Final Exam you can find the case, Gran Tierra Energy

Final Examyou can find the case, Gran Tierra Energy Inc. in Brazil, in your course pack. Please use a question and answer format to complete this exam. Case report should be double-spaced and no more than 10 pages long (not including figures, charts, tables and references). The font size should be no smaller than 12 point.Think about all you have learned in this class and apply it to your responses when appropriate (Guest Speakers, class cases, CAGE Framework, AAA Framework, ADDING Value Scorecard and Porter’s National Diamond Framework).1 What is Gran Tierra’s international strategy?2 Have Gran Tierra’s previous internationalization decisions been aligned with the firm’s strategy? Was the decision to enter Brazil aligned with the firm’s strategy?3 Assess Gran Tierra’s performance. Does the strategy seem sound?4 What are Gran Tierra’s firm-specific advantages? How does the firm leverage these advantages when entering new markets?5 Identify relevant location advantages. How do these impact the internationalization of Gran Tierra? What makes Brazil attractive for Gran Tierra?6 How different or similar is the Brazilian market compared to other host markets where Gran Tierra is already operating?7 Discuss why Gran Tierra has chosen its current operating methods. Are these feasible if the growth opportunities in Peru become economically viable?8 What are the main risks facing Gran Tierra?9 What recommendations would you give to Dana Coffield, Gran Tierra’s CEO and President?GRAN TIERRA ENERGY INC. IN BRAZIL Birgitte Grøgaard, Charlene D. Miller and Vivek Shah wrote this case solely to provide material for class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors may have disguised certain names and other identifying information to protect confidentiality.This publication may not be transmitted, photocopied, digitized or otherwise reproduced in any form or by any means without the permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) c..s@ivey.ca; www.iveycases…..Copyright © 2014, Richard Ivey School of Business Foundation Version: 2014-11-28During the first week of June 2013, Dana Coffield, the CEO of Gran Tierra Energy Inc. (Gran Tierra), pored over the company’s latest progress reports. He was preparing for the upcoming strategy session with senior executives and business unit presidents. Gran Tierra’s investments in Peru looked promising, as recent exploration well tests indicated large oil reserves with significant production potential that could transform the company. However, the company’s Brazil operations continued to encounter challenges. Coffield had high hopes when Gran Tierra entered Brazil in 2009 and thought that he and his team had carefully considered the risks. Given the increasingly positive developments in Peru, was dedicating Gran Tierra’s resources to the Brazil operations still worth the risk? Could Gran Tierra turn the situation around or should Coffield recommend a divestment of the Brazilian assets?BACKGROUND OF GRAN TIERRAGran Tierra, based in Calgary, Canada, was formed in 2005 by three senior-level executives — a geologist, an engineer and a finance expert — with proven track records in international upstream oil and gas who joined forces with three founding entrepreneurial directors with decades of broad international experience in the upstream and oil services industry. This executive team envisioned an international oil and gas company that could swiftly identify and capitalize on undervalued and overlooked opportunities in the energy industry.The conception of the company came at a time when several South American countries were making political, legal and fiscal changes in their national frameworks to attract more foreign investment. The management team had extensive experience in this region and knew of several opportunities to access assets that were undervalued and underdeveloped. With the support of a small community of Calgary- based entrepreneurial investors, Gran Tierra was able to attract the initial seed funding that allowed the team to begin pursuing these opportunities. Two subsequent financings from the broader financial community in Canada, the United States and Europe allowed Gran Tierra to capture a small set of assets and operations in Argentina, and then move into Colombia and Peru over the next 18 months.Page 2From 2007 onward, Gran Tierra strengthened the executive team through the addition of seasoned managers with extensive international experience, including Martin Eden as chief financial officer (CFO) in 2007, Shane O’Leary as chief operating officer (COO) in 2009 and David Hardy as vice-president of legal, secretary and general counsel in 2010. Eden was a Chartered Accountant with over 26 years of industry experience both in Canada and overseas. O’Leary was a professional engineer with an MBA degree and over 17 years of experience from various international positions in integrated oil and gas companies. O’Leary had previously worked as the vice-president of Encana’s Brazil Business Unit. Hardy had over 20 years of experience in the legal profession, including extensive international experience in the oil and gas industry. Exhibit 1 gives an overview of the new executive team.Within a few years, the executive team had established a solid South American