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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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ExxonMobil has been able to innovate the way they drill, enabling to do more, to do it deeper, and to do it better than in the past. This has also been due to continuous improvement in the technology and processes. With these advances, and risk-management techniques, ExxonMobil is projected to double the water depth production in North America and worldwide.

When it comes to primary activities, In the Supply Chain Management, Currently ExxonMobil relies on approximately 175,000 suppliers of goods and services, this includes also 85,000 third party contractor personnel. Exxonmobil seeks and develop relationships with suppliers that uphold their commitment to operations integrity, because their global reach expands well beyond its fence lines. In operations department, ExxonMobil has an interest in approximately 40 producing oil and gas fields in the North Sea. Shell U.K. Exploration and Production, ExxonMobil's direct competitor are operating many of these fields as a part of joint operation. ExxonMobil is responsible for approximately 5% of UK oil and gas production. In the distribution sector, approximately, 60% of refinery production of petroleum products is exported, qualifying the refinery as one of the largest export companies of mainland Norway. In Sales and Marketing sector, they still rely on advertising and effective market research.

For Support activities, ExxonMobil is well-known for their Product R&D, technology and system development. Its have efficient with advanced motor technology, Hydrogen fuel cells, carbon capture and storage. In the human resources management sector, its mission is to create competitive advantage through people. ExxonMobil wants employees to see the company as their employer  of choice, which is why HR is crucial and has the role to implement policies and programmes that support the development of strategies and people related initiatives.

Exxon's understanding of the global by-carbon endowment along with their unique geoscience capabilities allows them to identify and prioritize the development of the highest quality resources.

ExxonMobil's competitive position is they are a leader. Due to their immensely productive R&D department, we believe that this competitive advantage put ExxonMobil ahead of its competitors in terms of upstream related business and allow them lead the market in terms of determining the best costs for products. Therefore, Overall Cost Leadership would be the best alternative for ExxonMobil, in an industry where differentiation is barely an option since there so little to differentiate and the buyers are extremely sensitive to price, this is the best option to go with in terms of strategy.  The Company also achieves cost leadership through synergies gained by combining refining and chemical production operations. Operations, in the overall cost leadership, its essential the effective use of quality control inspections to minimize rework.

The best business strategy that ExxonMobil should follow is market development and development of their distinctive advantage, their research and development department. By doing so, they can take advantage and gain a competitive advantage by using their operations in other markets achieving economies of scale and a larger presence. Also, using their extremely profitable R&D department they can maintain their competitive advantage, maintaining a technological edge over their competitors and staying ahead of trends. ExxonMobil is very good on creating a low-cost position.

Corporate Strategy—CC

As we have clearly laid out throughout this report, ExxonMobil has been one of the most successful petrochemical energy companies in the world. They sustain this success and their market share through regular acquisitions and strategic alliances with both petrochemical and non-petrochemical firms throughout the world, as well as with countries. ExxonMobil operates as the global holding company/conglomerate overseeing the brand names Exxon, Esso and Mobil and their respective product offerings.

Given the unique, price in-elastic nature of the exploration and production, energy and chemicals industries, vertical integration for ExxonMobil presents very little risks to the firm. Of the main risks to vertical integration discussed in our book—increased costs from increased overhead and administration, loss of flexibility with larger investments, and problems associated with unbalanced capacities along the value chain—we believe only the loss of flexibility with larger investments is applicable to ExxonMobil. (Cite Textbook) With a company as big as ExxonMobil selling products that are virtually price in-elastic, we strongly feel that ExxonMobil will almost always benefit from strategic alliances/acquisitions and increasing its operations. Vertical integration within this industry presents benefits of increased access to higher quality capital stock, including increased access to highly skilled labor, and especially to more capable and modernized physical capital. We also hold that if ExxonMobil's financial flexibility became squeezed with increased alliances/acquisitions, ExxonMobil could raise capital in the debt markets with very little resistance, as they historically leverage their operations with very little debt so investors would not be spooked away by increasing debt levels. (See “Financial Ratio Analysis” section)

Diversification of Product/Service

Esso is a global (less the United States and Africa) petrochemical brand offering fuels, service and lubricants with predominant operations in Europe. Exxon also offers an array of fuels, services and lubricants operating solely within the United States. Mobil is ExxonMobil's flagship consumer brand, leading the industry in technology and innovation for gasoline, diesel, octane and ethanol— the most downstream of operations for energy companies. Mobil operates in every continent specializing in industrial and specialty engine lubricants, as well as heavy duty, basic and premium car engine oils. Aside from acting as the holding company for these three consumer brands, ExxonMobil serves the industrial complex and the world's governments as ExxonMobil Chemical. This is the part of the company where industry-changing strategic alliances, mergers and acquisitions take place—those that operate within the packaging, lubricants, fuels and alternative energy spaces.

