTORS
A very important part of the macro-environment is the examining of one's competitive
positioning. By taking into advantage competitive opportunities or rivalry among the

industry, the company is able to perform and strengthen an oriented, well-positioned
strategy. [2]
In the examined case, the following facts were identified: [3,4]
 In 2001 Statoil entered the NY stock exchange and rose its value by 6.4 times.
Although the global economic crisis and depletion, Statoil maintained its
values up to 5 times. This strong brand name results in easy access to capital
market, making the company extremely competitive.
 Statoil is planning an oil terminal at Veidnes which consists a development
project for the Skrugard field in the Barrents Sea. The decision to bring
Skrugard oil ashore at Veidnes, is a key element of the further development of
Norwegian oil and gas industry aiming to make Northern Norway the
country’s net big petroleum region.
 The supply of shale gas continues to surprise both in terms of volume and
marginal cost.
 Unopened acreage on the Norwegian Continental shelf in the far north is a
corporative initiative to establish sustainable Petroleum activities in Arctic
regions.
 Over the next three years, the company will invest around 54 billion annually
on the continental shelf which is the main field of action in Statoil’s biggest
project portfolio ever.
 Statoil, Statkraft, UK and Germany electricity providers are partners at
Forewind consortium. The consortium is seeking consent for the DoggerBank
projects located at UK an potentially make the world’s biggest offshore wind
development. This project can supply 9gw of power and it is considered to be
a significant contribution to the UK’s electricity needs.
 Environmental policies are expected to improve the competitiveness of gas
compared to coal and because Statoil has a strong position in gas and oil
exploitation and this will be a great opportunity for market penetration.
 The Johan Sverdrup field, estimated to hold at least 1.8 billion barrels of oil,
will produce between 315,000 barrels a day and 380,000 barrels a day in the
first phase, and could produce between 550,000 barrels a day and 650,000
barrels a day in later development stages.

 Norway has saved much of its oil and gas revenues in a sovereign-wealth
fund, the world’s biggest, currently valued at around $840 billion. Statoil is
67% owned by the government. “This will be a gigantic project that will
secure energy supply and jobs and result in substantial spin offs and value for
Norwegian society, the industry and the partnership behind the development''
said Arne Sigve Nylund, a Statoil executive vice president.
SOCIAL, ENVIRONMENTAL FACTORS
Social and environmental factors include policies, trends, instabilities, or
boundaries that may influence or restrict the company's growth rates. [2]
 Gas demand to power, is expected to recover due to tight European climate
policies. The European Commission and a number of Member States have
developed adaptation strategies to help strengthen Europe's resilience to the
inevitable impacts of climate change.
 Emerging demand in renewable forms of energy stands as a social and
environmental opportunity for the company to maintain sustainability.
 Fishery in the far North is a major threat, due to the fact that the continental
shelf is narrow and the waters are particularly important.
 Environmentalists have denounced Norway’s push to exploit Arctic waters for
oil. [1,3]
GOVERNMENTAL FACTORS
In an industry such as the O&G, governments have a significant influence to
decision- making. Strategic alliances, agreements and commitments can be beneficial
and facilitate the growth of the company. [2]
In the examined case, the following facts were identified: [1,3]
 Statoil’s partnership with Wintershall (German) results in total supply
reliability between Norway and Germany. The two countries share similar
political and economic beliefs and enjoy close relations. Corresponding
technologies for maximizing the exploitation rate of existing production sites

as the development of new oil fields has become very difficult. Statoil hold
49% stakes in two onshore shale exploitation licenses in Germany.
 Statoil has signed an agreement to sell gas to Ukraine gas firm Naftogaz, due
to Russia's cut of supply.
 Governments are pressured due to global social instability resulting from
house – hold and banks weak balance sheets, and unemployment.
 Political instability on international operations. Specifically in North Africa
and South America, where Statoil has wide operations, unstable political and
condition result in an existing threat.
 8/5/2014 ‘’Reuters’’- Norway’s energy boom has caved in years ahead of
expectation threatening the long- term viability of the world’s most generous
welfare model.
 Although Arctic Barrent Sea is believed to contain 40% of the country’s
undiscovered resources, operating there is expensive. Even before the
lowering prices, Statoil’s project in the area was delayed twice.
 Rival competition. Due to economic development in China, which depend
exclusively on import, competition will rise for scarce resources.

CONSTRUCTION OF EFE MATRIX
The summary step in conducting an internal strategic management audit is the
constructing of the Internal Factor Evaluation (EFE) Matrix. This strategy formulation
tool summarizes and evaluates the major opportunities and threats in the functional
areas of a business and it also provides a basis for identifying and evaluating
relationships among those areas. The External Factor Evaluation Matrix is presented
below: [2]
Table 1: EFE Matrix for Statoil
EFE Matrix for Statoil
Key external factors Weight Rating Weighted
Score
Opportunities
Growing population in emerging economies 0.13 1 0.13
''Gina Krog'' offshore oil field development 0.04 4 0.16
Increase in gas demand 0.08 3 0.24
Other forms of energy 0.05 4 0.2
Acreage on the Norwegian continental shelf 0.07 3 0.21
Partnership with U.K and Germany 0.05 3 0.15
Planned oil terminal at Veidnes making Northern
Norway a strong petroleum margin
0.04 2 0.08
Easy access to capital market due to Brand name 0.01 2 0.02
Threats
Fishery and environmental organizations 0.05 1 0.05
Tight fiscal conditions 0.11 1 0.11
Rival competition 0.01 3 0.03
Instability in oil prices 0.11 3 0.33
Delayed projects in Arctic Barrel sea 0.03 2 0.06
Global social instability 0.06 1 0.06
Total 1 1.83

