Faculty School of

Business
Innovation and
Technopreneurship

(BFT105)
Introduction to
Business
Individual Assignment
UMW Oil and Gas
Company Cut Nearly
300 Jobs
Prepared for:
En. Muhammad
Asyraf Bin Mohd
Kassim
Prepared by:
Nurul Shahira Binti Mat Arzaman

| Submitted on |

Content
1.0

Introduction

2.0

The Justification and Importance of the Tittle

3-4

3.0

Key Points

5-6

4.0

Elaborate Issue

7-9

5.0

SWOT Analysis

8-13

6.0

5.1

Strengths

5.2

Weakness

5.3

Opportunity

5.4

Threat

Conclusion

14

PAGE 1

1.0

Introduction

The UMW Holdings Berhad is one of the largest companies and also one of the leading
industrial enterprises, serving the economies of Malaysia and the Asia-Pacific region.
The UMW Group is an RM 9.9 billion company and ranks among the foremost
corporations listed on the Bursa Malaysia. Its net assets exceed RM2.3 billion and its
workforce numbers more than 11,000 employees serving the customers through a
nationwide distribution network. No modern society can run smoothly without oil and
gas. This is why these products are very important today. Essentially, the demand of oil
and gas exceed their production. Since the functionality of a modern society relies to a
huge extent on crude oil, it is very important to employ high tech and cutting edge
technological processes towards this important field in order to ensure effectiveness in
the process of a business. Recently, UMWOG faced with streamlined its workforce to
combat the downturn in oil prices they come with some strategies to overcome the issues
meanwhile they need to ensure that they are efficient in terms of cost.

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2.0

The Justification and Importance of the Tittle

We cannot underestimate the impact the global downturn in the industry is having
on the Malaysian economy especially in oil and gas industry which is one of the industry
that depend on international crude oil prices. Based on the article shows that the company
UMW Oil & Gas cut nearly 300 jobs and mostly the company reduce the contract staff in
rig operations. Workers in the nations petroleum industry, tend to expose high risk in
cutting job by the company.

On the article I can justify that by reducing workers by a company can help or
save the company to stable their profit but on the other hands, it may impact to our
economy because of the rising cost of living in this country now. Therefore, by reducing
the workers by a company a worker can lose their job and jobless people will increase in
this country. As we can see now, fresh graduate who are taking courses in oil and gas also
can be unemployed and difficult to get a job in course they are taking in universities.
Besides, they also cannot expose to a job experience if a company do not give them
opportunity to show their ability to work.

The government and the nation suffer by the effect of unemployment because of
the greater number of the unemployed or the longer they are without work the more
money the government has to shell out. Therefore, the nation not only has to deal with the

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lost income and decreased production but also with additional cost. Unemployment
affects not just the person himself but also his/her family and in the long run society
where he lives. For examples., that we can see to further complicate the situation the
longer the individual is out of job the more difficult it becomes to find out. Employers
find employment gaps as a negative aspect, employers difficult to hire a person who has
been out of work for some time even when theres no fault of the individual per say. For
me the article that I analysis are important because it showed the nowadays business have
to face their problem by satisfy needs, and it must earn a profit.

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3.0

Key Points

UMW Oil and Gas Corporation has cut nearly 300 jobs, mainly in rig operations,
due to low crude oil prices. The terminations are part of a group-wide-cost cutting
exercise to address operating costs. Week demand for the groups drilling and oil field
services in the first quarter of 2016 due to low oil prices had caused both the drilling
services and oilfield services segments to incur losses.

UMW company currently has 736 employees, about a third of which comprise
contract staff. Headcount reduction comprised workers who were on a contractual basis.
The firms president, Rohaizad Darus said in the companys annual general meeting, he
told that they have made the necessary rationalisations via the reduction in manpower, renegotiations with vendors and reduction in capital costs. Their company already saved
RM18million in expenses by doing this structure. They also are trying to reduce a bit
more, but it will be focus on the contract staff and not permanent ones UMWOG also has
no attention to renew the contract of expatriates when their terms expire.

Meanwhile, UMWOG not only focus on reducing the staff but it also includes
other cost cutting that will stable the profit of the company. Cost-cutting measures
include a reduction in inventory and capital cost, negotiation with vendors, and
improvement in company process or restructure the new organizations. By doing all this

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structure they need to ensure that they are efficient in terms of cost, to operate at the best
level, and are able to offer competitive prices than others company.

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4.0

Elaborate The Issue

From the article that I have analysis what is concerning for a lot of companies is
that due to the continued low oil and gas prices they have had to go well beyond reducing
their contract employees and are having to reduce permanent workers it was something
they were trying to avoid. The company UMWOG they have a negative profit, which
results when a firms expenses are greater than its sales revenue, is called a loss. A
business cannot continue to operate at a loss for an indefinite period of time because it
may put the companies in a danger. Companies are doing what they can to hold on to
their best and brightest. Therefore, UMWOG overcome their problem by a numbers of
strategies to put the companies in stable.

Crude oil and gas is the one of the natural resources which is elements that can be
used in the production process to make appliances, automobiles, and other products.
Exploration is a very difficult process and therefore requires the service of experts in the
field. More so, information technology plays active roles in the exploration or searching
of crude oil in order to easily discover new grounds where oil is located.

