Jamin Echols

Final

December 9, 2014

Strategic Management

I. DIAGNOSIS

A. Mission: Exxon Mobil has no clear vision or mission statement but the company

has a statement of guiding principles: Exxon Mobil Corporation is committed to

being the world’s premier petroleum and petrochemical company. To that end, we

must continuously achieve superior financial and operating results while

simultaneously adhering to high ethical standards (David 534).

B. Objectives: Exxon Mobil’s objectives are to increase their productivity and

profitability in order to become the driving force in both the petroleum and the

petrochemical industry.

C. Corporate Strategy: Exxon Mobil’s current corporate strategy is reliant on their

ability to develop in the new emerging markets by using their strong market

position and by using their broad portfolio to stay profitable despite the volatile

nature of the prices within the industry.

D. Policies

1. Diversity: Their Global Diversity Framework is the foundation for their long-

term, career-oriented approach to employment, and has three interrelated

objectives: attract, develop and retain a premier, diverse workforce; actively

foster a productive work environment where individual and cultural

differences are respected and valued; and identify and develop leadership

capabilities to excel in a global environment. We use a series of Web-based

trainings and tools to support this framework and help their employees

understand effective cross-cultural communication and cultural sensitivities

(Employment Practices and Policies).

2. Ethical Standards/code of Conduct: The policy of Exxon Mobil Corporation is

to comply with all governmental laws, rules, and regulations applicable to its

business. It also chooses the course of highest integrity. Local customs,

traditions, and mores differ from place to place, and this must be recognized.

But honesty is not subject to criticism in any culture (Code of Ethics and

Business Conduct).

3. Suppliers: Directors, officers, and employees should deal fairly with each

other and with the Corporation's suppliers, customers, competitors, and other

third parties. Also they are expected to avoid actual or apparent conflict in

dealings with suppliers, customers, competitors, and other third parties

(Standards of Business Conduct).

4. HR: Their policies are related to the ethical standards and are required by the

company to be an accessible channel of communication for the employees

depending on the subject of the question, concern or suggestion (Standards of

Business Conduct).

E. Strategic Managers and Board

1. Sr. Level Executives: There is a large number of Sr. level executives under

William Colton, the VP of Strategic Planning so I will focus on the Sr. level

executives under the CEO and Chairman of the Board Rex Tillerson.

(David 536)

2. Corporate governance

a. Responsibilities

1) amendment of the By-Laws,

2) filling vacancies on the Board and designation of nominees for

election to the Board by the shareholders,

3) establishment of committees of the Board and appointment of

committee members,

4) election of officers of the Corporation, designation of the chief

executive officer of the Corporation and authorization to any

officer of the Corporation to appoint assistant officers,

5) establishment of divisions of the Corporation and appointment

of the presidents thereof,

6) remuneration of the Directors,

7) setting the date, time and place of shareholder meetings,

8) submission to shareholders of any action that requires

shareholder approval,

9) approval of the Annual Report and proxy statement,

10) appointment of independent auditors by the Audit Committee,

subject to shareholder ratification and receiving of auditors'

reports,

11) declaration of dividends,

12) issuance and acquisition of long-term debt or shares of stock,

and the fixing of the consideration for treasury shares to be

disposed of by the Corporation, except as delegated to the

Treasurer as described in B.7 below,

13) registration and listing of securities and appointment of transfer

agents and registrars,

14) review of summary financial and operating results (quarterly),

15) adoption of any new major employee benefit plans and

programs and approval of any major amendment of an existing

major employee benefit plan or program (e.g., Pension Plan

and Savings Plan) which might involve substantial cost to the

Corporation or significantly alter the scope, nature or degree of

benefits,

16) review of overall policies and objectives for corporate

contributions, and approval of contributions budget (annually),

17) authorization of political contributions and political action

committees, except as delegated to officers of the Corporation

as described in B.11 below,

18) adoption of such policies and the taking of such other actions

as the Board deems to be in the best interests of the

Corporation

(Powers of the Board)

b. Board Committees: The Board will appoint from among its members

committees it determines are necessary or appropriate to conduct its

business. Currently, the standing committees of the Board are the

Executive Committee, Audit Committee, Board Affairs Committee (which

serves as the nominating and corporate governance committee),

Compensation Committee, Finance Committee, and Public Issues and

Contributions Committee (Corporate Governance Guidelines).

c. Director Compensation: At this time, the Board believes it is appropriate

and efficient for ExxonMobil's Chief Executive Officer (CEO) also to

serve as Chairman of the Board. However, the Board retains the authority

to separate those functions if it deems such action appropriate in the future.

