MKG final papers
salma 0133
mktg4540_report_4.docRunning Head: STRATEGIC MANAGEMENT 1
STRATEGIC MANAGEMENT 2
ConocoPhillips Company: Strategic
Supply chain
ConocoPhillips Company is a Houston-based gas and oil company. Chima (2011) says that ConocoPhillips has adopted the pull model for it crude oil products. The business model is aimed at matching the customer preference for low-priced oil environment. The aim is to keep operational cost low, so prices of oil products are kept low. Focusing on the demand has led to a production that matches the market's needs. The results have been a lower production, cut on storage cost and improved pricing. The oil supply of the firm is 500,000 barrels per day which can meet the market demands. There are no losses that accrue for all oil is dispatched to the market without having to look for customers. Availability of oil in ConocoPhillips ensures the firm to offer it at best price for they do not have to offer a discount on the case they had to do when they had excess oil in their storage facilities.
Industry Balance of Power: include Sources of Channel Power
ConocoPhillips draws its power from its enormous cash flow, a huge supply of oil and it’s reputation. The firm is known to produce pure products which have earned the firm a large customer base worldwide. ConocoPhillips has a large customer base who are spread globally. The customers are drawn from Europe, American, Asian and African markets. The customers ensure that all 500,000 barrels produced each day are sold. ConocoPhillips can produce huge supplies of crude oil to the global market. According to Pune (2016), the firm produced a 500,000 barrels a day against a global demand of 1.4 million a day. The company holds a 6.25 percentage of the daily production. The firm controls a 35.7 percent of the global market sales from its daily basis. ConocoPhillips has healthy cash flow. The cash flows able to meet its operations needs, pay dividends and meet CapEx requirements. Its average projection of a 50 dpb will earn the firm a revenue of $ 6.5 billion which way above the normal operating cash flows of $1.5 billion.
External Trends
There is a decline in consumption of oil products as countries discover their oil deposits and adoption of green energy (Chima, 2011). Countries like Kenya and Uganda which were customers of ConocoPhillips have stopped consuming oil products from abroad. The countries have started producing their oil products. The countries have started selling globally reducing the market shares of existing companies for they offer a lower entry price.
Green energy is on the rise. Pune (2016) says that geothermal, the wind and solar energies have been adopted globally at an increasing rate. Green energy is renewable as opposed to oil which has to depletion of natural deposit. Consumers have found out that green energy is less pollutant to the environment and are committed to reducing pollution to the environment. Green energy is cheap than oil supplies meaning consumers want to cut their operating expenses related to recurrent expenditures of purchasing oil products.
E-commerce/Technology
Social media marketing has revolutionized the way oil prices are determined. Customers have taken to the digital marketing to increase their bargaining power. According to Pune (2016), the customers rely on Facebook pages, and Twitter handles pricing of oil products to make decisions on the company that will offer the best oil prices. Customers will compare pricing of oil and gas of ConocoPhillips and that of competitors like Shell BP company before making the buy decision. Customers will choose to buy from company with the best selling price offer
Regulation/New Laws
The President Obama’s Environmental Protection Agency’s Clean Power Plan has had an adverse impact on consumption of oil products (Pune, 2016). The Clean Power Plan is a regulation whose aim is to reduce greenhouse gas emissions. Oil has been the greatest contributor of greenhouse emission. Greenhouse emission is dubbed to cause health problems. The Clean Power Plan aims at making the environment safer for citizens. The Clean Power Plan promotes the use of renewable energy. ConocoPhillips is affected negatively by local and international demand for oil has reduced from 1.8 million per to 1.4 million barrels per day as consumers take green energy.
Environment, Political, Social Trends that Impact Business
According to Chima (2011), depletion of the environment is happening. As ConocoPhillips drills and exploits the ground for oil, it leaves the open ground and degrading of soil due to operations that make the environment not suitable for agriculture. The environment is polluted when the oil used in engines and machines for carbon dioxide is generated as a by-product. Cases of carbon monoxide are also recorded where the oil is not fully burnt.
Obama administration spells doom to the energy sector. Promotion of the Clean Power Plan has seen the global demand for oil drop by 0.4 million barrels per day (Pune, 2016). The plan promotes renewable energy options of the wind, geothermal and solar energy. The result is a decline of oil products for green energy.
ConocoPhillips reduction in operations has rendered people jobless. The effect runs down the supply chain. Chima (2011) stated that the job cuts happen when services are reduced and mechanized. Job cuts affect persons regarding reduced purchasing power.
References
Chima, C. M. (2011). Supply-chain management issues in the oil and gas industry. Journal of Business & Economics Research (JBER), 5(6).
