External and Internal Business Environments - ExxonMobil Corporation - Case Study Example

External and Internal Business Environments External and internal business environments Multinational corporations and other business entities around the globe comprise of two environments; the external and internal business environments. These environments may serve to enhance the performance and competence of the corporation as well as causing a diminishing level of performance, in direct response to the application of the environmental factors. The competitive and general factors are salient components of the external environment, whereas the internal environment entails the company’s resources, management, and leadership practices (National Research Council U.S, 2010). Since the amalgamation and formation of The ExxonMobil Corporation, growth has been significant and implicit to the outstanding performance and competence in the petroleum field of business. The market leadership performance is relative to investment initiatives by the corporation to improve on the environmental factors with the aim of propulsion towards achieving the target objectives (Cooper, 2006). The following entails Exxon’s general and competitive forces, the future forecasts, the opportunities and threats, strengths and weaknesses and the company’s vale prepositions emanating from the key competences. The economic and technological segments of the general environment in reference to the Exxon Corporation The multinational corporation ranks first among the six petroleum giants across the globe. The continuous performance and unchallenged growth emanates from the direct and successful investment of the corporation’s surplus revenue. In close relation to the investments, the corporation values the other segments in the general environment, for example investing in community welfare programs and initiatives that focus on creating environmentally friendly programs (Hogan & Sturzenegger, 2010). These attributes are propellants to the skyrocketing demand with the corporation investing heavily to the required supply and cater to the demand. The future prospects in relation to inclination of demand and supply of oil products signify a state of inelasticity as the forecasted population by the year 2040 shall total at 9 billion, a factor implicating the demand of fuel and energy. With these forecasts, the corporation insists on a continuous investment program in revamping the petroleum projects throughout the affiliated companies (Cooper, 2006). The petroleum field of production is sensitive to technology in resolution to the growing urge of environmentally friendly programs. With the increased threat of global warming, the world reflects emphases on industrial operations and goods that cause little or no harm to the environment. The ExxonMobil Corporation forecasts on the future use of energy in accordance to the increased population. Therefore, the corporation indulges in a continuous technological improvement to produce enough of the required petroleum products (Hogan & Sturzenegger, 2010). Production of alternative energy products that reflect to the general environment is the key to Exxon’s penetration to other global economies despite the political, legal, social and cultural constraints. The essence is that the economic and technological approaches of the corporation are implicit of the inclined performance of the multinational’s operations and competence. Forces of competition In accordance to Michael Porter’s competitive forces analyses, the main factors of consideration in relation to competition reflect on the new entrants in the market, extent of substitution, the power of buyers and suppliers, and the existing relations among the present competitors. The petroleum industry stands vulnerable to the threat of competition forces. With the increased demand of petroleum products, manufacturers result into production of bio-fuels to supplement the crude oil levels and production capacity. This factor implicates to the threat of substitution of the crude by the bio-fuel as well as creating a platform of new entrants into the market. The resulting outcome is that the existing petroleum producers may find the situation very challenging in that the shift of production from mining to farming of the bio-fuel crops may cost a fortune while implicating a stature of earning economies of scale for the new entrants. With demand and supply reflecting the most important factors in the theory of production and creation of utility, the increasing population reflects to increased demand whereas the price inelasticity relates to the diminishing levels of mines despite the increased rivalry with the urge of survival (Cooper, 2006). The ExxonMobil Corporation bases a competitive background in the U.S.A which is the world’s second largest consumer market. The company has over the years led in the global production of oil and petroleum (Hogan & Sturzenegger, 2010). However, these facts do not implicate a surety that the corporation shall predominantly rein as the global market leader. The increased rivalry of the key petroleum producers reflects a significant threat to Exxon Corporation. Therefore, the multinational realizes that the only advantage is indulgence into technology and investment in research and development programs, which will reflect on positive future forecasts. Exxon invests heavily in the technology as the approach will serve to drive away unnecessary threats and lead to the production of environmentally friendly petroleum products (National Research Council U.S, 2010). These practices are significant to profitable performances as the energy consumers are gradually seeking environmentally friendly options. The resulting factor is that Exxon Corporation invests heavily on technology to bolster production to an inclined level and to competitively meet the growing demand in different consumer markets. Exxon’s approach in yielding positive performances from the forces The company connotes competitive rivalry as present and stiff in the petroleum industry. To counter the rival competition, Exxon initiates a continuous investment program in the oil, and gas fields of production. Further, the corporation estimates on the continuous threat of diminished levels of oil basins, reflects on increased competition, and establishes the need for reserves (Hogan & Sturzenegger, 2010). Over the past two years, the corporation reportedly reserved 24.9 billion barrels of fossil fuel. This approach serves in ensuring future certainty of the corporation, which possesses a stake of refining and producing in over 20 countries across the globe. The competitive advantage held by the corporation is that its 36 refineries are capable of producing a daily yield of over 6.2 million barrels. The company further diversifies investments into the gas stations with a total of 25,000 outlets in over 100 countries globally (Cooper, 2006). The tactical approach to the competitive force is significant to the market leadership ahead of the Royal Dutch Shell plc, B.P plc, and Chevron Corporation. The second major force threatening the Exxon Corporation is the power of buyers and their