SWOT Analysis of ExxonMobil and Petronas - Case Study Example

ExxonMobil and Petronas Name Institution Executive summary This report offers an analysis into two oil companies. One of them is an international oil company (IOC), ExxonMobil and the other, Petronas is a national oil company (NOC). Several features into the independent analysis of the two oil companies have been offered following the basis of SWOT, strengths, weaknesses, opportunities and threats. The report shows that each of the two companies has their own strengths and weaknesses based largely upon their geographical reach and scope. The findings show that both companies have these challenges and opportunities on their own capacity and they way they deal with them is also limited to their level of operation, the NOC in the national levels and IOC in the international perspective. Contents Executive summary 2 Contents 3 Introduction 5 Petronas- brief company profile 5 Strengths of the company 6 Weaknesses 6 Opportunities 7 Threats 7 ExxonMobil- brief company profile 8 Strengths of the company 8 Weaknesses 9 Opportunities present to the company 9 Threats faced by this company 9 Investment analysis for Petronas 10 Investment analysis for ExxonMobil 11 Conclusion 12 References 13 Charles, K, W 2013, ‘Supply chain management challenges in Kenya petroleum industry: case 13 of national oil corporation of Kenya’, international journal of human resources and 13 procurement, vol. 1, no.3, pp. 3-18. 13 ExxonMobil website 2013, About us, viewed 1, November 2013, 13 http://www.exxonmobil.com/Corporate/ 13 IPIECA website 2013, World National Oil Companies Congress, viewed 1, November 2013, 13 http://www.ipieca.org/event/20130131/world-national-oil-companies-congress. 13 Stevens, P 2008, ‘National oil companies and international oil companies in the Middle East: 14 Under the shadow of government and the resource nationalism cycle’, Journal of World 14 Energy Law Business, vol.1, no.1, pp. 5-30.DOI: 10.1093/jwelb/jwn004 14 Introduction Before a potential investor decides to make a choice to invest in a certain company or organization, he or she needs to establish in detail about the standing, mostly financial of the company of choice (Rajendra et al 2011, p. 5). The best way is to ensure that all the aspects that surround the company, strengths, weaknesses, opportunities as well as threats have been looked into conclusively (Togar et al 2005, p.58). This report provides an illumination into two oil companies, one a national oil company, Petronas operating in Malaysia and the other one is an international oil company, ExxonMobil that has branches and business interests in multiple nations across the world. SWOT analysis will be utilized in this case to provide an in-depth analysis of the two companies independently. It will be found that most of these issues discussed in this report for each company will be related and somehow in harmony with those of the other company. An analysis of the companies’ suitability as an investment vehicle will also be issued. A conclusion that ties the basic points that this report discusses will be offered at the end. Petronas- brief company profile Petronas is short for Petroliam Nasional Berhad (Petronas website 2013). The company is based and operates in Malaysia as an oil and gas company. The company has since started expanding into other countries and into other forms of products and services such as chemicals, refining oil and petroleum products, shipping and automotive engineering. The company has an employee base of over 39000 people employed either directly to work in the mainstream company or through distribution partnerships spread across the nation. Strengths of the company There are several factors that could be termed as the strength avenues of the Petronas oil company. One of the strengths identified here would be the fact that the oil company was started off a long time ago, in 1974. By then, there were no strong competitors and suppliers of the petroleum products in the country and for this reason, they had a head start in establishing themselves in the country. Another strength that the company has is capital power. Capital is always a major resource and a major determinant of whether companies succeed in their business endeavors or they fail. Petronas has a huge capital outlay, both in working and investment capital. The Petronas company website (2013) places the total equity of the company as of the year 2012 at over 89 billion dollars. The capital enables the company to be able to run comfortably and expand into other venture ideas that increase the volumes of revenues and net worth of the company. Another strength would also be derived from the presence of skilled personnel to run the company. This management team is responsible for creation and execution of policies that are sound and that take the company to a completely new level. Weaknesses For every set of strengths, there are some weaknesses that go along and these are what need to be checked (Vollman et al 2004, p.16). Petronas as a company has weaknesses too as the following sentences highlights. One of the major weaknesses that the company has lies in its ownership structure. The company is owned by the government of Malaysia and this subjects it to a lot of political and centralized control. This sometimes makes the process of making important decisions very slow, as approval has to be sought before the decisions are made. Another weakness is that the company is not traded on a public platform yet and this