Understanding Organisations

Group Assignment 1

Group 6

Team Members:

Aman Kanungo (C001)

Shruti Surve (C009)
Tanya Kapoor (C017)
Arjun Chawla (C031)
Vijay Surya Parvataneni (C045)
Soumyadeep Saha (C052)
1. Introduction to the Merging Organizations

● Company Profile of both the organizations

ONGC- ​Oil and Natural Gas Corporation falls under the administrative control of the
Ministry of petroleum and natural gas. It is a Public sector undertaking of the government of
India and was awarded a maharatna certificate for being a robust public sector enterprise. It
produces approximately 77% of India’s crude oil and around 62% of its natural gas.

HCPL- ​Hindustan Petroleum Corporation Limited, is an oil and natural gas company
owned by Indian state. HCPL has around 25% market share in India among public sector
companies. HPCL uses a pipeline network of more than 3370 kms for transportation of
petroleum products and also has a vast marketing network of 14 Zonal offices in major cities and
133 Regional Offices.

● Details of product/services offered

ONGC- ​Crude oil, Kerosene oil, Natural Gas, Ethane, Liquefied Petroleum Gas

HCPL- ​Petrol, Diesel, Lubricants, LPG, Aviation Fuel. Compressed natural gas

● ​End Consumers

End consumers for these corporations are large organisations like steel authority of India,
conglomerates like Reliance Industries Limited, aviation companies like Indigo, Spicejet etc.

2. Rationale behind the Acquisition of HPCL by ONGC

● Consolidation:

The acquisition of one Public Sector Undertaking (PSU) by another is in tandem with the
government’s objective to create an Indian “Oil Major” that can perform as well as other energy
giants, in the international and domestic private market. Most importantly, this move is supposed
to shore up domestic oil exploration, centralize key technological resources and streamline cost
and operating structures at a globally competitive level. Considering a predicted uptick in
domestic fuel demand (for both production and transportation) this move is supposed to make
way for greater bargaining power - the likes of which are currently possessed by consolidated
companies such as Rosneft or ExxonMobil.

● Integration:
 Vertical Integration, resulting from the consolidation, will synergize the core strengths of
both companies: Exploration by ONGC and Refining and Retailing by HPCL. The latter will add
a refining capacity of 23.8 million tons to ONGC, thereby making it the third largest oil refiner
in the country after Reliance Industries Limited and Indian Oil Corporation.

● Economies of Scale:

Energy security of the country underpins the acquisition. With estimates suggesting that
India’s dependence on crude oil imports could grow to 90%, it is imperative that domestic firms
expand their scale and do so efficiently. A stronger balance sheet and focused management
enabled by the acquisition are also necessary to achieve this scale, take investment decisions and
create more value for shareholders.

● Risk Management:

For the merged entity, this acquisition is certain to aid in absorbing the risk arising out of
volatile global oil prices. Furthermore, it will also help the major obtain attractive terms on
overseas assets while creating diverse sources of cash flow – both upstream and downstream. If
the former fails, the latter’s performance can cushion the blow and vice versa.

● Fiscal Policy Targets:

The acquisition is a part of the government’s disinvestment strategy in several PSUs.

Their economic motive is to deflate the fiscal deficit by accounting the sales proceeds as
revenues. Although, this is merely a shift of ownership using the holding company mechanism,
the deal (valued somewhere between Rs. 28,000 crore and Rs. 35,000 crore) will still help the
government meet a third of its disinvestment target of Rs. 72,500 crore.

