Principles of Managerial Finance - Essay Example

? TOTAL SA April 22, Financial Report Chief Executive Officer TOTAL SA Company Introduction TOTAL SA Company is engaged in the petroleum business. The research delves on TOTAL SA Company culture. The research delves on the company’s marketing, operations, supply chain, knowledge management strategies. TOTAL SA Company must profitably implement its current strategies. Corporate Structure TOTAL SA is established as a corporation (Noreen, 2008). A corporation is composed of more than five persons. The corporation is composed of investors. The investors expected to generate cash inflows from their investments in TOTA SA Company. The investors generate dividends from their investments. Investors receive dividends based on the prior year’s net income performance. With higher net income, the investors will automatically receive higher dividends (Warren, 2009). Further, the investors can also generate gains from the selling of their TOTAL SA investments (Crosson, 2011). If the investors are able to sell their investments at a bid price that is higher than the investors’ cost of investing in the TOTAL SA stocks, the investors generate gains. When economic depression or unfavorable economic constraints crop up, the investors may be persuaded to sell their investments in TOTAL SA investments at prices at an amount that is lower than the investment price. When this occurs, the investors generate stock exchange losses (DuBrin, 2009). TOTAL SA Company’s structure in relation the organisation’s goals, aims and objectives. The TOTAL SA organisation structure fittingly enhances the accomplishment of organizational s goal, aims and objectives (Daft, 2011). With more investors, the amount of investment is higher. The investors’ money plus TOTAL SA Company’s use of long term loans increase the amount of assets. The TOTAL SA Company maximizes the total assets to generate revenues (Weetman, 2006). Further, the stockholders’ investments and loans ensure accomplishment of the company’s goal, aims and objectives (Ferrrell, 2010). The company is able to establish oil and natural gas exploration development contracts in different strategic locations around the world. The cash inflows from loans and stockholders’ investments are successfully used to refine petrochemicals. The same finance amounts are used to manufacture the chemical product needs of the TOTAL SA Company’s current and future customers (Nutt, 2010). Specifically, the TOTAL SA Company specicalises in selling elastomer-based products (Total, 2012). The company also sells adhesive products. Another major product of TOTAL SA Company is classified as electroplating items. The bulk of the company’s profitable products falls under the petroleum market segment. The investments are used to foster company’s trading and shipping of petroleum chemical finished goods (products). Moreover, the investments and loan amounts are used to sell the finished goods (Baumol, 2009). The raw petroleum extracts are processed into finished goods. The TOTAL SA Company finished goods include the top selling Liquefied Petroleum Gas products. Another finished product is home heating gas. A third finished product is asphalt petroleum products. The fourth finished good type, asphalt, is used in the paving of the highways and smaller roads. The fifth finished good classification, lubricants, is a very popular lubricating product group (Total, 2012). Further, the investments and loans are used to generate a big share of the global energy market segment. The funds are used to realize generating an increase of 2.5 percent production output every year (Total, 2012). The funds are used to maximize the company’s scarce asset resources. The scarce resources are used to expand the oil production facilities (Fabozzi, 2011). The company continues to set up new oil production facilities in new oil fields. The investments and loans are used to quickly set into motion cost reduction activities. With cost reduction, the company’s net profit aims, goals, and objectives are achieved with flying colours (Melicher, 2011). Additionally, the stockholders’ investments and loan amounts are used to fund new global oil extraction sites. In 2012 alone, the company was investing $20 billion in the company’s upstream activities. The success of the company in the oil and gas market segment is grounded on technology. The company’s expertise in locating future oil extraction sites is one of the company’s best technology secrets. In 2011, the company acquired the Pasflor oil field. The TOTAL SA Company was able to successfully segregate gas and the liquid components of the Pasflor water bed oil field. The oil source was located 800 meters below the sea’s water surface. Further, the TOTAL SA Company’s projection is that the word will continue to be dependent on fossil fuel for a very long time. With this projection firmly embraced by TOTAL SA Company, the