So at least annually, the independent directors will, in conjunction with the

Compensation Committee, review the performance of the CEO in light of

the Corporation's goals and objectives (Corporate Governance Guidelines).

F. Generic Industry Type

1. The industry of Global Oil & Gas Exploration & Production is maturing with

the growth of emerging economies

2. Industry Economic Characteristics

Industry definition

Industry operators explore for, develop and operate oil and gas fields.

This industry includes the production of crude petroleum, the mining

and extraction of oil from oil shale and oil sands, the production of

natural gas, sulfur recovery from natural gas and the recovery of

hydrocarbon liquids. Transport, refining and marketing activities are

excluded from this industry (About this Industry Global Oil & Gas

Exploration & Production).

Market size and growth

rate

The market size is large with a yearly demand of $4,562,700.0 just for

the year 2014 and the industry revenue is forecast to grow at an

annualized rate of 4.3% to $5.6 trillion (Industry Outlook Global Oil

& Gas Exploration & Production).

Key rivals & market

share

These are the key rivals and market share for the global market in the

industry

(Major Companies Global Oil & Gas Exploration & Production).

While this is the US version if the key players and market share for

this industry.

(Major Companies Petroleum Refining).

As one can see Exxon Mobil has a large amount of the American

market share, and a acceptable amount of the global market share.

This is what makes them such a large, successful and viable company.

Scope of competitive

rivalry

The Global Oil and Gas Exploration and Production industry is subject

to a high level of competition. In general, the industry faces

competition on two levels: internal and external. Internal competition

regards competitive factors common to all or most companies within

the industry, while external competition represents threats based in

other industries, substitute products or from imports such as biodiesel,

ethanol, solar and wind power, and coal depending on what oil and gas

is being used for. The internal competition is based mainly off of price

between firms even though other factors, such as crude oil grades,

impurity levels and the costs of extraction are also important

(Competitive Landscape Global Oil & Gas Exploration & Production).

Concentration vs.

fragmentation

The industry is rather fragmented as seen by the market share; no one

company has a substantially large amount of the market and due to the

highly competitive nature of the market. A large change in these

numbers does not seem likely (Competitive Landscape Global Oil &

Gas Exploration & Production).

Also because the global scale of production creates the opportunity for

many small companies to dilute the market, industry concentration is

low (Competitive Landscape Global Oil & Gas Exploration &

Production).

Number of buyers

The number of buyers is large and belongs to these four key markets:

petroleum refiners, the industrial sector, electricity generators and

natural gas distributors. Since the use of natural gas is diverse, and has

a range of activities there is a large number of buyers (Products &

Markets Global Oil & Gas Exploration & Production).

Demand determinants

The demand determinants are oil and natural gas (Products & Markets

Global Oil & Gas Exploration & Production).

Oil demand depends on global economic growth related to demand for

goods and services. While the demand for natural gas is less closely

linked to economic performance than the demand for oil. Because

natural gas functions largely as a heating course, seasonality and

geography play a hand in determining demand (Products & Markets

Global Oil & Gas Exploration & Production).

Degree of product

differentiation

The degree of differentiation in this market is extremely low since

methods that produce the gas and oil used by buyers is essentially the

same across firms. Due to this is causes the market to be highly

competitive.

Product innovation

Product innovation for this product is also low; however there have

been innovations that threaten the life cycle of this industry, such as

biodiesel and alternative fuels.

Key success factors

The key success factors for the firms in this industry are:

The ability to accommodate environmental

requirements: Environmental protection is a key issue in the

development of oil and gas resources.

The ability to find new resource deposits: In order to continue

producing oil and gas, companies must either uncover new fields, or

acquire those discovered by other operators.

The ability to comply with government regulations: Companies

may shift exploration and production efforts if the regulatory

framework is either unattractive or lacks certainty.

The ability to have license: Oil and gas producers are required to

obtain licenses for both exploration and production activities.

Downstream ownership links: Ownership links with major oil

refining and marketing companies provide a ready market for oil

production.

Output is sold under contract - incorporate long-term sales

contracts: For gas producers in particular, long-term contracts are a

pre-requisite for survival in a volatile market. Generally, sales

contracts need to be in place to ensure a new project proceeds.

