Presentazione Case Study per OIS e BPM

«RIGGED»

A case of merger

in the oil industry

Master Degree in Management Engeneering

Università degli studi di Palermo

Professor Giovanni Perrone

Student Riccardo Scimeca

2 Market

extension

1998

"Rigged – A case of merger in the oil industry" by Riccardo Scimeca

3 "Rigged – A case of merger in the oil industry" by Riccardo Scimeca

4 30 Billions $

"Rigged – A case of merger in the oil industry" by Riccardo Scimeca

5 "Rigged – A case of merger in the oil industry" by Riccardo Scimeca

6 ,

"Rigged – A case of merger in the oil industry" by Riccardo Scimeca

7 FTC guidelines based on Herfindahl – Hirschman

index:

<1000

 1800 con Δ 100

1000 1800 con Δ 50

 BP should be able to overcome the FTC audit!

Exactly the amount of share

BP holds before the merge!

"Rigged – A case of merger in the oil industry" by Riccardo Scimeca

8 1998

"Rigged – A case of merger in the oil industry" by Riccardo Scimeca

9 "Rigged – A case of merger in the oil industry" by Riccardo Scimeca

10 2

2 ; ; / 9

3 3 merging… 5

; ; 4 4

2 2 4

"Rigged – A case of merger in the oil industry" by Riccardo Scimeca

11 Mergers hard to Guidelines and

manage: several indices as

factors to be preliminary steps of

evaluated evaluation

Court

challenges

lasting

over time

"Rigged – A case of merger in the oil industry" by Riccardo Scimeca

Thanks for your

attention

“Behind every successful company there is

someone who has made a bold decision”

Peter Ferdinand Drucker

Rigged (by Riccardo Scimeca)

Introduction

Hi, I’m Riccardo Scimeca and my speech regards a case of merger in the oil industry. You are in the year 2000,

when BP begins a challenge against FTC for the acquisition of ARCO. Let’s see in details who are the actors

involved in this case study.

I actor

BP, originally known as British Petroleum, is a Britain oil company. In 1998, it achieved a takeover on Amoco

(American Oil Company), and so now BP stands for Beyond Petroleum, in order to remark the new

international dimension. Henceforth, I will refer to BP with Bp‐Amoco.

II actor

The Atlantic Richfield Company, known as Arco, is an American oil company with operations in US, Indonesia,

North Sea and South China Sea. So, it is an industry of Oil and Gas Extraction, although it has many refineries.

And this is exactly the company that Bp wants to takeover for 30 billion of dollars. Together, BP Amoco and

Arco should hold 70% of Alaskan oil reserves. You can say that this merger is a merge between firms operating

in the same market that produce similar product and sell in the same geographic area (after the acquisition

of Amoco), and for these reasons it can be classified as a horizontal merger.

III actor

But, as you know, mergers are preventively evaluated by Federal Trade Commission FTC, which wants to

oppose to this merge.

The conflict

There are several reasons why FTC starts a challenge against BP Amoco. Let’s see the steps of the conflict,

which appears as a tit for tat between the American antitrust commission and the oil giant.

Step 1

FTC claims that this merge implies an upstream dominance of BP‐Amoco – Arco of oil production in Alaska,

from which almost of the American west coast refineries depends. This should allow the new merged firm to

unfairly raise the price. According to experts, this is not true, because, although these refinery strongly

depends on Alaskan supplies, the crude price depends on broader international trends.

Step 2

Moreover, FTC answer that, in any case, BP Amoco should obtain market power because of the switching

cost. As evidence of this, FTC declares that it holds data regarding sells to a small group of refineries which

buy crude oil from Alaskan supplier, and these data show how BP discriminates prices among those

customers who cannot switch easily supplier, due to the switching costs. This is a credible reason for not

allowing to concentrate levels of market shares in the hands of a single firm, because, as you know, the

literature agrees that a company which has a dominant position in the market should squeeze out consumers,

taking advantage from the position guaranteed by the switching costs. Amoco BP says in response that it has

just reached an agreement with Alaskan officials to reduce its possible dimensions in that state until 55%

(which are the shares it is actually holding before the merge!) and promises to sell crude to independent

refineries with long‐term contracts.

Step 3

This response should allow BP Amoco to pass the audit of the anti‐trust authorities about post‐merger

concentration based on the condition you can see here. These guidelines, I mean, are computed with the

Herfindhal‐Hirshmann index among market shares pre‐ and post‐merger of merging companies.

But why although this, FTC still refuse to approve this merge? Probably it is due to the increasingly rigid

position of the commission about the mergers, in particular mergers in the oil industry. In fact, looking back

at 2 years before, a merge between Exxon and Mobil, from which the company commonly known as Esso

was born, led to a consolidation of the oil market. Furthermore, you must note that BP was an English

company, and not an American one.

