The Performance of Exxon Mobil Corporation in the Market - Case Study Example

Macro & Micro Economics EME Proposal Introduction In the business environment, there are macro and micro factors that affect the running of the business. These factors can affect the business positively while at the same time they can affect the business negatively. The essay investigates how various economic factors have affected Exxon Mobil Corporation and the magnitude of the changes emanating from the factors. Exxon Mobil being a multinational company, slight changes in macro and microenvironment translates to significant changes in stock and market prices (Exxon Mobil Corporation, 2015). The prices per barrel of the crude oil highly affect the price of the shares of the company in the stock market. The symbiotic relationship between the macro and microenvironment of a business governs the running and management of the corporation at local and international. Below are some of the ten economic events that have affected the price of the oil barrels, as well as the price of shares in the stock market (Exxon Mobil Corporation, 2015). Event number one In 2014, the quarter four earnings per share stood at 1.56, which was a decrease from 1.91 of the previous year. In the same breath, the revenues dropped from 110.9 billion to 87.3 billion which is a considerably high decrease that affected the company negatively. The decline of the prices of the shares emanated from poor performance of the company and shareholders thought it wise to dispose the shares hence decline in the stock market value. The stock market highly determines whether companies will trade with the company, and that is why the company ended up trading at a loss because investors engaged in business elsewhere hence causing a significant negative impact to the company (ExxonMobil, 2006). The decrease in the price of the share culminated in reduced revenue taking into account that the stock market is a source income for trading companies. The decline of a share from 1.912 to 1.56 is considerably high, and that must affect negatively on the corporation. As posited earlier, stock market prices are the guiding parameters for investors who deal with the stock market. An increase or decrease of the capital markets highly depends on company’s operations. Companies that have good management and supervision will ultimately do well in the stock market compared to those that have problems in the internal environment of a business (Exxon Mobil Corporation, 2014). Event number two Revenue decrease for any business calls for alarm and Exxon Mobil Corporation is a not an exemption. A decrease from 110.9 billion to 87.3 billion is not a slight decrease for it translates to 23.6 billion. The fall is drastic and continuing with that trend ultimately leads to collapse of the business. The radical changes in the revenue collection and stock market emanate from the high cost of production. Following the trend, the company opted to slash the spending budget by 12% to get 34 billion. Through the approach, the company will normalize the operations and at the same time create the good reputation in the stock market to deter such occurrences in the future. The company achieved that through joining four dozen U.S energy producers that formulated plans to curb capital spending by approximately $ billion. Through the approach, the company would sharply reduce the stock buy backs in the near-term. The other big oil companies have applied the same principles that have worked effectively in reducing cases loss (Crude oil trading, 2014). Event number three On 5 February, Exxon Mobil Shares managed to rise the ladder by 0.66percentage to hit $92.06.The superb increase emanates from effective management and monitoring the previous loss of 23.6 billion. Difficult lessons help people to make wise decisions that deter similar problems from happening (Crude oil trading. 2014). For instance, the elongated decrease of the market price calls for alarm and, therefore, the analysts must have speculated the market trend that would favor the company. Moreover, as indicated in the previous notes, good management and reputation of the corporation promote the prices of shares o in the stock market. The public announcement that the company would cut down the costs of operation gives the investors a good reason to invest in the company. This action ultimately draws more clients to the company. In addition, when the company receives more customers, the growth rate will be very high as it receives more customers and net profits. Any bad experience arms one to wait for such experience if it happens to hit you in the future. The preparedness of the company made it possible for it to catch the market in case of an opportunity (Crude oil trading, 2014). In reference to ExxonMobil (2006), the third economic event has a close relationship with the second taking into account that the price of the shares is increasing. The New York Street Rating gave Exxon Mobil Corporation a B that is a great milestone towards promoting the reputation and productivity of the company. The shares gained up to $87.67 from1.24 in the pre –marketing trading Monday immediately after the Multinational Gas and Oil Company had a rising from the underperforming group straight to the market performing companies. The capital markets analysts on that morning raised the price from 85 to 95 on the shares of the Exxon Mobil. Furthermore, the firm noted that the stock looked expensive considering the defensive nature of that company remains weak in the entire 2015 hence increasing the rating. The BMO posited that the prices of petroleum would continue to decrease with the organization of the Petroleum Exporting Countries failing to defend the prices and the firm believes that it might be difficult before any supply moves back to the market to balance the entire situation (ExxonMobil, 2006). Exxon Mobil Corporation has taken the initiative to improve the earnings by approximately 5.6% in the recent quarter compared to the same in the previous year. The company reported volatile earnings, but it is evident that it has greater EPS growth in the coming years. In the previous fiscal year, Exxon Mobil Corporation reported decreased earnings of $7.37 compared to $9.70 in the previous years. This year the markets expect great improvement of $7.63 versus$7.37. The ultimate income in the company increases by 2.5% compared to the same quarter one year before increasing from $ 7,870 to $8,070 million (Exxon Mobil Corporation, 2015). Event number four The current XOM debt relationship to equity ratio is very low at 0.12, and it hits below the industry average rate. This means that there has been successful management of the levels of debt. In as much as the XOM debt- to- equity ratio is quite low, the quick ratio is currently at 0.55 displaying potential problem in covering the short-term cash needs. Irrespective of the drop in revenue, the company has managed to outdo the industry average rate of 6.3 %. In the previous same quarter, the revenues slightly drooped by 4.4% and the declining revenue has not hurt the company bottom line (Exxon Mobil Corporation, 2015). Event number five According to Exxon Mobil Corporation, (2015), On February 5, 2015, XOM proved to have more competitive advantages than expected because it had strong financial position; the shares had increased earnings and finally the low levels of debts. These factors promoted the company to perform well in the market and ultimately become a giant in the industry. Financial strength is an important aspect to any enterprise. XOM has good financial base the fact that helps the company to steer ahead in the developmental projects. Moreover, working with qualified rating agencies enables the company to recognize the superior financial strength through working with the best credit rating to the financial obligations. XOM is one of the few companies that maintain the credit consistency for many decades hence making it possible to maintain the market at the required levels. The financial strength allows the company to finance attractive investment opportunities. The high price of shares in the market generates more income for the company and through that: more people can invest. If more start trading in the shares of the company, it will ultimately increase the price of shares and eventually increasing revenue for the company. Therefore, the increasing price of the shares makes it possible for more shares to have a trading in the market hence increasing income for the company (Exxon Mobil Corporation, 2015). XOM’s operations exhibit the low level of debts, and this makes it possible for the company to have a smooth running. Debts enslave companies because most of the revenues received end up paying such debts hence making it difficult for such companies to expand. The Leverage ratio indicates the relative proportion of the shareholders debt and equity used in financing the assets of the company. When there is low equity debt ratio, there is a lower risk because the debtors have a lower claim on the assets of the company. For instance, a debt to equity ratio of five, it means that debt holders have five times claim on the assets more than the holders of the investments do do. XOM debt equity ratio is too low (0.12) to an extent that the equity holders have the greater share compared to the debtors making it easy for the company to run its affairs. The low debt ration makes it strength and it works for the best of the company (ExxonMobil.2006). The 0.12 ratio indicates that the company has greater assets compared to the debts hence increasing the viability of the corporation. Companies that have such equity debt ratio find it easy to invest because many financial institutions and banks strive to bank with the company hence making it worth and valuable in the market. Moreover, when the company has few debts, it becomes easy to engage in other developmental projects because the revenue collected does not end up paying debts. Debts contribute to stagnation of companies, and XOM have lucrative ratio that attracts many potential investors. The three aspects have made XOM to be the best oil company in the world today hence promoting its growth in the end (Exxon Mobil Corporation XOM, 2014). Event number six Towards, the end of December 2014, XOM adopted a policy that created equal opportunities for people with the different gender and sexual orientations. The step made the company popular, and much-qualified personnel started seeking jobs in the company. Lack of discrimination prompted many people to have confidence with the company the fact that attracted many people to invest and buy the shares. People who were professionals and experienced discrimination due to unique sexual orientations felt at ease because they would interact freely with the people in the company. The constitution requires that gender sensitivity to be an issue of concern and companies that adhere to the law and deter glass-ceiling principles normally get the best employees. Following the approach, XOM got the best employees who have worked to stimulate growth and development in the company. These policies have proved to be one of the best systems in the oil corporation’s today (Exxon Mobil Corporation, 2015).The issue of labor is very important to any given company as the employees tend increase the level of productivity. Furthermore the human resources of given company ensures the objectives and the goals of the company are achieved through their hard work and dedication to call of duty. Event number seven The strike led by the United Steel workers Union across the nation led to increasing in shares of the oil refining companies. The BP oil refinery workers walked out citing unfair practices of labor as well as dangerous conditions of working such as leaks and explosions. These workers strike hampered the production of oil and, therefore, the companies whose workers never went on strike were on the safer side (ExxonMobil, 2006).Consequently, prices of oil went high causing the considerable increase in the price of shares in the stock market. Event number eight nine and ten It is evident that the exports to China from United States have decreased because the OPEC (Oil and Petroleum Producing Countries) countries have enhanced some ludicrous restriction. In as much as Saudi Arabia (the main oil powerhouse) has been a longtime ally to the US, the restrictions ensured a great rift between the two countries and United States would not export oil to such to China because Saudi Arabia would eventfully lose the share(Crude oil trading,2014). Conclusion In conclusion, the performance of XOM in the market is better in comparison to the other oil companies. The strong financial ability and 0.12 debt equity ratio makes it possible for the corporation to have strong economic base that facilitates a concrete foundation in the stock market. Frankly, XOM will acquire some oil producing companies that experience problems because it has the labor, financial and good management. These pillars will help the company to streamline the business and carry out possible purchase in the future. It is evident that XOM (Exxon Mobil Corporation) is a unique company right from the day of formation up to date. Its way of operation and financial base makes it unique to survive in the competitive world today. The above-mentioned economic pillars have proved effective in maintaining the company as well as putting it on its toes. References Crude oil trading. (2014) Retrieved from http://www.indexmundi.com/commodities/? Commodity=crude-oil-west-Texas- intermediate months=12 Exxon Mobil Corporation (XOM). (2014, 15). Retrieved from http://finance.yahoo.com/echarts;_ylt=AwrBJR.nqddUuWIAFeCTmYlQ?s=XOM+Intera ctive#{%22range%22%3A%221y%22%2C%22scale%22%3A%22linear%22} Exxon Mobil Corporation. (2015). Retrieved from http://finance.yahoo.com/q?s=XOM ExxonMobil. (2006). Retrieved from http://exxonenergy.com.yeslab.org/html/ourcoAboutHistory.htm Read More