influence to the level of demand and prices. The multinational corporation produces and explores in over 20 countries and realizes variations of production costs at the long run. From the cost variations, Exxon predicts on the future forecasts on possible reactions of the buyers in accordance to the set prices of the petroleum products. The research is significant to the actual satisfaction of different buyers despite of their differences in value perceptions globally. Therefore, Exxon’s consideration of buyers as of salient value in the competitive environment is attributable to the investment in value prepositions that simultaneously implicate on the increment of market share. Exxon’s opportunities and threats in the petroleum industry As a multinational corporation, the petroleum firm expands and operates profitably in over 100 countries globally. Exxon relies on various opportunities that reflect on the profitable outcomes in most of its business ventures. The corporation is dominant in the U.S.A, China, and India, which are the world’s greatest consumer markets. This strategic approach serves as a shield against the threat of competition as the corporation is financially capable of tackling any threat that would short live its market superiority (Hogan & Sturzenegger, 2010). The corporation further relies on the reduced use of coal as a source of energy, which accordingly paves way for the demand of liquid petroleum gas. Lastly, the privatization of the corporation attracts more capital intensive investments from global shareholders. The continuous performance of the corporation is attributable to attraction of its equities in the global exchange markets. This factor enables the corporation to invest in other capital intensive projects in the petroleum industry. However, the corporation’s endeavors and the zeal to succeed meet hindrances from the business environment. For example, the economic crunch that dominated America since 2008 to the present day posed a threat to the company’s operations bearing in mind that America is the parent country of corporation (International Energy Agency, 2005). On a different phase, environmental regulations often halt or imply on increased cost of production thus forming an obstacle to success. Thirdly, the corporation suffers the threat of foreign exchange fluctuations against the dollar, which reflects as the parent currency (National Research Council U.S, 2010). To counter these threats, the company has franchised and amalgamated with other companies in order to produce profitably. It further budgets for environmental conservation programs in all the fields of operation (Cooper, 2006). The corporation holds all subsidiaries under its mandate in order to propel competence across them. Exxon’s strengths and weaknesses and significant strategic approaches ExxonMobil enjoys more a than a two-decade long supremacy in the petroleum industry. This attribute reflects further to the unchallenged financial performance of the corporation (National Research Council U.S, 2010). The two factors ignite Exxon to a higher platform of competence as the financial capabilities bolster the corporation’s approach in diversifying investments. Throughout the corporation’s rein in the petroleum industry, success posts as target aim of the long-range plans, and has reflected on a steady revenue stream throughout its investments (Hogan & Sturzenegger, 2010). It further invests in research and development programs, which are the key to enhanced performances and acceptability in the environmentally friendly markets. Exxon falls prey of other key weaknesses in the business operations it conducts globally. For example, it has fallen into environmental tussles over oil spills with the “Gulf of Mexico” spill posing as the major one. These hindrances reflect on reduced advancements into new exploration fields, as well as aggression to new markets. As a multinational corporation, Exxon suffers the aggression and unrest of employees across its global investments, which may affect performance at the long-run (International Energy Agency, 2005). Lastly, Exxon suffers the economic underperformance due to the American dollar fluctuations (Sander & Slatter, 2009). The corporation initiates a strategic approach in handling the different weaknesses in order to achieve the set goals, and responsibilities. The corporation initiates a balanced salary approach of the all the employees and the application of transfer in order to ensure that the employees experience different situations at equated remunerations thus resolving to work for the benefit of the organization. Exxon’s resources, capabilities and core competences Since the corporation’s orientation majors from the field of extraction to the end result of petroleum production and delivery, it employs different entities to run the each unit at different levels. Exxon Exploration Company is mandated to explore and extract fossil fuels. Currently, the unit holds a 61 million acreage with at least 71 billion barrels. Further, the company owns the ExxonMobil Development, and ExxonMobil production exercise the mandate to engage on extraction programs and produce respectively (National Research Council U.S, 2010). The corporation owns gas and power marketing subsidiaries, which serve to avail the products to the global consumer. Lastly, ExxonMobil Upstream Research majors in digital survey programs in order to collect relevant data, which steer performance of the entire organization (Hogan & Sturzenegger, 2010). These capabilities serve to steer the corporation ahead of other petroleum giants, for example, Royal Dutch Company, B.P Company and Shell. The value held by Exxon is a competitive edge and diversified investments, which create steady revenue ahead of other competitors. Exxon’s value chain emanating from the resources and core competences With the corporation owning a vast number of refineries globally, it boasts over the some of the world’s competent brands of Esso, Mobil, and Exxon. The corporation owns over 25,000 fuel stations in over 200 countries globally. Because of the technological investments endured on by the corporation, global consumers readily accept Exxon’s products, as they are environmentally friendly and fit for the purpose. Its entry to the Asian market cost a fortune as the target demand is relatively high (International Energy Agency, 2005). The corporation stands firm from competitive threats as it seizes early opportunities to enter new markets, which inhibit the ease of entry by new competitors. References Cooper, R. G. (2006). Product leadership: Pathways to profitable innovation. New York, NY: Basic Books. Hogan, W. W., & Sturzenegger, F. (2010). The natural resources trap: Private investment without public commitment. Cambridge, Mass: MIT Press. International Energy Agency. (2005). Resources to reserves: Oil & gas technologies for the energy markets of the future. Paris, France: International Energy Agency. National Research Council (U.S.). (2010). Selling the nations helium reserve. Washington, D.C: National Academies Press. Sander, P. J., & Slatter, J. (2009). The 100 best stocks you can buy 2010. Avon, Mass: Adams Media. Read More