(Competitive Landscape Global Oil & Gas Exploration & Production)

Supply/demand

conditions

As mentioned before, demand for oil depends on global economic

growth related to demand for goods and services. While the demand

for natural gas is less closely linked to economic performance than the

demand for oil. Because natural gas functions largely as a heating

course, seasonality and geography play a hand in determining demand.

Supply is closely related to this demand and producers are willing to

produce as much as possible, however the problem lies within the

possibility of running out of natural resources.

Analysis of stage in life

cycle

The industry is in a maturity do to the fact that industry output is

expected to lag the global economy's GDP, technological change in

this industry tends to be incremental, and merger activity is ongoing

(Industry Outlook Global Oil & Gas Exploration & Production).

Pace of technological

change

The pace of technological change is only moderate for the oil segment

but robust within the natural gas segment. Changes tend to involve

matters of scale and scope rather than fundamental shifts in

production, which is indicative of a mature industry. For example,

offshore oil platforms are larger and able to be sited in deeper water

than in the past, but operations have remained essentially unchanged.

Also, shale fracturing for natural gas has recently unleashed significant

potential for previously unreachable reserves. Improvements in

liquefied natural gas production facilities and in the ships used to

transport the product are playing a role in promoting the growth of the

fuel (Operating Conditions Global Oil & Gas Exploration &

Production).

Vertical integration

Mergers are occurring within the industry; however vertical

integration is less frequent. Possibly due to the fact that there is a small

need for it.

Economies of scale

The economies of scale in this industry are largely beneficial in

helping corporations produce a cost advantage with increased output

of oil and gas.

Learning/experience

curve effects

Those who have been successful in this market know the methods of

extraction that produce the most results already so there is a slight

learning curve/experience effect.

Barriers to entry

There are high barriers to entry protect the Global Oil and Gas

Exploration and Production industry Specific deterrents for

newcomers include the high levels of competition, regulation and

capital intensity. These barriers are projected to remain high through

the coming five years.

Regulation/deregulatio

n

The Global Oil and Gas Exploration and Production industry is highly

regulated, with various tiers of government being involved in all

stages of production. Typically, governments determine which areas

are open to oil exploration and extraction, issue exploration and

production leases and enforce environmental legislation. Regulatory

bodies typically enforce environmental regulation relating to the

production and transport of oil and gas, while others patrol adherence

to health and safety regulations. Some governments, notably the

United States, maintain petroleum reserves for strategic and national

security purposes. The United States established its Strategic

Petroleum Reserve in 1977 in response to upheaval in the Middle East.

The purpose of the reserve is to provide a stock of oil that can be

drawn down in the event of a major upheaval in the market (Operating

Conditions Global Oil & Gas Exploration & Production).

Globalization

The industry exhibits a high degree of globalization. International

trade is extremely important to the industry, with about 50.0% of oil

output and about 30.0% of gas output traded internationally (Products

& Markets Global Oil & Gas Exploration & Production).

Trends

Entrance into emerging economies

An increase in mergers and acquisitions

G. Organization Structure:

1. Exxon Mobil has an SBU organizational structure based off of their

downstream, upstream, natural gas and power marketing, and chemical

operations (David 534). Downstream means the refining and distribution of

products that are derived from crude oil to customers around the world.

Upstream means the exploration for and capture all resource types, across all

geological and geographical environments, using industry-leading technology

and capabilities. Using their unique geoscience capabilities and

understanding of the global hydrocarbon endowment to identify and prioritize

all quality resources. Chemical is all their petrochemical processes that

provides the building blocks for a wide range of products, from packaging

materials and plastic bottles to automobile bumpers, synthetic rubber,

solvents and countless consumer goods. Their natural gas and power

marketing uses their natural gases to market off those utilizing it to generate

power and other uses such as heating and so on.