company continues to search for new oil fields. The company continues to create partnership links with interested oil research and development partners. The company’s projection indicates that tight gas, coal bed methane and shale gas sources are projected to reach 788 trillion meters. The International Energy Agency estimates that the entire world’s total future output will reach an estimated 1,550 trillion meters. Furthermore, the company will use the stockholders’ investments and loans to focus on bold and persevering large-scale oil product prospects. The future sources of petroleum products include a repetition of the successes of 2011. In 2011, TOTAL SA Company was able to fund a new petroleum extraction site in Azerbaijan. The company was also fruitful in establishing the Bolivia petroleum facilities in the same year. TOTAL SA Company had profitably started its petroleum extraction operations in French Guiana. The 2012 and future year’s exploration activities will replicate the 2011 new petroleum source discoveries. TOTAL SA Company allocated $2.5 billion investment and loan amounts in 2012, 18 percent higher than last year’s budget (Total, 2012). TOTAL SA Company’s Culture The organisations’ culture is profit-oriented. To increase profits, the TOTAL SA Company embarks on the global expansion priorities. The company’s focus is to increase revenues. Increasing revenues precipitates to higher net profits. To increase revenues, TOTAL SA Company focuses on seeking new petroleum resources. The new petroleum sites will augment the current petroleum sites. The expansion sites will replace the dwindling black gold supplies of the company’s current oil production fields (Total, 2012). To continue the company’s profit-oriented culture, the company enters in strategic partnerships. In Australia, TOTAL SA Company entered into a synergy-based partnership with Japan’s INPEX. The partnership centered on profitable Ichthys venture. The Icthys venture generated 8.4 million metric tons of LNG products. The same venture contributed 1.6 million metric tons of LPG annually. The same venture produced 100,000 barrels of condensate a year until 2016. TOTAL SA Company signed a strategic partnership agreement with Russia. The Russia partnership focused on the profitable Yamal LNG project. TOTAL SA Company’s strategic partner in the Russian environment is Novatek Company. The TOTAL SA Company owns a huge 14 percent equity interest share in the Yamal LNG venture. The Yamal LNG venture is projected to generate a profitable 15 million metric tons of LNG annually (Total, 2012). Further, the profit-based culture focuses on enhancing current marketing and production activities. The TOTAL SA Company aims to increase funds allocated to increase the visibility of marketing the company’s petroleum-based products and services. The TOTAL SA Company aims to increase the performance outputs of both the marketing and production activities. Furthermore, the company’s profit culture includes enhancing the company’s refining activities and chemical production activities. The company aims to take advantage of its synergies. The synergies include improving the current refining facilities. With better refineries, the quality of the Petroleum finished goods (products) is increased. The focus includes improving the petrochemical production quality of the company’s finished goods. To ensure success in the two activities, TOTAL SA Company finally decided to combine the two activities, refining and chemical production (Total, 2012). Moreover, improving the company’ marketing and supply chain prerogatives will ensure a projected increase in the demand for the company’s products and services. TOTAL SA Company’s profit culture includes optimising the production outputs of the current and future petroleum extractions sites. Specifically, TOTAL SA Company will optimize the production performance of its mature regions. The optimisation of petroleum facilities includes increase the petroleum research and development presence in Asia. The optimization also includes reassigning investors’ funds and loan amounts finding more petroleum sources in the Middle East areas. TOTAL SA Company allocates stockholders’ investments and loan amounts to acquiring and maximizing large scale petroleum facilities. Large scale petroleum –related facilities’ investments will boost the company’s global competitiveness (Total, 2012). For example, the company’s large scale facility investments are strategically positioned. One such large scale facility is found in Antwerp, Belgium. Another large scale facility is found in Confreville, France. A third such large scale facility is located in Port Arthur, Texas (United States). Another large scale facility is found in Jubail, Saudi Arabia. Lastly, TOTAL SA Company has a large scale facility in Daesan, South Korea (Total, 2012). Other TOTAL SA Company Relevant Information The TOTAL SA Company enforces ethical