CONSTRUCTION OF CPM
The Competitive Profile Matrix (CPM) is a tool used to identify the company’s major
competitors as well as their particular threats and weaknesses. Critical success factors
include internal and external issues. [2]
The CP Matrix is presented below:
Table 2: Competitive Profile Matrix
Competitive Profile Matrix
Statoil BP Chevron Total SA
Critical Success
factors
Weight Rating Score Rating Score Rating Score Rating Score
Brand Name 0.12 2 0.24 4 0.48 3 0.36 3 0.36
Sustainability 0.13 3 0.39 2 0.26 2 0.26 3 0.39
Frequency of
accidents
0.05 2 0.10 1 0.05 3 0.15 3 0.15
Global expansion 0.12 2 0.24 4 0.48 3 0.36 3 0.36
Market Share 0.18 2 0.36 3 0.54 3 0.54 2 0.36
Technology 0.16 1 0.16 4 0.64 3 0.48 4 0.64
Acquisition /
Partnership
0.15 3 0.45 3 0.45 2 0.30 2 0.30
Total 1 1.94 2.90 2.45 2.56
PORTER’S FIVE FORCES
In Oil and Gas industry, companies are competing with their direct
competitors also they are in a constant fight for profit.
Porter’s 5 forces is a holistic way to look into any industry and understanding the
structure, underlying drivers of profitability and competition. Those forces apply to
every industry even if there is a different set of economic and fundamentals. Five
forces help’s somebody to understand what really causing profitability, what are the
trends that are most likely to be significant in changing the ‘’game’’ in the industry
and where are the constrains which an enterprise relax, relay and find a strong
competitive position.
The five forces give you the tools to understand the company’s dynamics. How the
threats of new entrants, the threats of substitute products or services, the bargaining
power of customers (buyers), the bargaining power of suppliers and the intensity of
competitive rivalry, involving and what are the implications for company’s strategy.

Furthermore shows how an enterprise positions itself to find spot in the industry that it
can really command a profit. And finally how somebody or something can ‘’maybe’’
re-shape the nature of the industry structure. [2]
Figure 2: Porter's Five Forces
Examining the attractiveness from the profit point of view is essential to analyze
Porter's five forces. [1,2,3,5,6]
Bargaining power of consumers
 It is considered to be rather low, because of the large number of consumers
compared to the small number of O&G firms within the industry.
Threats of substitute products
 It is known that there are few alternatives in the O&G industry. Nuclear
energy presents a high risk regarding safety and waste disposal. Hydrogen and
solar energy have not been developed yet and in contrast to oil they cannot be
stored or transported. Due to that fact, we can estimate that there will be no
significant modification in the oil and gas demand.
 However, a small percentage of substitutes is obtained by biofuels although
they are not rather threatening for the O&G company because of their low
efficiency.
Bargaining power of suppliers

Case Study: Statoil ASA | INTERNAL ASSESSEMENT 18
 Low bargaining power of suppliers attributes the whole industry. In particular,
Statoil is vertically integrated and controls areas from production to markets
and retail through the distribution and refining activities, weakening the power
of suppliers.
New entries
 Proceeding to the analysis of new entries we take into account environmental
regulations, political factors and technological demand considering them high
barriers for the O&G industry.
Competition
 Lastly, Statoil, efforts to maintain its sustainability and proceed in the race of
success within the O&G industry. Climbing up the industry's ladder of
success, Statoil aims to achieve a dominant role. As a result of these facts and
from all the other four forces, we can easily conclude that rival competition
among competitive firms, is one of the main aspects of this race.
INTERNAL ASSESSEMENT
Internal auditing is implemented for a company to assess its micro-
environment. It is an important activity as it evaluates strengths and weaknesses
within the company, providing independent advice for senior managers and
improving risk management and management control procedures. [2]
INTERNAL AUDIT PROCESS
Performing an internal audit requires a gathering, assimilating and evaluating
information about the firm’s operations. Critical success factors, consisting of both
strengths and weaknesses will be discussed over the following aspects: [2]
 Culture
 Management
 Marketing
 Finance/Accounting
 Research & Development
 Production/Operations
 Information Systems Management

After inspecting the above factors, the Internal Factor Evaluation (IFE) Matrix will be
constructed.
CULTURE
Relationships among a firm’s functional
business activities can be exemplified by focusing
on organization culture and internal phenomenon
that permeates all departments and divisions of an
organization. Organizational culture can be
defined as “a pattern of behavior that has been
developed by an organization as it learns to cope
with its problem of external adaption and internal
integration, and that has worked well enough to be
considered valid and be taught to new members as
the correct way to perceive, think and feel”. This definition emphasizes the
importance of matching external with internal factors in making strategic decisions. [2]
In the examined case, the following cultural facts were identified: [3,5]
 Statoil expects high ethical standards of everyone who acts on their behalf and
will maintain an open dialogue on ethical issues, internally and externally.
 Encouraging Statoil’s business partners to implement standards for business
ethics compatible with their own.
 The Statoil Ethics Code of Conduct describes the requirements in terms of
business ethics applying to Statoil’s business activities.
 Statoil’s values embody the spirit and energy of the company. They are at the
core of the management system, driving the company’s performance and
guide it in how the act in business, work together and towards external
stakeholders.
 In September 2011 Statoil launched a new e-learning program on business
ethics and anti-corruption compliance. The new e-learning program consists of
an introduction by Helge Lund, CEO and President of Statoil ASA, an
introduction to the Norwegian and US anti-corruption legislation, as well as
“We treat ethics as
an integral part of our
business activities. We
are determined to
make Statoil known for
its high standards with
respect to business
ethics.”

nine interactive cases built upon Statoil’s Ethical Code of Conduct. The
program is mandatory for the Statoil's employees.
 A strong safety culture, as engendered and required by North Sea regulatory
and licensing authorities.
MANAGEMENT
The functions of management consist of
five basic activities: planning, organizing,
motivating, staffing, and controlling. These
activities are important to assess in strategic
planning because an organization should
continually capitalize on its management
strengths and improve on its management
weaknesses. [2]
Regarding Statoil’s case, the following facts
were considered important: Promotes a
stimulating work environment guided by the
company’s values and a commitment to the
employee’s personal and professional
development. [3,5]
 Provides a good match between the
employee’s professional interests and
goals and challenging and meaningful job
opportunities.
 Builds a high-performing environment,
and gives direct feedback on the
employee’s performance.
 Recognizes and rewards the employee’s
performance based equally on what the
employee delivers.
 Values diversity and provides equal
opportunities. Management and employees are jointly responsible for
“Our management
system has three main
objectives:
1. Contribute to safe,
reliable and efficient
operations and enable us
to comply with external
and internal requirements
2 Help us to incorporate
our values, our people and
our leadership principles
in everything we do.
3. Support our business
performance through
high-quality decision-
making, fast and precise
execution, and continuous
learning
Commitment to and
compliance with our
management system are a
requirement.”