3. Summary of the two themes chosen with respect to the organizations

a) Organization Culture

Organizational Culture refers to a system of shared meaning held by an organization’s

members that distinguishes the organization from others organizations. The six primary
characteristics seem to capture the essence of an organization’s culture - Adaptability, Detail
orientation, Results/outcome Orientation, People/customer orientation, Collaboration/team
orientation and Integrity. Apart from these characteristics, every organization has a cultural
framework that is classified into the following four types (Exhibit1);

1. Clan​: These types of organizations have a culture of human affiliation. The employees
here have value attachment and a nature of trust, collaboration and support.
 2. Adhocracy​: This is a type of culture that is based on change and growth. The employees
focus more on growth, details and autonomy.
3. Market​: This is an achievement based culture wherein the employees have a high level of
value communication, competence and competition.
4. Hierarchy​: The organizations in this framework have a culture based on stability.

All the differences in these cultures are influenced by the internal and external focus and also the
flexibility and stability.

Now, understanding an organization’s culture becomes extremely important in cases

when a person first joins a new organization as a manager or an employee, when one of the
companies is acquired by the other, when a manager has to coordinate the efforts of different
departments within the organization and when a manager is faced with a need to fundamentally
change the strategic direction if the company and hence would by implication need a change in
the culture.

Taking the case of mergers and acquisitions, When a company decides to acquire another
company, they are basically purchasing the three factors that have contributed the most to the
acquired company - its resources, process and its business model. Its resources include its
people, quipments, products, technologies, market etc. which is much easier to acquire and
change as per the acquiring firm's needs and requirements. Culture especially has a very high
influence on the acquired organization’s capabilities, disabilities, decision making criteria and
also the culture. And it's the acquiring organization’s management’s task to not only first
understand the culture of one's own organization but also to then try and understand the acquired
organization’s culture and values. Only after a correct balance between the two cultures is met,
can the organizations work in harmony and have a successful merger.

In the case of ONGC and HPCL with an ownership of 51% shares in the latter. There was
a bigger challenge which these two government entities faced and that was of the cultures that
they have been following especially with a workforce of such huge numbers. The cultural
differences or clashes were expected in the senior management level wherein the constant
meddling of ONGC into the daily operations of the other. All of this could be avoided if the two
organizations go about their defined course of actions irrespective of thinking of the change of
hands that had taken place.

Exhibit 1: Organizational Culture Framework

b) Organizational Structure

ONGC and HPCL are both legacy organizations and have been profitable government
entities for decades. A major part of this can be attributed to the organizational structure that has
enabled the working and decision making process over the years. Both these organizations
involve key decision making and ownership at every level. They hence have been following a
divisional structure. The organizations are divided into divisions based on their functions such as
marketing, engineering, HR, etc. Here is the diagrammatic representation of the organization
structure inside HPCL.
 This structure is preferred because divisions need to perform with more autonomy and
with less interruption from others. This will help the sub groups in each division focus on their
own products or offerings and meet their objectives. Thus, it makes it easier to set goals and
metrics and measure the success of each department and division. This will also help the
divisions set separate rules and working cultures among them. For example, the guidelines and
code of conduct in the HR division of ONGC varies from the Offshore division in the same
organization. This division of organization will help leaders of the respective divisions make
more contextual decisions regarding resource allocation.
Post merger, HPCL is set to become a subsidiary of ONGC. Since both HPCL and
ONGC have the same organization structure, it will be relatively easier to coalesce them into a
single entity defined by the same structure again. If the merged ONGC-HPCL entity works in the
same organization structure as their individual entities used to function, it will be easier for the
stakeholders involved to achieve the goals intended to reach.
 PLAGIARISM SCAN REPORT

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Company Pro le of both the organizations

