Project 4

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Project 3: Internal Environmental Analysis

I. Corporate Level Strategy Analysis

Exxon Mobile Corporation, also referred to as ExxonMobile, is an American international company that deals with producing, exploring, and selling oil and gas. The corporation was founded in 1999 and followed the merger between Exxon and Mobil. The oil and gas business is one of many products the organization has been dealing with. In 2002, the company was interested in engaging in copper and coal, but it was later abandoned. The entity began phasing out from the United States direct-served retail market by selling its service station. It bought XTO Energy 2010, an organization specialized in improving and manufacturing unconventional resources. ExxonMobil partnered with Rosneft, which was an oil entity from Russia, to establish the Tuapse and East-Prinovozemelsky oil fields.

Currently, the company is ranked at position fourteen globally based on its oil and gas reserves. It operates 37 refinery plants across twenty-one states and produces more than 6.3 million barrels daily. The entity has provided employment opportunities for over 71000 individuals in the locations of its global operations. Besides, the entity is divided into three different global units, which include downstream, upstream, and chemical branches. It also has numerous divisions of a subsidiary, such as Coal and Minerals, which autonomously operate its business. The division upstream provides the most significant share of its income. It focuses on the mining, exploration, and transportation of crude oil. Most activities related to the unit are often located in the Permian Basin, Bakken Formation, and the Gulf of Mexico. On the other hand, the division downstream is responsible for marketing, refining, and selling oil. The unit has numerous outlets in Texas, Mid-Atlantic, Pennsylvania, and New Jersey. The business reported a total revenue of $19.7 billion in 2017, although it has been under-securitized for playing the role of polluting the environment.

II. Partial SWOT (SW) Table

Strengths

Weaknesses

· Strong Public Image: one of the strengths for the company is its robust public image. Having a strong public image has enabled the company to enhance its customer loyalty. · The company has also contributed to corporate social responsibility initiatives. It has been creating rapport with the public addressing challenges affecting society. In turn, such initiatives have made the company to increase its base of loyal customers. · Effective communication strategy: the company has a well-established communication system that plays the role of facilitating the organization decision making process (Fish Can’t see water, 2015). It has been fostering effective and quicker transfer of information and directives from one executive level to the other and in all levels of staff members. · Effective Disaster Management program: the company has one of the best functioning disaster plan managements. It has enabled the entity to swiftly respond to incidents related to oil spillage and notifying the public and environment about its progress. · Cost effective capability: the company has a unique geoscience capabilities and comprehension of the endowment of global hydrocarbon that identifies and prioritizes its entire quality resources to determine where to invest capital.

· Development of Novel Items: the company is unable to develop novel products and services that reflects customer dynamic changes. · Lack of research and development: the company has not significantly invested in the field of research and development making it lag behind with the customers’ expectations. · Lack of employee training program: in case of a new approach or equipment use, the company’s workforce members are more likely to slow down the implementation process. · Poor technological advancement: the company has no ability of coordinating activities across its businesses due to its non-procured modern technology. · Inability to streamline operations: inability to streamline its operations across the board making it incapable of planning to expand its business in the overseas markets.

III. SW Analysis

As the global energy demand continues to grow globally, the company has been focusing on expanding its business operations abroad. The company has seen opportunities in the process of both the government and the private sectors to open additional industries that require energy resources. As a result, such additional industries across the world have boosted global demand

forcing the entity to focus on the global market share. The company has been focusing on cost leadership to reach potential customers in emerging markets such as the Middle East, Asia, Southeast Asia, and Africa. However, the government's call to adopt an environmentally conservative form of energy has negatively impacted the organization. Business is more likely to impact its business as more regulations and laws on the same continue to be formulated (Mustofa, 2018). In response, the company has been investing in green energy like solar and wind to achieve sustainable development. Moreover, it has invested heavily in other green energy sources to minimize its discharge of greenhouse gases. It is on the call to attempting to grow its portfolio and boost its profitability margin. The cost-leadership approach has enabled the company to meet its goal of maximizing its profitability margin (Schoenlaub, 2015). Lowering its operation and production cost can widen the gap between the total expenses it applies in its operations and the net income that comes from the operations.

The company should also use a differentiation strategy to differentiate its services from those in the industry. ExxonMobil has been in the energy business for many years, winning a good reputation worldwide. Hence, this company has an opportunity to expand its operations to target developing economies in Southeast Asia, the Middle East, Europe, Africa, and Asia. This is especially significant when dealing with premium customers. Such customers involve individuals who focus on value creation rather than price. It should therefore increase its market share by involving premium customers. In other words, the company should focus on emerging markets and developed markets, including the Canadian, European, and Australian markets. It has invested heavily in other green energy sources to minimize its discharge of greenhouse gases. It is on the call to attempting to grow its portfolio and boost its profitability margin. The cost-leadership approach has enabled the company to meet its goal of maximizing its profitability margin.

