Saudi Aramco: Company History
Saudi Aramco started its humble beginnings in 1933 when Saudi Arabia granted a US company, the California Arabian Standard Oil Company, a license to drill or discover oil in the kingdom. This was later joined in by several big oil companies to form the Arabian American Oil Company, now the giant conglomerate Saudi Aramco.
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Five years later after the exploration by the Californian company, oil was discovered at Dhahran and soon exportation of oil was commenced to the neighboring Middle East states. The largest oil fields in the world have been discovered in Saudi Arabia and these are now operated and controlled by Saudi Aramco, now fully-owned by the government of the Kingdom of Saudi Arabia.
Saudi Aramco (to be called Aramco for the rest of this dissertation) has acquired controlling interests in some other oil refineries such as the SsangYong Oil Refining Company (or S-Oil Corporation) which was once owned by the Republic of Korea. Aramco has major interests in many oil companies in the neighboring states of the Middle East, UAE, and other countries. (Saudi Aramco, 2011)
But what is remarkable is that this giant state-owned oil company is not only oil-producing, it has also taken control of refining and marketing of oil to the various parts of the country and of the world. It has acquired oil refineries and marketing firms for such purposes. Aramco now employs approximately 51,000 people from 66 different countries. The pool of human resources is composed of geologists, engineers, scientists, and computer specialists who are mostly from Saudi Arabia. (Saudi Aramco, 2011)
A small percentage of the workforce consists of about 8,000 expatriates who come from the United States, Europe, and Asia. (Simmons, 2005, p. 101)
Saudi Aramco is now the leading oil-producing company in the world. Its rise to global leadership in oil production has been influenced by many factors coming from inside and outside of the country.
On July 1, 1993, Aramco assumed responsibility and control on all state-owned oil refineries in Saudi Arabia. It has been described as a sophisticated organization whose business is producing and processing ‘black gold’. Its control of the vast oil industry was made official through a Royal Decree which put into law the marketing and distribution of oil to the different parts of the country. Previously, it was once held by the Petromin Marketing and Refining but now Aramco has held controlling interests in most refineries in the country. Aramco also holds major interests in international refineries in different parts of the world. In Saudi Arabia, Aramco takes charge of the distribution and marketing through its many branches. Moreover, Aramco has a supply of a million barrels of oil per day, distributed locally and throughout its subsidiaries in many parts of the world. (Saudi Aramco, 2011)
Although Aramco has a monopoly of oil production, refining, and marketing in the country, there are signs that it has given up some of its control. This is so because an ongoing refinery in Jizan, Saudi Arabia has been going on without the involvement of Aramco. (Oxford Business Group, 2007, p. 130)
The world’s oil industry was once controlled by a world cartel composed of companies from the US and the UK. They were once known as the ‘Seven Sisters’ consisting of Standard Oil, or Exxon; then there was also the Royal Dutch Shell; the BP; another company named Standard Oil which later became Mobil; Chevron; Gulf Oil and Texaco. They held the monopoly for some time but some of them have merged. Their leadership and control have been tremendously reduced, amounting to about 10% of the world’s oil and a little reserve. These companies formed a monopoly in the world oil industry. They controlled the prices and the flow of marketing. (Oxford Business Group, 2007, p. 130)
During the time of the ‘Seven Sisters’, market research and market intelligence were not very significant in the other companies’ development. This is so because prices were controlled by a few companies. Market research and marketing intelligence are effective only when there is a free market.
However, the ‘Seven Sisters’ which are mostly foreign companies are now replaced by a new set of government-owned companies from other countries led by Saudi Aramco. These companies are government-controlled so that dealing business with them has to pass through government channels or a government to government communication.
Humans create knowledge in social interactions. Aramco has created knowledge structures, places, and mechanisms for the creation of knowledge, whether this is through the interaction of employees and managers, and the vast physical structures created by the great wealth from a precious element called oil. Through the networks that the company has created, both locally and internationally, Saudi Aramco has maintained a product-development process unique from the rest of the world’s oil industry. Its wealth of knowledge-based system is a product of marketing intelligence and years of continuous data-basing. It can be challenged but cannot be equaled because it is unique by itself.
Saudi Aramco was a personal pick for my goals and objectives in life and my career. I want to spend my whole time perfecting my talent and skill with a Saudi company in the industrial sector. To be trained and molded in a giant conglomerate famous for having a dedicated workforce, professional experience, and a friendly work environment is a great personal accomplishment for me. The people in this organization are well known for their professionalism and expertise in the industry.
To start with, I knew I would accomplish something. Years after that, I believe I have faithfully extracted something, some precious amount of knowledge and expertise from the organization which has become the lifeblood of the Saudi economy.
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From the beginning of my internship, I set my neophyte goals for personal advancement with the following belief and principles:
- I had a basic knowledge of a college degree and industrial work which I wanted to be improved and made use of for personal advancement and to be a part of the working people of Saudi Aramco in particular and national Saudi Arabia in general.
- I believed the working environment of Aramco, including its people, management, and employees, could provide me with the knowledge and experience to prepare myself for a great career stride ahead.
- I wanted to contribute something, my little knowledge, and expertise, to the world and let this become a part of a larger whole like Aramco, to prepare and to empower myself, and to become proud and feel that I am here a part of a prosperous economy. I thought to be a member of a big organization like Saudi Aramco was an unreachable dream, but when I was accepted, that dream which became a reality, motivated me to leap some more, to become big like her, to be someone like the rest of the progressive and generous people of Saudi Aramco.
Market Intelligence Study
Saudi Aramco is a global organization with many subsidiaries in the Middle East and around the world. It operates a network of companies and branches of refining, distribution, and processing of petroleum products. It operates using the latest technology coupled with software and Information Technology. It supplies liquid hydrocarbons which include fuel and feedstock products.
I was assigned to a department that has three teams namely: demand forecasting, allocation, and market intelligence. This third team was where I put all my talent and efforts to the test.