2. Advantages and Disadvantages

a. The advantages of this are:

1) That it provides a strategically relevant way to organize the business-

unit portfolio of this broadly diverse company

2) It facilitates the coordination of related activities within an SBU

helping it capture the benefits of strategic fits and resource fits among

related businesses

3) It promotes more cohesiveness and collaboration among separate but

related businesses

4) It allows strategic planning to be done at the most relevant level

within the total enterprise

5) It makes the task of strategic review by top executives more objective

and effective

6) It helps allocate corporate resources to areas with greatest growth and

profit opportunities

7) And group VP position is a good training ground for future CEOs

b. The disadvantages of this are:

1) It’s easy for the definition and grouping of businesses into SBUs to

just be for administration convenience

2) The SBUs can still be narrow-minded in charting their future

direction

3) It adds another layer to top management

4) The roles and authority of the CEO, group VP and BU manager have

to be carefully worked out otherwise the VP has an ill-defined

authority

5) The collaboration and coordination between SBUs is unlikely to occur

6) Performance recognition gets blurred

H. Financial Analysis / Altman & DuPont

1. Liquidity, Activity, Profitability and Leverage ratios

a. Liquidity ratios

1) Current Ratio=.8269

2) Quick Ratio=.527

b. Activity ratios

1) Debt Ratio=.063

2) Long-Term Debt=22.7 Billion

3) Equity Ratio=.1305

4) Earning-Times Interest=.26

c. Profitability ratios

1) Asset Turnover=1.26

2) Inventory Turnover=24.96

3) Accounts Receivable Turnover=16.8

d. Leverage ratios

1) Gross Profit Margin=33.39%

2) Operating Profit Margin=11.23%

3) Pretax Profit Margin=13.1%

4) Net Profit Margin= 8.73%

5) ROE=19.55%

6) ROA= 7.87%

2. Altman for Exxon Mobil is 3.8084

3. Tobin’s Q for Exxon Mobil is 1.321

4. DuPont Analysis is 19.46%

5. Financials obtained from Yahoo! Finance income statement, balance sheet,

and cash flow.

6. Exxon Mobil has had great financial performance, despite the decrease in their

revenues as of the past few years. However, even though they are still doing

well, they should turn around the decrease in revenue.

I. Stock Analysis: one year and Max Graph from Yahoo. Finance including: major

competitors.

One Year graph with Competitors Chevron Corp. (Darker Blue) and BP (Red)

(XOM Interactive Chart).

Max Graph with Competitors Chevron Corp. Chevron Corp. (Darker Blue) and

BP (Red) (XOM Interactive Chart).

Exxon Mobil’s 1 year graph (XOM Interactive Chart).

Exxon Mobil’s Max Graph (XOM Interactive Chart).

BP’s 1 year graph (BP Interactive Chart).

BP Max Graph (BP Interactive Chart).

Chevron Corp 1 year graph (CVX Interactive Chart).

Chevron Corp Max Graph (CVX Interactive Chart).

As seen by all the graphs, obtained from Yahoo! Finance, Exxon Mobil clearly

out performs their competitors in terms of estimated value.

J. SWOT Analysis

1. Internal (strengths, weaknesses)

Strengths Weaknesses

Strong market position

Strong research and development

capabilities

Diversified geographic revenue

stream

Litigations and contingencies

Declining financial performance

a. Strengths

1) Strong market position: What this means is that Exxon Mobil has

presence in almost every aspect of the energy and petrochemical

industry. With presence in most of the world countries and across

every aspect of the industry including the following: downstream,

upstream, chemicals, and natural gas and power marketing

activities. They involved across the entire value chain. This allows

them to take advantage of emerging growth opportunities around

the world. Also their broad portfolio allows them to mitigate risks

in the volatile market environment and maximize their profitability

through changing business cycles (Exxon Mobil Corporation 29).

2) Strong research and development capabilities: What this means is

that Exxon Mobil has great R&D capabilities. The company

conducts research and develops new products, develops existing

one and improves current operations through this department. Also

they not only progress operationally but also technologically,

keeping up with new and more efficient was of gaining oil and

natural gas (Exxon Mobil Corporation 30).

3) Diversified geographic revenue stream: Exxon Mobil has a

presence across various regions, this allows for them to have

competitive advantage and indicates that the company has a wider

ability to increase its revenues, allows due to their large presence

worldwide they can whether economic conditions that take place in

geographic locations without having a large decrease in their

revenue stream (Exxon Mobil Corporation 30).

b. Weaknesses

1) Litigations and contingencies: The company is involved in various

lawsuits proceeding the conduct of their business. These lawsuits

will adversely affect the company’s brand image as well as the

reduce profitability (Exxon Mobil Corporation 31).

2) Declining financial performance: The recent years there has been a

decrease in revenues, 6.8 % decrease in 2013 and a 26.7% decrease

in operating profit and a net incline profit of 27.4%. If this

continues the company could be looking at decreased cash flow

and a smaller company market presence (Exxon Mobil Corporation

31).

