Managing the subsidiary within the rules of the head office : a case for the oil industry in the SADC Region

Abstract

Most international oil companies have historically used South Africa as their regional headquarters from which to drive their strategies within the South African Developing Community (SADC) region. The SADC based companies or subsidiaries view South Africa as a head office of the international oil company. Naturally, the effectiveness of these strategies depends on whether they are aligned with realities of the SADC market. The researcher assesses this question using Yadong Luo’s framework, viz. the determinants of local responsiveness. The role of these factors within the oil industry in SADC is assessed, and the local responsiveness of international oil companies in relation to the local oil companies (LOC’s) is reviewed for adequacy.

Industrial factors, particularly competition and demand heterogeneity, undoubtedly, are the dominant factors. And this applies equally in both the deregulated and regulated markets, respectively. Environmental factors have the second highest impactful, specifically environmental complexity.

The conclusion is that international oil companies have some lessons to learn from local oil companies in terms of head office making the rules for the subsidiary to execute and vice versa. Similarly, host governments, as key players in creating an investor friendly environment have some lessons to learn from this research.