The Market Intelligence (MI) team’s primary job is to track and study the activities, moods, and changes of the domestic market, the demand and supply, and the many facets of market intelligence for inputs into the organization’s database. The data and information which our team had gathered and provided the main office formed into a stimulus for decision making. At that time, the market intelligence of Aramco was at its infant stage; it was still in the initial phase of development which motivated me and the team to work hard and contribute to the success of our mission.
I joined my Co-op on the 18th of July and participated in several projects. The experience has formed part of my precious moments with the company.
The projects which have given me wonderful experience are the following.
PG91 & PG95 (Premium Gasoline) Demand
- This was carried out with the cooperation of two of my colleagues from KFUPM which allowed them to complete their co-op.
- The purpose of the study is to find the difference between the targeted percentages of PG 91 and PG 95 along with the actual sales of the western region.
- Although the study had been completed, I took my chance of inputting some of my knowledge. My suggestions and comments were on the methodology, data analysis, findings, and recommendations of the study.
International Road (Road 85) Gas Stations Survey
This was a survey conducted to all the gas stations along the international road (Road 85). The objective of the survey was to verify the availability of liquid petroleum products sold (PG 95, PG 91, and diesel). We did the actual survey by visiting the gas stations along Road 85. The survey was commissioned to find out which product was selling high and which was not; which among the gas stations were taking the lead in the sale of PG 95, PG 91, and Diesel fuel; and which Aramco products were selling high in the market.
- We added some improvement to the data collection. Previously, Aramco people would just collect the data, but what we did, along with a fellow co-op student from KFU, was to do some editing and put it into a spreadsheet. I added an analysis of the data, presented it to my supervisor with a chart, and also made some findings, conclusions, and recommendations.
- To complete my survey, I created a simple GIS system by using “Google map” and “Google Earth”. This allowed me to provide a detailed plot of the gas stations we surveyed, along with coordinates and significant information that appears with the clicking of the station.
- The clickable information in the map includes gas station consumption of every type of fuel, capacity, contact, and bulk plant information. The map is a very important feature of the study whereupon it can provide data, statistics, and findings for analysis and decision making for the particular department of Aramco. This map was shared online among the different departments of the company, along with a link and a final report.
Market intelligence refers to the broad spectrum of the market. When the market is mentioned, this refers to a lot of topics which may include the organization and its products, prices, macro-environment, competition, and so on.
The study of market research is one that requires intelligence. For Saudi Arabia and the local market of oil, market research will include the existing business environment of the country, the price of oil in the local market, the oil companies and the competitors, and the assets of those companies.
Saudi Aramco, which is a case study for this dissertation, is a company built from several businesses in oil production, refinery, distribution, and marketing of oil. It has controlling interests in various oil companies within Saudi Arabia and many other countries. It is owned by the government of Saudi Arabia and holds responsibilities for the production and distribution of oil within the country and to many parts of the world.
This dissertation is a study of the local oil market of Saudi Arabia, one of the main businesses of Saudi Aramco. The government had envisioned to gain control of the company to serve the interests of the people and the government itself.
To study the market research of Saudi Aramco is to dig deeper into its history, the products and the prices, the strengths and weaknesses, the different analyses involved in business and its role in the oil industry both locally and internationally. In short, market research for this particular company involves studying the many aspects of Aramco’s products and business environment.
Market intelligence, on the other hand, looks at a competition or as Callingham (2004) states, the client-side of the market research. Market intelligence is concerned with knowledge management and its significance to the organization, the many functions of market research, the future of the company, and so forth.
The objectives of this research are the following:
- To know and understand the differences between market research and market intelligence;
- To conduct market research for Saudi Aramco and the local petroleum industry in Saudi Arabia;
- To determine the importance of market intelligence in the petroleum industry, particularly in the domestic market of Saudi Arabia;
- To determine how Saudi Aramco can effectively implement a network system to effectively reach out to its clientele of retail oil companies and car users.
Knowledge is significant in the study of market research and marketing intelligence.
Knowledge is usually understood to mean theoretical knowledge, practical knowledge, experience, and skills. Knowledge and knowledge management are significant developments in the new globalizing environment.
Tacit knowledge is that which an individual is not fully aware of, and which is difficult or impossible to explain in writing (Nelson and Winter 1982, cited in Fong et al., 2007, p. 40). Explicit knowledge is tangible and can be understood orally or in writing (Kogut and Zander 1992, cited in Fong et al., 2007, p. 40).
Various kinds of organizational knowledge can be found in the literature, for instance, scientific and practical, and those which are codified. The most frequently used is the one that distinguishes between tacit and explicit knowledge. (Rodriguez and de Pablos, 2000, p. 175)
Tacit knowledge is common to all of us – it is knowledge as a result of experience. Explicit or codified knowledge is transmittable through formal, systematic language, and refers to computer programs, patents, diagrams, or similar.
Knowledge management and the creation of knowledge are phases or steps very much present in the study of organizations. Knowledge management in the context of the physical place of an organization draws one’s attention to the philosophy of ba, a concept originally proposed by the Japanese philosopher Kitaro Nishida (cited in Nonaka and Konno, 2008, p. 40). Knowledge is embedded in ba which is acquired through experience. When knowledge is separated from ba, it becomes information.
Tacit knowledge and explicit knowledge have to go together because there is a tacit characteristic to all forms of knowledge. Organizational knowledge is more of tacit knowledge because it is knowledge attained in the workplace. The creation of tacit knowledge is a continuous activity in organizations. (Rodriguez and de Pablos, 2000, p. 175)
In this study, the subject correlates with knowledge management, as market intelligence should be studied with an amount of knowledge management. Managing knowledge is a key element in the achievement and sustainability of an organization.