platform. The company’s oil exploration and subsequent development successes exceeded expectations and provided Gran Tierra with enough of a financial cushion to explore new, possibly riskier opportunities. This led Gran Tierra to enter Brazil in 2009, where the company saw significant opportunities.Gran Tierra’s StrategyGran Tierra began as an international oil and gas company with an initial focus on select countries in South America. The aim was to build the company through a two-stage approach to growth. First, establish a base of production by selective acquisitions; and second, achieve future growth through exploration and the development of new fields. This business model would be replicated in other areas as opportunities arose.To maximize the chance of success and return on investment, the team planned to pursue opportunities in countries with:· Proven petroleum/hydrocarbon systems;· Attractive fiscal terms (e.g., for royalties and taxation);· Stable legal systems;· Deal flow (i.e., the ability to acquire assets and/or enter into partnerships);· The ability to become the operator; and· Necessary infrastructure in place (e.g., pipelines and roads).Gran Tierra recognized that laws and legal systems might change, but tried to focus on countries with some measure of stability and avoid countries with a higher potential for arbitrary changes. A key aspect of Gran Tierra’s business plan was positioning — being in the right place at the right time with the right resources. This involved:· Entering countries with assets that Gran Tierra saw as being previously ignored or undervalued and that welcomed foreign investment, as evidenced by the offer of attractive fiscal terms;· Building a diverse portfolio of drilling opportunities, including exploration, development and production assets;· Engaging qualified and experienced professionals locally;· Establishing an effective local presence; and· Assessing and acting upon opportunities expeditiously.This approach provided a balanced portfolio that mixed a lower-risk predictable production base and cash flow with higher-risk exploration that could provide better rewards and growth opportunities. Gran TierraPage 3did not invest directly in research and development. Rather, the company made use of existing technologies and processes that were available “off the shelf.” The oil and gas industry was highly competitive. Competitors ranged from local companies, to smaller international independent companies such as Pacific Rubiales, to major international oil and gas companies such as BP and ConocoPhillips. The industry players primarily competed to access acreage licences for land to explore and develop, secure contracts with service companies to conduct work, and attract highly qualified personnel. Please see Exhibit 2 for a brief overview of the different market players in the international oil and gas industry.Gran Tierra also had a unique approach in terms of how the organization established a presence in local jurisdictions. The executive team made a point of hiring as many local staff as possible, and only using expatriates for limited or short-term technical assignments to fill critical gaps when local talent was unavailable. The local business units took ownership of the day-to-day operations of the company, while staff in the Calgary office was responsible for the overall strategy, business development, technical support, consolidating of operating results, and reporting to stock exchange regulators and shareholders (Gran Tierra was listed on both the Canadian TSX and American NYSE stock exchanges). Gran Tierra also made significant community investments related to health, education and infrastructure. Local projects that benefitted communities included maintaining roads and drainages, sponsoring agriculture and fishery initiatives, sponsoring medical and dental brigades, sponsoring education initiatives by providing school materials and scholarships, and many other projects specific to the needs of the local communities near each operation.Gran Tierra’s PortfolioWhen the founders had raised an initial $2 million1 in seed money from private investors, the newly formed team targeted Colombia, Peru and Argentina, and initially identified Argentinian assets with some production to provide the company with enough cash flow to cover expenses and fund further growth. Rafael Orunesu, an Argentine national, was hired as country manager. He had over 20 years of experience in the oil and gas sector in Argentina and the greater region, including the Peruvian North Jungle. Orunesu was a trained geologist, had strong business relationships and spoke Spanish, which facilitated Gran Tierra’s initial movement into the region. He played a pivotal role in developing the local office in Buenos Aires to manage all functions necessary to support local operations, as well as the greater region. This became the basic model for Gran Tierra’s other business units.Within one year of establishing the Argentine base, Gran Tierra had purchased interests in eight producing and non-producing properties in Argentina’s Noroeste basin. These initial properties were profitable enough to provide cash flow and cover overhead in the company’s early stages and effectively establish Argentina as Gran Tierra’s South American base with a trusted, knowledgeable