initiating and actively supporting and contributing to collaboration. It is
essential to have a good and confidence-based relationship between the
employees and the company.
 Maintaining a strong relationship with high-quality suppliers in order to
achieve a sustainable competitive edge.
 Have inner drive to enhance the performance of self, others and the business.
 Know how others perceive the company and how the company can best
influence others.
 Understand external forces, create business opportunities, manage risks and
adapt to reality.
 Collaborate with stakeholders to strengthen business and create innovative
solutions.
 Have a commercial mind-set, drive competitiveness and be cost conscious.
 An established and growing international position. Management's drive for a
greater international presence has taken the form of several acquisitions since
2004.
 Limited vertical integration in manufacturing, meaning refining and
marketing. Statoil's integration into refining is fairly limited, with two directly
operated refineries: Mongstad in Norway (79%-owned) and Kalundborg in
Denmark (fully owned). These refineries have a combined capacity of almost
300,000 boepd and, in our view, are of average complexity by European
standards.
MARKETING
Marketing can be described as the process of defining, anticipating, creating and
fulfilling customer’s needs and wants for products and services. [2]
The following key factors were perceived for the case of Statoil ASA: [3,5]
 Builds the company’s brand consistently, using an integrated brand strategy
across all media channels which is applied by dedicated marketing personnel
with clearly defined responsibilities.

 Statoil is a long-term, reliable natural gas supplier with a strong position in
some of the world's most attractive markets. The company is the second
largest gas supplier to Europe.
 Marketing, Processing and Renewable Energy (MPR's) strategy is to
maximize corporate value through safe, reliable and efficient operations, and
through the development of profitable midstream, downstream and renewable
energy business opportunities.
FINANCE & ACCOUNTING
Financial condition is often considered the single best measure of a firm’s
competitive position and overall attractiveness to investors. Determining an
organization’s financial strengths and weaknesses is essential to effectively
formulating strategies. A firm’s liquidity leverage, working capital, profitability, asset
utilization, cash flow and equity can eliminate some strategies as being feasible
alternatives. According to James Van Horne, the functions of finance accounting
comprise tree decisions: the investment decision, the financing decision, and dividend
decision. [2]
 In accordance with our criteria for GREs, we see a "moderately high"
likelihood that the Norwegian government would provide timely and sufficient
extraordinary support to Statoil in the event of financial distress. Statoil’s view
of a "moderate" likelihood of extraordinary government support is based on
the following:
o Important" role for the Norwegian government, which reflects the group's
dominant position in the Norwegian oil and gas production industry and its
substantial tax and dividend payments to the state; and
o "Strong" link with the Norwegian government, mostly reflecting the state's
majority ownership, even if the state is not directly involved in operational
decisions.
 Statoil has access to vast hydrocarbon reserves on the Norwegian continental
shelf, the group's increasing levels of international upstream diversity, resilient
upstream profitability, and conservative balance sheet management.
 Cash and cash equivalents of NOK36 billion as of June 30, 2012, of which
Statoil treats NOK2 billion as tied to operations. This was boosted by the

recent proceeds from the sale of Statoil's stake in Statoil Fuel & Retail ASA
for NOK8.3 billion.
 Statoil's marketable securities of NOK45 billion. According to management
those are predominantly very highly rated investments and liquid government
bonds.
 Funds from operations over the next year of NOK120 billion–130 billion.
 An undrawn committed $3 billion bank facility maturing in December 2016.
 Manageable short-term debt of NOK17 billion.
 Capital investment of up to NOK105 billion in both 2012 and 2013.
 Dividends of about NOK21 billion, normally paid in the second quarter each
year.
 Profitability measures among the highest in its peer group. This is partly
because it has less downstream exposure than most peers. Statoil's strong
profitability is underpinned by its low-cost, concentrated, and highly profitable
E&P operations. In 2011, strong hydrocarbon prices improved the group's net
income to about $16 per boe, despite the negative impact by Norway's very
high, but stable, upstream tax rate of 78%. Over time, Statoil's future
profitability should benefit from its rising proportion of international
production, which incurs a lower tax rate of about 40%-45%.
 Its conservative financial policies. Management targets a strong 'A' rating from
S&P, on a standalone basis, but does not explicitly state credit ratio targets.
Financial flexibility, notably Statoil's access to the capital markets, benefits
from state ownership.
 Demonstrated commitment to keep high flexibility. It is noticed that
management has made several large disposals in recent years, to offset the
negative affect for acquisitions, among other reasons. Disposals include the
fuel and retail segment, the Gassled pipeline and 50% of the Peregrino field.
Total disposals earned over $6 billion over the past two years.
 Financial flexibility. Statoil has over time built up a sizable investment
portfolio of highly rated government bonds worth about NOK45 billion as of
Sept.30, 2012.
 State ownership. This facilitates a stronger long-term focus on investment and
results in less shareholder pressure than Statoil's peers experience, for