Knowledge management is defined as:
“…the necessary identification of knowledge categories for the support of the global firm strategy, the evaluation of the firm’s present state of knowledge management, and the transformation of the current knowledge foundation into a new, powerful basis for knowledge filling in any existing gaps”. (Rodriguez and de Pablos, 2000, p. 176)
Knowledge management is developed within and among organizations as a form of sharing. This is implying knowledge sharing among partners, branches, intermediaries, suppliers, and customers. Knowledge management involves using knowledge to add significance and value to existing knowledge. It is relevant in the discussion of marketing intelligence. The researcher has to delve into tacit and explicit knowledge in the age of globalization. This is also significant in a knowledge economy like the US economy.
Through interaction in the network, with the aid of the internet and Information Technology, people and firms input data and information, along with their knowledge, expertise, and wisdom. This becomes an asset for the organization, a part of its database, something which cannot be taken out.
Rodriguez and de Pablos (2002, p. 174) have said that the organizational resources most difficult to control of all our people. This is why when organizations conduct training and development, they have to take extra efforts and apply the necessary mechanism to help in the development of the workforce.
In the present age of globalization, competitive advantage is more pronounced with the knowledge people possessed, or what is termed, ‘people-embodied knowhow’ (Rodriguez and de Pablos, 2002, p. 174). Tangible assets no longer provide concrete competitive advantages. Firms are focusing on what their people know, and invest much in intellectual capital.
There are special features of the theories of Industrial Organization (I/O) and Resource-Based View (RBV) models of the strategy included in this discussion. The theory was first formulated by University of London Professor of Economics, Edith Penrose (1959) who said that ‘firms are heterogeneous and there is money to be made from exploiting the differences.’ (Wright et al., 2007, p. 76)
The Resource-Based view model states that the firm is a collection of unique resources. From the experience and constant contact with customers, employees, and competitors, the organization forms a database of information. Each organization is a collection of unique resources and capabilities which can be the basis for a firm’s strategy and its ability to gain competitive advantage. Resources are those acquired by the firm in its long operations and these may include equipment, and skills, and talents of the employees and managers. They can be classified into physical, human, and organizational capital. The organization can accumulate diverse resources from the environmental forces, including that inside, such as from the employees, and outside (such as from the customers, competitors).
Resources are of different types that enable the firm to implement organizational strategies and help in attaining the organization’s objectives. But individual resources may not be enough. Resources have a greater likelihood of being a source of competitive advantage when they are formed into a capability. Organizational knowledge is one of these resources that present this type. It is original and unique for every company or organization. This kind of resource in an organization cannot be copied or moved.
The I/O model of strategy states that the firm should focus on the external environment to gain a competitive advantage. From 1960 through the 1980s, the external environment was the main focus and believed to be the determinant of firms’ strategies to be ahead of the competition.
The I/O model of strategy states that the external environment imposes pressures and constraints, thus the strategies, policies, and decision-making should be based on them to gain competitive advantage and attain success in the process. The firm has to take control or focus control and strategies on its resources. Furthermore, organizational decision-makers are assumed to be rational and committed to acting in the firm’s best interest.
A theory on the evolution of MNCs states that organizations can operate internationally because of their ability to acquire knowledge assets (Hymer, 1960). MNCs also can manipulate and transfer knowledge assets within the organization (Caves, 1971: Teece, 1981 cited in Chung et al., 2005, p. 153). As MNCs expand for more business ventures, interdependence across the various branches and subsidiaries increases. Thus, there is a need for more studies and researches on the topic of MNCs, with their managers and key players.
Saudi Arabia is one of the world’s richest countries when it comes to oil. One of the largest oil companies operating in the country is Saudi Aramco, which is a knowledge-based, global firm, producing and refining oil for the Kingdom of Saudi Arabia. As mentioned in the introduction, Aramco has now taken the lead in the production, refining, marketing, and processing of oil in the country through its many plants, refineries, and merged companies within the country and outside the country.
Saudi Arabia has a limited number of wells producing oil, estimated to be 5,000-8,700 oil wells, although this has been kept secret from the public. The wells produce volumes of oil every day. A paper in 2004 confirmed that Saudi Arabia had a total of 8,700 wells. (Simmons, 2005, p. 102)
These oil wells have the capability of producing millions of oil and provide a reserve for the country in the many years ahead. Petroleum products are the lifeblood of the Saudi economy. This is why the government has taken the lead and acquired controlling interests in the company along with the many refineries and companies in the country.
Marketing has been revolutionized with the advent of high technology, the internet, and consequently, globalization. Distance is no longer a problem for businesses and organizations because of increased mobility, and organizations are free to locate many screen-based activities wherever they can find the best bargain of skills and productivity. The world is having access to networks that are all interactive. Large networks enable consumers to order and receive what they want to buy – where and when do they want these things to be delivered.
Market research is research for a particular company to look at the significance and many aspects of the company’s products and other important details about the organization.
A definition of market research by the American Marketing Association goes:
“Marketing research is the function which links the consumer, customer, and public to the marketer through information – information used to identify and define marketing opportunities and problems; generate, refine, and evaluate marketing actions; monitor marketing performance; and improve understanding of marketing as a process.
“Marketing research specifies the information required to address these issues; designs the method for collecting information; manages and implements the data collection process; analyzes the results, and communicates the findings and their implications.” (Wrenn and Loudon, 2002, p. 2)
Market research is a broad subject and encompasses many aspects of business and marketing. As stated above, it includes information about the product and customer, opportunities and problems, performance and activities, the interaction of salespeople and customers, and many other activities involving the transfer and buying of products from the company to the customer.
The AMA definition connects research and decision making, or in other words, decisions in the company are made by the results of the research. Business organizations do regard market research as a very important factor in formulating policies and deciding which plans and moves to implement for their business.
