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Exxon Mobile Corporation External Environment Analysis
Exxon Mobile Corporation External Environment Analysis
I. Company Overview
Exxon Mobil Corporation is an American multinational oil and gas corporation headquartered in Irving, Texas. It is the most prominent direct descendant of John D. Rockefeller's Standard Oil Company. It was formed on November 30, 1999, by the merger of Exxon, formerly the Standard Oil Company of New Jersey, and Mobil, once the Standard Oil Company of New York. The world's seventh largest company by revenue, ExxonMobil is also the sixth largest publicly traded company by market capitalization, and it has a market capitalization of $ 461.82billion. ExxonMobil has functions in more than 75 countries. It has over 37 oil refineries in 21 countries (Krizsa, 2022). The company also has chemical plants in Baytown, Texas, and Antwerp, Belgium. ExxonMobil's upstream activities are divided into three main areas: exploration and production, refining, and marketing. The Exploration and production segment of the company is engaged in the exploration for and the development and production of crude oil, natural gas, and natural gas liquids. The company operates in over 75 countries and markets its products in more than 200 countries. Due to its expansive operations, the company has employed 63 000 employees, according to its data for 2021, and generated a revenue of $ 285.64B in 2021.
II. Industry for Focal Company
Exxon Mobile Corporation operates in the oil and gas industry, which is highly competitive, and firms compete on different fronts. The US oil and gas industry is one of the most competitive industries in the world. The industry is constantly changing and evolving, and companies are always looking for new ways to improve their operations. The industry is also very capital-intensive, and companies must constantly invest in new technology and equipment to stay ahead of the competition (Glasmeier & Williams, 2022, p.150). Chevron and ConocoPhillips are the key companies in this industry competing with Exxon Mobile Corporation. These companies are all highly competitive and constantly strive to be the best in the industry. Companies in this industry compete by investing in exploration and production, refining, and marketing. They also compete by providing services to the industry, such as transportation and drilling.
III. PESTEL Analysis
PESTEL analysis is a valuable tool for understanding the macro environment in which a company operates. It can be used to identify opportunities and threats and to help develop a strategic plan. The PESTEL analysis transcends the external business environment of the companies by evaluating six key factors that define, influence, and control a company's activities at the industry level (Capobianco et al.,2021, p.6236). The underpinning macro-elements of the PESTLE analysis are Political, Economic, Social, Technological, Legal, and environmental factors. These factors are fundamental in strategic planning and guide the company as it competes in the industry.
IV. Six Key Trends for Each PESTEL Factor for Industry
1. Political Factors: The political element makes it possible to examine how government policies and regulations influence company performance. The direction the organizations will go in is shaped and influenced by factors like tax laws, tariff barriers, changes in trade restrictions, and the government's stability.
2. Economic Factors: The state of the economy significantly impacts how well the company performs. The amount of money that businesses make depends on several variables, including inflation rates, consumer spending power, interest rates, and the state of the economy, among others. For instance, the global recession of 2007 had a negative impact on numerous businesses worldwide.
3. Social Factors: The foundational elements of social structure are generational transitions and demographic elements like ethnic diversity, population size, cultural dynamics, and age. These factors determine what the manufacturer should produce and sell; for example, in the US, the high demand for salsa over the demand for ketchup explicates how generational transition impacts business operations.
4. Technological Factors: Technology focuses on creating new methods that help raise the quality of goods and services. The advanced service industry, new products, and automation are examples of technology components. Technological factors greatly influence an organization's ability to grow; for example, the rise in internet usage and online shopping has changed everything for businesses.
5. Environmental Factors: The sustainability of a business is significantly influenced by environmental factors such as pollution and weather patterns (Lu et al.,2019, p. 69). For instance, in the USA, the water pollution risks have influenced the operation of bottled water companies through increased sales and threats of environmental concerns on the disposal of plastic bottles.
6. Legal Factors: The main focus is how the legal system, including the courts, affects businesses' operations. Legal considerations include but are not limited to antitrust laws, labor regulations, intellectual property rights, and employee safety and regulation laws.
Exxon Mobile PESTEL Analysis
Political Environment
Exxon Mobil's business is affected by several political factors. Tax policies, government stability, trade restrictions, and import-export regulations are some of the political factors affecting Exxon Mobile. The company operates in countries all over the world and must comply with the laws and regulations of each country. The company must also navigate the complex relationships between countries, governments, and oil companies. For instance, the most recent political impact on Exxon Mobile is the Russian-Ukrainian war. This political conflict has led to an increase in the price of crude oil and natural gas, thus increasing the cost of production.
Economic Factors
Exxon Mobil's business is also affected by economic factors. Inflation, interest, and currency exchange rates can affect the company's business. Exxon Mobil is a global company that must deal with global economic fluctuations (Shakya, Li & Etienne, 2022, p.130). The company must also manage its finances and make investment decisions to generate the best return. The rising prices of petroleum products are a big concern for Exxon Mobile as this will lead to low demand and affect profitability.
Social Environment
Social factors such as demographics, consumer needs, wants, and social trends can also affect Exxon Mobil's business (Khan, 2019). The company must understand the needs and wants of its consumers and develop products and services that meet those needs. Exxon Mobil must also stay ahead of social trends and be ready to adapt its products and services to changing social norms.
Technological Environment
Technological factors such as research and development and technological change have also influenced Exxon Mobil’s business. Exxon Mobile has been spending much on research and development to ensure that it remains technologically competitive. For instance, in 2019 and 2020, the company's R&D cost was $ 1,214 Million and $ 1016Million, respectively.
Environmental Factors
Exxon Mobile is also affected by the environment, considering the nature of the business. For instance, due to increased environmental sustainability campaigns, the company has developed an environmental management approach focused on understanding and limiting the impacts of its activities on society (Blommaert, 2022, p. 150).
