Abstract: of the business by covering the SWOT,

Abstract:

Proper
business requires a clear and detailed analysis of the business strategies, and
how that effect on the performance of the firm. Analysing the highlights and
the growth of the business by covering the SWOT, Porter Five Forces criteria
and a critically analyse, all of those prospective will give us a better
understanding to the strategies of the enterprise

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ExxonMobil
and British Petroleum, being big multinational oil enterprises with a high
growth and a top ranking in the oil industry, with their successful business
strategies. However, those companies are facing several number of threats and
weaknesses, in addition to their competition with each other. This report is delivered
to examine and analyse the key factor of the growth wither is internal or
external. In contrast the report shall clarify the weaknesses and the
approximate recommendation to face the challenges, and accelerating the model
business into a growing opportunity.   

Introduction:

Earlier
British Petroleum is global
oil and Gas
Company was headquartered in London,
United Kingdom. In revenues BP is measured as the third largest energy company and the fourth largest Company in the world and is one of the six oil and gas “super majors”.
It is been operated over 80 countries which produces around 3.8 million barrels of oil equivalent per day
and runs with 22,400 service stations worldwide. The largest division
BP America is the biggest producer of oil and gas in the United States and headquarter lies in Houston, Texas. On 31 December 2009 it had total proven commercial reserves of 18.3 billion barrels
of
oil equivalent. The name “BP” derives from the initials of one of the company’s former
legal names, British Petroleum.” (Ferrier, 1982).

On the other hand we have ExxonMobil, which was
formed in 1999 and has realised consistent growth in sales and profitability to
become one of the largest producers in the word. The company now handled 3% of
global energy output. The company is also the second largest listed firm in in
the US (Vassilou, 2009).

ExxonMobil operate in most of the world’s countries, and are best known
by our familiar brand names: Exxon, Esso and Mobil. They make the products that
drive modern transportation, power cities, lubricate industry and provide
petrochemical building blocks that lead to thousands of consumer goods. (Exxon,
2007).

As two leading corporations in the petroleum sector, their
growth has depends on their way of implementing the business strategy with a
successful formulation. From analysing the strength, weakness, opportunities
and threats, we could identify the key factors and the focuses of the
companies, from the analysis the strategy of the companies has a long term
focus, heavy fixed cost and low margins, and huge economies of scal.

ExxonMobil Strategy:

“ExxonMobil
has two main operating segments namely upstream and downstream. Upstream
operation include all activities involved in exploration, drying and pumping
fossil fuels from beneath to the surface for onward processing. Down steam
operations involve the processing distribution and marketing of hydrocarbons.”
(Vassilou, 2009).

“The
company has capacity to produce 6.5 million barrels of crude daily, a relative
huge amount relative to the other players in the industry. The company has
operations in more than 100 countries under its various brands and has 37
refineries” (Exxon, 2007).

“The
firm’s annual growth in capacity stands at 17% and has enough resources to
invest in efficient production” (Exxon, 2009).

The corporation had a
consistent growth in sales and profitability, the company strategy is based on develop
upstream units which mean the core operation of the company, due to the
competition in the petroleum industry, all the firms play to gain the customer
loyalty so they insure their sustainability of their sales. So Exxon emphasises
to maintain their customer service, to move forward in maintaining their
technological strategy, which is one part of Exxon business strategy.

 

Internal Analysis of ExxonMobil:

Strengths:

Private
ownership

ExxonMobil
is a private company, so the government has minimal government control. (Omeje
2008).

Leadership
in environmental conservation

The
organization need negligible violations about environment set of principles as
laid down by those Different environment organisations in Different businesses.
Concerns the global warming have brought about the expanded examination of its
generation operations particularly profound ocean penetrating what is more
emanations. This displays the organization with no quick operational issues.

Strong
research and development team

The
organization need a solid asset base. This is essential in the business owing
of the high fixed operational costs in the market. The organization reinvest a
normal about 16% from the benefits of the boosting capacity for the development
and research. The firm need those ability to get guaranteeing benefits of the
business operational units should develop its benefits of the business.

Competitive
labour force

Human
resource offers the organizations a powerful structure for competitive
advantage. The organization attracts young talent ability.

Weaknesses:

Litigation

“The
company’s 1989 Alaska oil spill and its sponsorship of research publications
hurt the firm’s image and resulted in numerous law suits and other contingent
liabilities that could cost the firm billions in claims. The company’s sales
experienced a dip following concerns of irresponsibility. The oil spill also
pushed the firms’ operational costs up by 11%. This led to the company’s
adoption of new, more expensive technologies to gaud against such violations”
(Porter 2008).

Rising
production costs

“Following
the firm has aging oil wells and its new oil finds are deeper and more
expensive to drill” (ExxonMobil, 2009).

“This
means that the per unit production cost continues to rise over even as other
costs such as marketing and distribution rise” (Vassiliou 2009).

The
energy prices and taxes have increased, so it rise the production costs.