example, to carry out large share buybacks. In addition, there is a lower risk of
Statoil undertaking sizable debt-financed mergers or acquisitions, and the
group has the potential to access additional state shareholder funding, if
required.
 The group's fairly aggressive capital expenditure (capex) and acquisition
strategies. Capex, in 2012 and beyond, could also impair free operating cash
flow (FOCF). Furthermore, further bolt-on acquisitions are not fully excluded,
like the acquisition of Brigham Exploration for $4.7 billion in 2011.
 Persistent negative discretionary cash flow and weak free operating cash flow.
Dividends usually increase in line with underlying earnings. However, in
practice Statoil's dividends have not been funded by FOCF and therefore have
increased debt if they were not covered by disposal proceeds.
 The group's modest leverage. However, it can be noticed as a risk, that the
group's high share of asset retirement obligations and deferred tax liabilities.
The company's debt maturity profile is long term and fairly even. A large
share of Statoil's gross debt is U.S. dollar-denominated. Most of Statoil's non-
U.S. dollar-denominated debt has U.S. dollar exposure, and the group uses
derivative instruments to hedge U.S. dollar-denominated oil and gas revenue
streams. [1,3,4,5,6]
LIQUIDITY, GROWTH AND FINANCIAL HEALTH
Examining Statoil’s Liquidity and Financial Health, through the following table we
can come to some important conclusions: [6]
Table 3: Liquidity & Financial Health
Liquidity
Financial Health
2010 2011 2012 2013
Current Ratio 1.09 1.16 1.12 1.43
Quick Ratio 0.87 0.92 0.93 1.22
Financial Leverage 2.93 2.76 2.46 2.49

 Current & Quick Ratio have an increased trend, that means Statoil can easily
pay back its liabilities.
 Financial Leverage has a stable trend, that means Statoil is in a good position
in transactions and can easy continues the investments.
Through the following table we can come to some important conclusions: [6]
Table 4: Growth
Growth 2011 2012 2013
Total Revenues 670.0 722.0 637.4
Net Operating Income 211.8 206.6 155.5
Net Income 78.4 69.5 39.2
 If we take as an example the year 2013, the 75% of Statoil’s Net Operating
Income is the Taxes,
 While only the 25% is the Net Profit.
 The taxation has increased through year 2011 to 2013 from 63% to 75% !

STATISTICS TABLES OF STATOIL
Table 5: Statoil ASA Exploration And Production Statistics FAS69 Upstream Data [5 ]
Statoil ASA Exploration And Production Statistics FAS69 Upstream Data
--Year ended Dec. 31--
2011 2010 2009 2008 2007
Reserves
Provedreserves (mmboe) 5427 5325 5305 5456 6010
of which oil reserves (% of total) 41.9 40 39 38 40
of which developed reserves (% oftotal) 69.9 74 77 77 72
Proved reserve volumes breakdown by region ( %)
Norway 70 74 82 83 83
Rest of world 30 26 18 17 17
Production
Production (mmboe perday) 1650 1706 1807 1751 1724
of which equity affiliates (mmboe per day) 14 14 14 0 0
of which oil production(% of total) 57 56 58 59 62
Annual productiongrowth(%) (3) (6) 3 2 1
Norway 1316 1374 1450 1461 1417
Angola (Block 15+17) 69 88 119 117 109

Table 6: Reconciliation Of Statoil ASA Reported Amounts With Standard & Poor's
Adjusted Amounts (Mil. NOK) [5 ]
Reconciliation Of Statoil ASA Reported Amounts With Standard & Poor's Adjusted Amounts (Mil. NOK)
--Fiscal year ended Dec. 31, 2011--
Statoil ASA reported amounts
Shareholders'
Debt equity Revenues EBITDA
Operating
income
Interest
expense
Cash flow
from
operations
Cash flow
from
operations
Dividends
paid Capex
Reported131458.00278916.00 670205.00 263134.00 211784.00 3745.00 111463.00 111463.00 19891.00 92227.00
Standard & Poor's adjustments
Operatingleases 63251.66 -- -- 3311.62 3311.62 3311.62 13712.88 13712.88 -- 29829.00
Postretirement
benefit
obligations
16433.00 -- -- (134.00) (134.00) -- 414.48 414.48 -- --
Surplus cash and
near cash
investments
(38596.00) -- -- -- -- -- -- -- -- --
Capitalized
interest
-- -- -- -- -- 869.00 (869.00) (869.00) -- (869.00)
Share-based
compensation
expense
-- -- -- 451.00 -- -- -- -- -- --
Asset retirement
obligations
24423.39 -- -- 2813.00 2813.00 2813.00 (1333.85) (1333.85) -- --
Explorationcosts -- -- -- 13839.00 -- -- -- -- -- --
Reclassification
of nonoperating
income
( expenses )
-- -- -- -- 2604.00 -- -- -- -- --
Reclassification
of working-
capital cash flow
changes
-- -- -- -- -- -- -- 19121.00 -- --
Minorityinterests -- 6239.00 -- -- -- -- -- -- -- --
Debt - Other (1800.00) -- -- -- -- -- -- -- -- --
Total
adjustments
63712.05 6239.00 0.00 20280.62 8594.62 6993.62 11924.51 31045.51 0.00 28960.00
Standard & Poor's adjusted amounts
Adjusted 195170.05285155.00 670205.00 283414.62 220378.62 10738.62 123387.51 142508.51 19891.00 121187.00

Table 7: Statoil ASA - Financial Summary[5 ]
Statoil ASA -- Financial Summary
Industry Sector: Integrated Oil & Gas
--Fiscal year ended Dec. 31--
2011 2010 2009 2008 2007
Ratinghistory AA-/Stable/A-1+ AA-/Stable/A-1+ AA-/Stable/A-1+ AA-/Stable/A-1+ AA-/Stable/A-1+
(Mil. NOK)
Revenues 670,205.0 529,915.0 465,433.0 656,020.0 522,797.0
EBITDA 283,414.6 209,330.0 190,942.6 257,839.0 199,592.0
Net incomefromcontinuingoperations 78,787.0 38,082.0 18,313.0 43,265.0 44,096.0
Funds from operations (FFO) 142,508.5 106,537.6 91,526.2 108,187.9 98,529.5
Capital expenditures 121,187.0 107,860.0 75,365.5 83,657.5 91,250.7
Free operatingcash flow 2,200.5 (17,018.4) 7,704.8 26,793.5 7,897.7
Discretionarycash flow (17,690.5) (36,113.4) (15,380.2) (288.5) (17,796.3)
Cash andshort-term investments 2,000.0 2,184.0 2,000.0 2,038.0 2,000.0
Debt 195,170.1 155,044.2 140,434.3 129,261.9 91,019.6
Equity 285,155.0 226,395.0 200,118.0 216,055.0 179,067.0
Adjusted ratios
EBITDA margin (%) 42.3 39.5 41.0 39.3 38.2
EBITDA interest coverage (x) 26.4 26.8 18.8 33.0 20.9
EBIT interest coverage (x) 20.5 18.6 12.8 27.0 16.0
Return on capital(%) 43.1 33.1 31.2 56.2 46.1
FFO/debt (%) 73.0 68.7 65.2 83.7 108.3
Free operatingcash flow/debt (%) 1.1 (11.0) 5.5 20.7 8.7
Debt/EBITDA (x) 0.7 0.7 0.7 0.5 0.5
Debt/debt andequity (%) 40.6 40.6 41.2 37.4 33.7

