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Since the 1950s, firms in mature manufacturing industries in the developed countries have come under severe pressure from competition based in up-and-coming newly industrialized countries. Particularly in heavy industries, the outlook for the established manufacturers became grim in the 1970s and 1980s. Despite a partial resurgence in some western heavy industries in the 1990s, a new generation of powerful competition emerged in the 2000s and this has placed the future of heavy industrial competitiveness in western and developed Asian countries in question. What is the situation in shipbuilding? Can competitiveness be maintained or resurrected in developed countries? In this article, this question is discussed through two perspectives: that of the industry life cycle and the level of attractiveness of the industry.
In the future, strategy will play a bigger role in determining how the shareholder value of petroleum companies will increase compared with the overall share market. Outperforming companies will identify market discontinuities and rapidly and aggressively apply existing and new capabilities to generate advantage business positions.
The petroleum industry is facing many downside forces. Oil prices are forecast to be flat in real terms with potential for short-term volatility. Operating costs are experiencing upward pressure from stricter environmental standards and other sources. Traditional basins are mature, so elephant hunters have encountered slim pickings. Access to new markets is constrained and competition is intense. The logical response to these prevailing trends has been restructuring and re-engineering. This has led to reduction in activity, outsourcing, and focusing on core assets and skills.
Beyond restructuring, what opportunities exist in the energy business? Agile and aggressive companies may be able to take advantage of second-order trends and changes. These companies will then be able to break from the pack and outperform the rest of the industry (Fig. 1).
Role of Strategy
A McKinsey study of 30 major industry groupings (Fig. 2) showed that in all but two industries some large companies significantly outperformed their peers over the long term. We deemed a company large if annual revenues exceeded $500 million and considered long term 5 to 10 years. The two industries with no sizable outperformers were electric utilities and petroleum. In these two industries, performance was driven by the structure of the industry.
Despite being structure driven, the petroleum industry as a group at various times has drastically outperformed the Standard & Poor (S&P) 500 in terms of increase in shareholder value (Fig. 3). During the boom years of 1976-80, the industry performed extraordinarily well. Then again from 1987 to 1994, the industry excelled as the companies tapped the value of existing assets by restructuring and re-engineering. However, the role of structure vs. strategy may be changing for the petroleum industry. In the future, we think that the petroleum industry will be more like other industries. Company strategy, not industry structure, will be more critical to performance.
The petroleum industry is mature, but other mature industries have significant outperformers (Table 1). Winning growth approaches from other industries are increasingly applicable to petroleum. Although no traditional large players have met the breakout standard (Figs. 4 and 5), examples of the importance of strategy over structure are already emerging in the energy industry.
This paper assumes the incontrovertible nature of the statement that thevalidity of competition in the nonnatural resource industries is establishedfirmly on the rate and extent of the economic development of the United States.It then demonstrates the nonexistence of any condition within the petroleumindustry that would invalidate the principle of competition as applied to it.It points to the benefits that competition has effected in the oil industry andthe reasons why the practice of the competitive principle should continue tokeep the industry virile and progressive in meeting the requirements of futuregenerations for the kind of products natural to it. Finally, it pleads for aclearer view of the affairs of the oil industry by seeing them against abackground of the whole economy.
Even a few years ago there would have been only an academic reason forpresenting before this Institute a paper on the validity of competition in theoil industry or any other natural resource industry; today there is no morepractical subject for this body to consider. In social importance it transcendsattempted solutions of perplexing technical problems; and even the numerouslegal and economic problems that grow out of administration of state regulatorymeasures appear to be of secondary importance because they would cease to existif competition were abolished.
The aspiration of certain elements of the Federal Government to acquirecontrol of the oil industry has long been suspected and so frequently indicatedas to need no documentation here. The President's attitude, as expressed in thefollowing statement from an open letter to Representative Cole, is noteworthybecause of its high authority:
The vital need for petroleum in the national defense ?confirms my belief inthe urgent need of Federal legislation to safeguard our petroleum supplythrough prevention of waste and by establishment and maintenance of soundeconomic conditions in-the oil industry?
But also it may be dismissed with this mere mention of it because itpredicates government control and the abandonment or broad reduction ofcompetition on a war emergency. Clearly, the fight for a nation's life mayjustify a government's control over men and resources that would be abhorrentand economically enervating under conditions of national security.
The writer regularly provides safety training instruction to workers who work either in general industry or construction. The general industry classes are based on the standards from 29 CFR 1910 General industry; and the construction classes on 29 CFR 1926 Construction. For the purpose of this report the term OSHA General industry standards will refer to 29 CFR 1910 and the term OSHA Construction standards will refer to 29 CFR 1926. It is frequently observed that students in the general industry classes are unaware that certain construction standards are critical to their safety as well as achieving OSHA compliance. Likewise, students in the construction classes are many times without the necessary knowledge of understanding the general industry standards.
There are several important factors that cause the confusion as to which standards, general industry or construction, apply to the work being performed. These factors are explained later on in this report. The following list contains a summary of these factors:
• Definitions to clearly explain the difference between “maintenance tasks” and “construction tasks”. For example, are workers in general industry who work in the maintenance department exempt from following the construction standards?
• Completion of the OSHA 10-hour Construction course is typically voluntary. In other words, there is not a federal OSHA standard requiring the completion of this training. However, this paper will explain the requirements, levied by seven states in the United States, where this training is mandatory for employees performing certain construction activities.