Eight strategic decisions that weakened gulf oil

Abstract

The notion that ‘success breeds failure’ is well known to management scholars and practitioners. Gulf Oil Corporation was among the largest corporations in the world. In 1984, its management was forced to seek a white knight to avoid a hostile takeover. The $13·3bn merger with Chevron is among the largest deals in corporate history. This research explores ‘how’ and ‘why’ this event occurred through case research. Strategic decision processes across eight critical events during 30 years were examined. Data was collected through interviews with forty senior corporate executives. The case analysis suggests that inertia and political processes stifled innovation. Also, there is evidence that Gulf's ‘downward spiral’ began 10 years prior to the takeover battle. The data reveal the internal dynamics of decline, the complexities of organizational life, and paradoxical situations which challenge executives. The continuing challenges in the oil industry, as recently exemplified at British Petroleum, underscore the importance of acting promptly to avoid such downward spirals.