DQ 021417

Exxon Mobile is a USA company that deals with the extraction, refining, and supply of oil and gas in the US. It was formed in 1999 as a merger of Mobil Oil Corporation and Exxon Corporation. Headquartered in Irving, Texas with around 82,100 workers the business and products of Exxon Mobil comprises of 1) upstream actions gas and oil exploration, development, and fabrication. 2) Downstream practices of petrol and its products’ refining and marketing and 3) chemical businesses compactly incorporated with the downstream refinement activities. Exxon Mobil also produces energy, gasoline and raw materials for chemicals and plastics. This essay seeks to explore the external environment of Exxon Mobil and identify the factors likely to impact on its activities and business model either positively or negatively. Citing the symptoms of the factors, the paper also tries to link them to either Porter’s Five Forces or the Blue Ocean models. In this connection, the essay draws a conclusion on what these factors mean for the future of this organization and in a business brief makes these findings to the Company’s Executives.

The External Factors Likely to Impact Exxon Mobil

Given that the both the market and source of raw materials for this corporation are 90% outside the US’ boundaries, the external environment of Exxon Mobil is complex in terms of the factors that can affect its operation both positively and negatively. Although there are also factors, which are likely to pose positive impacts, the majority of them are negatively oriented. They include; Political instability in the raw material source regions, inflation and economic slowdown in the US, the threat of natural disasters and stiff competition.

Instability in the raw materials’ source regions

The Middle East and Africa are the major regions where Exxon Mobil obtains its raw materials in form of crude oil or petroleum and natural gas. For the safety of the Exxon Mobil’s workers and the security of their machinery in these regions, there must be peace and accord. Warfare and conflicts increase the tension in the region and put the lives of the workers and the safety of the machinery at risk. This case is what is transpiring at the moment as instability increases in both Africa and the Middle East in recent times. Iraq and Iran, some of the oil rich lands in the Middle East have been in constant warfare since 2008. In Africa, on the other hand, the northern and central regions, which are the major oil soils in the continent, have started fighting of late. In Nigeria and Libya, for a case in point, there is still tension sourcing from political religious and political factors respectively (Abrahamsen, 2013). In this case, instability in these regions has amplified the risk connected to Exxon Mobil acquiring and extracting crude oil and gas in these places. To be specific, the upstream activities of Exxon Mobil, especially in the Middle East are at risk.

The Symptoms of Instability

Warfare, tension, and conflict are some of the symptoms of the instability factor. In Africa, there is still tension over the Muslim/Christians war. Libya has fresh smell and memory of Muammar Gadafi (McKinney & Dignity, 2012). Somalia just split up after the own war over the oil resource, something that Exxon Mobil is interested in. In the Middle East, Iraq and Iran other than their domestic wars have also been on the hot with the US and reports suggest that it was all because of the US ‘looting’ their resources (oil).

Generally, this factor has seen Exxon Mobil shun from approaching these regions for their raw materials. The question in mind, and probably the element that makes this factor a negative one is; whether there is another region that this corporation will turn to for the oil. In short, there is going to be a shortage of raw materials and oil products in turn. As such, I expect the US and its dependants to suffer an energy scarcity blow.

Inflation and economic slowdown in the US

Inflation and the slowdown of the US’ economy are other external factors with direct impacts to Exxon Mobil. It is external because it does not source from within the company. According to recent reports, the US is experiencing and is likely to have a fiscal decelerate accompanied by rising inflation until in the near future. In 2014, according to Hördahl & Tristani, (2010), Exxon Mobil made 30.9% of combined income from its US businesses, hinting that a retard in the US economy will pose a momentous negative impact on the organization.

Symptoms of Inflation and economic slowdown in the US

Inflation is characterized by the depreciation in the value of the US currency, the dollar. It should be noted that majority of the services or items, which were acquired by one dollar ten years ago goes by more today (Hördahl & Tristani, 2010). While this is exactly, what inflation is, it is as well a sign of the retard of the US’ economy.

