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Table of Contents
Globalisation has created an institution of businesses that have gained the desire to expand its operations globally. Globalisation has increased opportunities for businesses to extend its international operations. The market growth of Eni was centralised as the company only strengthen its domestic market and the state-owned enterprise status extended its recognition. Eni was formed in the early 1950s after the World War II. Eni was formed through the merger of Agip, Snam SpA and other energy industries and the purpose were to form a strong state-owned enterprise which could strengthen the Italian economy. Also, the aim of Eni was to protect national interest especially the field of hydrocarbon and natural gases. Enrico Mattei was the first chairman of Eni and his visions for Eni was liked by politicians and economists because Mattei’s strategic vision was to restructure Eni and increase Eni’s international growth. The case study is relevant to this case study because it outlines the changes of strategies and the leadership roles within Eni.
The global expansion of business has resulted in the implementation of the global strategies. Global strategies look at three distinctive areas of the organisation and they are resources, capabilities and current global position. This section looks at the global strategy of Eni SpA and how the company has transformed its resources to establish a global market presence. The global strategy of Eni has strengthened its core competencies as the company has focused on oil and gas exploration in different countries and different continents. The global strategy of Eni can be affected by both economic and political issues as the Arab Spring in 2014 affected the strategic plan of Eni.
The era of Enrico Mattei saw the transformation of Eni and the transformation of Eni on the global stage under Mattei was remarkable, and it created a different identity for Eni. The exploration of Eni into different subsidiaries was the strategic plan of Mattei and the core sustainability of Eni was based on moving into different subsidiaries that could enhance its operations. During, Mattei’s short-lived chairman roles, he created a new vision for Eni which was to diversify into different markets so that Eni could increase its competitive advantage. In 1953, the strategy of Eni was centralised on international expansion and growth. The strategic vision of Mattei stemmed from the post-war vision of Italy and internationalisation was significant for post-war Italy to resurrect its economy. The so-called ‘Mattei formula’ was solid and the implementation of the formula was important for Eni because it created a new path for the company. The Mattei formula was based on forming a relationship with other oil and energy countries which Mattei referred to as ‘Seven Sisters’. The Seven Sister ideology was based on tying up oil resources with countries in the Middle East and Latin America. The production-sharing between Shah of Iran and Eni in 1957 illustrate the international strategy that Mattei implement because the relationship with the Shah of Iran extend the global reputation of Eni and also strengthen the market position of Eni. As it was mentioned in ‘core competencies’ framework by Hamel and Prahalad (1991), it shows that Mattei used the resources of Eni to establish a relationship with oil-based countries so that Eni could increase its capabilities. Also, the international strategy of Eni under Mattei create an advantage for buyers and it was difficult for other oil and gas companies in Europe to imitate because other European oil and gas companies were reluctant to form a relationship with other countries.
The Bartlett and Ghoshal model is used to describe the international operations of Eni. The two pressures [local responsiveness and global integration] of operating international are illustrated during Mattei era because the two pressures determine whether Eni should focus on delivering good products to its domestic market or Eni should focus on global integration by forming a strategic alliance with oil and gas producers in different countries. As it is in this model, this shows that Eni uses the multi-domestic strategy where the local responsiveness is high and the global integration is low. The local responsiveness was high because the Italian government wanted to sustain capabilities of state-owned enterprise and also wanted state-owned enterprise to provide better products to the domestic market. The global integration was low because the globalisation ideology was not fully integrated into the global market systems and Eni did not want to commit its resource capabilities in other countries where there was no stability.
The Bernabe era did not follow the existing example of Mattei and Eni did not have a strong strategic direction to carry forward its international activities. The ‘radical transformation’ that was used by Bernabe did not create strategies that could sustain Eni’s competitive advantage and Bernabe’s radical transformation was based on the privatisation of Eni, and diversification was not an option. As it is in Porter’s generic strategy, it shows that Bernabe suggested that using differentiation focus will allow Eni to focus on its energy activity and eradicate its conglomerate activities which were affecting the performance of the company.
Bernabe used the SWOT [strengths, weaknesses, opportunities and threats] analysis to assess the internal and external capabilities of Eni and by using the SWOT analysis, Bernabe was able to reduce debts and increase profitability through eradication of non-strategic activities.
|StrengthsPrivatisation of Eni – allowed shareholders to invest in the company
Reduced debts and turning loss to profits
Selling assets to make $2 billion in profits
|WeaknessesClosing or selling significant subsidiaries of Eni
No diversified businesses were established
Refocusing elevated shareholder value
New businesses in different geographical areas through technology and cost structure
Public offerings in stock exchanges in London, New York and Milan
Privatisation increased the vulnerability of Eni as the company had to compete with other European energy providers.
