Exxon Mobil: Strategic Analysis essay
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The following is a marketing report that evaluates Exxon Mobil Corporation. The report is divided into two phases: phase one and two. In the phase one, the focus is on competitor analysis, market analysis, environmental analysis, customer analysis and internal analysis. The phase concludes with a SWOT analysis of the company. In the second phase, the focus is on marketing objectives, targeting and positioning, growth strategies (the objectives refer to growth/improvement of current position, selection of competitive advantage and marketing mix programme). All these aspects border on the strategic positioning of Exxon Mobil Corporation. It is concluded that Exxon Mobil is strategically placed to dominate the oil and gas industry.
In analysing the strategic setting of the organisation, deep research and analysis are critical. Based on the prevailing background information, the procedure entails the review of the literature on the various strategic aspects as well as on Exxon Mobil Corporation. Upon this review, a critical analysis of the literature is made and it paved the way for the report development.
Competitor analysis borders on reviewing the level of competition within an industry. The dangers, posed by the entry of new entrants, are relatively fewer in the oil and gas industry. This is caused by the barriers for the entry such as the high costs associated with the capital, economies of scale, proprietary technologies, distribution channels, geopolitical factors and etc. (Fleig, 2005). In brief, it is required large sums of money for new entrants to join the industry. Thus, it is extremely hard for new players to enter the market. Moreover, the oil and gas industry is dominated by a very small number of players (the Royal Dutch Shell, BP, Chevron and Conoco Philips). Hence, Exxon Mobil does not face stiff competition from other players.
In the current times, environmental concerns have dominated the world agenda. Thus, stakeholders in the oil and gas industry now recognize the significance of being more proactive to protect the environment (Fleig, 2005). In 2007, the company contributed 6.5 million US dollars to environmental protection. However, observers criticize its environmental record because of its position on global warming. This is because it leads in the emission of greenhouse gases. Similarly, committing less than 1% of its budget on researching on alternative energy sources raises eyebrows.
In order to understand the market environment, it is helpful to conduct a market analysis. In this regard, the focus is on the business rivalry, which centers on the nature and the extent of competition. The oil and gas businesses are commodity-based. This aspect contributes towards the heightening of the degree of competition. Other industries, including those that supply fuel, energy and chemicals, are equally added to the levels of competition. Nonetheless, the growth rate in the industry is roughly two percent as it is pointed out by Halliday (2005). This means that there are no threats to opportunities. Moreover, within a commodity-based market, players derive a viable edge by producing the reduced costs. Noteworthy competitors of the company include: the Royal Dutch Shell, BP, Chevron and Conoco Philips. Clearly, these are fewer worthy competitors.
When focus shifts to issues of customer analysis, the concentration on the powers held by buyers is significant (Ginsberg, 2006). It should be noted that there are two categories of major consumers of the industry's products. The two include industrial and individual consumers. Industrial consumers have minimal power. In the same way, individual consumer power is low due to the increasing levels of demand for the oil and gas products. Moreover, projections also show that the demand for these products will continue to increase (“The Wall Street Journal“ 2012). Hence, Exxon Mobil would continue enjoying more power against the customers.
In regards to the internal financial analysis, the corporation’s financials are put into perspective.
The Corporation’s Financials
In the past, the Exxon Mobil Corporation has performed exceptionally well financially. This is corroborated by its long-term performance in the industry. According to the given statistics, the gross profit margins of Exxon Mobil Corporation fell during the 2nd quarter of 2012 when it is assessed against the second quarter of the preceding year (The Street, Inc., 2012). Even though the sales declined, the net earnings increased, representing an overall growth in the company. Still, the financial records show that the company had weak liquidity. According to the reviewed financials, the quick ratio was 0.74. This confirms that the company did not have the capability to address the short-term cash needs. However, the past records demonstrate that the Exxon's liquidity has continued to increase (Yahoo! Finance 2012).
A crucial review of the financial records indicates that the net value (i.e. stockholder's equity) has remained fairly unchanged as the increase is only 4.6% (The Street, Inc., 2012). The overall level of liquidity indicates that Exxon Mobil Corporation was affected by the recent financial difficulties. The P/E ratio was 14.39 while the S&P ratio was 16.18 (The Street, Inc., 2012). As shown by the details, the price-to-sales ratio was below the average S&P ratio. Correspondingly, it was below the industry’s average discounting. Thus, Exxon Mobil Corporation proved to be offering a discount to generate investment options within the oil and gas industry. When exchanging below the industry P/E ratio, it implies that the stocks are less expensive. Put differently, the stocks have reduced growth projections. Particularly, Exxon Mobil is extending a bigger discount compared to other industry players.
