(Jason Franson/Canadian Press): Suncor is focused on cost-cutting to in order to increase profits and remain competitive.
Today, I’ve read an article called “Canadian oil producers alter strategies in face of oil supply certainty” from CBC news, which invoked my deep thoughts of business strategy.
In summary, massive industrial productions largely drive up the surplus of oil supply nowadays; therefore, oil prices overall become more and more limited or even lower. Many investors are scared away from oil and gas industries due to the volatility of energy prices and fading margins. Steve Reynish, executive vice-president of strategy and corporate development at Suncor Energy Inc, made a saying at a conference in Alberta to express the company’s shift of strategy focus on cost-cutting of oil production in order to increase margins and stay competitive in financial markets. Due to lack of enough pipeline spaces for most of Canadian oil producers and suppliers, Canadian oil companies typically often choose railway transportations which cost significantly higher than pipelines do. Suncor, one of the major Canadian oil producers, will probably be one of the first oil companies to slow down and sacrifice growth in order to cut down long-term transportation costs and keep up profit margins.
Although the article mentions that recent rise of U.S. dollar price to Canadian dollar is expected to hurt Canadian oil producers’ oil and gas prices, I don’t think they will get affected too much as long as they trade in Canadian domestic oil markets and employ Forex Asset Department to keep track of asset values affected by volatility in international currency, which is what large international corporations do typically. I really like how Suncor assesses its internal and external contexts in detail and serves as the first Canadian oil producers to take the initiative for long-term cost-cutting strategy development.
Recently in COMM 101 lectures, we just learned financial accounting, managerial accounting, and business strategy, and I feel they are all interconnected somehow in a corporate organization both internally and externally. For example, in this piece of news article, initially, Suncor wants to increase the financial performance in cash flow statements and fund markets in order to better attract investors, which is the perspective of financial accounting; then, Suncor made plans to particularly sacrifice short-term growth to exchange long-term limited transportation costs, or known as period costs in managerial accounting, which is an internal decision-making accounting perspective. The entire proposal processes of long-term strategies and short-term tactics are just what we call “Strategic Decision Making”, including strategies, tactics, situation analysis, and initiatives; situation analysis includes both internal and external strategic assessments, which is highly bond to both managerial accounting and financial accounting together.
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