Since market research is broad, its scope is also broad and cannot be accurately determined. Market research will just have to depend on the aims of the marketing research for which it was commissioned. However, for purposes of this dissertation, market research may include marketing and consumer segmentation, the type of consumer and the location of the market, the size of the market and its growth over the years, the supply and competition, prices and quality of the product, and many more. (Avasarikar and Chordiya, 2007, p. 1.3-1.4)
Aramco commissions its people to conduct market research. With this, it has a module or template in the carrying out of the objectives of the market research. It has its definition of market research which is a bit synonymous with the present definition of the AMA. Market research, according to the Domestic Sales & Logistics Department, Demand Forecasting and Market Intelligence Group of Saudi Aramco, is the systematic collection and analysis of collected data and information about the company’s products, clients’ demands and suggestions, and the whole business environment of Aramco. The objectives of market research always link the company to the customer, on how the company can satisfy the customer, what are his/her needs and wants, how should the product/s be made and how are they delivered and presented to the customers. The performance of the product or service is also a significant part of market research.
Other important aspects of market research are discussed in this section.
The Marketing Mix
Market position refers to the relative market share that a firm holds over its competition. Firms that have a large share of a market tend to be the most profitable. However, market share does not necessarily create profitability. Business strategies, such as the marketing of high-quality products, and the provision of good service, result in profitability.
There is an inter-relation on all marketing mix variables. Some of the marketing mix variables associated with pricing decisions are product, distribution, promotion, and price.
Jobber and Lancaster (2003, p. 22) state that “these components are called marketing mix decision variables because a marketing manager decides what type of each component to use and in what amounts. A primary goal of a marketing manager is to create and maintain a marketing mix that satisfies consumers’ needs for a general product type.”
All marketing mix variables could be categorized into just two groups:
- The Offering (product, packaging, service, brand, and price), and
- The Methods/Tools (distribution channels, personal selling, advertising, and sales promotion. (Albert Frey, 1961 cited in Smith and Taylor, 2004, p. 7)
The 4Ps which are a product, price, place, promotion, and a fifth which is people, is a marketing strategy employed by most firms for competitive advantage. Marketing strategy indicates the specific markets towards which activities are to be targeted and the types of competitive advantages that are to be developed and exploited.
The strategy requires clear objectives and a focus in line with an organization’s corporate goals; the right customers must be targeted more effectively than they are by its competitors, and associated marketing mixes must be developed into marketing programs that successfully implement the marketing strategy.
A marketing strategy can be likened to a recipe. Lancaster and Reynolds (2002, p. 14) state that the ingredients are the marketing functions. Different marketing strategies require differing blends of functional ingredients. If a minor ingredient is miscalculated or forgotten, a recipe may not be successful. The same is true with marketing strategy where all functional ingredients depend on each other for success.
The attractiveness of marketing opportunities is determined by market factors, such as size and growth rate, as well as competitive, financial, economic, technological, social, ecological, legal, and political factors. (Jobber and Lancaster, 2003, p. 658)
There are three levels of a product, namely:
The Core product
To be motivated to make the purchase, there must be a perceived or real core benefit or service to be gained from the product. At this level, the perceived or real core benefit or service is provided.
The Actual Product
The actual product is a composite of several factors: the features and capabilities offered, quality and durability, design and product styling, packaging, and, often of great importance, the brand name.
To make the purchase, the consumer will often require the assistance of sales personnel; there may be delivery and payment credit requirements and, for bulky or very technical products, advice regarding installation. The level of warranty back-up and after-sales support, particularly for innovative, highly technical, or high-value goods, will be of concern to most consumers. Increasingly, the overall level of customer service constitutes part of the purchase criteria, and in many markets, it is deemed integral to the product on offer. These “support” issues form what is termed the augmented product.
The Augmented Product
This refers to the support aspects of a product, including customer service, warranty, delivery and credit personnel, installation, and after-sales support. Of growing importance to many marketers is the role of personnel, who facilitate most product exchanges. Without people, there would be no marketing. Companies design, produce, market, and sell products and services. In the distribution channel, they help to make products available to the marketplace.
As consumers, people make decisions and ultimately adopt products for use and consumption. Companies endeavor to educate their target customers. Promotional activity explains product usage, presents an image for the product, and convinces customers that they have a reason to purchase. More attention is now being paid to the skills, attitudes, and motivations of personnel involved in the marketing channel. Most companies are recognizing the key role played by their personnel, particularly in their interaction with customers.
A marketing opportunity arises when the right combination of circumstances occurs at the right time to allow an organization to take action towards reaching a target market. An opportunity provides a favorable chance or opening for the firm to generate sales from identifiable markets (Jobber and Lancaster, 2003, p. 656).
Jobber and Lancaster (2003, p. 256) further state:
‘Marketing must aim to satisfy customers. In the context of products, this goal demands an understanding of the core product requirement. However, it depends on marketers identifying and providing the actual product features expected and – with ever-increasing importance – aspects of the augmented product such as customer service, warranty, delivery and credit, personnel installation and after-sales support.’
Advertising and Promotion
When an organization combines specific ingredients to promote a particular product, that combination constitutes the promotional mix for that product. The four traditional ingredients of a promotional mix are advertising, personal selling, public relations, and sales promotion. Advertising is a paid form of non-personal communication about an organization and its products that is transmitted to a target audience through a mass medium such as television, radio, newspapers, magazines, direct mail, public transport, outdoor displays, or catalogs. (Jobber and Lancaster, 2003, p. 468)
Marketers indirectly facilitate exchanges by focusing information about company activities and products on interest groups (such as environmental and consumer groups), current and potential investors, regulatory agencies, and society in general. Some marketers use cause-related marketing, which links the purchase of their products to philanthropic efforts for a particular cause. Cause-related marketing often helps a marketer boost sales and generate goodwill through contributions to causes that members of its target markets want to support. (Jobber & Lancaster, 2003, p. 457)
Price has different effects on the mind of the buyer. He may or may not take the bait. There are times that by raising the price of their products, marketers can emphasize the quality of their products as compared to others.
Jobber and Lancaster (2003) state:
‘Because the price has a psychological impact on customers, marketers can use it symbolically. By raising a price, they can emphasize the quality of a product and try to increase the status associated with its ownership. By lowering a price, they can emphasize a bargain and attract customers who go out of their way – spending extra time and effort – to save a small amount.’ (p. 561-2)
Profits of companies depend largely or in part on the prices of the companies’ commodities. Profits are the life-blood of any business organization.