In reference to discounts, the P/CF ratio, which is found by diving the stock's price by the company’s cash flow from operations, is useful in assessing capital requirements or different financial structures (The Street, Inc., 2012). The financial statements reflect that the company is successful, taking into account the stock pricing.
The first specific objective is to increase its activities (sales and supplies) every year.
The second specific objective is to increase customer reach each year.
The third specific objective is to establish new sources (areas) of energy.
The company’s marketing objectives are geared towards enhancing its overall objectives. Thus, different objectives are considered since they are complimentary. The company sells its products using three main brand names: Exxon, Esso and Mobil. In addition, the company owns several subsidiaries across the world (Tolf, 1976). The company is also divided into various sub-divisions. The company equally employs a large number of people across the globe.
From the introduction, it is evident that Exxon Mobil Corporation has a number of objectives that it pursues. The first objective is to be a top company across the world. The company must market its products in order to achieve the goal. Based on its revenues figures, the company has achieved the objective as it is the top on that list. The company also pursues the objective of serving the world’s people by supplying them with energy resources. In fact, the company operates in larger parts of the world. In this regard, it is also arguable that the company has made substantial progress towards attaining that goal. The company has another objective, which entails making life better or improving lives. By employing a large number of people, the company has made a significant progress towards achieving the goal. Equally, by enhancing the drilling, processing and distribution of gas and oil products, the company has made substantive steps towards realizing the ambition.
Targeting, Positioning and Growth Strategies
In the wake of ever-increasing competition amongst market players, the significance of the organization positioning itself for superior global competitiveness cannot be disregarded. Bowman (2008) observed that the strategy is important since it allows the organization to expand its market, venture into new businesses, reduce costs and realize the advantages of scope and scale based on the overall impact of increasing the market penetration. Nevertheless, the concept of creating a superior competitiveness internationally is many-sided and thus takes aboard various organizational strategies. The drive for increased profitability has culminated to an increase in motivation amongst organizations to be globally competitive. Other factors gravitate around the increasing demand by companies to operate globally, as well as, fast changes in the marketplace. Hence, one of the ways through which Exxon Mobil Corporation has developed its global competitiveness is through the development of a top notch production system in all its markets along with the putting in place of a strong financial resource base (Yeomans, 2004).
Based on the views of external observers, the company embraces the concept of the best practices for its entire production system (Yergin, 2003). Collectively, these practices have allowed the company to build a reputation of having well-qualified automobile products as well as services under conditions of flexibility and efficiency.
The creation of a unique production system anchors the company’s management philosophy. Guiding strategies, internalized by this multinational corporation, are especially important since they provide a platform for the company to create a favorable business environment across its expansive yet diverse international market. One of these strategies is captured in terms of being able to use a long-term philosophy to base its management decisions. Creation of a continuous flow process as a tool for bringing problems unto the surface is the second strategy. The organizational culture shows that it has a level workload strategy. Equally important, a production guiding strategy, based on standardizing tasks, which in turn allows for employee empowerment and continuous improvement, is discernible.
The inside-out strategy involves the recognition of the organisation’s abilities before producing and offering products. Strengths must be considered in a way that other firms cannot match. After launching the approach the firm’s staffs find ways to persuade customers to use the new products. In the oil and gas industry, organisations do not apply customer reviews to make production decisions as the competition is limited.
The company could also explore the diversification of its energy resources. To achieve the goal, investing in research is the most viable option. This should be supported by the adoption of the inside-out strategy which could allow Exxon Mobil to assess its strengths before embarking on such a venture.
Selection of Competitive Advantage
Exxon Mobil employs a model that enhances its chances of attaining excellence (Tolf, 1976). In this regards, the generation of superior cash flows in addition to the creation of long lasting shareholder value. This allows the organization to hold a strong competitive edge in the market.
The first aspect that gives the company a competitive edge is conducting operations in a safe environment. Exxon Mobil employees observe excellence in reference to health and safety. Safety remains a core value of the company that guides its decisions. The company is committed to safety as well as environmental protection. In addition, the company promotes local initiatives to protect the business environment.
