Strategic Management of Chevron Corporation - Case Study Example

? Strategic Management of Chevron Corporation Table of Contents Overview Market Analysis……………………………………………………………………..1 Community Analysis………………………………………………………………...1 Competitor Analysis…………………………………………………………………2 Supplier Analysis……………………………………………………………………..2 Government Analysis…………………………………………………………………3 Opportunities………………………………………………………………………….4 Weaknesses……………………………………………………………………………5 Social Environmental Factors…………………………………………………………6 Strategic Management of Chevron Corporation Overview Chevron Corporation is an American multinational corporation. It is among the top five integrated energy companies globally. It specializes in the oil and gas industry. It is involved in the exploration and production of crude oil and natural gas, refining and transportation of crude oil and natural gas and manufacturing of petroleum products. Its headquarters are in San Ramon, California. The company’s total production and reserves were 1,008.5 MMboe and 10,544.8 MMboe in 2010, respectively (Global Data, 2011). Market Analysis The company has a strong global market. It offers diversified products which strengthen its market base. Due to its strategic planning and technological advancements, it is the second largest integrated energy company. As a multinational energy corporation, its products are marketed across the globe. Its strong market base will continue to grow due to increased demand for oil. The world depends on oil and Chevron makes oil available to its consumers. Community Analysis The company has established an extensive social network. It takes seriously its role across the globe. It has a strong network of retail gas stations which consist of Chevron, Texaco and Caltex. Its operations range from producing oil to manufacturing petrochemical. In countries where Chevron does business, it is a strong supporter of programs that support the community. It works with local and national governments and other organizations to provide basic human needs, education and career training, support for local businesses. It has a university partnership program which works with colleges and universities around the world to provide scholarships and grants to outstanding students. Chevron is helping most countries diversify their economies by investing in all aspects of the energy industry. It aids countries gain self reliance as it enables them produce commodities that they would otherwise import. It works closely with leaders in its operational countries to select social infrastructure projects for funding such as schools, hospitals and electrical projects. The company works to add value to businesses and communities around the globe. It supplies the countries with professional and versatile task forces through spreading knowledge and skills in entrepreneurship. Competitor analysis Chevron Company mainly faces competition from industries dealing with petroleum refining, manufacturing of chemicals, alternative power generation, gas stations and electrical utilities. Its main competitors are ExxonMobil, Royal Dutch Shell, ConocoPhillips, BP p.I.c. and Anadarko Petroleum Corporation. It has used strategic planning and corporate management to establish itself on top of the energy industry. Its E-business applications have greatly added to its measure of success. In the modern globalized world, the success of companies will be measured by how well they have leveraged E-business applications to beat competition (Thierauf & Hoctor, 2003). Supplier analysis Chevron has developed some of the world’s most complex crude oil fields for over 130 years (www.chevron.com). It has major capital projects aimed at establishing new resources to meet global demand. Its main sources of oil in Africa include Angola, Chad, Nigeria and the Democratic Republic of Congo. Its main oil sources in Asia include: Azerbaijan, Cambodia, China, Indonesia, Kazakhstan and Thailand. In South America, its main sources include Brazil, Argentina and Venezuela. The company is also exploring the Athabasca oil sands projects in Alberta, Canada. Other projects include 10 offshore producing fields in the UK, Denmark, the Netherlands and Norway (www.chevron.com). Government analysis The oil industry is highly concentrated and hard to get into. Mainly corporate companies have penetrated into it and achieved international recognition. It is worth noting that corporate companies invite government interest because there is a relationship between large firm size and political power (Harvey et al., 1984, p. 307; Heggestad, 1988, p. 17). The nature of that relationship determines whether it is good or bad. America has an anti-trust policy to check this relationship. Heggestad points out that successful US antitrust policy has been emulated to some degree in various industrial societies since World War II. The policy promotes fairness, competition, efficiency, and decentralization. In order to control the company’s monopoly, the government has set policies regarding oil prices. Tax policies, laws, regulations, trade restrictions and tariffs have been implemented to watch on evils that may arise from the company’s monopoly in the oil industry. Opportunities The company is crowned with opportunities arising from increasing demand for oil in China, increasing demand for liquefied natural gas, capital investments and bio-fuel initiatives. Weaknesses Weaknesses of the industry include declining sales of refined products and declining oil and gas reserves. Social Environmental factors Economic Practically, antitrust law generally prohibits monopolization while sustaining the methods and structure of entrenched oligopolistic markets, albeit in accordance with the rules of fair competition (Bowman, 1996, p. 169). Chevron Company, being part of the top five energy companies, determines oil prices. However, due to political factors across the globe, oil prices greatly fluctuate. Moreover, governments have continuously imposed laws and regulations to control ills that arise from