High fixed
costs

“The initial
cost of production is very high. Exploration, drilling and maintenance of oil
wells makes firms incur excessive costs. The company has to recoup the high
costs by operating in large scale. The firm cannot sell at high prices due to
competition and therefore it has to rely on economies of scale to drive its
profitability. High fixed costs mean that the company experiences
disproportionate fall in profits if sales decline” (Porter 2011).

Limited
human resource pool

There is
a shortage of qualified talent in the oil industry, the lack of human resource
is critical to firm’s productivity. “Most of the firm’s new hires require excessive
training to orient to the training environment.” (Mondy, Noe & Gowan 2005).

External
analysis of British Petroleum:

Economic – US dominating Iraq and their political instability and also greater demand from India and China made the rise in oil
prices. To ensure the company stability and capacity to avoid further happening in disaster BP have to invest more on oil and gas
production and also in infrastructure too.

Social – BP promoting
methodologies gets influenced toward the figure climb in the domestic oil And
gas cost and they searching for good suppliers. Change Previously,
environmental will be an alternate variable influences the benefits of the
business about BP. Environmental change need been an alternate component that
influences a great deal on BP’s benefits of the business. The point when there
is increase of population the oil interest will develop despite the fact that
there is no change done wage dissemination in this way that risk may be low to
BP.

Technological – The interest to elective vitality increases,
coordination with business sectors needs to make accomplished for those
innovation organization. Researches indicate that innovation organization may
be the way figure to the rival in the elective vitality showcase. To decrease
the greenhouse gas emanation BP need with contribute ton. Should enhance
sub-sea oil innovation BP need will contribute on the engineering organization
for oil What’s more gas creation techniques.

Environmental – Climatic change will influence the oil commercial
enterprises a considerable measure. To decrease the Greenhouse discharges
organization need will set a greater amount deliberations. Should keep up those
foundation Furthermore to evade further harm in the oil wells and pipelines
reasonable financing has to a chance to be done. With reduced the greenhouse
emanations for around 40% BP need situated a objective Toward pushing the
utilization of atomic force.

Legal –
Taxation and fuel obligation about
administration demonstrations influences those value for oil. Those one gesture
about renewable transport fuel commitment weights those consumers to utilize
bio-fuels that camwood weaken those bargains in the oil industry. BP if make
mindful On Comprehending the first parts of the EU outflows exchanging plan
will be should think over those carbon emanations.

External
analysis of ExxonMobil:

Opportunities

Tax
breaks

“Energy
companies earn tax breaks from the government. Being a private listed company,
ExxonMobil qualifies for annual tax breaks and subsidies by the federal
government” (Pennell et al. 2008).

Improvements
in drilling technology to lower costs and conserve environment

The
company has the capability to ensure environmental safety, more technologically
advanced operations. The company has to implement a new technology to extract
oil in previously to the surface at lower cost.

Threats

Uncertain
political climate

“Changes
in political leadership can have market impact on the firm’s operations. For
instance, a change of government in the US can result in denial of licences to
drill in offshore areas where the company derives significant oil deposits.”
(Reinecke & Strobenreuther 2008; Mondi & Gowan, 2005; Powel, 2013).

Increased
costs of Global warming

“The
firm’s costs of operation are likely to rise as the effect of global warming
take their toll. This will be more pronounced especially in the low-lying areas
where the firms drilling operations are more exposed to extreme weather.”
(Environment, 2012; Coll 2012; Vernon, 2012; Prahalad & Hamel 2010; Smith
2012).

Technological
know how

“The
energy industry depends heavily on technological advancements to drive
production and efficiency” (Powel, 2013).

 

Porter
Five Forces for ExxonMobil Company:

Power of
supplier: half of the host countries of the reserves are
unstable, and that could lead to limit on the production and a rise on the
prices, however, Exxon assets now is stable and benefiting from dealing with
the OPEC which controls 40% of the global supply of oil.

Power of
buyer: there is a high demand for the product due to its
importance in the daily work, so it is mandatory to purchase the product.

Threat of
new entrants: a high Fixed cost levels, and high levels of
industry with a strong competitiveness, high capital cost.

Threat of
substitute: the renewable energy could replace the
consumption of the fuel, due to the geographic availability of the raw material
and the unstable of most of the countries, the oil industry would be replaced
by a new source of energy, cheaper and more efficient.

Competitive Rivalry: competing with other industries such
as renewable energy and hybrid, having high competitors such as British
Petroleum.

Porter
five forces of British Petroleum:

“Threat
of new entrants – As
there is a strong competition in the oil industry and there is a strong threat for new entrants into this industry. Low pricing and the strong competition
makes others to come into the industry and Albeit BP is a leader of market. In different
locations of solar industry, the rate of
threats for BP differs.  There is an example in US for
solar business there is very less profitable market and very few big companies that needs to
come into this industry because of legal backup.  Soon after BP will become a market leader
in US with very
less new entrant threat.

