Exxon Mobil Corporation - Analysis of the Companys Progress - Assignment Example

EXXON MOBIL CORPORATION By Mahmoud Khaled International Business Emerging Markets Paladini , Stefania Of Liverpool Exxon Mobil CorporationBrief description of Exxon Mobil Exxon Mobil Corporation is an American transnational company that deals with gas and oil and its headquarters are situated in Irving, Texas in the United States. It was established on November 30, 1999 after the amalgamation of Mobil and Exxon. By revenue, Exxon Mobil is the largest company and the second-biggest publicly traded company by market capitalization. It is the largest of the global super-majors with daily production of more than 3.921 million BOE. As of 2008, this was relatively 3 percent of the world production (Warner & Marsden, 2014). The company announced strong first quarter earnings featuring 3.5 percent consolidated volume growth. The emerging market accelerated growth of its international business, which were up 4% LFL. In June 2014, the company planned to invest $20 billion in a gas-fired power complex in Vietnam. In its planning, the company recognized the need to create a partnership with a host well-known company in Vietnam in an attempt to sell its products in this emerging market. It, therefore, collaborated with Vietnam’s state-owned petrol Vietnam. It erected two power plants with a capacity to produce between 6000 and 6500 megawatts of power. In this perspective, the company focuses on capturing the gas and oil market in Vietnam through provision of cheaper prices and diversified oil and gas brands (Regester & Larkin, 2014). It proposed to position its operation in 700 locations and several retail operations. In addition, the strategy aims to present its brands closer to consumers and therefore making its brand most accessible products in Vietnam. Environment of Emerging Markets (Vietnam) Vietnam is one of the top five developing nations in Asia. It has a robust middle class, a crucial driver of economic expansion in a developing country. It is valid to argue that middle class mainly supports the policy change significantly to the success of the country and in supporting capitalist democracy. The country has the fastest-growing middle class in the whole Southeast Asia and is expected to double in size from 12 million (2014) to 32 million by 2020. Generally, Exxon Mobil was experiencing various impending challenges in Vietnam such as complex foreign investment laws, corruption in infrastructure projects, lack of comprehensive and transparent legal system and restricted land usage rights (Plunkett, 2014). However, Vietnam is currently undergoing trade liberalization through negotiations toward a free agreement with the European Union (Van Dyke, et al., 2014). The negotiation presents viable market to Exxon Mobil since its objects to stimulate investment and trade through the reduction of tariff and elimination of trade barriers. Energy (oil and gas) industry is a major priority sector in the country. Actually, Vietnam is third largest oil producer in South East Asia. Vietnamese culture accentuates more with a status that is obtained with an education and age. Although the younger generation adheres to the traditional hierarchical family structure and values, they are somehow financially autonomous and capable to make their own decisions (Obrien, 2014). Young people are the majority in the Vietnam and present the market for Exxon Mobil products. The cultural political and legal environment of Vietnam An important element towards the success of a company is based on the ability of the company to respond to the external environment affecting the company. The political cultural and legal environments are important elements with regard to the success of any business organization in respect to the external factors that may be critical towards the success of a company. In this case, the same situation also applies to Vietnam. Vietnam has earned great strides towards establishing a stable political environment in comparison to the instability that was rife in the country to the war that was halted in the year 1975 (BBC, 2014). Vietnam is a one party State that is made up of a unilateral government which integrates the various sector of the economy to support both global and economic growth (Gainsborough, 2002 pp. 697). As a result, the political situation in the country is viable with regards to encouraging local and external investments in the country. Although the economic growth of the country can be perceived to be in its infant stages the political stability has facilitated a growth in external investments with the United States being the key external investor (BBC, 2014). Therefore, the ability of Exxon Mobil to establish itself will be high due to the enhanced political relations between the Vietnam and foreign companies especially from the United States. Nevertheless, regardless of the existence of a stable political environment, the Vietnam government is intolerant towards rampant criticism (BBC, 2014). Therefore, criticism of the government policies may put organizations or individuals in the middle of a turbulent political environment. Consequently, Legal environment in Vietnam is highly dependent on the stability of the political environment. Over the years the Vietnam laws have been rigid and very restrictive of the entrepreneurial culture from foreigners or local investors (Lee, 2013). Nevertheless, the Vietnam’s legal structured is slowly being reviewed to facilitate the entrepreneurial culture within the country. In this case, the most relevant laws with regard to the existence of Exxon Mobil in Vietnam are the Enterprise laws and the energy laws. The enterprise laws of developed in 2005 were structured to ensure that all business organizations ensured they complied with corporate governance laws and emphasized on risk management (Vietnam oil and gas group, 2014). Therefore, organizations that comply with the enterprise laws should ensure that constant risk management is part of the company’s activities. On the other hand, the energy sector receives the Avoided cost tariff which in order to enhance production of energy. In this case, the legal framework creates these incentives in order to encourage the growth of the industry among investors such as Exxon Mobil. On the other hand, the Vietnamese cultural environment is critical towards Exxon Mobil’s adaption in the Vietnamese market. The Vietnamese culture establishes a great significance towards families and groups. The responsibilities of individuals in Vietnamese are usually influenced by community groups (Kwintessential, 2014). In this case, this would play a great role in the company’s market identification and segmentation strategies. This is due to the fact that market sampling would greatly reflect the prevalent market preferences in the country since a sample of the population may portray the major preferences within the relevant communities. On the other hand, etiquette and reputation plays a major role in the relationship between the residents of Vietnam and foreigners. Since reputation is a common virtue in the Vietnam’s culture, most Vietnamese observe the conduct of people closely which means it is easy for an individual to ruin his or her reputation (Kwintessential, 2014). Therefore, a ruined reputation would be detrimental to business organizations especially from foreign companies. Analysis