Entering the new millennium was a path for a new direction and stakeholders at Eni wanted a change to its strategies and systems. The eras of Minato and Scaroni were different as both CEOs had the vision to change Eni’s working systems and implement profound internationalisation strategies which allowed Eni to compete with major competitors. The similarities of strategies created a disciplined growth within Eni as this growth was outlined in Eni’s upstream strategy. The primary strategy was to develop new ways to enhance its production of oil and gas and small acquisitions created new business opportunities and allowed Eni to penetrate through different markets. As it is in the Ansoff matrix, it shows that Minato and Scaroni adopted three determinants from the Ansoff matrix which are market penetration, market development and product development. Minato and Scaroni did not want to diversify as they believed that diversification would create risks which could hamper the business growth.
|Market penetrationStrong relationship with Gazprom
15 billion barrel of oil in the last three years in Kazakhstan
|Product developmentDeveloped electricity in Nigeria supplied to 10.5 million people.
Create chemical-based products through its separate company, Versalis
|Market developmentProviding electricity in Congo and health clinics through Eni Foundation
Major sources of hydrocarbon in North America and the Middle East
Eni developed a different relationship with countries that had major oil and gas reserves and the internationalisation strategies that were employed, extend different market opportunities to sustain its market leadership. The upstream strategy was a success as it allowed Eni to reprogram its resources so that they could increase its value chain. The connection of both CEOs increases Eni’s participation in the global market because the company was able to link its gas supplies to other international pipelines. The gas strategy was well-executed as Eni had full control of many gas reserves around the world and this illustrates how Eni’s strategies were formulated with a vision to control the global markets. The competition directive introduced by the European Union (EU) came as a threat to Eni as the company was put under pressure to change its gas strategy because it did not meet the competition regulations of the Union. Downstream gas was reduced to 50 percent which led to refocus of gas strategy that threatens its role in the gas market.
The changes of the upstream strategy did not reflect on the downstream strategy as Eni struggled to refine and market oil products. The global marketing strategy was lacking as there was no cohesion; the failure to market its product led to the closure of retail outlets and also leaving the downstream market in Italy. The chemical business of Eni was also scrutinised under Minato and Scaroni because they did not have the vision to implement specific strategies which could enhance the chemical business. The use of strategic alliances such as joint venture and licensing (Dunning, 1992) changed the chemical business as Minato and Scaroni believed that joint venture will enable Eni to restructure its resources and also gain technological advantages from other businesses that have the knowledge to create chemical-based products.
Question 2 – Leadership roles and Change management
The disconnection of the leadership vision is missing in Eni’s strategic changes; the vision of the company does not exist and the strategic direction shows very little movement. The core notion of transforming leaders to achieve results is not present at Eni. The long-term strategies are not profound to achieve the results that the company has envisioned. The long-term strategy lacks transparency and also presents many challenges ahead. The leadership qualities at Eni is weak and strategic thinking which transform a manager to leader is missing in the fundamental strategies of Eni. The change management seems to be a difficult element to the sustainability of Eni’s operations as Bernabe Era led to errors and corruption scandals which created divisions within the company. The Bernabe era also led to changes in management which reshaped the organisational structure. The privatisation of Eni in the late 1990s brought a different management philosophy as the company was not controlled by the Italian government. The changes in management after the privatisation brought hope to Eni but it was difficult for the company to implement changes and enforce strategic decisions that could help strengthen its internal operations.
The role of leadership is to assess the process of the organisation and also lead people within the organisation to meet the organisational goals. Leaders instil trust in people and allow people to make decisions which could also lead to organisational success. The reinvention of Eni under Bernabe was a turning point as the company went through the moral and financial changes. Bernabe was able to transform Eni unethical practices and also promote the vision and strategy of Eni to its employees. Bernabe took a dictatorial role of leadership to manage Eni and this dictatorship role created dishonesty among the workforce. Bernabe wanted total authority in decision-making as Bernabe wanted to senior managers to report to him through a directive that Bernabe implemented. The autocratic role of leadership that Bernabe adopted did not transform the organisation as Eni was disinclined to implement dynamic management of its portfolio because Bernabe did not want other companies making a decision. The autocratic style of leadership created confusion at Eni and also Eni had a leader that did not encourage employee involvement. Bernabe adopted a selfish thinking and a thinking which involves individualism rather than collectivism.