However, at the end of the challenge, BP Amoco and ARCO merge together, but they were forced to sold

ARCO Alaska to Phillips Petroleum, and other concessions.

The actual scenario of the oil industry is dominated by the following big four: ExxonMobil, BP, Total and Shell.

This case study is a proof of how the merger case are often hard to manage. I mean, in the majorities of

merger cases, the consequences are an increase in prices and market concentration which leads to loss of

social welfare. This is the reason because, in my opinion, indices and guidelines are to be seen as preliminary

requirements: each case stands on its own and it is influenced by several factors and this often implies court

challenges between anti‐trust authorities and merging firms that extend over time.

Thanks for your attention.

Università degli studi di Palermo – Corso di Laurea Magistrale in

Ingegneria Gestionale

Modellazione dei processi

Presentazione del Case Study per

d’impresa (BPM) Team MARC:

Emanuela Liga, Andrea Leone

Claudio Scimeca, Riccardo Scimeca

The County of San Joaquin

(California, USA) is located

in the Central Valley to the

east of the San Francisco

Bay Area. From 2009‐2011

this county faced a difficult

challenge, in order to find

the solutions to various

problems. Decreasing budget in terms of resource

Ι

Obsolescence and required modernization by Administrative Office of the

Courts

Demographical changes: increase of population (over 650,000 residents) and

its expectations. Many people have moved into the county because of the

most affordable costs for housing

Difficulty in finding the correct services

Necessity to improve investments allocations

To improve

performance of

interfaces and

synchronization To provide

To reduce integration

costs and between users

redundancies • Oracle BPM/BPEL/BAM and Oracle SOA suite

• Automon caseload explorer and many others

Tools • Techniques of BPM like BPMN and others

(document don’t specifies this aspect)

Technique

Methodologies • Data – focused paradigm

• Oracle application

Frameworks development framework

• Information system

Area of interest modelling

SOA Implementation

Agile: you develop many versions which

Waterfall: each step produces an output provide a small increase in the

that is used as input to the next functionality of the software

Orchestration: Increase Service Bus Layer: To provide

the integration between software infrastructure integration, reuse

two or more applications that provides integration

in terms of data and interoperability for and scalability

synchronization complex SOA

. Law Enforcement

In terms of data and Public

Entity 1

information, actors

were very divided.

Activities was

performed manually

and with inefficiencies.

External and internal

users had to visit

several offices before

completing

transactions. Law Enforcement Law Enforcement

Entity 2 Entity x

District

Scheriff Public

Attorney Probabtion

IJIS provides an online ...

system to connect

more than 650,000

residents, 6,600

internal users, 18 city County Service Oriented

agencies and other Architecture

Enterprise Service Bus

national law

enforcements. ... District Attorney AOC CCMS

Scheriff applications CMS (Administrative Office

of the Courts)

We choose to use IDEF0 technique to explain

how the whole To‐Be process works

Authorizations Bureaucracy Legal proceedings

and licenses

Providing IJIS Increased knowledge

Services

Transactions to be paid Payments effected

Data and informations to be Recovered data

retrieved

Need for judicial services Legal services carried out

A0

County Service CaseLoad

BAM

Cloud Bus

CMS Explorer

Interfaces

System Layer

NODO: A-0 TITOLO: Providing IJIS Services N.: 1

Transaction Transaction

Online Citation

to be paid accomplished

and Payments

Citation

and offences 1

to be made Authorizations

County and licenses

Public citation

Cloud and offences

System Retrieving Increased Knowledge

Data from Sheriff’s Office information

Data from District Attorney

Data from Public Defender 2

Data from Probation Department

Data from external law enforcement users (such as AOC) Legal Bureaucracy

proceedings

Probation Retrieved

CMS information Updated

Evaluating and

District CaseLoad info

Exchange

Attorney Explorer

CMS Updating data Filing

Service

Bus 3

Layer

JCAD Online

CaseLoad

BAM Assessment

Explorer System

NODO: A0 TITOLO: Main services provided N.: 2

Adult Probation Case Management System

District Attorney Case Management System

Online Citation Inquiry and Payment System

Online Assessment System

JCAD (Application for Mobile Police Units)

Critical issues Need for a

About 15.000 workflow for Integration

probationers and transferring data between all

data for 250,000 from CJIS to the stakeholders

court cases for new Caseload

probation Explorer System Easy to fill

Information entered

manually Difficult to find

Solution

Caseload Explorer contact the Probation Department with other legal

entities, in terms of data exchanged. All data are exchanged in real time.

Results

Custom screen for all stakeh