‘Price influences total costs through its impact on quantities sold.’ (Jobber & Lancaster, 2003, p. 561)
Price is also a very important factor in the marketing mix because this concerns generating revenue to the coffers of the organization.
The following equation is an important one for an organization:
Profits = Total Revenues – Total Costs (Jobber and Lancaster, 2003, p. 561).
The price is negotiable because the suppliers of the product or service are competing to get customers’ attention. The price customers are prepared to pay determines the level of demand for a product or service which affects the prosperity of the marketing company and the company’s competitive position in the marketplace. Price levels have far-reaching implications for the national economy. They influence wages, interest rates, and government policy. (Lancaster & Reynolds, 2002, p. 28)
Price has a strategic element since the price is commonly how products become positioned against other products in the market: undercutting competitors on price is a common way of competing. Although several areas of marketing activity, including managing the supply chain, can lead indirectly to cutting costs, price is the only area where marketers can directly improve the profits of the firm. (Blythe, 2006, p. 447)
Other scientists, such as Montgomery and Rossi (1999 cited in Weitz and Wensley, 2006) used methods to improve the estimation of store-based price elasticity.
Areas of interest in marketing include selling advertising and other marketing research areas. It can include planning and other details for product development and promotion.
A business organization must sell products to survive and to grow. Marketing activities help sell organizations’ products. (Jobber & Lancaster, 2003, p. 11)
The satisfaction of the customer is a concept and theory of the marketing concept. This is the major concern of marketing. The organization has to find out what will satisfy customers; after that, it creates satisfying products. Research and development is also a part of marketing.
The marketing concept stresses the importance of customers and emphasizes that marketing activities begin and end with them. (Jobber & Lancaster, 2003, p. 15)
Market intelligence, on the other hand, is concerned with the client-side of market research. Contents of market intelligence include:
- Knowledge management and the significance of knowledge in the company
- Significance of decision making in the firm;
- The different functions and objectives of market research;
- The advantages and disadvantages of buyer-supplier interaction;
- The details of the quantitative data;
- The results of the qualitative and quantitative information and the relationship between the two;
- How market research is designed;
- Management of market research;
- How the results will apply to the benefits of the organization;
- What the future holds. (Callingham, 2004, p. 34)
A study of intelligence applies to many disciplines, for example in the military, which is a study on how the enemy moves, operates, attacks, strength, and whereabouts. It is almost similar to business and marketing.
Marketing intelligence focuses on how business can improve; how competitors move, react, and compete with others. It is studying the ‘enemy’ or the competitor. But more specifically, market intelligence is focusing on the customers’ needs and wants and how they can be better served. The final tally is that the results of the market intelligence will be the basis for the strategic decisions of the company which conducted the research.
Globalization and Market Intelligence
Aramco is a global organization; its organizational set up reveals it’s being a global organization. It has many branches in many parts of the world. Being a global organization motivates it to fulfill the processes of globalization. It has also to adapt to the changing times, and the application of technological tools for operations and fast communications.
The internet changed the way things are for businesses and organizations. It is seen as a significant contributor to the globalization of economies and markets throughout the world. The internet, the World Wide Web, and globalization are almost synonymous because their functions point to the interconnectedness of computers, and communications have become so easy and accessible wherever and whenever. National borders are ignored or removed from the jurisdiction of the nation-state.
The Internet and the World Wide Web have changed the ways of businesses and organizations. With this technological tool, the rules of business have changed. It is an entirely different ball game, one would comment. Some commentators say that this is now “the death of distance”; meaning distance is not anymore a factor because people can communicate with anyone wherever he/she may be.
The exponential growth of the internet in the United States, now being overtaken by the growth in the rest of the world, has led many to question the relationship between a new global network and the future of the sovereignty of the nation-state. In globalization, firms are faced with more challenges and ambiguity but they have to cope and go with the flow of social and economic transformations. Inside the organization, structural reforms have changed. The main drivers of globalization are the declining trade and investment barriers as well as advances in communication, transportation, and information technologies.
One of the outcomes of the internet and globalization is outsourcing. Outsourcing is delegating some functions of the organization or business to outside organizations or firms whose main business is to provide services or outsourcing functions to these companies. Outsourcing is not new; it is a force in the business transformation that continues to dominate business functions throughout the world.
We are now in the age of digitization and fast-paced communication. There are major changes in firms, and the setup is different. Top managers and their boards now assume functions different from traditional firms. The structures and functions for the roles of top managers and board of directors, the CEO or the Managing Director, and the composition of the Board of Directors are not the same as in the traditional firms. The changes are much more pronounced concerning the scope and the geographical considerations, unlike the organization of proximity.
An accepted definition of globalization by economists is that it is the international economic integration that can be pursued through policies of ‘openness’, the liberalization of trade, investment, and finance, leading to an ‘open economy. Internationalization, liberalization, increased competitiveness – are some of the aspects of globalization.
There is a convergence of employment-related aspects of industries. Mills et al proposed “a theory of the mechanisms of convergence, divergence via path dependence and convergent-divergent”. (Mills and Hofmeister, 2008, p. 570)
Global firms have the whole world as their market field that they can offer a wide array of products and services. Firms keep growing while others downsize, and they can delegate departmental functions, such as marketing, finance, operations, human resource management, and accounting to other firms or organizations which may be found in other countries.
Firms use many different structural forms in dealing with globalization. They can use the horizontal structure because this is made easier with the availability of the internet and Information Technology. It is still possible with the old structure, i.e., the vertical structure where the top echelon of the organization can dictate or take hold of the reins of business even if they are on the other side of the world.
In globalization, some firms centralize control, meaning decisions are made at headquarters. But other firms delegate some important decisions to overseas managers. The relationship between top managers and their boards differ on a global basis, resulting in different structural arrangements among firms.