ONGC- Oil and Natural Gas Corporation falls under the administrative control of the Ministry of petroleum and
natural gas. It is a Public sector undertaking of the government of India and was awarded a maharatna certi cate
for being a robust public sector enterprise. It produces approximately 77% of India’s crude oil and around 62% of
its natural gas.
HCPL- Hindustan Petroleum Corporation Limited, is an oil and natural gas company owned by Indian state. HCPL
has around 25% market share in India among public sector companies. HPCL uses a pipeline network of more
than 3370 kms for transportation of petroleum products and also has a vast marketing network of 14 Zonal
o ces in major cities and 133 Regional O ces.
Details of product/services o ered
ONGC- Crude oil, Kerosene oil, Natural Gas, Ethane, Lique ed Petroleum Gas
HCPL- Petrol, Diesel, Lubricants, LPG, Aviation Fuel. Compressed natural gas
End Consumers
End consumers for these corporations are large organisations like steel authority of India, conglomerates like
Reliance Industries Limited, aviation companies like Indigo, Spicejet etc.
2. Rationale behind the Acquisition of HPCL by ONGC
Consolidation:
The acquisition of one Public Sector Undertaking (PSU) by another is in tandem with the government’s objective
to create an Indian “Oil Major” that can perform as well as other energy giants, in the international and domestic
private market. Most importantly, this move is supposed to shore up domestic oil exploration, centralize key
technological resources and streamline cost and operating structures at a globally competitive level. Considering
a predicted uptick in domestic fuel demand (for both production and transportation) this move is supposed to
make way for greater bargaining power - the likes of which are currently possessed by consolidated companies
such as Rosneft or ExxonMobil.
Integration:
Vertical Integration, resulting from the consolidation, will synergize the core strengths of both companies:
Exploration by ONGC and Re ning and Retailing by HPCL. The latter will add a re ning capacity of 23.8 million
tons to ONGC, thereby making it the third largest oil re ner in the country after Reliance Industries Limited and
Indian Oil Corporation.
Economies of Scale:
Energy security of the country underpins the acquisition. With estimates suggesting that India’s dependence on
crude oil imports could grow to 90%, it is imperative that domestic rms expand their scale and do so e ciently.
A stronger balance sheet and focused management enabled by the acquisition are also necessary to achieve this
scale, take investment decisions and create more value for shareholders.
Risk Management:
For the merged entity, this acquisition is certain to aid in absorbing the risk arising out of volatile global oil prices.
Furthermore, it will also help the major obtain attractive terms on overseas assets while creating diverse sources
of cash ow – both upstream and downstream. If the former fails, the latter’s performance can cushion the blow
and vice versa.
Fiscal Policy Targets:
The acquisition is a part of the government’s disinvestment strategy in several PSUs. Their economic motive is to
de ate the scal de cit by accounting the sales proceeds as revenues. Although, this is merely a shift of
ownership using the holding company mechanism, the deal (valued somewhere between Rs. 28,000 crore and Rs.
35,000 crore) will still help the government meet a third of its disinvestment target of Rs. 72,500 crore.

3. Summary of the two themes chosen with respect to the organizations

Organization Culture
Organizational Culture refers to a system of shared meaning held by an organization’s members that
distinguishes the organization from others organizations. The six primary characteristics seem to capture the
essence of an organization’s culture - Adaptability, Detail orientation, Results/outcome Orientation,
People/customer orientation, Collaboration/team orientation and Integrity. Apart from these characteristics,
every organization has a cultural framework that is classi ed into the following four types (Exhibit1);
Clan: These types of organizations have a culture of human a liation. The employees here have value
attachment and a nature of trust, collaboration and support.
Adhocracy: This is a type of culture that is based on change and growth. The employees focus more on growth,
details and autonomy.
Market: This is an achievement based culture wherein the employees have a high level of value communication,
competence and competition.
Hierarchy: The organizations in this framework have a culture based on stability.
All the di erences in these cultures are in uenced by the internal and external focus and also the exibility and
stability.
Now, understanding an organization’s culture becomes extremely important in cases when a person rst joins a
new organization as a manager or an employee, when one of the companies is acquired by the other, when a
manager has to coordinate the e orts of di erent departments within the organization and when a manager is
faced with a need to fundamentally change the strategic direction if the company and hence would by implication
need a change in the culture.
Taking the case of mergers and acquisitions, When a company decides to acquire another company, they are
basically purchasing the three factors that have contributed the most to the acquired company - its resources,
process and its business model. Its resources include its people, quipments, products, technologies, market etc.
which is much easier to acquire and change as per the acquiring rm's needs and requirements. Culture
especially has a very high in uence on the acquired organization’s capabilities, disabilities, decision making
criteria and also the culture. And it's the acquiring organization’s management’s task to not only rst understand
the culture of one's own organization but also to then try and understand the acquired organization’s culture and
values. Only after a correct balance between the two cultures is met, can the organizations work in harmony and
have a successful merger.