2. External (Opportunities, Threats)

Opportunities Threats

Rising global energy demand

Addition of new oil and gas projects

Growing chemical demand in Asia

Increasing demand of LNG globally

Environmental regulations

Economic conditions

Challenging Downstream industry

environment

a. Opportunities

1) Rising global energy demand: The energy demand in the market

has been growing as is expected to grow as population continues to

grow. Overall global energy is perceived to grow by 35%. As

economic progresses drives demand for energy higher, the levels

of energy consumption is also expected to get lower. In order to

meet demand, Exxon Mobil plans to start production on 10 major

projects which should add a new and larger capacity of oil barrels

(Exxon Mobil Corporation 32).

2) Addition of new oil and gas projects: Exxon Mobil is highly

focused on adding more room to increase business growth. They

are pursuing more than 120 projects to develop about 24 billion oil

equivalent barrels of oil and natural gas (Exxon Mobil Corporation

32).

3) Growing chemical demand in Asia: Exxon Mobil plans to pursue

investment opportunities to expand the chemical business and

other growth markets in Asia. By making strategic investments that

capture advantaged feedstocks, increase product sales, and employ

lower-cost processes. They recently completed a project that builds

on an integrated platform with advanced feedstock capability, and

produces products that meet the demands of growing Asian

economies. The project has been very successful and is the largest

chemical expansion in the company’s history. This growth can

continue for Exxon Mobil (Exxon Mobil Corporation 32).

4) Increasing demand of LNG globally: The global demand for LNG

(Liquefied natural gas) is anticipated to continue by 5% per year.

With this increase there is also an option for Exxon Mobil to

become more involved in this emerging market (Exxon Mobil

Corporation 33).

b. Threats

1) Environmental regulations: Exxon Mobil businesses are subject to

numerous laws and regulations in relation to protecting the

environment. For example the Clean Air Interstate Rule and other

greenhouse gas laws (Exxon Mobil Corporation 34).

2) Economic conditions: Economic conditions like the demand the

demand for energy correlates with the economic growth rates. In

light of recent recessions have had negative connotations to Exxon

Mobil’s profitability and the possibility of break downs in other

markets, such as Sovereign debt downgrades and the possible

restructuring of the European Union, could adversely affect the

company (Exxon Mobil Corporation 34).

3) Challenging Downstream industry environment: the downstream

industry has recently had weak margins and intense competition.

New policies and other climate-related regulations have negatively

impacted on the refining business. This in turn will pressure the

company’s earnings and margins (Exxon Mobil Corporation 33).

3. TOWS MATRIX

External Opportunities

1) Rising global

energy demand

2) Growing chemical

External Threats

1) Environmental

regulations

2) Economic

demand in Asia

3) Increasing demand

of LNG globally

4) Addition of new oil

and gas projects

conditions

3) Challenging

Downstream industry

environment

Internal Strengths

1) Strong market

position

2) Strong research and

development

capabilities

3) Diversified

geographic revenue

stream

SO: Using their strong

market position they

can take hold of all the

increasing demand in

emerging and existing

markets. As well as

build their diversified

revenue stream even

more with these

emerging demands.

Using their strong

research and

development

capabilities they can

create new methods to

take advantage of the

new oil and gas

products.

ST: Using their

diversified revenue

stream they can

whether a volatile

market and stay

profitable despite price

changes in the

industry. In regards to

the downstream

industry environment,

there is a lack of

demand in this portion

of the industry

however, by

liquidating their less

profitable assets could

allow for the assets to

be reallocated into the

rest of their broad

geographical portfolio.

Internal Weaknesses

1) Litigations and

contingencies

2) Declining financial

performance

WO: By turning

around the way they do

business in emerging

markets they can

rebuild their image that

was damaged in the

WT: By pulling out

their presence in the

countries that have a

tattered image, and

moving to a country

with fewer government

litigations and

contingencies, and also

by developing these

markets they could

turn around the decline

of financial

performance.

regulation they could

avoid most of their

weaknesses and

threats.

II. FOCAL POINTS FOR ACTION

A. Short Range

1. Supply and Demand: The oil, gas, and petrochemical businesses are

fundamentally commodity businesses. This means ExxonMobil’s operations

and earnings may be significantly affected by changes in oil, gas and

petrochemical prices and by changes in margins on refined products (EXXON

MOBIL CORPORATION FORM 10-K 2).