ExxonMobil Chemical serves the world through chemical innovation that reaches each and every one of us every single day. Think how many times you encounter some sort of plastic based packaging in any given day. ExxonMobil Chemical concerns itself with polymers, adhesives, polypropylene resins, polyethylene among other chemicals that serve the wider global packaging industry. They also innovate technologies for automotive, industrial and special service lubricants that ensure engines inside airplanes, cars, boats, trucks, heavy machinery and food processing equipment is running smoothly and efficiently.

Recent Acquisitions

Jurong Aromatics Corporation Pte. Ltd. is a Singapore-based aromatics and transportation fuels company offering a broad array of chemical products including paraxylene, benzene and orthoxylene for the textiles, sports equipment, plastics and construction industries throughout the world. Jurong also operates a water treatment plant to produce demineralized water and boiler feed water, a cooling water and fire water system, and a steam generation and distribution system. (Bloomberg Private company information) This acquisition—a major one in the eyes of Wall Street and the petrochemicals industry—is based on an expected increase in consumer demand for petroleum-based chemical products of around 45% over the next decade, which is a faster pace that current global economic growth. (ExxonMobil)

Recent Alliances

The exploration and production industry divides the world up into “blocks” that denote the various territories energy companies can engage in exploration operations. The world's supermajors like ExxonMobil often engage in strategic alliances with other energy companies or sometimes even governments in which exploration and production operations within blocks are shared. These alliances allow ExxonMobil to establish cooperative and strategic relationships with competitors so as to reduce manufacturing costs in the value chain and developing and diffusing new technologies. (Cite textbook) As ExxonMobil

Signing of production-sharing-contracts with Hess and Statoil of offshore blocks 59 and 60 in the Guyana-Suriname Basin adds to the acreage of ExxonMobil's operation portfolio. This is the first time ExxonMobil has added a territory of Suriname to their upstream business portfolio, despite having other operations throughout South America. Such a move shows the health of ExxonMobil's global conglomerate, as they continue to expand their operational portfolio for traditional exploration and production activities.


BCG Matrix

Exploration and production companies as big as ExxonMobil organize their financial statements into upstream, downstream and chemical titled line items. The closer the operation, product, function or company is to the end user, the more downstream it is considered to be. Upstream would thus refer to products in their most natural forms, freshly extracted from the ground and sold to major production companies that are in the business of transforming natural resources into tangible, usable goods such as packaging, lubrication and/or fuels. For ExxonMobil, we consider upstream products to be Cash Cows on the BCG matrix given the slow growth nature of the traditional energy industry and the large portion of market share ExxonMobil has been able to capture. The downstream products provided by ExxonMobil, usually through one of the three brands Esso, Exxon or Mobil operating under the umbrella company of ExxonMobil will comprised mainly of fuels and lubricants for motor vehicle engines. Given that profits within the engine fuel space and that this is a relatively flooded market (there are many fuel providers that do not engage in exploration and production on their own, but rather purchase inputs from supermajors like ExxonMobil), we consider the downstream segment of ExxonMobil to fall under the dogs category. Lastly, we consider the chemical segment of ExxonMobil to be both a star and a question mark given the generally broad nature of the chemical business. As we have covered, ExxonMobil is undoubtedly a leader on the front of technological and chemical innovation. When it comes to alternative fuel sources, they are an industry leader—their work into LNG, algae fuel and advanced carbonate fuel cell technology and carbon and carbon capture storage has allowed them to capture significant market share in this space. As demand for alternative fuel source continues to increase, the industry growth rate will also continue to grow. However, their operations in petro-based plastics forms is met with competition from other supermajors around the world. Although they have to share this market with these firms, the industry growth rate is huge as global population increases and the fact that we live in an individually packaged-goods era.

Entrepreneurship Strategy- JP

Entrepreneurship at its most basic essence is new value creation (p250). For a business venture to be considered entrepreneurship the project must consist of three essential criteria. These three factors are an first an opportunity, the resources to address the opportunity and entrepreneurs to follow through with the opportunity. Entrepreneurship relates to all aspects of business ranging from startups, family owned businesses,  non for profits, and well established corporations (p250). In order for an opportunity to be worthy of invested resources and time it must have four major qualities. These qualities are attractiveness, achievability, durability and the value creating ability of the opportunity. (p.253). ExxonMobil is a quintessential example with a well established company that maintains an active entrepreneurship strategy in order to sustain its competitive advantage.