of the company’s progress in the Vietnamese market Based on the fact that Exxon Mobil has yet to establish itself into the Vietnamese market most of the analysis on the company performance in the market can be based on prospects within the market. Most of the Exxon Mobil’s activities in the Vietnamese market have been based on exploration of prospective oil mines (Meirbrugger, 2010). However, as at 2014 the company has entered into an investment agreement with the government of Vietnam which includes setting up a power plant that would produce up to 6,500 Mega Watts (Meirbrugger, 2010). With regards to the energy sector in Vietnam the hydro electricity potential in the country is 20,000 Mega watts (Reegle, 2012). Therefore, the position of the Exxon Mobil Company in the country is significant based on its stake in the prospective market. This is due to the fact that the amount of power that will be generated will be more than a quarter of the power potential in the country. The proposed investment by Exxon Mobil is worth 20 billion dollars (Meirbrugger, 2010). This shows that the Exxon Mobil Company has rapidly grown from exploiting potential oilfields in the country to partnering with the government of Vietnam as an investor. Moreover, the development of the 20 billion dollars energy project will elevate the status of United States companies to be among the top four investors in Vietnam (Meirbrugger, 2010). Similarly, the progress of Exxon Mobil in Vietnam can be compared to certain sectors of the energy industry in the country. For instance, the estimated net worth of the nuclear industry in Vietnam is 20 billion dollars (Nuclear energy Institute, 2014). Therefore, whereas the investment of Exxon Mobil is within a different segment of the energy sector, the significance of the company’s progress can be established by the fact that its investment is worth the nuclear sector in the country. Organization Strategies For Exxon Mobil In Vietnam Exxon Mobil conducted a deep research in the emerging market to evaluate the viability of the company in a new market, political and legal compliance and the appropriate entry strategy among other factors. Its collaborative strategy with a state-own company has been effective in this emerging market. It presented products and solutions tailored to the values and priorities in the emerging market. Exxon Mobil also recognized the need to build a local workforce that responds to more sophisticated local consumers (Regester & Larkin, 2014). It appreciated the change of the foot and identified the fundamentals of modifying their existing global talent frameworks to permit for local customization. To secure its existence in Vietnam, it deployed strategies designed to enhance flexibility through opening the flow of ideas among markets and deliver localized approaches. Exxon organizes reward strategies that include differing market values, among other retention strategies in an attempt to maintain its competitiveness in terms of attracting qualified and skilled workforce. The company has an internal philosophy of greater openness and respect for perspectives and innovations that originate in its area of operation. Factor input in the company is innovative and involves technological creativity in nature (Van Dyke, et al., 2014). The strategy involved in Exxon Mobil is flexible and of a quality which creates uniqueness and product differentiation in its production. Exxon Mobil Corporation is using its various brands and participation in many segments and other competences of the company to utilize the differentiated strategy. Exxon Mobil is doing well in Vietnam since it has successfully achieved a greater comparative advantage over other energy companies. Although it experienced threat of the entrance in the emerging market, its collaborative strategy was a well-defined program that assures the existence of the company in Vietnam (Coll, 2014). Its international business revenue has increased by 3.7%, according to its quarterly report, possibly due to the establishment of Exxon operations in Vietnam. However, the company is facing serious challenges in trying to secure a competitive advantage in Vietnam due to intense competition from host rivals. Most of these rivals have large production units, while others are subsidiaries of OPEC. It gives them power to manipulate the oil and gas industry in terms of price and quantity. Evaluation of the company’s strategy The major strategy used by Exxon Mobil can be presumed to be a market penetration strategy. This strategy is effectively facilitated through collaboration with the government of Singapore (Miller, 2014). The partnership with the government’s owned corporations is a critical strategy based on the significant role of the government with regard to controlling the energy sector. Based on the political environment of Vietnam it is evident that the government promotes foreign investment in order to facilitate economic growth. Hence, the partnership between the government and the company will enable the company to not only establish itself but also exploit the governments backing in order to enhance growth. Additionally, based on the partnership with the government of Vietnam it is evident that the company aims to establish a long term business venture in the market. Based on the fact that Vietnam is an emerging market, the activities of Exxon Mobil in Vietnam are meant to have a firm grip on the market based on the prospective. In this case, since the rate of growth of Vietnam is expected to be rapid in future, the essence of Exxon Mobil to Invest in Vietnam due to the fact that at this stage there is little competition in the market. Therefore, at this stage the company will be able to form a stable market base. It is expected that by the year 2020 the number of middle class citizens in Vietnam will have doubled. It is noteworthy, that the middle class citizens in Vietnam entail the major consumers of the country’s products and services (Kohli, 2014). Therefore, Exxon Mobil’s strategy seems to be a viable venture since it will achieve its long term goals if it haves a firm grip on the middle class market at this stage which will enable it to become a market leader in future as the expected population increase of the middle class citizens in Vietnam takes effect. The strengths of the company’s business strategy can also be analyzed through its timing game plan. Whereas, Exxon Mobil can be perceived to have initiated its investments in 2014, the company began its investment plans prior to the investment partnership with the government. The company had previously explored various oil wells in the country and established the relevant oils that had the appropriate amount of oil and gas that had commercial value. Nevertheless, the company refrained from exploiting the wells and waited for the appropriate time to launch its long term project (Miller, 2014). Therefore, based on the fact that the economy of Vietnam is picking up and the level of government support for foreign investment is favorable, the company decided to start its investment in the year 2014. Therefore, the company’s strategy can be established to be viable to the ability to integrate perfect timing in order to achieve the long term objectives of penetrating the market. Reference: BBC. 2014. Vietnam profile. Available from [5th December 2014]. Coll, S. 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