team in place.Despite the good fit with Gran Tierra’s decision criteria upon market entry, operations in Argentina had their challenges. The country was prone to political and economic instability, with the government of Argentina showing a tendency to change the regulatory and commercial rules more frequently than expected. There were also price caps on oil that brought less return on investment. Although the seed money had helped Gran Tierra solidify its position in Argentina, the long-term potential for Gran Tierra to grow in the Argentine market did not look particularly lucrative. The team agreed that it was time to continue looking at Colombia and Peru for growth.1 All currencies in US$ unless otherwise stated.Page 4After having raised an additional $90 million from U.S., Canadian and European investment markets in 2005–2006, the team looked seriously at Colombia for further expansion. Under President Álvaro Uribe’s reforms, Colombia had become one of the best places for a small foreign exploration and production company to do business. The legal and fiscal regimes were attractive and stable, and the country had a solid history of oil and gas production, with an immense amount of untapped resources. The government licensed large areas of the country for exploration and offered tax breaks to investors. The reforms had opened competition between foreign companies and the state-owned enterprise (SOE) Ecopetrol. These changes were also coupled with improvements in national security. Social conflicts and associated high security risks had limited or stalled the industry during the past 40 years with disruptions in operations due to attacks on plants, pipelines and personnel. Local communities had not yet visibly benefitted from the many years of natural resource extraction in Colombia, an inequality that Colombian terrorist groups had previously played on. Coffield and his team wanted to create value for all stakeholders by maintaining a strong local presence, training personnel and contributing to the development of local communities. The executive team saw an opportunity for entry and seized it through the acquisition of Argosy Energy International, a company that had long existed but had not fully realized its potential because of historical conflicts in the region.Gran Tierra had extraordinary success and discovered the largest and second-largest light oil fields in Colombia in 20 years. As the rest of the world began to catch up to the fact that Colombia had become a more attractive country in which to invest, competition and prices increased for land and concessions. In parallel, the attractiveness of available land decreased over time, as the early entrants (including Gran Tierra) had captured the best acreage. Access to new quality assets to continue Gran Tierra’s growth trajectory became increasingly difficult, making it much more difficult for the company to continue growing. This pushed Gran Tierra to once again look at new countries for further growth.In 2006, Gran Tierra acquired two exploration blocks in the Marañon basin in northern Peru. Peru’s geology in this area was similar to Colombia’s, but with greater prospects, and seemed to be the most natural move for the company. The Peruvian operations were managed by the Argentinian office until a local country manager was hired in 2011 as a result of a local acquisition.Located in the Amazon, the Marañon basin in Peru was an extremely environmentally sensitive and relatively remote and unexplored area that was home to indigenous populations. This made it challenging to obtain permits for oil and gas exploration and production activities. If Gran Tierra had a successful discovery, the upside potential for such a small company could be transformational. Peru also had extremely good fiscal terms that could ultimately pay off when a discovery was made, but due to the extensive environmental risk and consequent regulation, the executive team knew it could take years to reap the gains.Each of the markets Gran Tierra had entered in its early years had been beneficial to the company’s growth in different ways. Argentina was an effective base for smaller-scale production and for Gran Tierra to initially use as its main operating base in South America. The company had been successful in Colombia, which had been transformational in terms of finding reserves, growing production quickly and generating cash flow to fund future growth opportunities. The Colombian market was now of interest to SOEs, majors and independents alike, and the executive team realized that the quick growth that Gran Tierra had previously experienced in Colombia could not be easily repeated due to increased competition for lower-quality land. Peru had vast, untapped oil and gas reserves, but growth there was sure to be slow because of the environmental sensitivities and lengthy permit process. See Exhibit 3 for a summary of Gran Tierra’s initial markets.Page 5The executive team set out again to explore other potential avenues for Gran Tierra’s future growth. If Gran Tierra wanted to continue to strengthen its South American platform, the executive team saw few countries left that would meet the criteria: the political climates in Bolivia, Ecuador and Venezuela were not welcoming to a public energy company due to harsh fiscal terms and a lack