Imperial Oil as One of the Largest Corporate Companies in Canada - Research Paper Example

Imperial Oil Company Introduction Imperial oil is one of the largest corporate companies in Canada and operates under the petroleum industry. The company comes in second in terms of market capitalization of all the firms in the industry. In an effort to understand the running of the company, it is imperative to ensure that an in depth analysis of its running and external factors are accounted for. Moreover, this ensures that the company identifies its strong points and weaknesses to figure out how to improve itself. Key Economic and Industrial Variables a. The oil and gas industry is identified as one of the most important industries to Canada’s economy. b. Imperial oil has a net income of around 3.4 billion a factor that ensures that it has a high amount of employees to handle all its assets and branches. c. The industry is divided into five major sectors namely the marine, pipeline, service supply, downstream and upstream. d. Division of the sectors ensures healthy competition between different industries that is vital for the success of individual companies. e. Provision of geographic segmentation is from the different branches that the company has. f. Increased growth of the industry as more branches of the company are opened in different parts of the world including Texas in the United States. PEST Political/Legal a. One of the factors that affect the company in terms of politics of the company is in terms of supply. The Canadian government has made various restrictions in the oil industry in an effort to save the environment and thus the company faces various challenges in terms of freedom. b. The amount of energy that the company produces increases every year due to the increased growth faced by Canada each year. c. The international Energy Agency states that by the year 2015, the company will only have the ability to produce around 3.4% of the amount of energy required and thus increased pressure on the Canadian government. Economic a. One of the economic factors affecting the company is the high amount of funds required for the extraction of oil. This sets back the company very much provided the difficult economic conditions experienced by the industry contemporarily. b. There is also the competitive market that has affected the industry. This is from the confusion that the government has had in an effort to understand which sector of the economy to allocate certain funds. c. The total equity for the company is at 13.3 billion, which is much less, than the amount required to run the company despite the fact that the employees receive their salaries in time. d. The threat of unemployment is another factor that largely affects the industry that has the consequence of having the economic face a downfall. Social a. There are five segments in the industry thus having high levels of specialization. b. This segmentation is important in that it assists the various types of workers to focus on other social matters such as family issues c. All the five segments are price sensitive from the different types of services they provide being unique as compared to other energy sources. d. There is an improvement in the living conditions of the employees from the hard work earning them more income. Technological a. One of the major technology strides made in the industry is concerning the drilling of oil. b. Introduction of more effective machines ensures that there is the production of more in the industry from even less resources. c. Introduction of devices in the industry ensures that the line of communication between the miners and the people in the control offices is clear. d. Checking of products online has the customers save a lot of time that would get wasted visiting the company basis. Porter’s Five Forces Analysis Bargaining power of customers: There exists a high negative effect of this on the side of the customer. This is from the fact that majority of the industry is a monopoly and thus only the people with a lot of money have the ability to sustain themselves and their requirements. Threat of new Entrants: The threat of new entrants is rare from the fact that many other individuals have attempted entering the market but the high amounts of capital required make it hard. Threat of Substitute products: This threat is rather realistic because people that do not have the required amount of money may turn to other sources of power. Competitive Rivalry within the Industry: Competitive rivalry within the industry is existence from the segmentation into five parts. This is imperative for optimal and healthy competition. Bargaining Power of Suppliers: The suppliers have the highest bargaining power from the fact that they are exclusive to the industry. Strategic Group Map Imperial oil as stated earlier is one of the most successful oil companies in Canada. Despite its highly placed position in the market, the company still faces a lot of competition from other companies. Royal Dutch Shell is one of the leading competitors for the company. The company with its headquarters at Hague has made numerous strides to maintain its position among the world leading companies in the sector. Suncor Energy is a company based in Canada that has also shown a lot of potential in the industry. This has ensured that Imperial oil remains on its feet and does not rest. The other major group in its circles is BP. This is one of the oldest companies in the industry, which has made numerous branches all over the world including Canada. The fact that it has had a lot of experience in the field has ensured that the employee’s equities are higher and consequently the output is higher. Key Success Factors in the Industry Imperial Oil B.P Suncor.com Weight Rating Score Rating Score Rating Score Market Reach 0.2 7 2.1 6 0.9 5 0.9 Monopoly Power 0.3 6 2.5 4 0.4 7 0.6 Product assortment 0.4 11 4 8 0.3 6 0.8 Low Operating Cost 0.1 12 9 5 0.1 5 0.7 Weighted Total 1.0 36 17.6 23 1.5 23 3.0 Imperial oil is the highest in success rates as compared to the other companies. This is from the fact that it leads other companies in the same industry in various fields. The monopoly power of Imperial Oil Company is the factor that gives the organization the largest advantage as compared to other companies. This is from the fact that its strategic location has it that the number of substitute and competitor companies is minimal. Market research is another factor that assists the company in its leadership of the industry. This is from the fact that the company has a high number of research personnel that get into market research and try identifying various fields in the sector. Competitive Analysis Going through the competitive analysis of the company is very important. At this point, going through all the three major competitors of the company comes in as a rather vital issue. B.P This is one of the highly competitive companies in the contemporary