There are new paradigm shifts in organizations. Convergence is an outcome of globalization. With the interdependence of organizations and countries, functions and resources are converged and focused on a certain point. Advantages and disadvantages are brought out in the open. Furthermore, as a consequence of globalization, there is convergence in political institutions, systems, and organizations or global firms.
A commonly accepted definition of globalization by economists, says Van Der Bly (2005), is that it is the “international economic integration that can be pursued through policies of ‘openness’, the liberalization of trade, investment, and finance, leading to an ‘open economy” (p. 875). Internationalization, liberalization, increased competitiveness – are some of the aspects of globalization.
SFAS for Saudi Aramco
For a firm to be marketing orientated requires that several changes take place in the organization, in practices, and in attitudes. Implementing the marketing concept requires more than paying lip service to the ideas inherent in the concept.
Behavioral sciences can lead to an understanding of buyer behavior; another example is the development of quantitative and qualitative techniques of marketing research for analyzing and appraising markets. (Jobber and Lancaster, 2003, p. 13)
Saudi Aramco can implement the sales-force automation system (SFAS) to be more responsive to the needs of its customers and provide a systematic flow of communication within the company, to the stakeholders and clientele.
The SFAS includes marketing, customer service, product processing, and order-taking. Applications also involve contact managers, which means the automation of calendar and address book programs, databases, and workflow engines. (Boehm and Jain, 2007, p. 777)
The applications can be connected, web-enabled products connecting mobile workforce, composed of marketing analysts and customer sales representatives who can provide information about the customers, products, and competitors. (Baran et al., 2008, p. 304)
Automation will minimize paperwork-intensive processes, for instance, recording and logging of sales and service, or placing orders by customers. As a result, automation can enhance targeted marketing, minimize costs, and enhance sales. SFAS can minimize the use of tiresome paperwork or loads of paper ledgers and brochures. (Docstoc.com, 2009)
Moreover, this will provide the use of PCs and laptops and mobile communication and the use of the latest technologies. A return of investment (ROI) for Saudi Aramco is sure to be delivered within the soonest possible time. Salespeople can have close interactions with customers. They can record customer interactions and input all the needed information into the system. Advantages for the firm using SFAS range from cost-savings to advantages like more customers for the firm.
Customer relationship marketing systems or the use of the internet to support and answer customers’ needs and complaints provide fast service for the customers. Paper billing is minimized through online billing. The use of the internet through the company’s website is one way of saving millions of dollars for the firm and less effort for the customers. The company can use its web site’s customer service, and there will be more interaction with the customers and company representatives. Customer service provides a 24-hour service, seven days a week. That’s a lot of time and savings for the company and more customer interaction that will result in customer satisfaction. Customers can pay their bills through the websites using their credit cards. This process saves time and cost of going to the company’s billing office. The Invoice-to-payment cycle is shortened from more than a month to about six days with online invoices and payments. Other companies also use instant messaging (or text messaging) to answer the customers’ complaints and feedback on their products.
Sales-force automation systems usually require salespeople or representatives of the firm assigned in the field, to make use of the notebook computers which store information for the customers and all valuable data in the field. The laptop has installed software for manipulating information and forms that can be easily filled up by the salespeople. Personal digital assistants (PDAs) are handy assistants that connect organizational information systems using the internet. The sales representative in the field can easily connect online to the company’s information systems, thereby information and data are automatically stored. Product information that the customer and the sales rep would want to discuss right in the field is readily available. The salespeople can input all the necessary information to the company’s system and the main office, pass this information to the order-processing department, or the manufacturing unit if the customer wants a custom-built product, and the people in the manufacturing unit can get the product ready at the shortest time possible.
With the use of PDAs and other mobile communication technologies, salespeople can connect to the internet and check prices, confirm the availability of products that the customer wants to buy, and place an order right away. The salespeople can remain in the field without going back to the office to place the order.
This is a datacentric diagram for Saudi Aramco. The data here is focused which flows through several steps from shipping to inventory to accounting.
The strength of this data flow diagram is that it shows the overall structure of the system without the details of the various steps and processes. This is very significant in the vertical set up of the company when the top echelon of the company is directly controlling the system, including the salespeople or those people in the field. It is more important in presenting the systems to management and other business people.
Data Flow Chart for Saudi Aramco Marketing Operation
The explanation for the diagram
There is an existing SFAS for Saudi Aramco, considering that the company is a large and sophisticated company operating globally. The company has been using GIS and other sophisticated Information Systems for use of its people and the many branches and subsidiaries nationwide and internationally.
However, this recommendation of an SFAS application can improve the existing web-enabled state-of-the-art automation system of the company. The Internet can aid in the processing of information from the salespeople in the field to the decision making management inside the company.
It has been noted that the existing website does not provide for company-customer interaction. This can be reformatted and remodeled to enable interaction and allow for customer interaction. As mentioned in the “Job Description” part of this paper, we have added a GIS and a Google Map for the Market Research results and analysis. This is a clickable feature of the website where the company analysts and salespeople can avail. It is more useful and significant if comments, suggestions, and interactions can be added to this feature.
The SFAS process starts with the customers who make the ‘orders’ of products to Saudi Aramco. To begin with, literally, the customer does not make the order because a constant customer (the gas stations for example) has a regular supply of products. But the results of the market research is a form of ‘ordering’ to the company because the results are inputted in the database through the salespeople.
It flows to the process of receiving the orders from the customers (which is one of the stores), and this is validated as ‘valid or invalid orders’, meaning the system will validate if the order corresponds to the products available from the stock inventory of products available from the company. (Holden, 1992, p. 164)
It goes to another packet at rest. The details of the order flow contain the billing information which flows to another process named ‘invoices’. The ‘receive orders from customer’ process have some other detailed information like the customer information and order details, which may result in the delivery of the refined oil or whatever petroleum product. From ‘receive orders’, the next process goes to manufacturing or plant.
