StudentShare
Contact Us
Sign In / Sign Up for FREE
Search
Go to advanced search...
Free

Oil Prices Impact on Your Country Economy - Essay Example

Cite this document
Summary
The paper "Oil Prices Impact on Your Country Economy" is an outstanding example of a macro & microeconomics essay. The plunge in oil prices has affected a variety of nations, and this is no exception to our country. Regardless, this does not mean that the oil industry is about to collapse. Changes in prices are normal in a way, but their effect on our country must be mitigated…
Download full paper File format: .doc, available for editing
GRAB THE BEST PAPER92.5% of users find it useful

Extract of sample "Oil Prices Impact on Your Country Economy"

Oil Prices Impact on Your Country Economy

Introduction

The plunge in oil prices has affected a variety of nations, and this is no exception to our country. Regardless, this does not mean that the oil industry is about to collapse. Changes in prices are normal in a way, but their effect on our country must be mitigated. The changes in oil prices affect a variety of industries, and several measures must be adopted to ensure that this change is understood and mitigated. Evidently, countless issues are associated with the development of a better industry. Several theories have been proposed to control the effect of such changes on the industrial prices. For this exercise, the one theory that is mostly applicable is the Competitive Advantage of Nations (NCA) by Michael Porter.

Nation’s Competitive Advantage

The theory entails the boiling down of the various affecting factors into four main categories, which Porter represented as a diamond shaped graphical representation showing the four main areas that influence the competitive advantage of a nation. Every nation participates in both the local and global market. For a country to be more competitive than the rest of the countries selling the same product in the international markets, it has to offer some value or some difference that makes the buyers more inclined to making purchases from the country. For our case, oil is the main product being sold (Quick MBA, 2016). Oil producing nations are largely affected by changes in prices which thus make it necessary for the country to develop sound strategies that are meant to improve an organization’s competitive position.

The Diamond of National Advantage is classified into four main categories. The first category is firm structure, strategy and rivalry. The second classification is the factor conditions or the factors of production. The third category is related and supporting industry whereas the fourth category is demand conditions within the domestic and international markets. Arguably, there have been multiple issues associated with the development of a better competitive advantage for the country as will be described in this paper. This theory is applicable to our case and can assist our nation to come up with sound recommendations to help improve the competitive edge of the country in international markets (Porter, 1990). Each of these categories is instrumental to the development of a better competitive position for the country.

Google Image

Firstly, the firm structure, strategy and rivalry in local markets appear to be a significant factor that contributes to the overall success of the industry. When firms have great rivalry within them, they are more likely to use competitive strategies that are of much benefit to the consumers. In most cases, the oil industry is run by international companies working within the domestic market. In our case, there are a few local firms whose competitive strategies are also vital and must be reviewed to improve our country’s competitive position. In cases whereby the companies have a minimal rivalry, the prices are almost similar and competitive pricing is absent in such a market. Nonetheless, it is essential to evaluate the firms within a country and their overall influence on the competitive position.

Secondly, evaluating the factors of production within the country is also instrumental. In the oil industry, the various factors that facilitate production and their effect on the price and the competitive position must be evaluated. In some cases, the factors influencing production might work against the industry. Evaluating ways to make these factors more relevant to improving the pricing and sale of oil is vital when trying to improve a country’s competitive position. Often, the control of these factors is a significant determinant of their effect on a country’s productivity. When the factors are controlled by a single body, the pricing might be affected. Besides control, the consideration of innovation rates within a country is also vital when deciding how to improve the performance of the industry.

The third factor is the demand conditions. Comparing the demand within the domestic market to that in the international market is crucial in our case. When the domestic market is doing well, the international market is also likely to be doing well. Most firms within the industry produce for the local market. Therefore, according to this theory, it is vital that country evaluates some of the strategies that can assist in improving the industry performance. Additionally, it is vital to assess the causes of changes in demand and develop solutions to these changes (Pegels, 2005, p.25). Improving the domestic demand is vital as it will foster more innovation and further improve the products sold in the international market which would automatically improve the competitive position of our country.

Finally, it is always crucial to determine the influence of the related and supporting industries. The effect of the prices has not only affected the oil industry but also affected all related and supporting industries. For instance, a reduction in demand for oil will affect the transport industry, affecting all organizations that offer services for the oil companies. It also affects the human resource industry in our country bearing in mind that many HR consultancies benefit from the oil industry. In addition to these factors also largely affects the organization. The success of the oil industry will generally improve the performance of all our intertwined industries. As such, this issue needs to be addressed as early as now, to ensure that our country does not suffer any long-term implications of this price change.