makes it have some hindrances when it comes to raising additional capital for expansion policies. Opportunities There are several opportunities that are present and up for pick by Petronas oil company in Malaysia. One of the opportunities recognized here is the presence of a large market for the products of the company. Malaysia is a country that is growing at a very rapid rate and industries are cropping up in the nation daily. These industries need a form of energy and oil would be one of the options. This presents a huge opportunity for the company to explore. Another opportunity is the fact that the company has huge potential of exploring unexploited markets outside the country and into other nations that are close to the country. There is a lot of demand for petroleum products in countries that are in close proximity to Malaysia and these nations would form a huge market for the company’s products. Threats Political instability is among the major threats that this company faces. Political instability destabilizes the balance that between economic growth and stability through getting rid of the conducive environment to do business. Considering that the company is owned by the government, failure to disagree on policies and decisions for the company following political lines might bring the company down. ExxonMobil- brief company profile ExxonMobil is an international oil company that has operations and tentacles spreading across the globe. The company’s headquarters are located in the USA. The company is ranked among the world’s highest producers, refiners and distributors of oil in the world. The company has an employee base of over 82000 people spread across the world. The company operates today under a myriad of subsidiaries across the globe namely, Esso, Mobil, SeaRiver, Maritime, Superior Oil company, Aera energy and XTO energy (ExxonMobil website 2013). The company was founded in 1966 through a merger of two companies, Exxon and Mobil companies. Strengths of the company The company has a number of strengths as the following sentences highlight. Most notable is the company’s huge capital and asset base. As of the year 2012, the total equity of the company was pegged and over 165 billion dollars and assets of over 333 billion dollars. The revenue the same year was posted at 453 billion dollars. The company’s main products are fuels, chemicals and lubricants. This forms the company’s massive capital resources that it uses to expand its business into new products and into new markets across the world. The company has the strength in that it employs people who are very highly qualified and who have the necessary skills and expertise to handle the business demands of the company. Starting from the top man in this company, Rex Tillerson, chairman and CEO of the company to the subordinate staff, they are inculcated with beliefs of hard work and great skills in business. Weaknesses There are several weaknesses that are present in this company too. Because of the size of the company, there exists a lot of bureaucracy among the various subsidiaries that operate under the umbrella of ExxonMobil. This makes it very difficult to have decisions made and passed in time. Bureaucracy slows processes of communication to a very great extent leading to companies losing on important opportunities (Oliver 1990, p.250). Opportunities present to the company There are several opportunities that can be identified in this company. The company has a very huge global market to exploit. Despite the fact that the company has successfully managed to reach out and establish its mark in different nations across the globe, there is still a very huge market out there that the company has yet to explore. Another opportunity lies in the expansion of their services and products in the energy market to ensure that they have a concrete footing and a monopolistic status in this industry. The energy industry is very diverse. Each day, more and more new ways of providing energy to light up the world and run engines in industries are cropping up. The company should consider investing in nuclear energy and other forms of natural energy like wind. The nuclear energy is a very capital intensive form of energy but the company has the required capital resources to invest in the same and the returns are very attractive (Lalwani, Disney & Naim 2006, p.69). Threats faced by this company Due to the basic factor that the company operates in numerous countries across the globe, the company is faced with a constant threat of having its operations thwarted due to political instability and insurgencies across the nations that they operate in. Where some nations may enjoy a process of political stability and have a very conducive environment for business, others may not be as stable and for this reason, they are a constant threat to the company’s business (Charles 2013, p.6). Another threat that the company could be facing would be the threat of being forced to pay exorbitant taxes by the various nations and government that they operate in. Some nations have very stringent policies and rules that govern how much they can repatriate out of the country and the amount of tax they pay to these nations (IPIECA website 2013). Another threat is competition from upcoming companies that are also engaging themselves in the same business. This means that the market share of the company decreases. The threat of depletion of oil resources is also another very real threat to the company. Every business in the world needs to be