of contract sanctity, and Chile simply did not have the potential hydrocarbon resources. This left only Brazil, which, based on the team’s previous experience in the region, had great potential in terms of untapped hydrocarbon resources.THE DECISION TO ENTER BRAZILBrazil offered several opportunities for farm-ins, bid rounds and M&A transactions. Although Petrobras, a Brazilian SOE, had historically dominated the Brazilian oil and gas industry, regulatory changes in the mid-1990s opened the Brazilian market to competition. As a result, foreign companies were increasingly entering Brazil. While there were more than 20 proven basins in the country, other opportunities both onshore and offshore seemed underdeveloped. The country had a stable legal system with established regulatory jurisdictions and attractive fiscal terms. In contrast to Colombia, the operating environment was also much safer. Coffield saw potential for leveraging Gran Tierra’s capabilities generally, and O’Leary’s experience specifically, in this new territory.Soon thereafter, Gran Tierra expanded its geographical focus and opened a business development office in Rio de Janeiro, Brazil, in September 2009. Julio Moreira, a local with over 25 years of experience working for international oil and gas companies, was hired as president of the Brazilian business unit. In his previous position as country manager for Encana in Brazil, Moreira had already developed a strong relationship with O’Leary. A dedicated technical team with Brazil experience was also established in Calgary to support the local efforts to evaluate opportunities in Brazil.The Brazilian AssetsIn August 2010, as a first step to establishing Brazilian operations, Gran Tierra acquired a 70 per cent interest in four onshore blocks in the Recôncavo basin. The Recôncavo basin was a mature area with conventional production that was slowly declining. An advantage to Gran Tierra was that there was already substantial infrastructure in the area. The blocks provided Gran Tierra with production as well as exploration upsides that could serve as a strong initial platform for further expansion in Brazil. There was also the potential to introduce North American technology such as horizontal drilling and multi-stage fracturing stimulation that was not used onshore in Brazil. There were strong similarities between the Recôncavo basin and basins in North America such as Bakken and Eagle Ford,2 where activities were booming as a result of the implementation of these technologies. While Gran Tierra did not have the technical expertise in-house to perform these tasks, it expected these services could be transferred to the Brazil market through contracts with service companies.The team’s strategy was to reverse declining production by exploiting new technology. By generating increased activity for existing fields, it would also contribute to the creation of new jobs in local communities. However, its success ultimately relied on Petrobras granting it access to infrastructure and marketing the final products. This was not seen as a major obstacle, since the team assumed that Petrobras would also find these opportunities attractive, especially when the economy was still recovering from the2 “US Gulf Coast: New Crudes,” Platts, McGraw Hill Financial, January 31, 2013, www.platts…./news- feature/2013/oil/gulfcrude/index, accessed September 2, 2014.Page 62008 financial crash and the downturn that the industry had experienced due to the decline in the average price of crude oil in 2008–2009.In September 2011, Gran Tierra had two offshore farm-in opportunities in shallow water — partnering with the Norwegian SOE Statoil and Petrobras. Statoil was the operator of one agreement, while Petrobras was the operator of another. These were high-risk opportunities for Gran Tierra, with an estimated one-in-six chance of success. But if successful, the company would be transformed due to the huge potential of the prospects. Despite the high risk, these opportunities were very attractive, given that Brazilian offshore resources were considered to be among the most promising areas globally. Although shallow water operations were comparable to areas where the executive team had similar offshore experience, Gran Tierra’s current portfolio was entirely onshore and the company relied on the extensive experience of the two much larger integrated (and partly state-owned) oil and gas companies. Gran Tierra entered the offshore agreements as a non-operating partner with modest 10 per cent and 15 per cent working interests, respectively, due to the high costs expected from offshore operations.THE BRAZILIAN EXPERIENCEThe challenges in Brazil became increasingly evident after the initial investments and onshore operations moved slower than anticipated. The team began to sense that it had not fully taken into account the uncertainty of Petrobras’ priorities. The management team had known that Brazil was considered very relationship-based in its approach to doing business, but Gran Tierra saw its ability to develop and manage business relationships as one of its main strengths as a company. It consequently had not anticipated the slow progress in convincing Petrobras of the benefits of applying new technology. Gran Tierra’s strategy in Brazil depended on its ability to partner with other firms