monopolies especially in the oil industry. Chevron is among the top oil producers, holding important stakes in the biggest oil producing projects in the countries where it operates. It focuses on people, affiliations and performance. The company seeks to increase social infrastructure across the globe to maintain its strong market base. It also has affiliate social investments that add to the company’s portfolio. Chevron contributes to world economy by providing employment opportunities, engaging in business with other firms worldwide, paying tariffs and fees to state owned companies and paying taxes to the government. The company aims to strengthen global economy by offering diversified services in the energy industry. It promotes sustained economic growth through strategic planning and management. The company operates retail outlets across the globe that sell a range of products which include transportation fuel and lubricants. In most countries, it promotes health and education which are important for economic development. As a global supplier of oil, it enhances industrialization which greatly hastens development. Industrialization heavily relies on oil and Chevron fills this gap. It maximizes crude oil revenues while reducing the cost of raw materials and transportation which makes oil relatively affordable. Technology The process of innovation mostly involves complex interactions among firms and for it to succeed it must be turned towards the company’s competitive advantage (Kay, 1995, p. 96). Chevron Corp owes its great success to its technological capabilities in oil production. It implements technology with the aim of increasing productivity and reducing costs. The company is currently working to find better ways of providing the world with clean, reliable energy at affordable rates. It is also involved in technology marketing through its two main venture partners: Chevron Lummus Global LLC and Advanced Refining Technologies LP. The company uses venture capital by identifying technology advances that could strengthen core operations and lead Chevron to new opportunities for growth (www.chevron.com). Chevron seeks companies that are leading in technology to promote strategic value. Chevron Technology Ventures (CTV) enables Chevron identify and implement emerging technologies useful in its operations. It adapts new technology to create new opportunities and increase efficiency. CTV is one of the company’s most important technologies which aims to find emerging technologies for enhancing Chevron’s strategies (www.chevron.com). Chevron technology ventures involve venture capital, biofuels and emerging energies units. The company’s venture capital unit explores and makes investments in companies offering technology that Chevron finds valuable. It further facilitates other Chevron units implement that technology. Emerging energy business unit explores innovations which the company can use to produce renewable energy that will reduce carbon emissions and environmental pollution. The company also seeks to inject technology in the transportation of oil. This will greatly increase the oil capacity transported across the globe and lead to increased production. Hence, this will greatly enable the company to satisfy the increased demand of oil in industrialized countries and rapidly industrializing countries. Political-legal The importance of oil has made it a highly politicized commodity (Falola & Genova, 2005, p. 162). The company has faced major challenges in Nigeria, the largest oil producing country in Africa and Iraq, a great oil producer in the Middle East. As a great resource, “dash for oil” has led to political instability in many countries. It leads to great political contention which is mirrored in the global market. Power politics greatly affects the oil industry. Socio -cultural Oil drives the society. Socio-political and economic factors are affected by oil production. Oil producing countries are generally richer and have more political leverage than countries that do not produce oil. Chevron Corporation greatly liaises with oil producing countries. Changes in tastes and buying patterns greatly affect this relationship. The company works to promote understanding of various cultures through online exhibits which introduce various cultures to an international audience. This helps in raising awareness and cultural heritage. Chevron values protection of people and their environment. It understands that social factors such as demographic structures and sociopolitical trends influence the oil industry. Hence, it invests heavily in protecting people and the environment. The company is a promoter of community development and has various projects that capitalize on sustainable initiative. Its efforts to build stronger communities enable it to empower people to positively add to the global economy. Table 1: Socio Environmental Factors Affecting Chevron Corporation References Bowman, S. R. (1996). The Modern Corporation and American Political Thought: Law, Power, and Ideology. University Park: Pennysylvania State University Press. Chevron Official Website. 2012. “Oil: Providing Energy for Progress.” Web. http://www.chevron.com/deliveringenergy/oil/ Retrieved, April 21, 2012. Falola T., & Genova, A. (2005). The Politics of the Global Oil Industry: An Introduction. Westport: Praeger. GlobalData. 2011. Chevron Corporation, Company Intelligence Report. Nov, 2010. Web. http://www.researchandmarkets.com/reports/1991646/chevr on_corporation_company_intelligence_report. Retrieved April 21, 2012. Harvey, J. G., et al. The Impact of the Modern Corporation. Eds. 1984. New York: Columbia University Press. Heggestad, A. A. (1988). Public Policy toward Corporations. Gainesville: University Press of Florida. Kay, J. (1995). Why Firms Succeed. New York: Oxford University Press. Thierauf, R. J., & Hoctor, J. J. (2003). Smart Business Systems for the Optimized Organization. Westport: Praeger. Appendix Table 1: Socio Environmental Factors Affecting Chevron Corporation. Read More