PRODUCTION & OPERATIONS
The production/operations function of a business consists of all those activities
that transform inputs into goods and services. Production/operations management
deals with inputs, transformations and outputs that vary across industries and markets.
A manufacturing operation transforms or converts inputs such as raw materials, labor,
capital, machines and facilities into finished goods and services. [2]
For the case of Statoil ASA, the following facts were recognized: [1,3,4,5]
 Develops and operates subsea technologies in order to increase production and
recovery and pave the way for Statoil's future "subsea factory".
 Industry leader in seismic imaging and interpretation based on proprietary
technology in order to increase discovery rates.
 Achieves breakthrough performance on reservoir characterization and
recovery to maximize value.
 While cost levels could fall through Statoil's focus on cost improvement, this
is less likely for deep offshore projects in harsh environments.
 Low reserve-replacement rate, averaging only about 86% organically over the
past three years. Statoil is trying to improve its reserve replacement ratio,
particularly by adding unconventional oil and gas reserves.
 Producing technology and knowledge which will strengthen our positions in
important exploration areas.
 Improved reservoir models and new drilling and well solutions at reduced
costs, and maturing of resources into profitable reserves for development.
 Competitive and sustainable technology for heavy oil, refining and gas value
chain.
 Gulf of Mexico: Develop new technologies quickly and cost effective.
 Statoil has applied for three patents related to 3C technology. The patent
applications were published in January. 3C technology is based on the capture
of CO2 from exhaust gas, known as post-combustion removal, using an amino
solution in a compact capturing facility.

REASEARCH & DEVELOPMENT
The fifth major area of internal operations that should be examined for specific
strengths and weaknesses is Research & Development. For the case of Statoil ASA,
the following factors were examined: [2]
 Innovative development and the application of strong technology. Statoil
executes complex offshore and onshore field development projects and has
improved its knowledge of oil recovery. These factors put Statoil in a good
position as a global operator and partner. The group intends to use its expertise
in areas such as deep water, heavy oil, harsh environments, and gas value
chains to exploit new opportunities and develop high-quality projects which it
can use as part of its international diversification strategy.
 Ability to build on competitive advantages, stimulates innovation and takes a
long-term view on selected potentially high-impact technology ventures.
o Specifies asset-specific requirements and execution plans to introduce
new solutions.
o Provides incentives for and reward those ventures that solve complex
technical problems through innovative solutions, particularly when
combined with prudent risk management.
o Continuously adapt our collaborative way of working with partners
and suppliers on a global basis.
 Developing and implementing energy-efficient and environmentally
sustainable solutions.
 Technology development activities aim to reduce field development, drilling
and operating costs in order to increase capital efficiency.
 Building and profiling the group's leading technology positions through
internationally recognized R&D results.
 Establishing and executing the R&D project portfolio reflecting the corporate
technology strategy.
 Developing the group’s R&D competence.
 Pushing and positioning the group for the future’s big technology leaps by
looking beyond the current business.
 Operate and further develop world-class laboratories and experimental rigs. [4]

INFORMATION SYSTEMS MANAGEMENT
Information ties all business functions together and provides the basis for all
managerial decisions. It is the corner stone of all organizations. Information
represents a major source of competitive management advantage or disadvantage.
Assessing a firm’s internal strengths and weaknesses in information systems is a
critical dimension of performing an internal audit.
A management information system’s purpose is to improve the performance of an
enterprise by improving the quality of managerial decisions. An effective information
system thus collects codes, stores, synthesizes and presents information in such a
manner that it answers important operating and strategic questions. The hard of an
information system is a database containing the kinds of records and data important to
managers. A management information system receives raw material for both external
and internal evaluation of an organization. [2]
For the case of Statoil the following facts were detected: [5]
 Prioritizing the management of business critical information.
 Managing information in accordance with risk exposure.
 Sharing information to ensure efficient use and experience transfer
 Making information available for future needs
 Ensuring information quality
VALUE CHAIN ANALYSIS
The Value chain was introduced by Porter and represents an approach to
looking at the development of the competitive advantage within an organization. All
organizations consist of activities which ‘’link’’ together to develop the value of a
business. Together these activities represent the value chain.
The chain gives an overview of an organization and how the various activities are
structure together. It divided to primary activities that related with production and the
support activities which represent the effectiveness of an organization. Succinctly the
value chain represents a series of activities that create and build value. Combined,
they represent the total value delivered by an organization.[2]

Primary functions:
 Inbound logistic: How does the organization get their raw-materials into the
organization.
 Operations: Converting the raw materials to the output.
 Outbound logistics: Getting the products to the costumers.
 Marketing and sales.
 Service.
Support functions:
 Firm infrastructure.
 Human resource Management.
 Technological development.
 Procurement.
All of them cover the primary functions.[2]
Due to the lack of information a summarized Value Chain Analysis is presented:

UPSTREAM ACTIVITIES
In the Upstream section, the three major activities are Exploration, Development and
Production.
Statoil’s upstream section can be divided into two subsections. The International and
the Norwegian’s State Upstream Section.
Table 8 and Table 9 provide some economic factors: [3,6]
Table 8: Norwegian State Upstream Section Income Statement
Income statement under IFRS
(in NOK billion)
For the year ended 31 December
2013 2012 2011 13-12
change
12-11
change
Total revenues and other income 202,2 220,8 212,1 (8%) 4%
Operatingexpenses and selling, general and administrative
expenses
(27,4) (25,8) (24,7) 6% 4%
Depreciation, amortization and net impairmentlosses (32,2) (29,8) (29,6) 8% 1%
Exploration expenses (5,5) (3,5) (5,1) 54% (31%)
Net operating income 137,1 161,7 152,7 (15%) 6%
Table 9: International Upstream Section Income Statement
(in NOK billion)
2013 2012 2011 13-12
change
12-11
change
Total revenues and other income 81,9 80,1 70,2 2% 14%
Purchases [net of inventory variation] (0,1) (1,3) (0,7) (95%) 91%
Operatingexpense and selling, general and
administrative expenses
(21,0) (16,5) (14,2) 28% 16%
Depreciation, amortization and net impairmentlosses (31,9) (26,2) (13,8) 22% 90%
Exploration expenses (12,5) (14,6) (8,7) (14%) 67%
Net operating income 16,4 21,5 32,8 (24%) (35%)

Analyzing Table 8and Table 9coming to the following conclusions:
 The 73% of Statoil’s Net Operating Income, is earned from the International
Upstream Section while the 27% is earned from the Norwegian’s State
Upstream Section.
Figure 3: Statoil's Upstream Net Operation Income
 The 54% of Statoil’s Total Revenues is the Net operation Income while the
46% is Statoil’s expenses.
Figure 4: Statoil's Upstream Total Revenues
73%
27%
Norway
International
54%
46%
Net Operation
Income

DOWNSTREAM ACTIVITIES
In the Downstream section, the two major activities are Refining and Marketing.
Table 10 provides some economic factors for the Downstream Section: [3,6]
Table 10: Downstream Section Income Statement
(in NOK billion)
2013 2012 2011 13-12
change
12-11
change
Total revenues and other income 611,4 669,5 610,0 (9%) 10%
Purchases [net of inventory variation] (565,8) (620,3) (550,5) (9%) 13%
Operatingexpense and selling, general and administrative
expenses
(36,0) (30,6) (28,8) 17% 6%
Depreciation, amortisation and net impairment losses (7,0) (3,0) (6,0) >100% (50%)
Net operating income 2,6 15,5 24,7 (83%) (37%)
From the above table we conclude the following:
 From Statoil’s Total Revenues only 2% is the Net Operating Income while the
98% is expenses.
Figure 5: Statoil's Downstream Total Revenues
2%
98%
Net Operating Income
Expenses

SUMMARIZED ACTIVITIES
To summarize the whole activities the next chart shows each section’s Net Operation
Income.
Figure 6: Statoil's Summarized Activities
At this point we come to the following conclusions:
 The 88% of Statoil’s Net Operation Income is earned from the Upstream
Section concluding that Statoil is upstream- oriented.
 The 8% of Statoil’s Net Operation Income is earned from the Downstream
Section.
 Only a 3% of Statoil’s Net Operation Income is earned from Fuel & Retail
Activities.
CONSTRUCTION OF IFE MATRIX
The summary step in conducting an internal strategic management audit is the
constructing of the Internal Factor Evaluation (IFE) Matrix. This strategy formulation
tool summarizes and evaluates the major strengths and weaknesses in the functional
areas of a business and it also provides a basis for identifying and evaluating
relationships among those areas. Intuitive judgments are required in developing an
IFE Matrix, so the appearance of a scientific approach should not be interpreted to
88%
8%
3%
1%
Upstream
Downstream
Fuel & Retail
Other

mean this is an all-powerful technique. The Internal Factor Evaluation Matrix ( [2]
) is presented below. [2]
Table 11: IFE Matrix
Key Internal Factors Weight Rating
Weighted
Score
Strengths
1. Strong safety culture 0.02 3 0.06
2. Established and growing international position 0.08 3 0.24
3. Financial distress due to government support 0.06 4 0.24
4. Funds from operations over the year of NOK120
billion–130 billion.
0.05 3 0.15
5. Manageable short-term debt of NOK17 billion 0.03 3 0.09
6. Profitability measures among the highest in its peer
group
0.08 3 0.24
7. Develops and operates subsea technologies in order
to increase production and recovery
0.08 4 0.32
8. Industry leader in seismic imaging and interpretation 0.05 4 0.20
9. Ability to build on competitive advantages and
stimulates innovation
0.04 3 0.12
10. Internationally recognized R&D results 0.06 3 0.18
11. Reliable natural gas supplier with a strong position 0.07 3 0.21
12. e-learning program on business ethics and anti-
corruption compliance
0.01 3 0.03
Weaknesses
1. High capital expenditure and resulting weak free
cash generation
0.07 2 0.14
2. Limited vertical integration in manufacturing,
meaning refining and marketing.
0.06 1 0.06
3. Persistent negative discretionary cash flow and weak
free operating cash flow
0.05 2 0.10
4. Group's modest leverage. 0.07 2 0.14
5. Low reserve-replacement rate, averaging only about
86% organically over the past three years
0.05 1 0.05
6. Exposure to volatile and capital-intensive
exploration and production sector, with near-term
risk of falling oil prices.
0.07 2 0.14
Total 1.00 2.71

Case Study: Statoil ASA | STRATEGY FORMULATION 38
STRATEGY FORMULATION
Strategy formulation is a process which involves subjective decision making
based on the analysis of criteria that derive from objective inputs.
Statoil existing strategy is upstream-oriented, based on technology innovations. The
company’s growth strategy is reflected in merger and acquisition activities as well as
in long-term partnerships. Statoil, although an NOC, strives to build its size and
economic growth following a long-term strategy towards a more international profile.
The company currently seeks to diversify both geographical, through market
development and in terms of product varieties.
However, after taking into consideration the data derived from the internal and
external evaluation as well as the matrices a number of alternative strategies is
proposed.
In order to recommend and implement feasible alternative strategies, the use of
specific tools is of critical importance. [2]
The following tools which are used in the current study: [2]
 SWOT Matrix is a matching tool which is used in order to develop different
type of strategies, by combining the firm’s strengths, weaknesses,
opportunities and threats.
 Grand Strategy Matrix is a tool for formulating alternative strategies. The
Matrix is divided in four quadrants which describe the strategic position of the
company. Appropriate strategies which should be considered by the
organization are listed in sequential order in each quadrant of the matrix.
 The Internal-External Matrix is a schematic plotting diagram which combines
the Total Weighted Scores from IFE and EFE matrices in order to define the
company’s position and thus recommend the most appropriate strategies.
 In the current case, in order to proceed with the decision stage the simplify
methodology was considered more appropriate to follow than QSPM
technique.