The threat of Natural Disasters

Natural disasters include floods, wildfire, and earthquakes among many others. Because they come along with undesired results like the destruction of property, this factor is negative like they are. In this context, the threat of these natural disasters exposes both the upstream and downstream allotments of Exxon Mobil at danger. For instance, particularly in the Gulf of Mexico, hurricanes can bring about serious harm to offshore wells and refinement practices along the coast (Moustafa, n.d.). For a case in point, the hurricanes Rita and Katrina damaged the Gulf of Mexico activities of this organization in 2005.

Symptoms of the threat of Natural Disasters

Natural calamities exist, they have occurred and they will still occur in the future. While the past occurrences of these disasters is an enough signal of their recurrence, the weather scientists like geologists’ predictions of their happening is another crucial symptom.

Stiff Competition

Exxon Mobil cannot compete itself, and so, competition is another external factor. This organization is not a monopoly instead faces stiff competition from other oil organizations located in the US as well (Ciura, 2014). A clinical example of these organizations is the Royal Dutch Shell, PLC. Others include Chevron Corp. Chevron Corp. and Valero Energy Corporation.

Stiff competition is a negative factor for Exxon Mobil because of its competitors, while they claim a portion the market and the raw materials of which it could have otherwise enjoyed alone, they reduce its profit margin according to Ciura, (s2014). They also bring about a scarcity of the human resource or cause a hike in their wages or salaries.

Symptoms of Stiff Completion

The Royal Dutch Shell, PLC, the Chevron Corp., and the Valero Energy Corporation are not the only oil firms in the US (Ciura, 2014). There are numerous others, whose presence is an enough symptom of the factor in the US and for Exxon Mobil.

The Factors and Porter’s Five Forces/Blue Ocean models

While the other three factors do not directly fall between the lines of either Porter’s five forces or the Blue Ocean models that of competition does. It, in fact, falls in the frames of both Porter’s five forces and the Blue Ocean models. In the first place, it affects almost all the five forces of Porter, which are; the threat of substitute products or services, the threat of established rivals, the threat of new entrants, the bargaining power of suppliers and the bargaining power of customers (Shih, 2012). Already Exxon Mobil’s rivals are established. As such, they increase both the bargaining power of the suppliers and customers alike who has to weigh up their options for more favorable terms (Shih, 2012). On the other hand, Exxon Mobil satisfies the Blue Ocean model since it aims not to look for an environment that has no competition but struggle in this ‘red ocean’ condition.

The Rank of the Factors

The paper has discussed these factors in the descending order from the one with the greatest potential impact to that with the least. This order reads instability, inflation, and economy slowdown, natural disasters, and competition. Competition is even less than a threat here as it can easily be managed. Just an improvement on quality and some good marketing are enough to solve it. Natural disasters are destructive if they occur. However, they are rare and can be predicted today. Inflation is dangerous. Unless it is solved, the economy collapses with everything that depends on it. For instability in the source regions of raw materials, it is really difficult to find a solution given that they are foreign regions fighting each other.

Conclusion and the Stance

If there is any positive factor from these ones, then it is only the competition one. At least Exxon Mobil can still operate and make some profit while it operates as its rivals do. Moreover, the competition may prompt important strategies in the organization, which will see the quality of its products improved and its packaging and prices moderated as well among many others. While this trend looks to directly favor the consumers, it also does to the organization as the majority of them will turn to shop with it, hence winning a larger portion of the market. In this context, competition, Exxon Mobil may expect a bright future.

However, there is very little hope with the other factors. Instability in its raw materials’ source regions, for instance, means a shortage or even a total cut of raw materials. Inflation and a collapse in its nation’s economy, on the contrary, suggests an impending collapse of the organization as well while natural calamities threaten to bring down the corporation to scare zero. A logic analysis of these factors reveals bad news to this Exxon Mobil. As such, from a scratch point of view, I do not see anything like new opportunities for the organization as a result of the factors, but imminent doom.

All the same, it that does not mean that Exxon Mobil is done and should sit back and wait for its collapse. It is quite easy to manage all these factors and make the better out of them. The weather scientists can be crucial to the company on when to go for extraction affect the inconvenience of the calamities. As well, while there are other oil-rich regions other than the Middle East and Africa, its only part of the oil-rich nations in these regions that are in instability. As such, it is just and only up to the Exxon Mobil to wake up and strategize to save its future.

References

Abrahamsen, R. (2013). Conflict & security in Africa. Woodbridge, Suffolk: James Currey.