power point final

CHEVRON CORPORATION 9

Chevron Corporation

Lucy Rowell

BUS499 Business Administration Capstone

Professor’s Name

2/17/20

Chevron is a multinational corporation, a successor of Standard Oil, founded in 1879. It has it headquarters in San Ramon, California, United States. It is a public company that operates in the industry of oil and natural gas, dealing with products such as petroleum, petrochemicals as well as natural gas. Chevron has operations in over 180 countries all over the world and has been ranked on of the key players in the energy sector, with an annual revenue of $15.45 billion in the year 2018. The operation of Chevron, just like any other large corporation, is largely influenced by general environment such as technological factors, sociocultural factors, economic factors as well as political/legal climate. Similarly, it is affected either positively or negatively, by forces of competition such industry rivalry and buyers bargaining power. It has strengths and weaknesses, opportunities and threats, and core competencies and capabilities which also affect its day to day operation in the industry. Proper management of company resources; human, material and financial resources, has played a key role in maintaining the status of Chevron Corporation at the top. This paper explains all these factors influencing its operation and how their impact can be reduced so as to minimize the running cost and boost profitability.

General Environment

General environment refers to those factors outside the corporation that influencing its operation, affecting its long-term profitability in a given market or industry. In our case, we will only focus on the two main segments namely- political/legal factors as well as economic factors.

Political/legal climate

Political impact in the profitability or even the survival of Chevron Corporation is diverse. These political changes range from mass unrest due to dissatisfaction by the government decisions to prompt shift in current political regimes (Cherry et al. 2012). The political stability determines whether Chevron will invest in in a given location or not- where there is political instability, it will shy away from risking its finances thus affecting its income as well as profitability of the industry. The laws that a country puts in place regarding businesses, like contract law, outline what corporation is permitted to do and what is not allowed to do, if Chevron finds the laws favorable, it will invest in such place thus boosting both the organization profitability as well as the industry at large. Similarly, in countries where there are no policies to protect company’s intellectual property, investors see it risky to invest with Chevron. High taxation as well as stringed trade barriers will demotivate Chevron Corporation from maximizing their profits, and consequently that of the industry at large (Ketola 1993)

Economic factors

Economic factors have an effect on profitability of the company. These include; interest rates, foreign exchange rates, cost of labor and economic patterns. For instance, the rate at which the GDP grows in a given country will indicate Chevron growth in the days to come. When there are high interest rates, individuals will want to borrow and invest more leading to more growth of Chevron. Stability in interest rates will lure Chevron corporation to indulge in international trade, therefore more profits will be gained. When there is high rate of unemployment in a country, it means that the demand for jobs is higher that supply, and therefore individuals are willing to work at minimum wages, lowering the cost of production for Chevron Corporation thus maximizing profits of the organization and the industry at large.

Five Forces of Competition

According to Porter’s analysis of the competition a business faces in a given industry, the forces of competition include; the customers purchasing power, which refer to ability of your buyers to bring down your prices, the industrial rivalry, which is the stiffness of a competition from other existing corporation, the supplier bargaining power, which determines their ability to raise prices at will, threats from new firms entering the market and lastly threats from products that can be used as substitutes. In this case however, we will focus on the industrial rivalry as well as the buyers bargaining power.

Industrial rival

Industry rivalry is the competition from other players in that same industry. It is normally intense and could lead to lowering of the of the product prices and bring the overall profitability industry. Since chevron operates in a very competitive oil industry, the competition may affect the long-term income of the corporation

To tackle this, Chevron may need to sustainably differentiate its products so as to avoid standardization as well as build a large economy of scale so as to compete favorable in the capital dominant industry. Lastly it may consider collaboration with other competitors which will increase the market share rather than just fighting for small market.

Bargaining power of buyers

Buyers can be quite demanding since they always want the best quality offered for a minimum price possible. This will exert pressure on the corporation profitability in the long term.

This can however be addressed by establishing a large customer base to reduce consumer bargaining power, as well as invention of new products by Chevron to curb defection of its existing customers to other firms. It can also work towards improving the quality of its products so that customers are not lured by competitors due to low quality at Chevron Corporation.

Greatest External Threat

Greatest Opportunity

The company website suggests that there are numerous opportunities available for Chevron Corporation which can be optimized for profitability. These include the availability of internet where research and E-commerce can be done efficiently, a strong social media base by which faster advertisement with wide range can be made and household income increment which reflects to consumer spending habits thus high purchasing power. there is also onset of products which are environmentally friendly plus subsidies by government on these products. Lastly, the interest rates for loans are low, thus high investment opportunity for large projects. The greatest of these opportunities is the availability internet and strong social media base. The internet is a great opportunity for Chevron. This is because with the internet, the corporation is able carry out research which is the very major force that drives many companies past the rest. Research will enable Chevron to come identify its customers current needs and respond faster and better to them as well as helping the company to know new niches available for investment so as to raise its profitability. Research will also help the firm to identify opportunities to diversify its market, say, in areas where the demand is high but its products are not efficiently available. A strong social media presence also helps Chevron to market its products to a wide range of consumers at a lower cost which would otherwise be costly.

Strengths and Weaknesses

Online database proves that one of the greatest strengths of Chevron Corporation is that it has a stable network of distribution with large outlet numbers. It also has a strong capital base, availability of skilled labor which is diversified, innovative and excellently qualified, a social media platform with strong presence and low-cost structure, giving it an added advantage over its competitors. Its greatest strength is strong capital base.

Weaknesses of Chevron are that it operates largely on rented property which consume huge sums of money, low amount is also spend on research which risks outdating, high employee turnover rate as well as low motivation and morale and finally liquidity problems where current liabilities are higher than assets. The lack of motivation and morale of workers remains to be greatest weakness of Chevron.

Strategy or Tactic

The Chevron Corporation should use its strength in strong capital base to establish a stable network of distribution as well as increase the number of outlets all over the globe as to make sure that it reaches a wide customer base, therefore boosting the sales and profitability of the firm. This will also help serve as a barrier to new firms wishing to enter the market since Chevron is already well-established.

The greatest weakness of Chevron Corporation which is lack of motivation and morale among the employees can be remedied by ensuring there are effective channels of communication, mostly vertical, to enable employees to air their concerns to the leadership as well as give feedback. Employees retention is a big problem in this corporation, and therefore the corporation should invest in its employee’s welfare and know why they keep leaving after much resources and time has been invested on them, to reduce overall cost. The employees should also be rewarded on merit to promote healthy competition and lastly create events for them to have fun and get to know each other better.

Resources, Capabilities, and Core Competencies

In conclusion, company resources are all those assets which the company has total control over and can be brought together for achievement of its goals. For Chevron Corporation, these resources include human resources, material resources and financial resources. Human resources are the skills, experience, qualification time availability and geographical location. Material resources are machinery, computers and other inputs while financial resources are cash, checks, bank deposits and stocks and bonds. Chevron has its core competencies which gives it competitive power over other corporations in the oil industry. These core competences are;

· Healthy and sustainable environment- it has a very long partnership with World Health organization to protect wellness of people

· Natural gas, a core player in better future of the planet- these natural gases products are available to over 5 billion on affordable reasonable prices

· Development partnerships- Chevron has partnered with Science and Mathematics faculties to improve on quality provided, and change approach to these subjects

Sources

1. Hitt, Ireland, & Hoskisson. 2020. Strategic management: Concepts and cases: Competitiveness and globalization (13th ed.). Mason, OH: South-Western Cengage Learning

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