2. Economic conditions. The demand for energy and petrochemicals correlates

closely with general economic growth rates. The occurrence of recessions or

other periods of low or negative economic growth will typically have a direct

adverse impact on their results. Other factors that affect general economic

conditions in the world or in a major region, such as changes in population

growth rates, periods of civil unrest, government austerity programs, or

currency exchange rate fluctuations, can also impact the demand for energy

and petrochemicals (EXXON MOBIL CORPORATION FORM 10-K 2).

3. Other demand-related factors. Other factors that may affect the demand for oil,

gas and petrochemicals, and therefore impact their results, include

technological improvements in energy efficiency; seasonal weather patterns,

which affect the demand for energy associated with heating and cooling;

increased competitiveness of alternative energy sources that have so far

generally not been competitive with oil and gas without the benefit of

government subsidies or mandates; and changes in technology or consumer

preferences that alter fuel choices, such as toward alternative fueled vehicles

(EXXON MOBIL CORPORATION FORM 10-K 2).

4. Other supply-related factors. Commodity prices and margins also vary

depending on a number of factors affecting supply (EXXON MOBIL

CORPORATION FORM 10-K 2).

B. Long Range

1. Access limitations. A number of countries limit access to their oil and gas

resources, or may place resources off-limits from development altogether

(EXXON MOBIL CORPORATION FORM 10-K 2).

2. Restrictions on doing business. As a U.S. company, ExxonMobil is subject to

laws prohibiting U.S. companies from doing business in certain countries, or

restricting the kind of business that may be conducted (EXXON MOBIL

CORPORATION FORM 10-K 2).

3. Lack of legal certainty. Some countries in which we do business lack well-

developed legal systems, or have not yet adopted clear regulatory frameworks

for oil and gas development (EXXON MOBIL CORPORATION FORM 10-K

2).

4. Regulatory and litigation risks. Even in countries with well-developed legal

systems where ExxonMobil does business, we remain exposed to changes in

law (including changes that result from international treaties and accords) that

could adversely affect their results, such as:

a. Increases in taxes

b. Price controls

c. Changes in environmental regulations (EXXON MOBIL

CORPORATION FORM 10-K 3)

5. Climate changes and greenhouse gas restrictions (EXXON MOBIL

CORPORATION FORM 10-K 3).

6. Exploration and development program: the ability to maintain and grow their

oil and gas production depends on the success of their exploration and

development efforts (EXXON MOBIL CORPORATION FORM 10-K 3).

7. Project management: The success of ExxonMobil’s Upstream, Downstream,

and Chemical businesses depends on complex, long-term, capital intensive

projects. These projects in turn require a high degree of project management

expertise to maximize efficiency. Specific factors that can affect the

performance of major projects include their ability to: negotiate successfully

with joint ventures, partners, governments, suppliers, customers, or others;

model and optimize reservoir performance; develop markets for project

outputs, whether through long-term contracts or the development of effective

spot markets; manage changes in operating conditions and costs, including

costs of third party equipment or services such as drilling rigs and shipping;

prevent, to the extent possible, and respond effectively to unforeseen technical

difficulties that could delay project startup or cause unscheduled project

downtime; and influence the performance of project operators where

ExxonMobil does not perform that role (EXXON MOBIL CORPORATION

FORM 10-K 3).

8. Research and development. To maintain their competitive position, especially

in light of the technological nature of their businesses and the need for

continuous efficiency improvement, ExxonMobil’s research and development

organizations must be successful and able to adapt to a changing market and

policy environment (EXXON MOBIL CORPORATION FORM 10-K 4).

III. DEVELOP ALTERNATIVES

A. In such a volatile market, market development seems to be the best option for

Exxon Mobil, growing while diversifying their portfolio even more to grow and

stay profitable. Also liquidation of some of the underperforming downstream

related acquisitions should allow them to put assets toward there more profitable

segments such as the upstream segment.

B. Boston Consulting Group Matrix

The following BCG matrix takes Exxon Mobil’s 3 segments and tells the viewer

what should be done with them due to their positions in the market.

C. Competitive Position-Exxon Mobil’s competitive position is they are a leader.

Due to their immensely productive R&D department, I believe that this

competitive advantage put Exxon Mobil ahead of its competitors in terms of

upstream related business and allow them lead the market in terms of determining

the best costs for products.