The process of delivery has an input coming from the plant which has a shipping detail. It goes to the process of delivering petroleum products, then onto the customer. From the process of ‘invoices’, it goes to collecting payment to and from the customer.
There are many advantages to this SFAS since the former system of the company was not web-enabled. The invoice-to-payment was not shortened; the customer was obliged to go to a branch office to pay for the product. This new system provides a payment process through order processing by way of the Internet. Customers can pay using their credit cards.
SFAS offers simplification of the processes for the company. At first glance, this seemed to offer complexity in the processes, a lot of work, training, and more expenses for the company. However, the complexity can turn out to be a simplification and easy work on the part of the salespeople. Out there in the field, salespeople can immediately input a lot of information about the customers, the environment, problems which might still be not existing but the salespeople can see it beforehand. Moreover, inside the company, staff and management can analyze the operation, market behavior, and unforeseen problems. Management and staff can institute measures and provide an immediate solution. This is also risk management in effect. SFAS can do more for a large and global company like Saudi Aramco.
The methodology consists of a review of the literature from secondary sources and an analysis of the various studies and researches available. The literature was sourced from books, journals, and the internet. Studies and researches from reliable sources, of different authors and experts, are sourced from the university library, online library, journals, and other print materials.
The methodologies applied in this study are qualitative and quantitative research. The quantitative data were collected through questionnaires, as well as open-ended questions. The qualitative data was collected through one-to-one semi-structured interviews with gasoline station managers.
Bogdan and Biklen (1998, cited in Fraenkel and Wallen, 2006, p.431) state that qualitative researchers are concerned with context, which can be attained through questionnaires. In this kind of research, qualitative data are collected “in the form of words or pictures rather than numbers”. (Fraenkel and Wallen, p. 431)
Qualitative research uses questionnaires and interviews. The dissertation used survey research or the qualitative method which provided rich data about PG 91 & PG 95 (premium gasoline) demand. The research was to find the difference in the demand for PG 91 and PG 95 and the actual sales of the sample. The results of this survey are very important to the decision-making process of Aramco, particularly the Domestic Sales and Logistics Department. Questions are about the product, thus an analysis of the survey can truly provide how the product can be improved, which product can be processed or delivered, how and when, etc.
The sample of the survey was taken from the gas stations located along International Road 85. There were twenty gas stations. The station managers (others were represented by their assistant managers or officer-in-charge of the station) responded to the survey and we had a 90 percent response rate; meaning 18 gas stations responded to the survey, while two ignored our repeated calls and emails.
As mentioned in my job description, we did the actual survey by personally visiting the gas stations and asked the station managers or their authorized representatives to fill up the questionnaires. After the actual survey and interview, we exchanged emails and online communication with the managers or their assistants. When questions and answers were vague and unclear, we could follow it up or correct the data. The managers and their representatives were very cooperative and satisfied with our ‘performance’ and praised more the company which we represented.
We compiled and summarized the results of the survey and made our analysis. The results were put into a spreadsheet, with a corresponding chart, and added our findings, conclusions, and recommendations. To complete the survey, I created a simple GIS system by using “Google map” and “Google Earth”.
This allowed me to provide a detailed plot of the gas stations we surveyed, along with coordinates and significant information that appears with the clicking of the station.
The GIS information is a breakthrough for the company since this allowed complete information for the customers of Aramco and interaction for the company and the customers. The map was shared online.
How the sample was selected
First, we contacted the managers or officers-in-charge of the gas stations along International Road 85. Out of the 20 gas stations, 18 responded to our request and so we requested for their respective emails. Once permission was obtained we set a time for an appointment so that we could be assured of the managers’ presence once we got to their gas stations.
Eighteen of the 20 gas station managers or their representatives responded to the survey so the research obtained a 90% response rate. The reason for this is that the gas stations are regular customers of Saudi Aramco, thus we could sense their cooperation on the survey. The two gas station managers did not respond to our repeated call for the survey. When we approached the gas station, mostly present were attendants, not the authorized representatives. So, we left the matter to our supervisors or team leaders to resolve the issue.
We explained to the participants that the results of the survey would be used for the strategies and decision making of the company. It was also explained to them that the marketing research of Aramco focused on the gas stations’ needs and wants. They would be benefited by the results of the survey and we would personally provide them some valuable ideas to improve their business.
The research used closed and open-ended questions to collect the required information from the participants. Open-ended questions were used in the interview portion which was addressed to the managers. The managers had more knowledge and information on the sales performance of their respective gas stations, thus they can explain the significance of the numbers.
Open-ended questions allow the interviewees to explain and add more data to their answers. This is in contrast to the closed questions in the questionnaires which allow limited answers to the questions.
The questionnaire method is considered and found to be effective and efficient to the researcher since the questionnaires are only sent through emails and collected at a later date. The reason for choosing open-ended questions in the interview was to allow the managers to freely answer the questions.
The gas stations survey asked the participants to fill in the information about their business establishment, and this includes the Customer Business Name, the registration number, the Saudi Aramco Bulk plant name, the distance of the gas station to the bulk plant, customer contact person, mobile number, and other valuable data including a contact address, GPS coordinates, owner name, number of tanks of the gas station, etc.
The survey also asked about the gas station environment or surroundings, including other services available, the towns or cities they served, the size of the station, and the number of years they have served, among others.
Together with the survey, our team obtained the necessary information for the Demand Forecasting and Marketing Intelligence Group which contained information about the product. This form contained information on the Monthly lifting Average per lifting and the Lifting Frequency. The product information was for Gasoline 91, gasoline 95, and Diesel. The information for the three products requested Customer Agreement Quota/L, Storage Capacity, No. of Tanks, Monthly lifting Average per lifting, Monthly Consuming Average/ L, Monthly lifting frequency, No. of Equipment, Method of Supply, and Fuel or Feedstock.
The analysis technique we used for the survey results is descriptive evaluative. In this method, we analyze the survey results according to the individual answers of the participants during the interview. The open-ended questions required some follow questions, therefore note-taking was also important.