Buyer Bargaining Power – Buyer bargaining power is moderate due to there is increase
demand from the consumers because there is no other alternative fuel for the motors and this
shows the moderate bargaining power of
the buyer. Due to high expense on production,
marketing and advertising the products and brand image is minimal because of
the high demand.

Supplier Power –  When considering the high number of supplies and maximum size of the supplies and there were a high switching cost for few independent retailer as BP have a very strong
 supplier
 power.  From  the  fuel  supply  chain  the
 big  companies  are  able  to
 do everything. Due to there were not many suppliers the view of solar industry
shows that supplier power is huge.

Threat
of substitutes – Since the oil price is hike there is a weak threat of substitutes for BP
in the oil industry.. To develop new technologies for its solar industry
BP
is investing a lot on it

Competitive Rivalry – In solar industry
the competition for BP is moderate due to the huge switching cost and high size of BP and other same companies like Shell and Chevron. There is no chance for small companies
to
enter in the solar industry as
the rivalry price is huge and there are very few large competitors. Due to technology expense, huge switching cost the competition is not that much strong in
the aspect of solar energy and demand in
the market is less. Competitive Rivalry
Competitive rivalry is high
as in the world there are many Oil and gas
 companies
 (
 Shell,  Exxon-Mobil,  PDVSA,
 Saudi  Aramco,  Pemex,
 Emirates
 Oil,
Gazprom etc) competing for access to the same oil producing fields but BP is one of the six oil and gas
super majors
and is highly competitive.”
(Lydia, 2015).

 

Recommendation
and conclusion:

To lead a
successful business strategy on the oil industry, each company need to take the
main factors into consideration: operation and oil discovery, manufacturing,
technology, finance, Marketing and distribution. The
choice of an appropriate strategy depends
on various factors
like
the positioning of the company in the market,
financial stability and its competitive advantage.

As a wide
industry, each company is facing many strategic Problem, and each try to avoid
or respond to that obstacles, but the major problems are in case any company
take the risk to maintain its leadership, can give the chance to the
competitors an opportunity to gain some dominance. One more problem is facing
the changes in the gulf area and around is a real issue for the industry in
general, and that lead to either lower the profitability or less quality of
product.

As a
responds to those issues, it is recommended in the short term that the firms
need to focus on rising their sales and manage to refresh the retail sale,
invest more on the oil exploration and production. On the long term they must
invest in natural gas exploration that could give the firms a step ahead of
their competitors, investing in renewable energy sources will give them a
chance to avoid getting off the sales by another company, so it will be one
player dominating two field.

Diversification
is a successful strategy would help the corporation to generate more profits by
interring new markets with new product.

Feasibility
is an important factor on studying the switch of merge if the companies wants
to invest in development and research, so each company must provide the right
feasibility to avoid risks.

From the
analysis and the identification of the strength and weaknesses the company
should use its strengths should avoid its risks by establishing more operations
in emerging markets. Besides, the company should take into consideration to invest
in green energy to avoid the environmental disasters. Lastly, “the company
should invest in staff training to boost performance as well as in research and
development to drive down operation costs and raise efficiency” (Everard &
Burrow, 2010).

 

 

References

 

American Petroleum Institute (2010),  http://www.api.org/aboutoilgas/ .

BP
(2009) BP and AAR sign deal to align interests and boost value of Russian joint venture.
Available at:  http://www.bp.com/sectiongenericarticle.do?categoryId=3&contentId=2006926

Everard,
K & Burrow, J 2010, Business principles & management, South-Western Pub, Cincinnati.

Exxon Company 2007, U.S.A.’s
Energy outlook, 1977-1990, Exxon
Corp, Houston.

Exxon Company 2009,
U.S.A.’s energy outlook, 1980-2000,
Exxon Corp, Houston.

Mondy,
R, Noe, M & Gowan, M 2005, Human resource management, Pearson Prentice Hall, Upper Saddle
River, NJ

Omeje,
K 2008, High Stakes and Stakeholders: Oil
Conflict and security in the World, Ashgate Publishing, Burlington

Pennell, N, Lavery, G & Fowler, R
2010, The
Low-Carbon World Is Already Here Five Imperatives for Succeeding in an Era of
Carbon Constraints. Booz and Company,
New York.

Porter, M 2011, ‘From competitive
advantage to corporate strategy’ Harvard
Business Review, vol. 65, no. 3, pp. 43–59.

Porter, M 2008,’The Five Competitive
Forces That Shape Strategy’,Harvard business Review,
Vol.5, no.2, pp. 23- 37.

Powell,
T 2013, ‘How much does industry matter?An alternative empirical test’, Strategic
Management Journal, Vol. 17, no. 4, pp. 323–334.

Reinecke, N, Sohn, M &
Strobenreuther, H 2008, Sustainability:
The carbon imperative, Chartered
Institute of Purchasing and Supply, New York.

Vassiliou, M 2009, Historical
Dictionary of the Petroleum Industry,
Scarecrow Press, Lanham, MD.

Lydia harell 2015, otago polytechnic
Auckland International campus.