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National Fuel Company Analytical Essay

Organizations are formed to achieve numerous objectives. The most common objective which cut across several entities is profit maximization. Companies rank differently in the market depending on their profitability and sustainability. Some are viewed as top performers whiles others have no image in the market.

All these depend on the strategic tactics employed by an institution. The strategies utilized by a company also define its complexity. Companies with complex structures are believed to have employed numerous basic strategies.

The strategies revolve around how managers make informed decisions on the day-to-day operations of an organization. This paper explores on the various perspectives of an organization form an institutionalist, economic, behaviorist and, emerging and integrating point of view. Further, it discusses various strategies that can be employed by National Fuel Company to enable it to achieve its missions and visions.

Institutionalist Perspectives

Institutional Theory Perspective

“The institutional perspective provides a view of relationships among various organizations. It explains how organizations continue to exist and thrive through analogy between an organization and the expectations from its environment” (Vibert 10).

It considers the processes by which structures including rules, norms and routines from stakeholders (customers, investors, associations, boards, other organizations among others) become established as authoritative guidelines for social behavior Therefore, “institutional view believes that organizations implement structures and processes to please outsiders and these activities come to take on rule like status in an organization” (Vibert 10).

Organizations aggressively contour and manage their reputation to increase their competitive advantage and so the institutional dimension is governed by expectations from the external environment (Vibert 11). For instance, fuel companies, banks and colleges among others will look conspicuously similar in their operation and outlook.

Also an organization can introduce positions in their structure because they are perceived to be essential by the society at large. Firms also undertake corporate social responsibility activities with an intention of pleasing the external environment and earning their support in return (Vibert 4).

Neo institutionalism is an up-and-coming perspective in organization theory and sociology. It rejects the institutional perspective of classical economics.

Instead, “it seeks cognitive and cultural explanations of social and organizational phenomena by considering the properties of supra -individual units of analysis that cannot be reduced to aggregations or direct consequences of individuals’ attributes or motives” (Vibert 10). Generally businesses tend to perform very well when they get institutional support. A new company such as the National Fuel Company would have to incorporate industry’s rules and norms in its structure for it build its image and prosper.

Economic Perspectives

Game Theory Perspective

Due to the dynamic nature of the business environment, organizations adopt various tactics which enable them report profits. One such tactic is the game theory.

In the view of Vibert (2004), the essentials of a game are players, actions, information, strategies, payoffs, outcomes and equilibria. “Players, actions and outcomes are the rules of the game while information and actions are the building blocks. Players can be organizations or individuals that can make decisions with an objective of maximizing the equilibrium” (Vibert 59).

The choices that players make are the actions. Information is the knowledge at a specified time. A player’s strategy is the canon which tells him which set of action to take while payoff is the utility received after all players and nature has picked their strategies and the game has been played. Outcome of the game is a set of interesting elements that the modeler picks from the values of actions, payoffs and other variables after the game has been played (Virbert 59).

Game theory is used in various areas of business for instance an oil company contracting for engineering services with Bechtel. Each company understands that the scope of services provided affects the price. The oil company would prefer a low price while Bechtel would prefer a high price. Game theory contributes little in terms of understanding of how entities are organized.

Effective use of game theory is time consuming. It also implicates a high level of rationality and information processing capability to managers thus casts doubt on its usefulness for management decision (Virbert 63).

Transaction Cost Economics Perspective

Transaction cost economics perspective is very vital in any organization. It analyses the costs and benefits of a transaction. Virbert (2004) defines transaction cost as the costs of operating the economic system or the costs of consumption over and above the purchase price of a product or service. The determinants of transaction costs are frequency, , uncertainty, limited rationality, and opportunistic behavior (Virbert 29).

Transaction costs can be classified into two aspects, that is, the cost of establishing prices and the cost of negotiating and concluding contracts (Dietrich 16). The transaction cost theory is based on two behavioral assumptions. First, actors are boundedly rational and second they are opportunistic.

Generally, it captures all the cost of making an economic trade. “In order to carry out a market transaction it is necessary to discover who it is that one deals with, to inform people that one wishes to deal and on what terms to conduct negotiations leading up to a bargain, to draw up a contract, to undertake the inspection needed to make sure that the terms of the contract are being observed” (Dietrich 17). Consider trading in fuel, transaction cost may entail purchase of the fuel, fuel pumps, labour costs among others.

The nature of a firm is derived from the trade relationships resulting from carrying out transactions. For instance, in the external environment of a firm there are price movements which are coordinated by different firms through series of exchange transactions on the market (Virbert 29).