IV. IFE Metrics

V. Grand Strategy Matrix

VI. The Business Level and Business-level Strategies

VI. A. The Business Level

Exxon operates in the energy field, with oil and gas products being its primary product line. The company has divided its business products into numerous divisions. One of the divisions includes low-carbon solutions. The division focuses on the commercialization of lower-emission opportunities in business. This is mainly done in carbon capture and storage, hydrogen, and low emission of fuels through leveraging skills and knowledge and ExxonMobil scale. The entity has more than thirty years of experience capturing carbon dioxide (Albu, 2018). Cumulatively, it has managed to capture more human-made carbon dioxide than any other organization that does the same. Another significant division of its product lines includes product Solutions Company. The division deals with the engineering, delivery, and manufacturing of items required by modern society in the contemporary world (Mukhammadsidiqov & Turaev, 2020).

It delivers the products at an industry-leading scale, products, and markets, serving multiple segments. It plays a vital role in reducing greenhouse gases from the atmosphere and contributing to sustainability. Moreover, it also reduces plastic waste by developing more sustainable items, including chemical performance products, lower-emission fuels, and the next generation lubricants and plastics. The other division of the company's product line includes the Upstream Company (Taylor, 2019). In this division, the narration of safely and responsibly meeting international demand for energy begins. It has managed to capture more human-made carbon dioxide than any other organization that does the same. Another significant division of its product lines includes product Solutions Company. The division deals with the engineering, delivery, and manufacturing of items that modern society requires. It delivers the products at an industry-leading scale, products, and markets, serving multiple segments. It plays a vital role in reducing greenhouse gases from the atmosphere and contributing to sustainability. The company's engineers, geologists, and scientists apply their effort to explore the development of oil and natural gas using innovation and industry-leading technology.

VI. B. Business-level Strategies

Exxon focuses on its core competencies, including vertical integration, a robust R&D platform, economies of scale, product diversification, and operations excellence. It utilizes such elements to ensure its products and services satisfy its customers' needs. Moreover, it uses the approach to ensure it achieves the highest value for its shareholders. The company has been using its business-level strategy to serve its customers and shareholders to their satisfaction levels effectively. It uses the business-level strategy to offer value proportion to its customers, thereby gaining a competitive advantage over its rivals. It gains a competitive advantage by exploiting its core competencies in its fundamental aspect of the oil and gas value chain. Its value chain ranges from the production of crude oil and natural gas in refining the oil and gas, petroleum products marketing, products trading, and transportation. Exxon is also a significant player in hydrocarbon conversion into commodities related to petrochemical. The organization applies the multi-business approach due to its operations and other vital activities, whose execution is usually through multiple industries. Typically, the corporate functions are based on an upstream and downstream business with low-cost provisions. At the business level, the multi-business strategy employed by Exxon Mobil Corporation has a great deal of appropriateness considering the corporation's primary products whereby switching costs are low, and there are difficulties concerning differentiation as far as competing commodities are concerned. From this point of view, the corporation strategically focuses on efficiency and cost. The corporation realizes growth strategy at this level through the engagement of market penetration approaches (Coll and Steve, 2012). Such approaches are employed because the use of petroleum commodities is ubiquitous; hence there exist no new markets where market development approaches can be applied.     

VII. Functional Level Strategies and Alignment

VII. A. Function-level Strategies

In ExxonMobil, actions and goals are typically assigned to numerous departments. These departments support the organization's business-level approach and corporate-level approach. The approaches tend to specify the results or implications the management needs to view their achievements from department daily operations. The company's functional level approaches tend to reflect that corporate and business objective often need multiple functional areas' involvement (Raynor, 2007). It has continued with the corporate-level strategy to raise its market share. The functional level strategy has led to various implications, including hiring highly trained workers by the HR department, improving brand identification in the marketing department, and reducing rejections in the production department. The strategies are often set to allow the departmental managers to devise personal employee assignments supporting the departments' goals. The organization and functional level strategy has the most details of the types of the three strategies. It often has goals and actionable aspects for each department within its organization. Moreover, it has numerous metrics through which its management uses to gauge the success of the team members.

VII.B. Alignment of Functional-level Strategies

The company's functional-level strategies align with its business-level and corporate approaches. The management has aligned the approaches with its mission statement, vision statements, and core values used in its business culture. It has incorporated functional-level strategies with its cultural practices. The culture which has been formulated at the heart of each department uniformly allows the departments to have uniform practices across all workplace levels. The departments operate under the organization's mission statement, which is the world's premier petroleum and manufacturing entity of chemical substances. The departments work effortlessly to achieve superior financial and operating outputs consistently. It ensures that all its operations and activities have adhered to the code of ethics.

The company's shareholders are committed to enhancing the long-term value of the investment dollars entrusted to the entity by them. Shareholders are rewarded with significant returns after the company's operations that aim at business profitability, responsibility, and accountability. Due to the company's commitment to offering quality products at the level of customer satisfaction, consumers consistently support its products and services. This is by always becoming the company’s loyal customers. The exceptional quality of our workforce provides a valuable competitive edge. To build on this advantage, we will strive to hire and retain the most qualified people available and maximize their success opportunities through training and development. We are committed to maintaining a safe work environment enriched by diversity and characterized by open communication, trust, and fair treatment.