standards in all its global facilities (Transjo, 2008). In some countries, oil companies were urged to withdraw from places where ethical standards were found wanting. Burma was classified as one country were ethical standards are not very popular. Total was urged to withdraw its investments in Burma. TOTAL SA Company refused to adhere to the talks to divest investments in Burma. TOTAL SA Company reasoned that another oil company will take the place of TOTAL SA Company in Burma if TOTAL SA Company will pull out from the Burma (Myanmar) territory. TOTAL SA Company fears that the next oil company may not uphold ethical standards in Burma. Thus, TOTAL SA Company will continue its business in Burma as a symbol of ethics in the Asian country (Levant, 2011). Further, the TOTAL SA Company’s knowledge management policies ensure it achieves its goals, aims and objectives (Abele, 2008). The company’s expertise in the global petroleum market segment ensures all future activities will repeatedly generate high current and future customers in new market segments. The company’s expertise in refining and chemical production ensures the current and future customers will continue to patronize the TOTAL SA Company petroleum products and services. Furthermore, the TOTAL SA Company’s operations management priorities are geared towards increasing revenues (Hill, 2011). The company strategically set up facilities in several countries to increase the global demand for the TOTAL SA Company’s petroleum products. The petroleum facilities generate enough petroleum products to fill the needs of the current and future global customers. The company’s production and marketing activities ensure there is ample supply of LPG, gas, and chemical products filling the TOTAL SA Company stores located around the world (Kotler, 2006). Moreover, the TOTAL SA Company’s marketing efforts are focused on enforcing the four P’s (Buttle, 2009). The company produces quality petroleum products. The company also sells several innovative products. One of the innovative products is the total concept car. The car uses lesser gasoline and other petroleum amounts. With lesser gasoline expenses, there will be an increasing demand for the petroleum saving TOTAL SA Company car. The TOTAL SA Company sells the products are reasonable prices. The company promotes the many advantages of using the TOTAL SA Company’s products and services. The company sets up petroleum branches in many countries in order to fill the current and future global customers’ petroleum products and services (Fisk, 2006). Likewise, the TOTAL SA Company caters to the needs of the current and future customers. The company fills the LPG needs of world’s homes and businesses. The company fills the asphalt needs of the world’s road constructors. The company supplies the gasoline needs of the world’s car and other vehicle owners. The company sells other chemicals to the current and future global clients (Czinkota, 2007). The company introduces innovation as one of the secret ingredients to the success of the company’s products and services (Etzel, 2001). To set the company apart from the petroleum market segment competitors, TOTAL SA Company strives to meet the expectations of the company’s current and future global clients. The company’s petroleum products’ many advantages include its energy efficiency. The current and future global customers will use lesser quantities of TOTAL SA Company gasoline and other petroleum products when compared to using the competitor’s products and services. Additionally, the company consistently engages in research and development activities (Rix, 2007). The activities focus on determining the current and future demands of the global target markets. The company uses the current and future global customers’ feedbacks and recommendations in continuing research and improvement activities. The company continues to sell its petroleum products at prices that are equal to or slightly lower than the prices of the competitors. One of the new gasoline–saving TOTAL SA Company products is the Excellium Diesel car. The car uses gasoline friction to run. With lesser friction, the vehicle users will use lesser gasoline to reach from one location to another location. With less friction, the care emits lesser polluting exhaust smoke emissions. Effect of above profit culture of TOTAL SA Company The TOTAL SA Company successful achieved its profit culture’s goals, aims, and objectives. One way to determine whether the company was able to achieve its goals, aims and objectives is to scrutinised the company’s actual business operations. Analysis focuses on the prior year’s accounting periods. The analysis focuses on the three major accounts of the TOTAL SA Company income statement. The first major account is the income statement’s revenues account. The revenues account is sometimes called the sales account. The second major income statement account is the