Project 4

The nature of the energy business, one of the sectors in which the firm works, is one of the aspects discussed in the study. The firm's strengths and limitations, as well as the legal difficulties that impact its operation, are also discussed, among other aspects of the business. When doing a financial analysis of the sector in which Exxon Mobil Corporation is active, Porter's Five Forces model is the instrument of choice (Dess & Davis, 1984). The Five Forces of Competitive Position Analysis, developed by Porter, is a straightforward method for analyzing and determining the competitiveness and capability of a company or other kinds of business organization (Dess & Davis, 1984). A sector's competitive intensity and allure are said to be determined by a combination of five different factors. The five forces current analysis, also referred to as the Porter Five Forces Analysis, is as follows:

1. Supplier power.

3. Competitive rivalry.

4. The threat of substitution.

5. The threat of new entry.

I. Porter's Five Forces for the Industry

Exxon Mobil Corporation is one of the biggest oil and gas companies in the United States. To better understand Exxon Mobil Corporation's operations and success level, it is necessary to carry out a detailed industry analysis as it helps in understanding the position of the focal company better. The industrial analysis of the oil and gas industry is detailed below.

Supplier Power

Enterprises that operate in oil and gas fields and are responsible for extracting oil as a mineral wealth are referred to as suppliers in the oil and gas industry (Trencher & Asuka, 2022). These corporations have a considerable degree of influence on how the sector functions. The suppliers in the oil business have a reasonable amount of leverage to negotiate with customers. Furthermore, the negotiating strength of the oil suppliers is affected by the contracts made with the legislatures of the territories from where the oil is taken. The choices made by corporations are susceptible to some of the administration's control. However, since the economies reliant on oil are reliant on the activities of these firms, the degree of control these companies can exercise is limited.

Buyer Power

Buyers are also known as consumers. People who purchase fuel, gasoline, and other products from the oil and gas industry are considered purchasers in the context of the industry. Oil-producing companies set the price of gasoline and other items derived from petroleum; as a result, customers have very little leverage in price negotiations. When there is a shift in the cost of crude oil, it is necessary for there to be a corresponding shift in the price of gasoline and other fuels throughout the world. A rise in the pricing model of crude oil leads to a hike in the cost of petroleum around the globe, which impacts global consumers (Trencher & Asuka, 2022). Because customers lack the power to negotiate with oil suppliers on price reductions, they must pay the prices that the providers set for their products. Because of this, it is clear that purchasers in the oil business have little leverage to negotiate prices, but oil producers continue to have a significant influence over the pricing choices.

Competitive Rivalry

Several significant oil corporations have solidified their standing in the global oil business and have a dominant position. Several major corporations, including Saudi Aramco, ExxonMobil, Chevron, and Shell, own significant stakes in areas that produce oil (Sönnichsen, 2022). However, compared to other oil and gas global producers, Exxon Mobil has the biggest market capitalization. A high degree of intense rivalry is being experienced in the oil business as a direct result of the existence of a small number of very big corporations. Because of this, the level of competitive rivalry ranges from mild to extreme. Since of the intense rivalry, it is challenging for companies to retain their profit margins because they are required to price their products depending on the pricing of their competitors and on government restrictions.

The Threat of Substitution

Alternative energy sources capable of being used in the operation of motor vehicles are referred to as substitute options for the oil and gas industry. The production of oil and gas has been altered in certain ways due to the arrival of electric cars, which do not rely on power sources derived from oil. Because of the proliferation of these cars, there has been a discernible shift in the consumption of and use of fuels derived from petroleum (Bradshaw, 2015). Despite this, the automotive industry places a significant amount of reliance on gasoline as the major fuel source for vehicles in motion. As a result, the oil and gas business might be perceived as being in danger from alternative fuels, given that it is expected that people will continue to utilize alternative energy sources more in the future.

The Threat of New Entry

There is a perception that new competitors pose less of a danger to the oil business. This viewpoint is prevalent since it requires a significant sum of initial investment cash to launch a new oil firm in a certain region. Establishing the mechanical aspects of a worldwide supply chain and constructing extraction units require a large expenditure. Consequently, it is difficult for new companies to establish themselves in the oil sector. New entrants won't only have to contend with financial obstacles; they'll also have to contend with the presence of huge existing oil firms. Newcomers face several hurdles, one of which is the presence of unpredictable economic and sociopolitical conflicts in oil-rich areas. The volatility of oil prices introduces additional risks for firms operating in the oil sector and makes it more difficult for new enterprises to enter the market.