Corporate communication involves orchestrating and managing different internal

and external communication in order to create favorable point of view among

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stakeholders. This involves issuing a message by an organization to its audiences which

might include the employees, the media, partners and so on.

They also can apply human resources planning into their strategies to overcome
the problem. Human resources planning is the development of strategies to meet a firms
future human resources needs. There is one technique for forecasting human resources
supply is a skill inventory. Skill inventory is a computerized data bank containing
information on the skills and experience of all present employees. It is used to search for
candidates to fill available positions. For a special project, a manager may be seeking a
current employee with specific information technology skills, at least six years of
experience and fluency in French. The skills inventory can quickly identify employee
who possess such qualifications.

We also notice that UMWOG company apply the human resources planning into
their decisions which is they using matching supply with demand. When supply is
predicted to be greater than demand, the firm must take steps to reduce the size of its
workforce. When the oversupply is expected to be temporary, some employees may be
laid off- dismissed from the work force until they are needed again.

Perhaps the most humane method for making personnel cutbacks is through
attrition. Attrition is the normal reduction in the workforce that occurs when employees

PAGE 8

leave a firm. Early retirement is other option. Under early retirement, people who are
within a few years of retirement are permitted to retire early with full benefits. Depending
on the age makeup of the workforce, this may or may not reduce the staff enough.

PAGE 9

5.0

SWOT Analysis

5.1 Strengths
5.1.1 High Salaries
Most of the oil and gas company offers high salaries especially in rig operations.
The higher level of jobs then the higher of salaries that a company offer.
5.1.2 High thinking skills Employee
From what we know, UMWOG only recruit staff who has a high thinking skill
that a capable to manage the situation if they having a problems.
5.2 Weakness
5.2.1 Management and information
Global forces such as geopolitical pressures are troubling the industry oil and gas.
We therefore, need the knowledge, contacts and skills to effectively adapt to these
troubles and geopolitical insecurity in the industry. Some challenges in the upstream oil
and gas industry can be effectively resolved if we lay emphasis on the new
interdependencies between senior management information, operational effectiveness and
decisions making. They also need to judge and understand their impact on overall profit
margins. This can go a long way solving their problem.
5.2.2 Sources of Crude Oil

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If we take a close look at the sources of oil and gas, we will realize that they a not
renewable natural resources. The using of oil and gas today places the fate of worlds
crude oil supply at risk. In some countries, likes India and China they using crude oil on
daily basis. Thus, this is a big challenge to the oil and gas company. In Malaysia, natural
resources like crude oil become less and the government need to think another way to
overcome this problem.

5.2.3 Unstable Jobs

UMWOG company are not a government company so the workers who work for
that company must show their ability using their skill to perform well in that company if
not they will be dismissed from that jobs. For example, UMWOG cut their contract staff
and keep their permanent staff it shows that permanent staff have more work experience
than contract workers.
5.3 Opportunity
5.3.1 Investing in R&D
Technology is the driving factor behind many opportunities, and makes investing
in research and development critical for oil and gas companies to be able to increase their
competitive advantage. Areas of focus includes technologies for new drilling techniques,
lessening environmental impact, and developing unconventional energy sources.
5.3.2 Cross-sector partnership

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Strategic partnerships with firms in other industries can help oil and gas
companies learn from the innovations of other sectors. Examples include a partnership in
the auto industry for the development of hydrogen vehicles, and benefiting from
technology developments in the marine and shipping industries for improving
environmental safety.

5.4 Threat
5.4.1 Environmental pollution
Environmental pollution is a major issue in the upstream oil and gas sector. There
is lots of oil and corroded pipelines still used today resulting to oil spill which degrades
the environment.
5.4.2 The People Shortage
The lack of skilled personnel and manpower or main operations requiring high
tech processes in the oil and gas industry is a challenge in most parts of the world include
Malaysia oil and gas company especially in the upstream sector of the industry. Processes
in the upstream sector such as exploration and production requires high technicality and
therefore there is need for skilled manpower. This has limited many operations in
different parts of the world.

PAGE 12

 High salaries
High thinking skill
employees

Management and
information
Sources of crude oil
Unstable jobs

Strengths

Weakness

Opportunity

Threat

Investing in R&D
Cross sector-partnership

Environmental pollution
The people shortage

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6.0

Conclusion

Obviously, the upstream and downstream value chains of the oil and gas industry face
lots of challenges in business so they have to overcome the problem with many strategies
to avoid the problem. Now more than ever before, the way a business operates is affected
by the competitive environment, global environment, technological environment, and
economic environment. As a result, business has a number of opportunities for
improvement and challenges for the future.

PAGE 14

References
Ang, J. (2016, 05 24). Human resources. Retrieved from Human resources Web site:
http://www.humanresourcesonline.net
Puspadevi, S. (2016, 6 3). Business News. Retrieved from The Star Web Site:
http://www.thestar.com.my
UMW Oil & Gas. (2016, 10 23). Retrieved from UMW Oil & Gas Web site:
http://www.umw-oilgas.com
William M. Pride, Robert J Hughes and Jack R.Kapoor. (2008). Business. Singapore:
Cengage Learning Asia Pte Ltd.

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