Quantitative data were inputted into a spreadsheet and forwarded to our department head for further analysis. The questionnaire forms on the gas survey were provided by the Domestics Sales and Logistics Department. This form is a regular form for customers or gas station managers and their authorized representatives. They know how to answer or fill up the forms. Only the interview questions were new to the gas station managers, so we had to explain a bit some of the details of the questions.
Analysis and Results
The main concern of this study is the question: how significant is market research and marketing intelligence to Saudi Aramco and the petroleum industry, particularly in the domestic market of Saudi Arabia?
The question was addressed to the participants. This question is expressed in the illustration diagram below.
The gathered data is divided into two sections, one set of results from the structured interviews, and the other set from the results of the questionnaire. The interview results were from the managers, while the questionnaire results were from the assistant managers or their authorized representatives.
The first section examines the transcript of the answers to the interviews with the managers. The managers of gas stations were chosen for structured interviews. They demonstrated knowledge and expertise in the subject of the products delivered to them by Saudi Aramco. They reflected their knowledge in their answers to the interviews.
The second section examines the answers in the questionnaires sent through emails to the assistant managers or the authorized representatives of gas stations. Questions in the questionnaire are presented as themes, so as not to be repetitive. Questions were categorized into several topics. They were related to the product and service delivered to them by Saudi Aramco. Questionnaires were separate from the gas survey forms which were to be filled up by the gas station managers.
Frequency of delivery
The majority of the participants stated that the frequency of delivery was effective. Petroleum products were delivered right on time. When stocks were about to be depleted, trucks were there to deliver the products. When there is great demand, the manager can always call the nearby bulk plant to deliver earlier than scheduled.
Product quality can never be questioned, the participants revealed. Products of Aramco are unequaled and respond to the needs of the customers.
There is not a time that the gas stations lack the necessary petroleum products for their respective customers. Petroleum products are always in demand and the demand side is quite constant. But there are times that the demand exceeds the supply. The time of year that demand is greater than the supply is well recorded in the logbooks of salespeople and our department.
The efficiency of sales personnel
There are a few complaints against the people of Aramco and these are addressed by the proper department. Sometimes lack of proper language, decorum, and respect has been recorded. All these are reported in the questionnaire. However, the report is just minimal, or only a few participants reported this kind of problem.
The company’s service
This pertains to the quality of service being delivered by the company to the gas stations, whether the participants received the quality service they expect from the company. Generally, their answers are quite satisfactory. But they do need some kind of improvement.
We noted this as some sort of lack of quality of service. Because of the great number of clients, not everyone is satisfied with the service. We have reported this to our direct supervisors who in turn logged the complaints to the appropriate department. Immediately, we received feedback from management and it was noted.
The confidentiality of the survey was such that the identity of the participants was only presented through code numbers. It was also explained to the participants that their answers were to be kept secret and only to be divulged to get the right results, but their identity would not be revealed.
We have discussed in the literature the broad subject of market research and marketing intelligence, but this has been narrowed down to the petroleum industry and the domestic market of Saudi Arabia. Marketing intelligence refers to the competition side of marketing.
The focus of this dissertation is the petroleum industry in Saudi Arabia, then we narrowed this down to the state-owned company, Saudi Aramco. This company is now concentrating on oil production, refinery, distribution, and marketing of petroleum products. It is now a sophisticated petroleum company that has controlling stakes in all oil companies inside Saudi Arabia.
Market intelligence is also concerned with knowledge management and its significance to the organization.
Market intelligence, on the other hand, looks at the competition, or as Callingham (2004) states the client-side of the market research. Market intelligence is concerned with knowledge management and its significance to the organization, the many functions of market research, the future of the company, and so forth.
Saudi Aramco is a knowledge-based organization. Its important assets are the human resource, and the vast resources composed of thousands of oil wells which number has remained a secret to the eyes of its competitors and the general public.
Saudi Arabia is one of the richest countries in the world because of the vast oil fields that abound in its territories.
Saudi Arabia is one of the world’s richest countries when it comes to oil. The largest oil company operating in the country is Saudi Aramco, which is a knowledge-based, global firm, producing and refining oil for the Kingdom of Saudi Arabia. Its wealth is as vast as its culture, which also makes Saudi Aramco so rich in assets and resources, people, and knowledge.
Saudi Aramco has maintained a product-development process using Information Technology. Marketing intelligence is continuously being implemented by the company’s thousands of engineers, geologists, and competitive managers. It operates the largest oil fields in the world.
The results of the survey have been very beneficial for both the participants and the company Saudi Aramco. Challenges and recommendations of the managers of gas stations should be noted by the companies concerned so that negative experiences can be addressed and corrected. Some of these recommendations are for more interaction between gas station managers and their staff with the salespeople of Aramco. If this is addressed to it could lead to a better work-life balance for both the participants and employees of Aramco.
Market research and market intelligence have a great significance for product development and advancement. Saudi Aramco conducts this regularly to its thousands of gas station customers. This particular segment constitutes the retail industry in the oil industry. It is important for the company’s marketing process.
Management of global companies realizes the great significance of training employees and salespeople. They have to inculcate in the minds of their managers the importance of knowing and mastering the art of dealing with people and the mastery of their products.
Our recommendation for applying SFAS to the existing GIS infrastructure to a big company like Saudi Aramco needs further study. We were told that this is so because SFAS has its loopholes and weaknesses, yet can be effective for the advancement of quality service. However, once this can be made operational or incorporated into the existing IT of Aramco, we believe it is worth it. We received an appropriate commendation for our team’s job, including our suggestions and recommendations.
For us, members of the co-op team and our counterpart team from Aramco, it has been a worthy experience. This is the knowledge that cannot be bought. It will remain in our minds and psyche forever and will form part of our basic knowledge in industrial work.
On my part, I want to remain with the company which I believe can deliver the kind of career that I have envisioned even when I was still young. Aramco can provide this for me.
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