Legal Factors
Legal factors such as intellectual property rights, antitrust, and employment laws affect Exxon Mobil's business. The company must comply with all applicable laws and protect its intellectual property. For instance, laws relating to consumer protection and environmental sustainability are the most critical legal factors impacting Exxon Mobile Corporation.
V. One Key Trend for Exxon Mobile
The global oil and gas industry is often driven and shaped by macro factors which force companies in the industry to adjust their operations in response to the prevailing market conditions. In this regard, the following are the trends in the industry based on the PESTLE analysis.
1. Political Trends: The oils and gas industry has been impacted by several political trends in recent years. One of the most significant has been the rise of nationalism and protectionism, which has led to increased regulation of the industry and a more challenging operating environment. Another trend has been the increasing focus on environmental issues, which has led to greater scrutiny of the industry and a push for more sustainable practices.
2. Economic Trends: Price volatility is one of the most significant economic trends in the oil and gas industry. The industry is experiencing a rise in oil and gas prices. This has led to increased exploration and production activity in many parts of the world as companies seek to take advantage of high prices (Shakya Li & Etienne,2022, p.120). Another trend has been the growing demand for natural gas as countries seek to diversify their energy mix. This has led to increased investment in gas exploration and production, as well as in LNG infrastructure.
3. Social Trends: The global oil and gas industry faces several social trends impacting its operations. One of the most significant trends is investors' and other stakeholders' increasing focus on environmental, social, and governance issues (Dirani & Ponomarenko,2021). This increases pressure on companies in the sector to improve their ESG performance. Besides, the industry faces several challenges related to workforce diversity and inclusion. This is leading to a need for companies to focus on attracting and retaining a diverse workforce.
4. Technological Trends: The oil and gas industry is highly technology intensive; thus, companies often respond to the technological trends in the industry. One of the technological trends is enhanced oil recovery. This technology helps to extract oil and gas from difficult-to-reach places, such as tight shale formations (Hagia et al., 2022, p. 145). This can help increase the amount of oil and gas extracted from a given area. Besides, enhanced oil recovery is another technological trend in the industry. This technology helps to extract oil and gas from difficult-to-reach places, such as tight shale formations. This can help increase the amount of oil and gas extracted from a given area.
5. Environmental Trends: The oil and gas industry is facing increased regulation and scrutiny from the public and government officials regarding its environmental impact. This results in higher costs for companies in the industry to comply with new regulations and mitigate their environmental impact. In addition, the industry is under pressure to develop and implement new technologies to reduce its environmental footprint (Mirzayev,2022, p.115). As a result, the oil and gas industry is becoming increasingly focused on environmental, social, and governance (ESG) issues
6. Legal Trends: The legal trend in the oil and gas industry is moving towards more regulation and oversight. This impacts the companies in the industry by increasing costs and compliance requirements.
VI. Technological Uncertainty Facing Exxon Mobile Corporation
Exxon Mobile Corporation operates in a technology-intensive industry, and it has been responding very fast to the technological trends in the industry. For instance, the technological trend in Exxon Mobile Corporation is using hydraulic fracturing, or fracking, to extract oil and gas from shale formations. This process has allowed the company to tap into previously inaccessible reserves and has led to a boom in domestic production of oil and gas.
Exxon Mobil Corporation is facing uncertainty regarding the use of technology in its operations due to the constantly changing landscape of technology. What may be considered cutting-edge today may be outdated in a few years, so Exxon Mobil must constantly evaluate its options and decide which technologies to use in its operations. This technological uncertainty has been forcing the company to invest more in R&D.
VII. Strategic Analysis of Mission, Vision, and Objectives
Strategic analysis is the process of assessing an organization's business model and competitive position in the marketplace. The strategic analysis aims to identify opportunities and threats that could impact the organization's ability to achieve its objectives. Strategies are tools a business uses to implement operations that give it a competitive edge in the market (Kennedy et al.,2020). This process entails strategizing tactical moves, developing schemes to outsmart rivals, maintaining consistency, positioning in the sectors, and, most notably, the general executive perception of the industry's competitiveness. To critically understand and evaluate the company's strategic position, the organization's mission, vision, and objectives must be critically assessed.
Exxon Mobile Corporation's strategic planning is guided by its mission statement, which focuses on making the company the leading and world's premier petroleum and petrochemical company. The company is focused on excelling in every facet of its operation by offering products and services that meet and sustain the needs of its customers. The company's success is measured by its ability to create superior shareholder value and make a meaningful contribution to the world it serves. The mission statement of Exxon Corporation helps it in strategic planning by providing a clear purpose for the company and its employees. It also helps to guide decision-making and resource allocation.
Exxon Mobile Corporation has a clearly defined vision that is premised on making the company a world-leading petroleum and petrochemical company. The company's strategic planning process is focused on creating shareholder value by identifying and investing in opportunities that will maximize the company's long-term growth and profitability. The company's vision and strategy are closely linked, with the vision providing a long-term direction for the company and the strategy outlining the specific actions that will be taken to achieve the vision.
The mission and vision of Exxon Mobile are closely interlinked, forming the basis of its strategic planning. The objectives of Exxon Mobile Corporation are to provide shareholders with a high return on their investment, to grow the company's business, and to create value for customers and society. The company plans to achieve these objectives by investing in high-quality assets, growing its production and refining capacity, and expanding its marketing and trading activities.
VIII. Conclusion
In summary, businesses are affected by external environmental factors which drive and dictate how companies operate. More importantly, companies must comply with the political and social needs of the society it operates. Besides political and social factors, businesses are also affected by economic factors, legal concerns, environmental issues, and technological trends.
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