world. This comes from the management of the organization and especially the top administration that has a well-set board of governors with clearly set out strategies. Moreover, the number of branches that the company has is also imperative in terms of superiority with regard to market capitalization. Suncor Suncor is also said to be one of the competitors from the manner through which it dedicates its time and money to ensure that the satisfaction of customers is achieved. This is from the fact that it majors in the extraction of crude from oil, which is a very large business boost in the oil and petroleum industry from the many clients it has. APPENDIX B – Company’s Resource and Competitive Position (Internal): 1. Company Vision and Mission/Purpose Vision: Safety of workers with the goal of attaining the most out of the industry is our main vision as a company in the industry. Mission: Ensuring customer satisfaction for the maintenance of great reputation and customers 2. VRIO Analysis Valuable- Yes- The petroleum industry is one of the most sought after industries of the 21st century due to the vast uses of oil. Rare- Yes- Oil is one very rare commodity and this is from the fact that the oil mines present in the world are in very few locations Imitability- Moderate- This is from the fact that there are other substitutes for oil with regard to energy sources. Organization- Yes- The organization of the oil industry and the company in particular is rare and strategized. Value Chain Oil drilling site - Refinery - Company Premises- Customer Financial Analysis INDUSTRY: Oil & Gas Refining & Marketing GROWTH RATES % COMPANY INDUSTRY S&P 500 Sales (Qtr vs year ago qtr) 4.9 6.2 3.6 Net Income (YTD vs YTD) NA NA NA Net Income (Qtr vs year ago qtr) 21.1 40.8 -0.6 Sales (5-Year Annual Avg.) 4.38 8.53 8.19 Net Income (5-Year Annual Avg.) 2.06 1.43 6.96 Dividends (5-Year Annual Avg.) 6.58 2.5 5.19 The net income of the industry has been great given the numerous changes that have been witnessed in the sector. This is from the harsh economic conditions that have faced the industry over the years. Environmental issues have also been a major issue affecting the company and the industry as a whole. The net average of five years has gone up and down from the number of people that has come up in the industry providing rather strong competition. Over the past five years, the company has also faced challenges with regard to the dividends that the shareholders have been receiving. However, its efforts to maintain them are always appreciated. 4. SWOT Analysis Strengths Weaknesses Excellent customer service High drilling prices Low price rates Poor reputation from environmentalists Effective market campaigns Low number of well-trained workers Opportunities Threats Marketing in Africa High competition from BP Economic recession Issues and Rationale Safety Safety is one of the key factors that the company observes in its efforts to have the success of its products given. This is actually observed clearly from the fact that it is stated in its vision. The oil industry is one delicate industry that has many issues from the time the oil starts being drilled to the last resort who is the customer. The drilling takes place in deep under water areas that makes it rather difficult for people to perform this activity safely. Many risks are involved while performing this activity and the major one is that of drowning. The products of oil are recognized to be risky also from the time they get off the sea, to the refinery and the customer. This is from the fact that the products are highly flammable and thus the importance of having them handled with a lot of safety. In the industries, there is combustion of gases in an effort to divide the crude oil into specific constituents and thus why the employees should take safety measures. Brand Recognition Brand recognition is one other key issue that the company has. It is common for any company to have interest on the products that it has and diversify its market. This is usually to increase the customer base and consequently have more profits. Imperial oil has done this successfully by launching its products in the United States. United States is a country with a wide market and the use of oil products is limitless. This has ensured an increase in the number of people that purchase its products. Staffing Staffing is a contemporary issue facing the company. This is from the fact that the number of branches that the company has opened worldwide has had the company require a greater number of employees. This has been difficult given the delicate conditions involving the products. This is from the fact that extensive training for these people is necessary and the cost of training them is high provided the lack of some of the facilities and equipments in these countries. Strategy and Implementation Quality and Safety Quality is one of the factors that the company has to observe in an effort to reach their goal of increasing their customer base. Having quality is important in that it ensures that the existing customers are maintained and puts the company in a better position to acquire even more of them. Failure to have quality assurance would have the competitors of the company such as BP get more customers and thus lead imperial oil to great losses. Quality is also important in ensuring that the employees get boosted to work even harder. This is from the fact that the employees get to understand that the work they carry out is legitimate and are urged to please society that in return would reward them. The reward that the workers get from the community is from an increase in customers and thus the employees have a higher chance of getting a pay rise. Brand Recognition Recognition of the brand should be a strategy that the organization puts as a vital priority. The company should invest in marketing modes that strike many people and appeal to their needs. People use oil products on a daily basis and thus the importance of having them advertised across various fields effectively. With this, the company is bound to get more customers and eliminate competition. Staffing Improved training for the personnel is very important. This is from the fact that these people are required in an effort to increase the produce and consequently have a higher number of customers. One strategy that these people have to incorporate is the increase in the number of training grounds in countries where they seek to launch their branches. This would save a lot on outsourcing and have a positive impact on the community surrounding the new branches. This factor would ensure an increase in the number of customers as a means of payback for employment creation. References Radforth, I. (2008). Canadian Working- Class History: Selected Readings. New York: McGraw Hill Publishers. Gow, S. (2007). Roughnecks, Rock Bits, and Rigs: The Evolution of Oil Wells. 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