The neoclassical theorists focus on the cost and benefits of producing an additional unit. An entity has to focus carry out his transactions at minimal cost per unit, taking into account the fact that he may get factors of production at a lower price than the market mechanism. This is for the reason that transaction cost theory is concerned with economizing on transaction cost (Dietrich 18).

Agency Theory Perspective

Large companies quoted in the stock market with numerous shareholders suffer from separation of ownership and control. Shareholders are distantly and widely dispersed and therefore cannot manage their business. Also, they may not have the required knowledge and experience on how to run an organization. Therefore, the running of the company is left in the hands of managers who are employed to be stewards for the resources.

A well run entity is expected to operate efficiently and report profits which can be reflected in the value of shares. Shareholders are unable to supervise the manager closely. If left unchecked, the managers may redirect the resources to their own use thereby deviating from the shareholders interests. Agency costs results when the interests of the shareholders (principles) are not in line with those of the mangers (agent).

This may result from asymmetry of information as the principles have less information as to how the organization is run while the agents have perfect information (Viberts 38). Also, “agency cost may also result from the problem of risk sharing that arises when the principal and the agent may prefer different actions because of the different risk preferences” (Vibert 42).

Positivist agency theorists argue that agency costs can be minimized by keeping managers focused on value creation. To achieve this, shareholders of National Fuel Company can seek to enhance monitoring and control of management. In addition, they can align the incentives of managers with the value of the company’s shares. This can be achieved by coming up with outcome-based contracts (Vibert 43).

Agency relationship between principals and agents can be successful as long as agents make investment decisions in ways that are consistent with the principals’ interests. In order to reduce the concerns about delegating the day-to-day management of shareholders investments, the agents should put in place investments decisions which are consistent with the principal’s interests (Virbert 42).

Behaviouralist Perspectives

The Cognitive Perspective

The cognition refers to a sense for processing of , applying knowledge, and changing preferences.

The processes can be natural, artificial conscious or unconscious. In the view of Nooteboom (2009), cognitive perspective of an organization is regarded as a system of shared cognitions or a system of knowledge and beliefs. Organizations are viewed as systems of knowledge and individual members are continually engaged in attempting to know the organization and know themselves in the context of an organization.

In the context of an organization, process of cognition entail attention, remembering, producing and understanding language, solving problems, and making decisions. Therefore experiences of individual organization members are stored in organizational memory maps which act as guidelines in decision making or solving problems for a long period of time. An organization is therefore seen as cognitive as it operates like a mental thinking process (Nooteboom 73).

Strategy as Practice Perspective

According to Langely et.al (2007), organizations have numerous strategies such as differentiation, diversification and joint-venture strategies. Further, various processes take place in an organization such as strategic planning processes, decision processes and change processes.

Strategy is a property of organizations and it is something that people do in day-to-day running of an organization For instance, differentiation strategies involve people doing things in a different way which can be difficult to emulate and strategy processes involve people making strategies.

Strategy as a practice is concerned with what people do and how this is influenced by and influences their organizational and institutional context. Therefore, the strategy adopted by an organization can have a great socio-economic impact both in the society and the organization.

The precincts between an organization and its environment are defined in a large degree by the kinds of strategies which its decision makers choose. Structure follow strategy and an organization with most complex type of structure is the result of the combination of several basic strategies. Human action and interaction, especially actions by decision makers in an organization, holds a vital ontological position in execution of strategies.

Langley et.al (2007) points out that there are economic, theoretical and empirical reasons why there is need to have strategies. “From economic point of view markets are becoming more open to entry, resources increasingly tradable, information more readily available and stiff competition”, (Langley, Gerry, Melin and Whittington 7).

From a theoretical level attention has to be given to what people do relation to strategy within organizations. Finally, from an institutional point of view, the behavior of organizations as entities and the nature and effects of their formal and collective parts call for strategy (Gerry, Langley, Melin and Whittington 10). National Fuel Company must have strategies that would enable it to remain profitable and sustainable in the market in the long run.

Emerging and Integrating Perspectives

Complexity Perspective

From complexity perspective, organizations are seen to be ongoing, iterated processes of cooperative and competitive relating between people. Organizations are not considered as systems but an ongoing patterning of interactions between people. If patterns of human interaction produce further patterns of human interaction in which we are all participating in, then the best way to understand an organization is from the position of an objective observer.

“Organizations have to be understood in terms of one’s own person experience of participating with others in the co-creation of the patterns of interaction that are the organization” (Vibert 171). Complexity also sees an organization as dynamic, unpredictable and non linear. Viberts (2004) further suggests that there are many advantages of being highly networked and highly connected.

