An exploratory study of localisation barriers of oil and gas service firms: a case study approach

Purpose
The purpose of this paper is to explore the ‘localisation’ phenomenon in Africa. The paper analyses geographical, cultural, technological, and governmental ‘barriers’ that influence the decisions of Senior Managers of an international company and whether to enter African markets to set up subsidiaries, with the primary objective in localising a workforce in the energy services sector of the Oil and Gas industry.

Localisation in Context – “When a local national is filling a required job sufficiently competently to fulfil organisational needs” (Potter 1989).

Design/methodology/approach
Using a qualitative inquiry and case study approach, a mix of qualitative data collection methods were used such as document, participant observation, and interviews with a targeted and ‘elite’ sample of senior managers at the corporate strategic level of a major oil and gas services contractor headquartered in the UK.

Findings
In addition to a thematic analysis, an integrated view from the researcher as a participant observer resulted in a validated conceptual model. This model has extended the knowledge body from existing research and has identified four concentrated barrier themes. Those are in-country knowledge, governmental, local content, and strategic behaviour. The model provides a holistic set of factors that must be considered, and understood, from a corporate strategic perspective as being directly influential in achieving successful localisation of a subsidiary part of the business.

The study provided solid justification for the selected themes and went on to produce interrelationship models to make analysis more easily understood. This work is expanded to develop a useful ready-reckoner for all executives and senior managers. This ready-reckoner compliments the conceptual framework and provides the tools required by the senior executives/managers at the strategic planning stage.

Sufficient evidence was collected to identify an opportunity for further research to investigate and develop weightings across the four localisation barrier themes to determine an optimised balance of cost, delivery, and local content to maintain the desired operational excellence in the oil and gas services contractor industry.

Practical Implications
Corporate strategic decision makers in headquarters or its subsidiaries may adopt a Management ready-reckoner question set during the decision making, and preceding any agreements or approvals to implement localization strategies that will cope with the localisation barriers adequately and mitigate risks and uncertainty. By adopting localization, through an informed process, this will fully consider short term benefits to gain local advantages in host countries but it also sets a solid foundation in building long term competitive international localization strategies.

Originality/Value
CEOs and senior managers of subsidiaries in active, or prospective emerging markets, can learn what barriers influence localization strategies and how these are consolidated into a simple question set to facilitate the decision making process. This contribution to knowledge through the validated conceptual model of localisation provides the first holistic view of localisation barriers relevant to oil and gas services contractors.