to exploit new technologies. Since horizontal drilling and multi-stage fracture stimulation were not used onshore in Brazil, the service providers lacked the “critical mass” to develop strong expertise, and the lack of scale led to high costs. As a result, the desired services were offered at lower quality and higher prices than the same services in North America, and operations took longer to execute and ultimately had poorer results.The reality of these challenges led the management team to question how great a commitment it was prepared to make in Brazil. Its own uncertainty about the scale and scope of activities made it difficult to convince service companies from North America with the necessary technical expertise to get involved in potentially short-term, highly cost-intensive projects in Brazil with little certainty of a payoff.Furthermore, Gran Tierra’s high-risk offshore activities were not as successful as initially hoped. By the end of 2011, Statoil had drilled an unsuccessful offshore well, which was disappointing but not altogether unexpected. The progress on the second offshore well, operated by Petrobras, was delayed indefinitely. These activities were capital-intensive with high technical risk and, as a minor player, Gran Tierra was only able to participate as a passive investor in these risky ventures.MOVING FORWARDOnly a few years ago, Coffield had looked to Brazil as one of the most promising markets for new opportunities. He had been prepared to allocate the necessary resources to ensure that Brazil operations could continue to grow. The slow progress onshore and disappointing results offshore in past years made him less certain. While Gran Tierra had anticipated challenges in Brazil, Coffield wondered if the management team had underestimated the impact these would have on the progress and success rate of activities. With its early successes, Gran Tierra had enjoyed the flexibility of funding its growth from itsPage 7operations without the need to approach investors for additional funds. This had also required a fiscally conservative approach where Gran Tierra continuously assessed its current operations and growth prospects to determine if they aligned with the company’s strategy and desire to maintain and develop a robust portfolio of assets. See Exhibits 4 and 5 for an overview of Gran Tierra’s financial situation.Coffield continued to read through the progress reports from May 2013. The organization had grown exponentially over the past years. By the end of 2012, Gran Tierra’s portfolio had grown to 44 blocks with 40.6 million boe3 total proved reserves net after royalties (NAR), and production levels had grown to over 17,000 boe/day NAR,4 as illustrated in Exhibits 6–8. The organization now employed a total of 485 people full-time, as illustrated in Exhibit 9. Things were starting to look up in several markets and Coffield felt the need to more clearly prioritize the allocation of resources. While opportunities in Peru and Brazil potentially represented more transformational changes for the growth of the company, there were also undeveloped potential reserves and exploration opportunities in Colombia that needed to be considered. Argentine reserves were also becoming more attractive due to an ease of the existing price cap on oil.A conversation Coffield had with O’Leary and Eden earlier during the day indicated that the capital allocation budget needed revisiting (an overview of Gran Tierra’s capital expenditures can be found in Exhibit 10). Gran Tierra had revised its original capital expenditure budget for 2013 from $363 million to $424 million due to the scale of the successful exploration success in Peru (see Exhibit 11). Despite this increase, Gran Tierra still expected to fund its capital budget through cash on hand, cash flows from current operations and the occasional use of credit if required. In the revised 2013 capital budget, a total of $218 million was allocated for drilling, $73 million for facilities, equipment and pipelines, $130 million for geological and geophysical expenditures and $3 million for corporate activities. The planned drilling activities were split roughly as 50 per cent for development and appraisal drilling and 50 per cent for exploration drilling.5A successful bid round in Brazil in May 2013 had opened the potential for Gran Tierra to explore familiar areas in the Recôncavo basin, where the company had so far successfully developed the Tiê conventional oil discovery. The additional three blocks (20,658 gross acres of land) acquired in the bid round, adjacent to the existing acreage, would allow Gran Tierra to leverage its growing knowledge of this basin. As a result of recent bid rounds, other junior companies were increasingly entering the Brazilian market, which could potentially impact the availability, quality and price of the service industry. The Brazilian government was also pleased to see its efforts to attract foreign direct investment were paying off.However, preliminary results from Peru put additional pressures on Gran Tierra’s resource allocation. Gran Tierra currently held operatorship and 100 per cent working interests in five blocks in Peru. Of these, the main focus was on the Bretaña oil discovery, which showed enormous potential. The results from recent tests were beyond expectations and