assured of the perpetuity of its business in the future. For this reason, the company has to be worried about the possible depletion of the natural resource that is oil from which the company forms its core business. Investment analysis for Petronas Petronas could form a very good investment vehicle. This statement can be backed by a number of factors that arise from the SWOT analysis of the company conducted in the above paragraphs. Firstly, the company is seen to be stable. The capital and asset base picture this company as an already established company. The implication is that the company has already garnered its own customer base. A company that has an existing customer base is a company that is capable of making revenues or one that is already in the process of making revenues. Petronas has already been tried and tested and proven to be a viable investment vehicle based on this criterion. The market for the company is also huge implying that if the company decided to go on to explore other avenues, the investors into the company would surely reap from such a move. The threat of political instability is a real one but it should not hinder one from investing in this company. The company generates a lot of income to the government of Malaysia in form of taxes and job creation to the locals and most certainly, the government would not want to interfere with the operations of such a treasured national outlook company through political fights and indecisions that are politically motivated. It is a perfect investment vehicle for potential investors who like starting small and watch as their portfolio grows steadily over a period of time. Investment analysis for ExxonMobil ExxonMobil, from the analysis conducted in the paragraphs above, is a very large international corporation. The company has ties and operations in almost every nation in the world. This makes it a gigantic company whose stocks are traded publicly at New York stock exchange, Dow and Jones industrial average component, S&P 500 component and XOM. The company forms a perfect investment vehicle for the people who wish to invest in huge international companies. The major advantages that would accrue to a trader who intends to invest in this company is that the company has already been tested and proven to be capable of providing return to equity. Every person loves to invest in places that he or she will be almost guaranteed of returns to the equity invested. The fact that the company is in so many countries means that the company is very solid and not in any danger of going bankrupt soon. This is backed by the capital and asset base that the company has posted over the years, having a steady increment in the level of revenue over the past years. The tremendous growth of the company has also pointed out to the fact that the company has very highly experienced and skilled personnel who are responsible for taking this business to another level. It is important for a potential investor to have the confidence in the management of the company that he or she wishes to invest in as the decisions made by these people may determine the destiny of the investor’s capital Conclusion This report has offered a comprehensive discussion of the two oil companies, ExxonMobil and Petronas using the SWOT analysis that has looked into their strengths, weaknesses, opportunities and threats. Despite operation on different scales in terms of geography and even capital base, the two companies face strengths that are differentiated, weaknesses within themselves, opportunities and even threats as the above individual discussion of the companies have shown. In conclusion, the desire to invest and the investment option for the potential investor in either of the company can be deduced from this report. Through this report, one may have more information to decide whether to invest in either ExxonMobil or in Petronas. References Charles, K, W 2013, ‘Supply chain management challenges in Kenya petroleum industry: case of national oil corporation of Kenya’, international journal of human resources and procurement, vol. 1, no.3, pp. 3-18. ExxonMobil website 2013, About us, viewed 1, November 2013, http://www.exxonmobil.com/Corporate/ IPIECA website 2013, World National Oil Companies Congress, viewed 1, November 2013, http://www.ipieca.org/event/20130131/world-national-oil-companies-congress. Lalwani, C,S, Disney, S,M, & Naim, M,M 2006, ‘Assessing the sensitivity to uncertainty in distribution network design’, International Journal of Physical Distribution & Logistics Management, vol. 36, no.1, pp.68-79. Oliver, C 1990, ‘Determinants of inter-organizational relationships: integration and future Directions’, Academy of Management Review, vol. 15, no. 2, pp. 241-265. Petronas website 2013, About us, viewed 1, November 2013, http://www.petronas.com.my/Pages/default.aspx Rajendra et al 2011, ‘Understanding Supply chain: A literature review’, International Journal of Engineering Science and Technology, vol. 3, no. 3, pp. 3-14. Stevens, P 2008, ‘National oil companies and international oil companies in the Middle East: Under the shadow of government and the resource nationalism cycle’, Journal of World Energy Law Business, vol.1, no.1, pp. 5-30.DOI: 10.1093/jwelb/jwn004 Togar et al 2005, ‘Applying the theory of constraints to supply chain collaboration’, Supply Chain Management: An International Journal, vol. 9, no.1, pp. 57 – 70. Vollman et al 2004, Manufacturing Planning and Control Systems for Supply Chain Management, McGraw-Hill, London. Read More