Recommendations

Recommendation #1: Improve Domestic Market

The first recommendation that can be implemented by the organization is improving the domestic market. Primarily, now that oil prices have slumped, improving the production and consumption back at home is probably the best approach to deal with the reduction in oil prices. Although back at home we cannot improve the prices, we can improve the consumption to offset the balance lost by the increase in prices and the slump in demand. Therefore, improving competitiveness locally and making sure that the local consumption is in excess would help revive the industry. More local consumption is the only proposed strategy that can help improve the current industry.

Recommendation #2: New International Markets

Besides focusing on the domestic market, implementing strategies aimed at looking for new international markets is also another proposed approach that would work out excellently. Currently, the slump in oil prices has not affected demand in a negative way, but it has badly affected the revenues. There are multiple approaches that can be used to ensure that the reduction in prices is offset by an increase in consumption. The country should invest more in marketing our products to some of the countries to whom we do not sell oil. Looking for new international markets should be made a priority for the country if it, in anyway hopes to achieve a restoration of the industry.

Recommendation #3: Improving Innovation

Besides focusing on the consumption, another approach is to focus on the factors of production. As advised by Nitisha (2016), factors of production might impact the industry in a great way. Primarily, the reduction in oil prices has largely affected the production costs. Currently, the reduction in prices has affected our profitability. To ensure that as a nation we are more competitive than our neighbouring competitors, the best approach entails reducing the costs of production. If the costs of production were reduced significantly to ensure profitability despite the slump in oil prices, the country might enjoy some degree of autonomy in controlling the negative effects of the drop in prices. This means that the country must heavily invest in research and development to come up with innovative ways to reduce the cost of production.

Innovation can further be facilitated by using cheap and yet quality factors of production. Also, the use of innovations that improve the quality of our oil can be another approach. For instance, it would be crucial to use fuel-saving technologies to ensure that our fuel is more competitive than that offered by our competition. For instance, some technological advancement can be used to make our oil less pollutant. Bearing in mind the contemporary consumers are more inclined to saving the environment, producing less toxic oil can help make our oil more attractive to both external and domestic markets. However, this might take time before we develop an innovation that makes our oil less toxic to the environment. Nonetheless, such an innovation would solve our crisis to a great extent.

Recommendation #4: Fostering Healthy Competition among local Firms

Fostering healthy competition and unison between companies will be required. A government department can be developed to improve the relationships between rival companies to help offset the current challenge collectively. If all firms within our country came together and established some viable solutions to the menace using their individual resources collectively, this menace can be overcome easily. Although we want the companies to remain competitive for better production to be realized and for the country to improve its industry, we must ensure a certain level of collaboration between them to develop a better solution to this issue. Bearing in mind that these companies have been performing exceptionally well in the past, their experience in the oil industry can shed light on some very highly effective strategies that would help improve the industry (International Relations Online, 2016). However, these firms have to work together for them to achieve this goal.

Conclusion

To conclude, several strategies that have been employed in other countries have worked greatly. It is crucial for our country to learn from these nations and borrow some of the solutions they had for their industry. Regardless, we need to empower the local companies by improving the domestic market through whatever means possible, including government subsidies. Fostering innovation will also be instrumental as it will bring with it a number of solutions that we can enact in our country. Thirdly, we have to foster the domestic market for our oil to seem attractive to other countries. Alternatively, it will be crucial to ensure that our local companies work together to develop long-term solutions. Regardless, innovation and collaboration seem to be the best choices for this undertaking to work. For our country’s oil industry to revive, much investment in research, development and marketing must be made, and it is up to our government to facilitate these factors.