II. Porter's Five Forces for the Company

Supplier Power

The term supplier refers to individuals or companies who supply businesses with the raw materials required for producing a good. Raw materials may be sourced from a wide selection of vendors by almost any business operating in the Major Integrated Oil and Gas sector. In this market, the providers do not face competition from other types of products. Because of this, it is ensured that the commodity will not be substituted with the items supplied by the makers. This boosts the ability of producers in the business to negotiate favorable terms for themselves. It is possible to classify suppliers in various ways, such as providers of crude oil to refineries, ExxonMobil Corporation equipment like drilling plants, and so on. There are many enterprises in the petroleum and gas industries; hence, switching costs are cheap, uniform products are offered, and consumers are consolidated. There are a much larger number of potential providers than consumers in the industry in which Exxon Mobil Corporation operates. Because of this, suppliers will experience less market stability. Therefore, it will result in a reduced level of negotiating leverage on their part. Consequently, the negotiating strength of suppliers at ExxonMobil Corporation is rather weak.

Buyer Power

The demand that consumers put on firms to get high-quality items at affordable rates while offering exceptional customer service is reflected in buyer bargaining power. Since customers value certain items more, they will likely pay more for the product in question. This will have a beneficial impact on ExxonMobil. Customers in the oil and gas industry may be divided into several groups, including oil majors, refineries, and the ultimate buyers from retail tankers. In the long term, ExxonMobil Corporation's level of sustainability will be impacted if the customers are demanding and need high quality at the lowest possible price. This will put pressure on ExxonMobil Corporation to lower prices and will put pressure on the company. It is simple to toggle between purchasers due to the low-price sensitivity.

Competitive Rivalry

When we talk about competitors, we mean businesses that are in the same industry and sell similar products to the selling demographic of customers. The ExxonMobil Corporation is active in the primary consolidated petroleum and gas industry (ExxonMobil Corporate, 2022). The industry is characterized by intense levels of competitiveness and consistent profitability. Chevron, Sinopec, BP, Valero Energy, Cheniere Energy, and several other companies are among ExxonMobil Corporation's most formidable rivals (Sönnichsen, 2022). The overall capital expenditures are rather high within Exxon Mobil Corporation's industry. Because of this, the companies within the industry can operate at their full potential. This also implies that if demand decreases, these businesses will lower their prices to compete (Sönnichsen, 2022). The rivalry amongst the existing companies in the sector is increased. As a direct consequence, the level of competitive competition is quite high.

The Threat of Substitution

Goods or services that threaten the industry are said to be replacements for those products when they provide advantages equivalent to those supplied by the sector's products. There are relatively few substitute items that low-income companies can produce. Besides, there are few substitutes for products created in the industry in which the Exxon Mobil Company operates (Sönnichsen, 2022). Changing over to alternative goods or services comes with a significant financial expense. Consequently, there is a restricted choice of alternative goods and services. Because of this, customers are unable to easily switch to other items or services that are comparable alternatives and continue to experience the same benefits. Because there is such a small pool of potential alternatives to Exxon Mobil, high switching costs are mitigated to some extent. The primary replacements pursued by ExxonMobil are photovoltaic, biofuel, biodiesel, and other such fuels (Sönnichsen, 2022). The processing and translation of these alternatives into energy sources are exceedingly expensive compared to the petroleum and gas produced by ExxonMobil Corporation. As a result, these substitutes do not pose a danger.

The Threat of New Entry

There is a perception that new competitors pose less of a danger to the oil business. This viewpoint is prevalent since it requires a significant amount of initial investment cash to launch a new oil firm in a certain region (Trencher & Asuka, 2022). Implementing the mechanical aspects of a worldwide supply chain and constructing extraction units require a large expenditure. Consequently, it is challenging for new companies to establish themselves in the oil sector. New competitors won't only have to contend with monetary obstacles (Trencher & Asuka, 2022). They will also have to contend with the presence of huge existing oil firms. Newcomers face several hurdles, one of which is the presence of unpredictable international and sociopolitical conflicts in oil-rich areas. The volatility of oil prices introduces additional risks for firms operating in the oil sector and makes it more difficult for new enterprises to enter the market.

III. Competitive Analysis

Businesses analyze the marketing approaches used by their rivals to identify both the strengths and the areas in which their brands might stand to be improved. Compared to other oil and gas producers throughout the globe, ExxonMobil has the greatest market valuation. The United States-based corporation has a total market capitalization of 410.22 billion United States dollars as of October 17, 2022 (Trencher & Asuka, 2022). There were ten firms with the most revenue, and five of them were classified as Big Oil corporations. The corporations considered to be among the biggest in their sector have mostly stayed the same throughout the years. However, change has been evident in the order in which they are ranked might shift significantly depending on the statistic that is being considered (Trencher & Asuka, 2022). According to revenue, China's Sinopec is the biggest oil and gas corporation globally, with ExxonMobil placing third in this category. This is even though ExxonMobil has often placed first in market value. Meanwhile, state-owned corporations like Gazprom and PetroChina have risen to the top of the oil and gas industry employment rankings around the globe.

Fig 1: Leading oil and gas companies worldwide based on market capitalization

IV. Critical Success Factors

It is possible that the structure, administration, strategy, staffing, operations, and brand of ExxonMobil have anything to do with the company's success in the oil and gas business. The criteria that will determine your level of success in the oil and gas industry are mentioned below.