After taking all the above into consideration, the final step of strategy formulation is
recommending specific alternative strategies and long-term objectives and comparing
them to actual strategies planned by the company.
CONSTRUCTION OF SWOT MATRIX
The Strengths -Weaknesses – Opportunities - Threats (SWOT) Matrix, is matching
tool which is essential to develop four types of strategies: [2]
 SO Strategies, which are strategies that use company’s internal strengths in
order to take advantage of external opportunities.
 WO Strategies, which are strategies aiming to improve internal weaknesses by
taking advantages of external opportunities.
 ST Strategies are strategies which use a firm’s strengths in order to avoid or
reduce the impact of external threats.
 WT Strategies, which are defensive tactics directed at reducing internal
weaknesses and avoid external threats.
The SWOT Matrix for Statoil was constructed and presented below.

Table 12: SWOT Matrix
Strengths-(S) Weaknesses-(W)
1. Strong safety culture 1. High capital expenditure and
resulting weak free cash
generation
2. Established and growing
international position
2. Limited vertical integration in
manufacturing, meaning refining
and marketing.
3. Financial distress due to
government support
3. Persistent negative discretionary
cash flow and weak free
operating cash flow
4. Funds from operations over the
year of NOK120 billion–130
billion
4. Group's modest leverage.
5. Manageable short-term debt of
NOK17 billion
5. Low reserve-replacement rate,
averaging only about 86%
organically over the past three
years
6. Profitability measures among the
highest in its peer group
6. Exposure to volatile and capital-
intensive exploration and
production sector, with near-term
risk of falling oil prices.
7. Develops and operates subsea
technologies in order to increase
production and recovery
8. Industry leader in seismic imaging
and interpretation
9. Ability to build on competitive
advantages and stimulates
innovation
10. Internationally recognized R&D
results
11. Reliable natural gas supplier with a
strong position
12. e-learning program on business
ethics and anti-corruption
compliance
Opportunities (O) SO Strategies WO-Strategies
1. Growing population in emerging
economies
o 8-3
o 4-4
o 11-1.3
o 7-5
o 2-4
o 1-6
2. ''Gina Krog'' offshore oil field
development
3. Increase in gas demand
4. Other forms of energy
5. Acreage on the Norwegian continental
shelf
6. Partnership with U.K and Germany
7. Planned oil terminal at Veidnes making
Northern Norway a strong petroleum
margin
Threats (T) ST-Strategies WT-Strategies
1. Fishery and environmental
organizations
o 1-1
o 7.8.9-3
o 11-3
o 3-6
o 6.1-4
o 2-3
o 1-2.52. Tight fiscal conditions
3. Rival competition
4. Instability in oil prices
5. Delayed projects in Arctic Barrel sea
6. Global social instability

SWOT MATRIX RESULTS
The proposed strategies, derived from the SWOT Matrix, are analyzed below.
 SO (Strengths – Opportunities) strategies
SO (8, 3): As a strong industry leader in seismic imaging and interpretation, Statoil
can benefit from the increasing gas demand and use wisely its strong position.
SO (4, 4): The funds coming from operations are up to 130 billion NOK and can be
invested in other forms of energy
SO (11, 1-3): Statoil is considered to be a reliable natural gas supplier. Emerging
economies in addition to global gas demand provides Statoil a chance to expand its
market share.
SO (7, 5): Norwegian’s natural resources and acreage can be explored and exploited
with the development of subsea technologies.
SO (2, 4): Other forms of energy demand are a great opportunity for Statoil to
establish its existing growing international position.
 ST (Strengths – Treats) strategies
ST (1, 1): Fishery and environmental organization are considered to be a great threat
specifically in the northern seas but Statoil’s strong safety culture allows the company
to take relevant matters into consideration.
ST (7-8-9,3): Rival competition is the main aspect in the O&G Company but Statoil’s
efficient technologies and innovative capabilities allows the company to play a rather
dominant role.
ST (11, 3): In addition to the previous, Statoil can also “hit” competition from its
strong gas- supply position.
ST (3, 6): Social instability is an important factor influencing the O&G Company, but
Statoil’s governmental support can be seen as an ability to react effectively.

 WO (Weaknesses – Opportunities) strategies
WO (1, 6): Statoil’s partnership with UK and Germany is of great significance and
can be implemented to avoid a high expenditure cost. The companies have faced
rising expenditure costs in the production area, but through partnership, cost and risk
can be divided.
 WT (Weaknesses – Treats) strategies
WT (2, 3): Competition as mentioned above is rival. Statoil has weak integration
activities, mainly in manufacturing and refining so we conclude that it is very
essential for the company to succeed full integration, gradually, in order to keep up
the pace.
WT (1, 2-5): Statoil spends an enormous amount in exploration activities. This fact, in
relation to the delayed projects and the tight fiscal conditions can be considered to be
highly risky for the company’s sustainable development.
A possible strategy we introduce is a tight- expenditure strategy along with share
selling to interested parties.
STRATEGY ANALYSIS
Examining all the above potential combinations we come to believe that
through Market Penetration / Market Development Strategy, Statoil can
significantly benefit from the emerging economies in Eastern Asia. China, India and
neighboring industrial- developing countries, attract major international O&G
companies, therefore, Statoil can proceed to penetrate in order not only to maintain,
but also improve, its global financial sustainability.
This strategy is in the form of an offensive attitude if we take into account Statoil’s
major strengths and opportunities.
On the other hand, we have recognized, several weaknesses which in relation with the
threats mentioned above, lead to a tighter strategy through partnerships. Existing
partnerships with Germany and the UK can benefit Statoil in the alternative – energy
sector. With an ‘’alliance’’ of this size, the company can easily establish its brand

name, learn from its partners’ ‘’know- how’’, share technological advantages and
expand in Europe and Asia with less expenditure costs.
Related diversification, Market Development/ Market Penetration, are the
strategies we suggest bearing all the above, in mind.
Considering the combination ‘’Weaknesses- Threats’’, the strategy we insist is
defensive. Divestiture, is a strategy that enables the specific company which is by
60% national, to increase its size in the private sector. By selling a small percent of its
shares to private stakeholders, Statoil can increase its cash flow and therefore
strengthen its integration activities.
From the above matrix we come to conclude that the prevalent strategy proposed, is
‘’Market Penetration’’. The second best seems to be ‘’Related Diversification’’.