Read More
Cite this document
  • APA
  • MLA
  • CHICAGO
(Oil Prices Impact on Your Country Economy Essay Example | Topics and Well Written Essays - 1500 words, n.d.)
Oil Prices Impact on Your Country Economy Essay Example | Topics and Well Written Essays - 1500 words. https://studentshare.org/macro-microeconomics/2109062-oil-prices-impact-on-your-country-economy
(Oil Prices Impact on Your Country Economy Essay Example | Topics and Well Written Essays - 1500 Words)
Oil Prices Impact on Your Country Economy Essay Example | Topics and Well Written Essays - 1500 Words. https://studentshare.org/macro-microeconomics/2109062-oil-prices-impact-on-your-country-economy.
“Oil Prices Impact on Your Country Economy Essay Example | Topics and Well Written Essays - 1500 Words”. https://studentshare.org/macro-microeconomics/2109062-oil-prices-impact-on-your-country-economy.
  • Cited: 0 times

CHECK THESE SAMPLES OF Oil Prices Impact on Your Country Economy

The impact of Oil price changes on the Gulf Council Countries (GCC) stock markets

The study is to examine the effect on the stock market of Gulf Council Countries due to the fluctuations of the oil prices.... The stock market condition for a period will analyze by the statistical tools and the conclusion would be whether the oil prices affect the stock markets of the gulf council countries or not.... The researcher will try to find out the effect of the oil prices on the stock markets of Gulf Council Countries considering all the factors which affects the stock market like the capital existing in the market, the gross domestic product, the unemployment rate etc....
12 Pages (3000 words) Dissertation

Economic Relationship Between Oil Prices, Food Prices and the Nascent Global Economic Recovery

This paper 'Economic Relationship Between Oil Prices, Food Prices and the Nascent Global Economic Recovery' is an effort to gauge the economic relationship of oil price inflation and food price inflation and what is their impact on the nascent global economy.... People of Argentina have been seen boycotting tomatoes during the presidential elections as the price of vegetables got dearer to that of meat prices.... Another instance shows Italian shop keepers organizing a one-day pasta boycott as an agitation against the rising food prices....
16 Pages (4000 words) Research Paper

The Oil Industry and How It Affects Our Economy

The refinery capacity of the United States has also an impact on the high prices.... The paper will then examine the historical oil prices and the cause of the recent oil price hikes and their implications in the economy.... Therefore, the movements in oil prices also have direct effects in the production and the volume of goods produced in the country.... Figure 1 shows the behavior of oil prices in the world market from 1861 to 2004....
3 Pages (750 words) Essay

Oil Prices and the World Economy

This paper 'oil prices and the World Economy' investigates into the major factors that bring about a change in the price of oil, in particular, in the recent scenario of oil price hikes.... On the other hand, the major supply-side factors playing a role in increasing oil prices are incapability of OPEC to produce more, the inability to gauge future demand and political factors, etc.... On the other hand, the major supply-side factors playing a role in increasing oil prices are incapability of OPEC to produce more, the inability to gauge future demand and political factors, etc....
14 Pages (3500 words) Dissertation

Gasoline Prices in the US

Increased gasoline prices have a huge impact on the economy because of the heavy reliance in motor vehicles in developed countries.... rude oil prices have the major impact on gasoline prices.... In order to understand the importance of gasoline for the national economy, it is essential to look at the market and what factors are affecting the price of gasoline.... Other factors include refinery capacity in the country, gasoline inventories maintained by refiners which is going downward, regulatory environment (national air quality standards), and the structure of the gasoline market....
6 Pages (1500 words) Essay

Affect of oil on our economy

living organisms through metabolic processes while mineral oils that comprise of crude oils or even petroleum and there components that are refined and they are the important resources for the modern economy.... The oil business includes processes of exploration, extraction, Effect of Oil in Our economy Oil can be defined as a natural chemical substance that is non polar and a viscous liquid atambient temperature range and is also immiscible with water but miscible with other liquids....
2 Pages (500 words) Essay

The Impact of Oil Price Change on the US Economy

The current study "The Impact of Oil Price Change on the US Economy" seeks to assess the basis in supply and demand for the vulnerability of the United States economy to oil price hikes as well as describe how an oil price hike will impact on the US economy.... oil prices have been a serious concern for the United States economy.... This work seeks to merely describe why the US is vulnerable to oil price hikes and how an oil crisis would affect the US economy....
16 Pages (4000 words) Essay

Indias Economy - Indias Role as Regional Power

hey would see growth in exports, and the fall of oil prices favorable to the country.... As the country is dependent on oil for its fuel and industrial uses, the drop in oil prices would mean savings on subsidies in the government.... The paper "Indias economy - India's Role as Regional Power" is a wonderful example of an assignment on macro and microeconomics.... The paper "Indias economy - India's Role as Regional Power" is a wonderful example of an assignment on macro and microeconomics....
6 Pages (1500 words) Assignment
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Contact Us