Good investments

The high-quality project management techniques used by ExxonMobil always result in higher performance when it comes to the execution of projects. The market-leading repertoire of more than 150 large projects the business maintains paves the way for delivering an optimum amount or an exceptional return on investments.

Capitalization on Growing Markets

The enormous gas spectrum held by ExxonMobil puts the company in an advantageous position. Because of this placement, the firm is better equipped to offer dependable supplies of reasonably priced natural gas and electricity to satisfy the growing global demand (Pearce & Harvey, 1990). Their in-depth understanding of energy markets worldwide enables them to help us get the possible benefit from our investments in gas, natural gas liquids, and electricity.

Throughout a reservoir's life cycle, ExxonMobil can effectively optimize the industrial extraction of hydrocarbons. The organization implements the Operations Integrity Management System (ExxonMobil Corporate, 2022). The technology is efficient, affordable, and disciplined business strategy. To continue producing good performance, ExxonMobil continues to undertake selective investment as one of its major strategies.

Identification of Potential Profitable Opportunities

The primary goal of ExxonMobil's exploration strategy is to locate, assess, and strategically pursue. The company further strives to seize the resource prospects of the best possible quality while staying one step ahead of the competition. It allows the organization to investigate various resource potentials across all settings.

V. Competitor Profile Matrix (CPM)

The matrix was built by considering the significance of the chances and risks that the organization faces. The purpose is to establish weight scores based on evaluating the opportunities or the threats. The score determines the possible implications of opportunities and threats on the company's accomplishments. At the same time, the score may be used as an efficient strategy line to predict the future path. It can further predict actions that will be lucrative and methods of advancement for a firm operating inside a certain sector.

VI. Partial SWOT (OT) Table and Analysis

VI.A. OT Table

VI.B. OT Analysis

ExxonMobil has numerous options accessible to it. The company will begin its assessment of future opportunities by focusing on the expanding energy market. The energy needed is increasing, and this tendency is projected to continue as technological advances are developed. Because of this new achievement, ExxonMobil now has a major potential to expand. It is expected that rising energy demand will necessitate the adoption of a significant portion of renewable energy sources in the future (ExxonMobil Corporate, 2022). ExxonMobil must recognize this shift and take the required steps to correct the problem. ExxonMobil is putting a lot of effort into LNG research and development (R&D). LNG is predicted to meet approximately half of the demand for natural gas by the year 2040 (ExxonMobil Corporate, 2022). ExxonMobil should be prepared for this transformation to capitalize on the opportunity and begin making money from product sales, giving it a leg up on the competition regarding this shift. Furthermore, there are obvious threats that the organization confronts. ExxonMobil's revenues and profitability will suffer significantly due to competition from other businesses operating like them. Competitors like Royal Dutch Shell and Total are challenging ExxonMobil's supremacy in the oil and gas business (Sönnichsen, 2022). Environmental regulations are now being developed to address the plethora of environmental challenges associated with the oil and gas industry. As a result, not only will these rules get harsher, but they will also become more stringent. ExxonMobil's efforts to limit the company's impact on greenhouse gas emissions and global warming, as well as its water usage, have grown more difficult due to this new development.

VII. External Factor Evaluation (EFE) Analysis

VIII. Conclusion

ExxonMobil is dedicated to maintaining its position as an innovator and contributing to developing a wide variety of innovative technologies. In addition to requiring unheard-of levels of capital investment, the provision of the energy demands of the globe calls for continuous innovation on the part of energy providers. Because of its strong financial position, ExxonMobil can continue investing with a long-term vision unaffected by any given year's economic circumstances. They are aware that the production of energy and its delivery comes with a variety of hazards. ExxonMobil is committed to continuously enhancing and refining its methodology for evaluating and mitigating these risks. ExxonMobil is relied on by customers and the general public to provide reliable and reasonably priced energy that improves their quality of life. They do so in a manner that reduces the company's negative impact on individuals, society, and the ecosystem.

References

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Dess, G. G., & Davis, P. S. (1984). Porter's (1980) generic strategies as determinants of strategic group membership and organizational performance.  Academy of Management Journal,  27(3), 467-488.

Feedstock routing in the ExxonMobil downstream sector. Interfaces, 41(2), 149-163. Furman, K. C., Song, J. H., Kocis, G. R., McDonald, M. K., & Warrick, P. H. (2011).

Li, M., Trencher, G., & Asuka, J. (2022). The clean energy claims of BP, Chevron, ExxonMobil, and Shell: A mismatch between discourse, actions, and investments. PloS one,  17(2), e0263596.

Pearce, J. A., & Harvey, J. W. (1990). Robust growth strategies. Academy of Management Perspectives,  4(1), 61-68.

Sönnichsen, N. (2022, October 17). Top oil and gas companies based on Market Cap 2022. Statista. Retrieved November 15, 2022, from https://www.statista.com/statistics/272709/top-10-oil-and-gas-companies-worldwide-based-on-market-value.