The first factor for Exxon's entrepreneurship strategy is focused on the possibility of new opportunities. Perhaps the most glaring opportunity for Exxon is the ability to efficiently to mass produce and commercially cell liquified natural gas (LNG). According to the Exxon website, “liquefied natural gas technology has enabled cost-effective commercialization of new gas supplies to a growing world market” (Exxon website). Not only is LNG a cost-effective way to commercialize gas supplies, but 60% less CO2 is omitted by natural gas production than coal when used for electricity generation (website). Currently there is a lagging demand for LNG due to a lack of markets that have access to the product. However, this is a great financial and environmental opportunity for Exxon to figure out a way to open these markets. Another very pressing opportunity Exxon must address is renewable resources. With fossil fuel being a finite resource, the shift to renewable energy resources is an immediate necessity. Another opportunity that should draw Exxon's attention is the long list of developing countries that have a sizable demand for energy resources. It is estimated that by 2040, 65% of the world's energy will be consumed by developing countries (The Atlantic). In order to be able to make a financial advantage by aiding these as well as avoid a possible energy crisis it would be wise for Exxon to devote a portion of its many resources to this initiative.

The following factor for Exxon's entrepreneurship strategy is the resources they use to undertake these opportunities. First is their financial resources. Exxon has an abundant amount of financial capital to address these nearing opportunities. Next is the amount of human capital Exxon is willing to dedicate to pursuing these opportunities. Exxon is comprised of nearly 70,000 employees and has plenty of resources to dedicate teams to work on solutions to these opportunities (statistica). Again, with having just under 70,000 employees in every major country in the world they have a solid basis for social capital. Exxon's different locations all around the world have an understanding for the different cultures and ways to address problems in varying countries. Since Exxon is one of the largest companies globally, it already has a well established presences in dozens of countries. With natural resources and energy consumption being a chief focus for governments world wide, Exxon makes government communication one of its major focuses on addressing.

The last factor to tie together Exxon's entrepreneurship strategy is its entrepreneurial leadership. Exxon is headed and managed by some of the most prominent players in their respected industry. Their experience and expertise are close to unmatched. In an CNBC interview, Darren Woods commented on Exxon's current growth plan. This plan he mentions is very aggressive and assumes to double cash flow from operations at today's oil prices. Woods and other executives have a common goal in mind that is to pursue these opportunities in order to grow the company and assert its dominance in the energy industry (CNBC interview).

The need to develop an entry strategy is dependent on an entrepreneurial strategy. An entry strategy is the layout for how the entrepreneurial team is going to introduce their new plans and ideas. For all of the Exxon's impending opportunities they will need to develop a pioneering entry strategy. This is because all of these opportunities are untapped and are failed to being addressed by other competitors.

International Strategy - NA

Exxonmobil has many different ways to enter international markets.  One of their most impactful ways is through direct investments (Virginia's Community Colleges).  These investments include owning and operating refineries that produce oil and natural gases in other parts of of the world.  For example, in China they own parts of the behemoth corporation which is a direct participant in China's energy industry (Virginia's Community Colleges).  On top of direct investments, Exxon uses joint ventures to gain access to international markets.   For example, Exxon has a joint venture with Qatar Petroleum, this has made Qatar the world's largest liquefied natural gas (LNG) supplier (Virginia's Community Colleges).  This joint venture has also allowed Exxon to develop regasification terminals in the United States, the United Kingdom and off Italy's shores (Virginia's Community Colleges).  This is groundbreaking momentum for Exxon because it puts them ahead of the curve for when the demand for LNG starts to skyrocket.  Exxon is currently maxing out their internal resources to create four of the largest liquefaction facilities and LNG ships that will be able to carry 80% more natural gas than usual ships (Virginia's Community Colleges).

There are also challenges and risks involved with a company's international strategy. According to the textbook,  one of the two opposing pressures for entering an international market is adapting to local markets (p. 229).  This is the main issue Exxon is having with entering certain international markets through either joint ventures or direct investments.  There are multiple eco friendly countries globally.  Some of them include Iceland and Switzerland.  These markets are very hard for Exxon to enter into because these countries refuse to take a risk on potential polluting consequences of letting Exxon operate in their homeland. These countries believe Exxons business model does not fit with their culture and their business model would not be easily adaptable their environment and culture.

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