The company also upholds high standards. Aware of the need to achieve results, the company pays attention to how to attain such results. As demonstrated, Exxon Mobil relies on integrity in its business operations. The company has established the management systems to guarantee such pursuits. In addition, Exxon Mobil adheres to state laws and regulations. By doing so, the company enhances its reputation which translates into a commanding competitive edge.
The company’s competitive advantages include: its balanced portfolio, use of high-impact technologies, etc (Tolf, 1976). Its balanced portfolio reflects its size, quality and diversity in resources products, projects and assets. The company’s possessions are unparalleled. Such portfolio facilitates the enjoyment of economies of scale. The same also offers the company the opportunity to take advantage of emerging opportunities or support future growth.
It should be noted that the company leads in the oil and gas industry in terms of both the development and application of new technologies. Exxon Mobil is able to improve its projects, products and operations through the pursuit of high-impact technologies. The company also continues to invest in technology, an aspect that extends a competitive edge.
Marketing Mix Programme
The marketing mix focuses primarily on four elements. These elements include: product, price, place and promotion. It is worth to observe that the product is the service or product that is offered to consumers. Regarding physical products, any conveniences and services that are part of the offering are inclusive. Thus, product decisions include functionality, appearances, service, warranty, packaging, etc. Exxon Mobil offers energy products and services to its consumers. The most common products include fuel and liquefied gas.
The second attribute as mentioned is the price. Regarding the aspect of price such attributes as pricing responses to adjustments by competitors and profit margins are considered. Financing, discounting and leasing are aspects that also affect pricing. As already noted, the oil and gas industry is operated by few players, this makes it an oligopolistic market. Hence, the price differences are minimal. For instance, the offerings by Exxon Mobil price its products in line with those of Total or British Petroleum (BP).
The other attribute is place. Place is also viewed as placement. This is associated with distribution channels which serve as avenues for disbursing/distributing products to consumers. Hence, decisions on place involve market coverage, logistics, service levels and channel selection. Based on the market selection of Exxon Mobil, it is evident that it has a large scope in terms of its market coverage and service levels. The company has branches spread across the globe to serve its customers.
The final element put into perspective is promotion. Promotion relates to decisions on communication and selling to consumers. The Exxon group is beyond the break-even point. This may explain why it engages in widespread advertisements to woo customers. The company also invests in research with a view to identifying additional energy sources in order to meet the continued rise in demand for oil and gas products.
The SWOT analysis presents a valuable tool that helps in understanding strengths and weaknesses in addition to identifying opportunities and threats that a business entity faces. In a business set-up, the SWOT approach is critical as it helps in carving a sustainable niche.
The company has a big operational scope with a strong financial base. Similarly, the company has been successful in its research and development endeavours. Its management is equally long-term based.
Despite such internal strength, the company needs to find new reserves of its products in order to remain competitive. It also relies heavily on the OPEC region for its supply of oil and gas products. The implication is that it is likely to suffer losses were other substitute products discovered. Regarding the second attribute, dependence on one supplier could pose problems where problems are to arise.
It is notable that the demand for oil and gas products continues to rise. As a result, the company has the opportunity to increase its production capacity so as to earn more revenue.
The influence of OPEC is a threat since the firms in the industry buy oil and gas in an open market platform. Further, the countries that host the company are unstable. Hence, there is a threat to the company on this front.
Conclusion and Recommendation
Strategic management is a core element in the business environment. Companies that seek market dominance depend on strategies to achieve that objective. Exxon Mobil is a market leader in the gas and oil industry. By virtue of being a leader in an oligopolistic market, it is clear that the company has competitive strategies. It is concluded that Exxon Mobil is well placed strategically, leading to its success in the industry.
Given the current times, being good as the competition is might not be good enough. This is because organizations need to embrace strategies that make them better than their rivals significantly. Thus, an organization that adopts the inside-out strategy is under an obligation to review its strengths as well as weaknesses. In this regard, Exxon Mobil must consider where it is more efficient in terms of either producing, selling or branding. After identifying the strengths, the organization should focus on producing the products that it has an advantage. In addition, the company should employ heavy marketing practices in order to sell the products.
Exxon Mobil: Strategic Analysis. Custom Exxon Mobil: Strategic Analysis Essay Writing Service || Exxon Mobil: Strategic Analysis Essay samples, help
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