Sources Similarity

Corporate Pro le - ONGC

Maharatna ONGC is the largest crude oil and natural gas Company in India, ... under the administrative control
of the Ministry of Petroleum & Natural Gas, is the ...
25%

https://www.ongcindia.com/wps/wcm/connect/en/about-ongc/ongc-at-a-glance/corporate-pro le/

PowerPoint Presentation | HPCL R&D: THEN AND NOW

• HPCL has the second largest share of product pipelines in India with a pipeline network of more than 3370 km
for transportation of petroleum products and a vast marketing network consisting of 21 Zonal o ces in major 13%
cities and 128 Regional O ces.

https://ec.europa.eu/energy/sites/ener/ les/documents/27._b_ramachandrarao_hpc.pdf
(PDF) ORGANIZATIONAL CULTURE AND... - Academia.edu 4%
ORGANIZATIONAL CULTURE AND ORGANIZATIONAL COMMUNICATION INTRODUCTION Organizational Culture
refers to a system of shared meaning, held by a group of members that distinguishes the organization from
other organizations.

https://www.academia.edu/12226377/ORGANIZATIONAL_CULTURE_AND_COMMUNICATION

Organizational Behavior: Eighteenth Edition, Global Edition

Common Characteristics of Organizational Culture (2 of 6) • Primary characteristics that capture the essence of
an organization’s culture: – Adaptability – Detail orientation – Results/Outcome orientation – People/Customer 4%
orientation – Collaboration/Team orientation – Integrity.

https://www.scribd.com/presentation/395375379/ch-15
 PLAGIARISM SCAN REPORT

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Characters 2314 Exclude URL

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Sentences

Content Checked For Plagiarism

In the case of ONGC and HPCL with an ownership of 51% shares in the latter. There was a bigger challenge which
these two government entities faced and that was of the cultures that they have been following especially with a
workforce of such huge numbers. The cultural di erences or clashes were expected in the senior management
level wherein the constant meddling of ONGC into the daily operations of the other. All of this could be avoided if
the two organizations go about their de ned course of actions irrespective of thinking of the change of hands
that had taken place
ONGC and HPCL are both legacy organizations and have been pro table government entities for decades. A
major part of this can be attributed to the organizational structure that has enabled the working and decision
making process over the years. Both these organizations involve key decision making and ownership at every
level. They hence have been following a divisional structure. The organizations are divided into divisions based on
their functions such as marketing, engineering, HR, etc. Here is the diagrammatic representation of the
organization structure inside HPCL.
This structure is preferred because divisions need to perform with more autonomy and with less interruption
from others. This will help the sub groups in each division focus on their own products or o erings and meet
their objectives. Thus, it makes it easier to set goals and metrics and measure the success of each department
and division. This will also help the divisions set separate rules and working cultures among them. For example,
the guidelines and code of conduct in the HR division of ONGC varies from the O shore division in the same
organization. This division of organization will help leaders of the respective divisions make more contextual
decisions regarding resource allocation.
Post merger, HPCL is set to become a subsidiary of ONGC. Since both HPCL and ONGC have the same
organization structure, it will be relatively easier to coalesce them into a single entity de ned by the same
structure again. If the merged ONGC-HPCL entity works in the same organization structure as their individual
entities used to function, it will be easier for the stakeholders involved to achieve the goals intended to reach.

Sources Similarity