indicated significant resources of high-quality oil (i.e., low in sulfur and density). Although there was still uncertainty around the project’s economic viability, the sheer size of the Bretaña asset plus additional exploration potential on Gran Tierra’s land could lead to exponential growth for many years. However, this would take considerable investments over the next several years, larger than any of Gran Tierra’s current operations. Gran Tierra had initially allocated $383 Production is measured according to the industry standard of barrels of oil equivalents per day (boe/day). The size of a barrel of oil equals approximately 159 litres of oil. Natural gas is typically converted as roughly 6,000 cubic feet (Mcf) of natural gas per boe.4 “Gran Tierra Energy Inc. Announces Fourth Quarter and 2012 Year-End Results,” Gran Tierra Energy Inc., February 26, 2013.5 “Gran Tierra Announces $363 Million USD Capital Program for 2013 and Operations Update,” Gran Tierra Energy Inc., December 14, 2012.Page 8million in capital spending for activities in Peru during 2013. Based on the success of the ongoing well tests in the Bretaña field, the capital needed to increase approximately $70 million. Coffield had to consider if Gran Tierra was willing and able to commit these resources.Recent investor reports did not fully reflect opportunities in Brazil or Peru. While Gran Tierra’s current stock price at approximately $6.11 per share was slightly higher than its base net asset value, the potential in 2P reserves (total proved plus probable reserves) was not taken into account. A recent report from one of the leading investment firms estimated a target share price of approximately $8.20 for the coming year if current opportunities proved successful. See Exhibit 12 for a sample analysis of Gran Tierra’s value in May 2013.Some of the investors had also questioned whether a smaller firm such as Gran Tierra should engage in capital-intensive, high-risk offshore activities in Brazil or even take on a first-mover role in utilizing unconventional technology onshore in Brazil. It would take years for the service industry to develop the scale and scope necessary to make these types of activities as financially attractive as operations in similar basins in North America. If Petrobras was not aligned with Gran Tierra’s plans for the onshore activities, it could be difficult for Gran Tierra, as a much smaller foreign firm, to convince the large domestic giant to implement any changes. Despite its enormous growth since inception, Gran Tierra was still a small player on a global scale with limited resources. Though it was considered financially stable today, did Gran Tierra and the company’s investors have the patience and financial strength to get involved in such large-scale and/or long-term investments?For a small company, Coffield felt he had much to consider. With the approaching strategy session, Coffield wanted to have a clear understanding of where he saw the company moving in the future.Page 9EXHIBIT 1: THE NEW EXECUTIVE TEAM’S GLOBAL EXPERIENCEPresident and CEO (Dana Coffield)CFO (Martin Eden)VP Operations (Shane O’Leary)VP Legal, Secretary and General Counsel (David Hardy)Educational background· Geologist (PhD)· Economics · Businessadministration (MBA)· Chemical engineering· Business administration (MBA)· Juris Doctor degreeRange of previous experience (list not exhaustive)· Business development· Exploration & development operations· Commercial evaluations· Government and partner relations· Planning and budgeting· Environment/ health/safety· Security· Operationsmanagement· Accounting· Finance· Auditing· Business analysis· Treasurer· Corporate acquisitions· Reservoir engineering· Project management· Business development and international new ventures· Operations management· Government and partner relations· General legal services· Legal and commercial negotiations· Regulatory services· Corporate relations· Legal counsel for new ventures, dispositions and operationsExperience from geographical areas· Africa· Asia· Middle East· South America · North America· Africa· Asia· Europe· Middle East· North America· Africa· Europe· Middle East· North America · South America · The Caspian· Africa· Australia· North America · South AmericaExamples of organizations previously worked for· Encana · ARCOInternational· Nexen· Coopers &Lybrand· Several juniorcompanies· Encana· BP/Amoco· First CalgaryPetroleums· Encana· Private practiceSource: Gran Tierra Energy Inc., www.grantierra…., accessed September 2, 2014.Page 10 9B14M157 EXHIBIT 2: BACKGROUND ON THE INTERNATIONAL OIL AND GAS INDUSTRYThe oil and gas industry (also referred to simply as the energy industry) is inherently uncertain. The industry operates in cycles, where profitability can be extremely high for periods of time — even years — yet it must be understood that large profit margins tend not to last. A long-term approach to investment in the industry is essential, where producers cannot control the price of the commodity which they extract and sell, and can only control their own cost efficiency with the hopes of greater returns despite unpredictable fluctuating energy prices on the global market. Energy firms primarily compete on access to quality land, resources and finances, the ability to develop strong relationships with firms with compl