CONSTRUCTION OF GRAND STRATEGY MATRIX
The Grand Strategy Matrix (GSM) is a tool for formulating alternative
strategies in which all organizations can positioned in one of the four strategy
quadrants. The GSM is based on two evaluating dimensions competitive position and
market growth. Firms located in quadrant I, are in excellent strategic position. In
quadrant II firms which are unable to compete effectively are located. In quadrant III
represents company’s which compete in slow growth market and have weak
competitive positions. Finally, quadrant IV businesses have a strong competitive
position but in a slow growth industry. [2]
Its quadrant comprises different type of strategies.
From Statoil’s annual report of 2013, we underline a decrease in sale volumes both in
crude oil and natural gas. Total annual sale volumes in crude oil fell from 905
(mmbbls) in 2012 to 805(mmbbls) in 2013 and a significant reduction in natural gas
volume sales has also been realized. 3523 bcf of gas fell down to 3419.
Considering the decrease in annual sales and the fact that the firm’s competitive
position is strong, Statoil is positioned at quadrant IV of the GSM Matrix. Therefore,
it is proposed that joint ventures and related diversification strategies should be
Quadrant II
1.Market Development
2. Market Penetration
3. Product Development
4. HorizontalIntegration
5. Divestiture
6. Liquidation
Quadrant I
1.Market Development
2. Market Penetration
3. Product Development
4. Forward Integration
5. Backward Integration
6. HorizontalIntegration
7. Related Diversification
Quadrant III
1. Retrenchment
3. Unrelated Diversification
4. Divestiture
5. Liquidation
Quadrant IV
1.Joint Ventures
3. Unrelated Diversification
RAPID MARKET GROWTH
SLOW MARKET GROWTH
STRONGCOMPETITIVEPOSITION
WEAKCOMPETITIVEPOSITION
Figure 7: Grand Strategy Matrix

followed by the company. Contemplating the global financial crisis and Statoil’s
existing tight-expenditure strategy, through joint ventures the company can
accomplish market penetration and sustainability by dividing cost and risk.
CONSTRUCTION OF IE MATRIX
The Internal-External (IE) Matrix combines the Total Weighted Scores from
IFE and EFE matrices in order to define the company’s position on the plot and thus
recommend the most appropriate strategies. The IE Matrix is divided into three
regions which include different strategy types. In the first region (cells I, II and IV )
the implemented strategies are the backward, forward or horizontal integration,
market penetration, market development and product development. The second region
(cells III, V, VII) includes market penetration and product development strategies.
Finally, the third region (cells VI, VII and IX) includes defensive strategies like
retrenchment and divestiture. [2]
As it eventuates from the IFE and EFE scores, the company is placed on the V
division. Therefore, the proposed strategy is market penetration.
I II
V
VIII
III
VI
IX
IV
VII
Strong
3.00 to 4.00
Average
2.00 to 2.99
Weak
1.00 to 1.99
High
3.00 to 4.00
Medium
2.00 to 2.99
Low
1.00 to 1.99
I II
V
VIII
III
VI
IX
IV
VII
Strong
3.00 to 4.00
Average
2.00 to 2.99
Weak
1.00 to 1.99
High
3.00 to 4.00
Medium
2.00 to 2.99
Figure 8: IE Matrix

Case Study: Statoil ASA | CONCLUSION 46
DECISION STAGE: SIMPLIFIED METHODOLOGY
As a final step it is vital to proceed a methodology which indicates the optimal
alternative strategies that should be followed. In the current study, the technique of
“Simplified Methodology” is used.
Table 13: Decision Stage - Simplified Methodology
As it derives from the above table, the proposed strategies are Market Penetration,
Market Development and Related Diversification.
CONCLUSION
Following the detailed study of Statoil and analyzing the profile, the
internal/external environment along with matrices results. We come to conclude that
our best suggested strategies for the company’s growth are market penetration,
marketing development and related diversification.
Company’s existing strong position in Northern Europe in line with its natural
advantage and strategic partnerships with the United Kingdom and Germany can
facilitate the access to new markets and establish company’s brand name.
Geographically, current expansion, rival competition demands in China, in order to
maximize its supply chain. Also taking into consideration the emerging trend in
unconventional sources, Statoil can benefit via partnership mergers and acquisitions
and claim a dominant role as a new entrant in a challenging market.
Proposed Strategic
Options
Internal – External
(IE) Matrix
Hold and Maintain
SWOT Matrix Grant Strategy
Matrix
Market Penetration x x x
Market development x
Product development
Horizontal integration
Relateddiversification x x
Unrelated diversification
Divestiture x

Case Study: Statoil ASA | REFERENCES 47
REFERENCES
1. [Online] / auth. Statoil // Statoil Official Website. - 11 2014. -
http://www.statoil.com.
2. Strategic Management : Concepts & Cases 14th Edition [Book] / auth.
David Fred R.. - 2013.
3. Annual Report [Report] / auth. Statoil. - [s.l.] : Statoil, 2013.
4. Technology & Innovation [Online] / auth. Statoil. - 11 2014. -
http://www.statoil.com.
5. Ratings Direct - Statoil ASA [Report] / auth. Standard & Poors's Rating
Services. - 2014.
6. Reports archive [Online] / auth. Statoil. - 11 2014. - http://www.statoil.com.

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