D. Competitive Strategy Options- Overall cost leader-ship would be the best

alternative for Exxon Mobil, in an industry where there is little product

differentiation and the buyers are extremely sensitive to price, this is the best

option to go with in terms of strategy.

E. Rumelts Criteria

1. In terms of consistency these four alternative strategies are quite similar and

maintain consistency with Exxon Mobil’s goals and policies. However the

liquidation strategy could cause organizational conflict.

2. In terms of consonance there is a large amount of this needed for strategist to

stay on top of the research and development, the price inputs for natural gas

and petroleum crude oil as well as the development within the downstream

segment of the industry.

3. In terms of feasibility these are all feasible alternatives, however they are all

also very costly ones, however the high pay-off makes the strategy worthwhile.

4. The strategies all either utilize a competitive advantage or create a new one,

such as the ability to be a leader who can set the price in the industry

especially one as competitive and volatile as this one.

IV. DECISION AND RECOMMENDATION

A. Corporate: The best corporate strategy for Exxon Mobil to pursue is a merger

strategy; in the past Exxon Mobil’s mergers paid off significantly and contributed

to creating one of the largest petroleum and petrochemical companies. Also

mergers are intensifying in this market in order for companies to gain economies

of scale and produce at a lower cost. This could be a good corporate strategy for

Exxon Mobil.

B. Business: The best business strategy for Exxon Mobil is to pursue is market

development and development of their distinctive advantage, their research and

development department. By doing this they can take advantage of emerging

markets and keep them from their competitors. Therefore they could gain a

competitive advantage by utilizing their operations in other markets gaining

economies of scale and a larger presence. Also by utilizing their extremely

profitable r&d department they can keep their competitive advantage, maintain a

technological edge over their competitors and stay ahead of trends.

C. Functional: A marketing strategy would be the best strategy for Exxon Mobil do.

It would allow them to purposefully enter emerging markets and market off their

materials and products in a more effective manner.

D. Overall I would recommend the business level strategy, for two reasons. The first

reason is that a corporate level strategy would be extremely expensive and would

not pay off in the long run. The second reason is that a marketing strategy would

not utilize resources in the most effective manner. Now a business strategy that

pursues a market development and developing the R&D department which allows

for Exxon Mobil to takeover emerging markets and gain a competitive advantage,

maintain a technological edge over its competitors and stay ahead of the trends of

the industry as well as maximizes the market they’ve entered in.

V. IMPLEMENTATION

A. The person who should implement this strategy is the heads of the marketing

departments in each segment and the head of each R&D department. So this

means that A. J. Kelly, President of ExxonMobil Fuels, Lubricants & Specialties

Marketing Company and, T. J. Wojnar, Jr., President of ExxonMobil Research

and Engineering Company of the downstream segment as well as S. N. Ortwein,

President of ExxonMobil Upstream Research Company and, R. S. Franklin,

President of ExxonMobil Gas & Power Marketing Company in the upstream

segment should head the strategy’s implementation with consultation from W. M.

Colton the Vice President of Corporate Strategic Planning.

B. The strategy will gain organization wide commitment with a shift in the current

focus in projects in the marketing and research with incentives and compensation

for taking up these new projects. By making the new plan the employees’ goal,

they will become committed in seeing the plan succeed.

C. The structuring mechanism already exists within the SBUs and therefore they will

continue to exist after this policy is implemented.

D. There were no functional area conflicts between the Upstream and Downstream

SBUs so function area conflicts do need to be resolved in order for the strategy to

be implemented.

E. The leadership has the ability to turn around the company’s image by market

development with more sustainable projects that would utilize the external

opportunity of more LNG demand and the increase in Asian demand. SO they

could inspire even more commitment along with the commitment inspired

through new projects and incentives.

F. The incentive programs for working on the projects are basic compensation for a

job-well-done and increased recognition towards the company’s strategic success.

This allows for employees to be seen as possible candidates for promotion and is

more than appropriate for reinforcing good behavior.

G. The issues of decreasing brand image and downstream profitability are corrected

through this strategy, through more markets to generate revenue from and

increases in more sustainable projects in these new markets.

H. The strategy is implemented through projects that are handed down to and

explained by each level of management and a company-wide email will be sent

why the projects are happening; so it is communicated effectively.

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