VIII. Strategic Financial Analysis for the Last Reported Fiscal Year

VIII. A. Financial Ratios for Company

Leverage Ratios: The company's leverage ratios will be used to determine the ability of the company to meet its financial obligations at a given time frame. The ratio used to measure the company's leverage ratio includes the debt-to-equity ratio. The company's debt-to-equity ratio has stagnated in the last three years. In 2018, the company's debt-to-equity ratio was recorded at 0.74, while in 2019, it was at 0.85. The ratio yet inclined to 0.9 in 2020, and in 2021 it further inclined to 1.03. This is a negative indication for any investor wanting to invest in the company. It shows that a large portion of every dollar invested in the company comes from debt. This puts the investors' money at risk if the entity fails to meet its short-term obligation on time.

Liquidity ratio: liquidity ratio also shows the ability of the company to pay off its short-term liabilities. Based on the company's current ratio, it has yet to be able to effectively pay off its current debt without affecting its merchandise. It recorded a current ratio of 0.78, 0.80, and 1.04 in 2019, 2020, and 2021 respectively (Abdulwahed et al., 2022). Although its value had significantly improved in 2021, the past trend discourages investors from investing in the company.

Efficiency Ratios: efficiency ratios will measure the ability of the company to utilize assets in generating income. Based on the entity's asset turnover ratio, it declined from 2018 to 2019 by 0.1076. It further declined to 0.5455 in 2020 but inclined to 0.8428 in 2021. Being in the utility sector, the company's asset turnover ratio shows its potential to use its assets to effectively generate income for its organization.

Profitability Ratio: If an organization's operating income is less than its net sales, the operating margin ratio measures how efficient the business is. Revenue to Operating Margin Ratio = Revenue / Sales Asset utilization efficiency is measured by the company's return on assets (ROA). Net income divided by total assets is known as the return on assets ratio.

VIII. B. Financial Ratios for Industry

Over the past, the most recent years, the company's debt to equity has been much better than that of the industry it operates within. With a debt-to-equity ratio of 0.93 in the recent annual report, the company outshined its industry which recorded a ratio of 0.49. The liquidity ratio of the company was lower than that of its industry. In the recent annual reporting year, the company recorded its value at 1.04, meaning it had adequate assets to cover its short-term obligations. On the other hand, the oil and natural gas industry recorded a ratio of 1.27, which was relatively higher than that of Exxon. The industry also recorded its asset turnover ratio at 1.45 while that of the company was 0.8, indicating that the company was relatively using its assets to generate income.

VIII. C. Financial Analysis

Financial analysis is a vital element to investors. It communicates a company's financial health before the investors decide to invest their capital. The company's leverage ratios will be used to determine the ability of the company to meet its financial obligations at a given time frame. The liquidity ratio also shows the ability of the company to pay off its short-term liabilities. Efficiency ratios will measure the company's ability to utilize assets to generate income. Profitability ratios are a class of financial metrics used to assess a business's ability to generate earnings relative to its revenue, operating costs, balance sheet assets, or shareholders' equity over time, using data from a specific point in time.  

IX. Composite Analysis/Conclusion

In conclusion, the company's financial analysis discourages investors from investing their capital in the entity. Although its latest data indicate some improvements, the company's history creates a trend that might create a negative notion to investors interested in putting their money in the organization's business. Following its SWOT analysis and PESTEL analysis, the company is not exempt when it comes to being affected by internal and external factors. The company has seen opportunities in the process of both the government and the private sectors to open additional industries that require energy resources. As a result, such additional industries across the world have boosted global demand forcing the entity to focus on the global market share. The company has been focusing on cost leadership to reach potential customers in emerging markets such as the Middle East, Asia, Southeast Asia, and Africa.

References

Abdulwahed, M., AlMatrooshi, H., Alqaydi, K., Alketbi, S., Al Shamsi, A., & Nobanee, H. (2022). Financial Statement Analysis of Exxon Mobil.

Albu, M. (2018). Considerations regarding environmental aspects of risk management in the oil and gas industry. In  Advanced Engineering Forum (Vol. 27, pp. 213-218). Trans Tech Publications Ltd.

Fisj Cant see water. (2015). Chapter 1 - Strategy and Corporate Culture. Retrieved from; https://www.youtube.com/watch?v=zC13IaTFtXg

Mukhammadsidiqov, M., & Turaev, A. (2020). The Influence Of The Energy Factor On Modern International Relations.  The American Journal of Political Science Law and Criminology,  2(12), 5-15.

Mustofa, A. (2018). MNC ON OIL AND GAS EXPLORATION: ExxonMobil Gas and Oil Exploration in The Spratly Islands.  Mediasi: Journal of International Relation,  1(2).

Raynor M. E. (2007). WHAT IS CORPORATE STRATEGY, REALLY? Retrieved from; https://iveybusinessjournal.com/publication/what-is-corporate-strategy-really/

Taylor, G. D. (2019).  Imperial standard: Imperial Oil, Exxon, and the Canadian oil industry from 1880. Calgary: University of Calgary Press.

Schoenlaub. (2015). It's not the CEO, it's the leadership strategy that matters! Retrieved from; https://www.linkedin.com/pulse/its-ceo-leadership-strategy-matters-nicolas-schoenlaub