costs, expenses and costs, and taxes. The third major income statement account group is the net income account (Gitman, 2008). Sales. Table 1 shows that during the first half of 2011 and 2012, TOTAL SA Company generates high revenue outputs. The 2011 first half of the year sales is € 91,038 million. The 2012 first half of the year sales is € 100,303 million. The 2012 sales output is higher than the 2012 sales output by € 9,265 million. The sales analysis clearly shows that TOTAL SA Company’s first half of 2012 sales performance is better than the first half of 2011 sales performance (Total, 2012). Table 1 Total SA Financial Statement Analysis                       1st half   1st half   Variance     millions of euroes   2012   2011         Sales € 100,303 € 91,038 € 9,265     costs, expenses & Taxes   95,015   84,188   10,827     Net Income € 5288 € 6850 € -1,562                     Costs, Expenses, and Taxes. Table 1 indicates that during the first half of 2011 and 2012, TOTAL SA Company generates high costs, expenses, and taxes. The 2011 first half of the year costs, expenses, and taxes output is € 84,188 million. The 2012 first half of the year costs, expenses, and taxes output is € 95,015 million. The 2012 costs, expenses, and taxes output is higher than the 2011 costs, expenses, and taxes output by € 10,827 million. The costs, expenses, and taxes analysis clearly shows that TOTAL SA Company’s first half of 2011 costs, expenses, and taxes performance is better than the first half of 2012 costs, expenses, and taxes performance (Total 2012). Net Income. Table 1 signifies that during the first half of 2011 and 2012, TOTAL SA Company generates net income outputs. The 2011 first half of the year net income output is € 6,850 million. The 2012 first half of the year net income output is € 5,288 million. The 2011 net income output is higher than the 2012 net income output by € 1,562 million. The net income analysis clearly shows that TOTAL SA Company’s first half of 2011 net income performance is better than the first half of 2012 net income performance (Total, 2012). Recommendations It is highly recommended that TOTAL SA Company will continue its current marketing and management courses as follows: The above income statement proves that the current marketing strategies contributed to the company’s net profit performances during the first half of 2011 and the first half of 2012. Further, the company must continue its current operations management activities. The current operations management policies contributed to the TOTAL SA Company’s net income profit performances during the first half of 2011 and the first half of 2012. Furthermore, the company must continue its supply chain management strategies (Weetman, 2006). The current operations management policies aided in the TOTAL SA Company’s net income profit performances during the first half of 2011 and the first half of 2012. Lastly, the company must continue its current operations management activities (Total, 2012). Lastly, the current knowledge management policies contributed to the TOTAL SA Company’s net income profit performances during the first half of 2011 and the first half of 2012. The company’s expertise in oil research ensures its leadership in the petroleum market segment. The company’s knowledge of how to create strategic partnerships (Fernandez, 2010) contributes to higher revenues. The company’s knowledge on how to generate products that fills the demands of the customers will increase the company’s product popularity. Moreover, the income statement analysis clearly shows that the recommendations are based on actual performances (Crosson, 2011). The TOTAL SA Company’s 2011 and 2012 first half financial statements clearly indicate that the company’s recommendations are grounded on available stockholder investments and loans. With bigger stockholders’ investments and loan amounts, the recommendations can be achieved within lesser time period. Specifically, the maximum amount that can be used for expansion activities is equal to the total asset amount for the first half of 2012, € 170,619 million. The total asset amount is equal to the total stockholders’ equity amount € 73,359 million and total liabilities amount € 97,260 million. Conclusion Based on the above discussion, TOTAL SA Company is engaged in selling products in the petroleum business. The research indicates TOTAL SA Company implements a profit-based culture. The research proves the company’s marketing, operations, supply chain, knowledge management strategies are contribute to the achieving the company’s goals, aims, and objectives. Evidently, TOTAL SA Company must profitably implement its current strategies. References: Abele, E. 2008, Global Production, Springer, London. Baumol, W. 2009, Macroeconomic Principles, SouthWestern Press, London. Buttle, F. 2009, Customer Relations Management, Elsevier, London. 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