SWOT Analysis - Energy Sector

SWOT Analysis Strengths Well Well establish established ed brand brand with a strong strong reputatio reputation: n: One One of the major major str strengt engths hs of Exx Exxon Mo Mobi bill is its its huge huge scal scale e of oper operat atio ions ns.. It cur currentl ently y is involv involved ed in explo explora ratio tion n activi activitie ties s in six conti continen nents ts acros across s the the globe. globe. The The company’s existence in the energy and petrochemical business for over a century now provides it with formidable economies of scale and scope in the space. It has the largest crude capacity and the highest number of reneries in its peer group !Exhibit"#$. %s a result of all these factors Exxon Mobil has been able to carve out a strong brand image for itself in the competitive energy and petrochemicals landscape that provides a sense of security to its sta&eholders. sta&eholders. In the natural gas industry through the ac'uisition of (TO which was the leading technology provider in natural gas exploration) it has been further able to capitali*e its stronghold in the industry. Exhibit – 1: Key operational information of maor players in the !etro"hemi"al !etro"hemi"al #ndustry $%&1'(

-rude -ap/ $bn/ barrels2day( 5atural 6as +eser.es $1&&&s( 5o/ of +etail Outlets $1&&&s( 5o/ of +e9neries +e.enues $bn/( 5et #n"ome $ bn/(

Exxo n $)O *( 3/4

+oyal ,ut"h Shell $+,S( +.,

-he.ron -orp/ $-0)(

-ono"o!hi llips $-O!(

!

-./

-.

0.0-

74/4 13 %8

+.#0/

-+.-/#

#1.+1

+-.

-/

-1

-.2+

--.+

'7 ;'4/ %8 '%/3 %

01 +/#.-0/

#3 -11./

## /-./

#+.,

#2.-+

3.,32

 0/0. / 0.,

!Source: Yahoo Finance$

,i.ersi9ed operations operations a"ross geographies: geographies: One of the major strengths of Exx Exxon Mobil obil is the the vast vast scal scale e of its its div diversi ersie ed d oper opera ation tions s acr across oss geog geogra raph phie ies. s. Even Even thou though gh the the main main sour source ce of reven evenue ue str strea eam m for for the the company comes from the 45) the non 45 regions such as 6rance) 7elgium) 8erm 8erman any) y) 5ing 5ingap apor ore) e) 9apa 9apan) n) Ital Italy y and and many many othe otherr coun countr trie ies s are are also also a signicant source of revenue !Exhibit "-$. The diversied geographic presence presence enjoyed by the company provides it with the discretion of managing its global revenues in accordance with the varying economic and political conditions across various geographies and therefore minimi*e ris& with respect to its operations. 6urthermore) it has operations in a vast number of :on OE;< countr countries ies)) which which is again again a sour source ce of advant advantage age as the major major grow growth th in demand is expected from these countries in the near future. This vast scale of  operatio operation n across across geograph geographies ies therefor therefore e provides provides Exxon Exxon with a competit competitive ive

advantage by providing it with wider =exibility and scope in increasing its revenues through leveraging its global presence.

Exhibit – %: +e.enue brea= 4=

!Source: Exxon Mobil $

+obust +esear"h and ,e.elopment: ?ith its extensive experience in the energy and petrochemicals business) Exxon Mobil has been able to garner strong @A< capabilities. The company focuses on deriving a strong competitive advantage through continued investment in @A< !around B#bn in 6C -1#0$ and explore more eDcacious drilling and resource exploration techni'ues. Through a strong focus on @A< activities the company loo&s for opportunities in new product development) improve existing products and enhance customer service through optimi*ation of existent manufacturing and production capabilities. This therefore provides Exxon the advantage to establish itself at the forefront of radical innovations associated with the industry in which it operates.

0erti"ally integrated operations: 7eing an integrated Oil and gas company provides Exxon with the expertise to focus on all the aspects of the

value chain of the business rather than focusing on a particular compartmentali*ed activity such as rening or production. 7y exercising operational discretion and control in each and every step of the oil and gas process) the company is able to optimi*e the entire value chain to minimi*e costs and maximi*e process eDciencies.

Wea3

External fa"tor e.aluation matrix $EE *atrix( Key External a"tors OPPORTUNITIES @ise in global energy demand Increased :8 demand :ew projects %lternate energy sources THREATS Economic conditions :atural disasters 5tricter environmental compliance norms Increasing emergence of substitutes for Oil TOTA?

Weig ht

+ati ng

Wtd/ S"ore

1.-1 1.#/ 1.#1 1.1/

+ 0 + -

1.,1 1.+/ 1.+1 1.#1

1.-1 1.1/ 1.#1 1.#/ 1/&&

# 0

1.+1 1.#1 1.#1 1.+/ %/4&

!resent usiness Strategy usiness de9nition F *ission

ExxonMobil is operating in the business of production and exploration of oil and natural gas. It is also involved in the sale of crude oil) natural gas and other diGerent petroleum products. It also deals in the rening and manufacturing of  petroleum products. Its’ mission is Meeting the rising demand for energy J safely and with minimal environmental impactN. The company’s slogan spea&s of  Energy lives hereN and therefore communicates a strong message of positioning itself at the heart of the global energy business and ready to ta&e on the world’s toughest energy challenges. usiness !ortfolio

ExxonMobil’s business portfolio comprises geographically diverse upstream and downstream business along with a chemicals business. This portfolio of assets provides it a distinctive advantage in establishing economies of scale and avoid business ris&s which arise out of changes in margins) business cycles and erce competition. The amalgamation of globally diversied operations along with integration across business units provides Exxon a competitive advantage. The upstream and the downstream businesses are both essentially commodity businesses which are subject to changes in the prices of oil and gas. The 4pstream business is a capital intensive business involving huge costs associated with the exploration and development of natural gas and crude oil.  The downstream business on the other hand deals with the rening and mar&eting of the products. The downstream business therefore is more concerned with operational eDciency to achieve cost reduction unli&e the upstream business. The chemicals business unli&e the petroleum and energy business has relatively lesser cyclical =uctuations and therefore helps the company to reduce volatility in the overall portfolio and deliver results consistently. -orporate Strategy

ExxonMobil operates in a global context with a narrowly diversifed  business portfolio. It employs related business diversifcation  at the core of its corporate strategy which is clear from the current business portfolio f the company. The major driver of business for the company is the 4pstream business that more than 1 of the earnings alone. The chemicals business is at #3 and the downstream business at #- in generation of earnings for the company. The upstream business being extensively capital intensive in nature employs four to six times the average capital employed by the other segments and is therefore at the centre of ExxonMobil’s operations. usiness ?e.el Strategy

8iven the multiple business operations Exxon is engaged in) it employs a multi" business strategy. Exhibit J + provides a detailed insight into the strategies adopted by Exxon for its various business segments. Exhibit – ;: usiness Strategy $Adopted from Exxon*obilBs inan"ial and Operating re.iew %&1'(

Upstream Business Strategies

•

•

•

Downstream Business Strategies

•

•

•

•

•

•

Cemi!a" Business Strategies

•

• •

Identifying and selectively pursuing the highest 'uality exploration opportunities Investing in projects that deliver superior returns) maximi*ing protability of existing oil and gas production ;apitali*ing on growing natural gas and power mar&ets) using 9oint"venture to mitigate exploration cost and ris&) integrating the supply chain of 4pstream and