It gives organizations an in-built flexibility and adaptability. Also, it enables them be very effective at handling a variety of situations without any controlling mechanisms. From a complexity perspective, diversity is absolutely necessary for survival as it facilitates and encourages learning and adaption.

While classical economics view change as a linear fashion where change can be made and outcomes predicted with a simple linear equation, complexity perspective suggests that managers should instead consider the range of patterns of the effects that are taking place and try to work them rather than try to predict change.

Further, it believes that it is important to consider the organizations as a whole. Therefore strategic activities should embrace all aspects of an organization including underpinning design principles, its values and core belief systems (McMillan 92).

Mission and Vision


In a span of ten years, National Fuel Company aims to be a leader in the quality of products and services, to be a leader in profitability and returns to our shareholders and to be the most responsible and preferred company in the region.


National Fuel Company aspires to be the leader in offering quality petroleum products and services to its customers responsibly and profitably in an innovative way to ensure that the public will continue to come.

Strategic Tactics

Organizations require high-quality strategies in order to gain competitive advantages in the market and be profitable. The strategies adopted by an organization define its performance. Companies such as Wal-Mart, Dell, IBM and Shell Oil are top performers because of the strategies they employed.

Further, profit is not the sole motivator of corporate and any other organized activity, there are numerous goals and objectives that organizations intend to accomplish within a given time period and this call for a wide range strategies. This section will enlist various strategies which can be employed National Fuel Company in order to achieve the mission and vision.

Company image promotion

Support from the external environment is fundamental in carrying out business. Support can be achieved by creating a good image of the business. Customers will always prefer and choose companies which are responsible and have good image in the market. National Fuel Company should have structures that conform to the requirement of stakeholders.

The Company’s structure should cater for the needs of customers, investors, associations, boards, other organizations among others in its structure. Corporate social responsibility activities can also help the Company create a good image.

This strategy will aim at fulfilling the expectations of external environment. Further, it will also work towards adopting the norms and rules of the industry in which the Company will operate. The ultimate objective of this strategy is to create a good image of the Company to the external environment.

Optimization strategy

The core objective of an organization is to make profits which are generated from an economic trade. The nature of transactions defines a firm and the industry in which it operates. Transactions costs capture all the costs of making an economic trade.

For an entity to earn profits, it should work towards minimizing costs and maximizing revenues. “A high level of uncertainty regarding future outcomes makes it extremely costly if not impossible to write and enforce a contract that will specify all possible future conditions” (Vibert 31). National Fuel Company will not be in a position to establish its transactions costs with accuracy.

Therefore, it should carry out his transactions at very minimal cost, taking into account the fact that it may get factors of production at a lower price than the market mechanism. National Fuel Company will be able offer high rate of return and remain sustainable in the long run if it maximizes its profits. This can be achieved by operating at minimal costs (Dietrich 18).

Promotional Strategy

An effective promotional strategy shall comprise of detailed and comprehensive focus on offered services and products with their prices being a secondary component. It is vital to let the market know your services before concentrating much on pricing. Therefore, emphasis shall be directed towards promoting the unique image and line of operation for the Company as a means of self advertisement.

Also, contacts of the clients shall be greatly improved to enhance a sustainable and cordial business relationship. Special attention shall be accorded to advertisement, correspondent views, and satisfied clients’ endorsements and recommendations (Vibert 64). For a start, the firm shall set the most reasonable price for its services and accommodation packages for its potential customers. This shall be in discounts on its products.

Distribution Patterns

In order to expand the facets of operation, the target clients shall be from the urban and country side settings. Due to its relatively competitive price, firms in the industry would opt for its products and services to optimize gain on their products (Vibert 65).

Besides, the firm aims at establishing regional outlets in small municipalities for sustainable and expandable distribution network for service provision. This would enable customers be able to access our products and services easily in any part of the country. This network of branches will help improve on the customers’ confidence especially on the reliability of the company.

Works Cited

Ann, Langley, Gerry Johnson, Leif Melin, and Richard Whittington. Strategy as Practice: Research Directions and Resources. USA: Cambridge University Press, 2007. Print.

Dietrich, Michael. Transaction Cost Economics and Beyond: Towards a New Economics of the Firm. New York: Routledge, 2008. Print.

McMillan, Elizabeth. Complexity, Organization and Change. New York: Routledge, 2004. Print.

Nooteboom, Brian. A Cognitive Theory of the Firm: Learning, Governance and Dynamic Capabilities. USA: Edward Elgar Publishing Inc, 2009. Print.

Vibert, Conor. Theories of Macro Organizational Behavior: A Handbook of Ideas and Explanations. New York: M.E Sharpe, Inc., 2004. Print.

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