Analyze the following case carefully and answer the questions that follow:
The public sector Indian Oil Corporation (IOC), the major oil refining and marketing company which was also the channeling agency for oil imports and the only Indian company in the Fortune 500, in terms of sales, planned to make a project (foray) in to the foreign market by acquiring a substantial stake in the Iranian company (Balal Oil field) of the Premier Oil. The project was estimated to have recoverable oil reserves of about 11 million tones and IOC was supposed to get nearly four million tones.
When IOC started talking to the Iranian company for the acquisition in October 1998, oil prices were at rock bottom (11 per barrel) and most refining companies were closing shop due to falling margins. Indeed, a number of good oil properties in the Middle East were up for sale. Using this opportunity, several developing countries made a large profit by acquiring oil equities abroad.
For this, IOC needed Government's permission to invest abroad. Application by Indian company for investing abroad is to be scrutinized by a special committee represented by the Reserve Bank of India (RBI) and the Finance and Commerce ministries. By the time the government gave the clearance for the acquisition in December 1999 (i.e., more than a year after the application was made), the prices had bounced back to 24 per barrel. And the Elf of France (French brand of oils) had virtually took away the deal from under IOC's nose by acquiring the Premier Oil.
The RBI, which gave IOC the approval for 15 million investment, took more than a year for clearing the deal because the structure for such investments were not in place, it was reported.
a. Discuss internal and global environments of business revealed by this case.
b. Discuss whether it is the domestic or global environment that hinders the globalization of business.
c. Even if Elf had not acquired Premier Oil, what would have been the impact of the delay in the clearance on IOC?
d. What could be the best alternative to IOC whether to invest in Iranian Company or search the new company for investment?