Hill and Wetlaufer (1999) article entitled ‘leadership when there is no one to ask’ outline the leadership role that Bernabe created at Eni and Hill and Wetlaufer (1999) note that Bernabe was not a good leader but he was put in place to obliterate the resources and capabilities of Eni. Although, Bernabe restored some capabilities for Eni and made Eni competitive in the energy market; however, the way Bernabe made his decisions show how authoritarian he became and Bernabe refused to elicit opinions from other people from his senior team. The high expectation of Bernabe was what result to de-transformation of Eni and although Bernabe achieved some of its results, he was not a leader that could transform Eni and also promote teamwork to achieve results. The autocratic role of Bernabe is what led to the corruption scandal after months of taking charge at Eni because the lack of decisions by other senior managers led to bribe-taking as other senior managers felt that the decision-making process was not reasonable. A leader’s role is to enhance employees’ self-belief and also encourage self-thinking but this was not the case for Bernabe as his autocratic role was profoundly rooted in the core strategy of Eni. Bernabe called for the revision of strategic plan from the operating manager and operating managers were forced to implement strategic plans that suited the restructuring process of Eni and also the value creation and performance objectives. Furthermore, Bernabe was going to make all decisions regarding the strategic plans that were suitable for Eni. The selling off non-core businesses at Eni reshaped the company financial position as this was not a process of restructuring or change management but it was for Bernabe to show its dominance.
The clear vision of Mattei illustrates his leadership qualities because Mattei wants to regenerate post-war Italy through the exploration of oil and gas. The democratic and laissez-faire leadership roles that Mattei adopted made him a national hero, and also Mattei changed the mindset of Eni because he directed the company to make changes that were vital to its success and Eni’s integration in post-war Italy. The democratic leadership role of Mattei is shown through the strategic direction that he took Eni because Mattei’s leadership qualities were to create a high employees’ participation at Eni. What made Mattei is a good leader was that he understood the grassroots of Eni’s core strategy and he believed that Eni could extend its market opportunities beyond its domestic market. Mattei was a democratic leader that understood how a company should run and his dynamic leadership model was to make effective decisions to increase Eni’s core competencies and resource capabilities. By the early 1960s, the leadership qualities of Mattei allowed Eni to enter different businesses. The charismatic personality transformed a state-owned enterprise to a well-run global organisation. The personal authority of Mattei led to the success of Eni before his death in 1962. The resourcefulness and daring are what made Mattei a good leader because he saw business opportunities that could make Eni sustain its competitive advantage in the global market.
The leadership of Minato and Scaroni was very profound as these leaders use democratic leadership role. Minato and Scaroni change the way leaders were viewed as both CEOs implemented an organisational change which resulted in a corporate structure where roles and responsibilities were designated. The eras of Mattei and Bernabe, change management did not exist as the concept of change management is new. Although Minato and Scaroni embraced the corporation environment, both CEOs had also embraced the role of democratic leadership which meant decision-making was based on collectivism rather than individualism. Also, the corporate structure enables employees to be involved or participate in the organisational changes. Change management was essential to the organisational performance because the past eras have not changed the core principles of Eni. The past eras of Mattei and Bernabe have encouraged a very systematic way of doing business or managing workforce.
Minato and Scaroni focused on how business process and resources could be used to transform Eni to a global business which can compete with major competitors. The change management processes led to different transformation within Eni and these changes were vital to Eni’s transition to the global market because, under Bernabe, Eni was not engaging in the global market. The enhancement of resources was important for Minato and Scaroni because they believed that a multi-divisional corporation will deliver better results and also create efficiency. The three divisions [exploration and production, gas and power, and refining and marketing] of Eni was significant to its transition to the corporation interface because different division performed different tasks and these tasks that were performed elevated the success of change management within Eni. One of the significant factors of change management is the ability to enhance the human resource department because the human resources department was crucial for Eni because the human resources department provided important training which enabled employees to perform better. Minato and Scaroni adapted the change management processes into different parts of the organisation so that Eni could achieve better integration. The financial controls were more rigid and risk management procedures were established to create effectiveness; also creating a code of ethics enhances the organisational culture which enabled employees to understand the ethos of Eni. The promotion of ‘Eni’s Way’ shows how the process of change management was deeply rooted in the core foundation of organisation change. The ‘Eni’s Way’ became an identity which was employed by internal stakeholders when performing tasks. External stakeholders also had a deep connection with the tagline ‘Eni’s Way’ because it was used in marketing campaigns to change the old public perception of Eni. The ‘Eni Way’ tagline was bold and influential because Minato and Scaroni wanted internal and external stakeholders to be amused by the new direction that Eni was taking.
The leadership roles have shifted because the eras of Mattei and Bernabe provided a strong vision but Bernabe embraced a dictatorship role while Mattei had a very little democratic role. However, change management process was not implemented until Minato and Scaroni eras but it lacked a strong direction. The first recommendation is that taglines should not be developed for internal operations processes because it creates poor organisational culture. The second recommendation is that the change management of Eni does not use motivational practices as the process of change management focus on how Eni could function in the global markets. The change management of Eni should encourage employee empowerment and employee enrichment, and these changes will enhance employee development and it will also encourage employees to contribute towards the organisational objectives.