GRAN TIERRA ENERGY Case Solution & Answer

GRAN TIERRA ENERGY Case Study Help

Introduction

Gran Tierra came into existence in 2005 by the efforts of three talented senior executives. Out of these three executives, one is a geologist and others are engineer and finance expert. The company’s headquarter is in Alberta, Canada. These experienced executives combined their expertise and made a business plan to make an international oil and gas company, to secure the unidentified opportunities in the energy sector. Since all of them had already worked in the oil and gas sector; therefore they have an exposure to these industry dynamics and have the potential to drive the company to a successful level from its initiation.

Initially, the company obtained its funding from the small entrepreneur investors. Afterwards more funds were raised from the financial community in Canada, the US and Europe. The first operational base was built in Argentina at a small scale. The company has planned to expand its business to Columbia and Peru within the upcoming 18 months. The company has made an acquisition in Canada and has acquired another company in Argentina.

In 2007, the company strengthened its management with the addition of seasoned manager with high skills in the field. Gran Tierra’s CEO and CFO were also appointed, who were Martin Eden, a chartered accountant, and O’Leary a professional engineer, respectively. The company has operated well in its early years and its statistics shows it’s over performance. Thus, with this progress Gran Tierra started its operations in Brazil, in 2009.

Key Challenges

Gran Tierra entered in Brazil in the year 2009, but when its presence was made in Brazil after assessing the overall risks and market potential; Brazil’s operations started facing numerous difficulties. Thus, in this case, another country: Peru, is showing high opportunities for the company to have successful business in.

Therefore, a decision is needed to be taken after proper analysis regarding whether to disinvest the Brazil operations and bring the assets from Brazil to Peru, to use the favorable conditions of the country for the company’s growth or make different strategic changes in the Brazil’s operations and sort out the underlying problems to successfully generate profit  the brazil operations profitable.

Gran Tierra’s international strategy

Gran Tierra has made a business strategy to get itself back on the track of progress in a steady way. This strategy is divided into two parts, which can be defined as two stage process towards the success. Firstly, the company will make certain acquisitions in order to provide a base for its productions and operations.

The second stage is after getting the base operations, as the company should strive for growth through exploring and identifying the new potential oil fields as well as further development of the existing fields. The company has used positioning strategies, hired local staff to reach local customers, acquired diversified portfolio for reducing risk and developed business relations.

The company should target the countries that have certain attributes, and only if that country fits well in the criteria defined, after which the company should seek opportunities in that country and consider its expansion in that country. The defined attributes are proven system of petroleum and hydrocarbon, favorable taxation and royalties terms, standard legal system with stability, flow of transactions, developed basic infrastructure, and ability to start work as an operator.

Decision & Firm Strategy

Gran Tierra was a good decision maker, and its strategies were efficient to attain growth in the market. The strategy was favorable in the international market. Gran Tierra’s strategy was aligned with the firm’s strategy because it was giving tough competition to the local companies through using same technology and techniques.

The company used its best strategy of aligning with local firms and used horizontal drilling and multi-stage fracture for the extraction of oil. It was successful in other countries, but failed in Brazil, following which it had to wind up the company’s operations from Brazil. So, the decision of entering into Brazil was not correct

Strategy Performance

AAA- analysis of the company

This model uses three different factors that contribute to the global strategy, thus by using this model; the company’s strategy which it had applied in Brazil is analyzed. (Verdin, 2007)………………

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