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Term Paper Checklist:
Title page
2. Table of contents (name of each team member appears next to the sections in
charged)
3. Executive summary (The essence of the report--two pages maximum)
4. Introduction
5. The body of the report (See sections II)
6. Conclusions and/or recommendations
7. Bibliography (APA citation style)
1
A MULTINATIONAL CORPORATION:
AND THEIR PRESENCE IN RUSSIA & GERMANY
MBA 625-SUMMER 2015
Professor Chang
Written By: Yonatan Balin
Adrian GiwaApoorva Mahajan
Jackie MonroeFaisal Shah
2
TABLE OF CONTENTS:
Executive Summary + Business Scope and Major Competitors (Yonatan
B.).............................................................................................4-5
Introduction/ Overview of the MNE (Yonatan
B.)............................................................................................6-7
Profitability Analysis (Adrian G.)............................................................................................7-12
Foreign Market-Proper Business Etiquette {Apoorva
M.)............................................................................................12-14
GDP, IMP/EXP, CPI, IFDI/OFDI, GFCF in the Host Country (Adrian
G.)...........................................................................................14-17
Competitive Position of your MNE In Host Country For Future Growth {Apoorva
M.)..........................................................................................18
Economic Analysis of MNE and Competitors (Adrian
G.).........................................................................................19-20
Core Competencies Of Our MNE (Jackie
M.)........................................................................................20-28
Growth Strategies In The Host Country {Faisal
S.}.......................................................................................28-35
Keys To Success In The Host Countries (Yonatan
B.).......................................................................................35-36
Conclusion (Yonatan B.)......................................................................................37
References......................................................................................38
3
Executive Summary:
The essence of this research paper is to analyze the service that Exxon
provides from a global enterprise stance. We will go in depth regarding Exxon’s
business scope, assess the cultural differences and similarities between the host and home
countries with a strong emphasis on the business etiquette displayed between the two
countries. We will analyze Exxon’s activities across country borders via the use of FDI,
the profitability analysis as well as findings of GDP, IMP/EXP… etc. We will also
explore the findings of the profitability analysis. We will examine how Exxon leverages
its competitive edge globally through the use of its core competencies that the company
has mastered and the key strategies Exxon employs for successful growth in the host
country.
Global Enterprise:
Exxon conducts business in almost every part of the world. The diversity of ideas,
perspectives, skills, knowledge and cultures across the company facilitates innovation
and is a key competitive advantage. Exxon creates and maintains a diverse workforce
representative of the numerous geographies where they do business in.
Business Scope:
Exxon focuses on sustainable solutions based on time-tested business practices. The
core elements of their business practices include the following concepts:
1. Consistency- Consistent focus on delivering operational excellence through
superior execution and product efficiency while preserving product quality
excellence.
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2. Leadership-Leadership through people, ideas and integration.
3. Going Global- Exxon’s global scale creates an enormous pool of resources and
opportunities to integrate. Exxon looks beyond market fluctuations, which is why
Exxon is investing in high-growth areas in the Asia-Pacific region and expanding
its presence in the Middle East.
BUSINESS ETIQUETTE:
It is of vital importance to have a deep understanding of each country that
you conduct business in. It is important to be aware of the country's
geographical location, religious beliefs and government policies in order to
promote, sustain, and create new business. Exxon has endeavored to master
these values in its global business practices.
Economic Analysis:
Exxon has been a very profitable company globally for many years. We will
present an analysis of its finances of a ten-year period as well as its profits.
We will analyze the economic markets of the home and host countries
through understanding the trends of FDI, GDP, and other economic criteria. There
are usually major differences in the two economies but the growing importance of
energy makes Exxon Mobil’s presence a fundamental aspect of each economy.
Major Competitors and Success In Home and Host Countries:
Exxon is one of the largest oil and gas producers and faces fierce competition
from companies like BP, Chevron and Shell. Exxon and has been more profitable
than any of its competitors. This success can be attributed to two possibilities:
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1. Forming viable strategic alliances both locally and globally.
2. A strong commitment to the value chain-Service, Branding/Marketing, R&D
and Production.
Introduction/Overview of MNE:
Exxon is one of the world's largest integrated oil companies (with Royal
Dutch Shell and BP). Exxon Mobil engages in oil and gas exploration, production,
supply, transportation, and marketing. Exxon has over 30 refineries in 17 countries
employing over 80,000 people across the globe. Exxon supplies refined products to
more than 19,000 gas stations worldwide including approximately 10,000 in the US.
Additionally, Exxon is also a major player in the petrochemical industry.
Exxon focuses on operational efficiency-the ratio between the input to run a
business operation and the output gained from the business. To achieve this, the
company continues to advance its technologies, introduce marketing innovations, expand
the business lines and establish markets overseas. Exxon has continuously improved
health and safety procedures to reduce accidents. This focused strategy on controlling
costs has helped the company to reduce costs, thus, becoming more efficient.
Exxon has adopted the differentiation strategy to go along with their operational
efficiency. Exxon has sought to attract customers that are willing to pay additional
premiums for their products and at the same time improve efficiency in the supply chain
in order to reduce costs. Exxon encourages its customers to purchase goods from its
convenience stores apart from filling gasoline in the Exxon gas station. Second, with its
superior buying experience, the company has also been able to provide convenient and
fast service, hygiene restrooms and friendly employees to its customers. This exceptional
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service has made the relationships with its customers to become more bonded than ever
before. Exxon employees are self-motivated, because as the company grows, workers see
their career building and having personal and professional growth potential. Furthermore,
Exxon gives employees intrinsic motivation in terms of dividends as well as extrinsic
motivations, in terms of recognition, such as certificates and recognition, for example,
Loyal Employee of the year award.
The mission of Exxon is clear, provide quality products and services in the
most efficient and responsible manner to generate outstanding customer and
shareholder value while remaining committed to the principles of sustainability.
Profitability Analysis:
Exxon Mobil has a long history of increasing revenues. In 2009 Exxon had hit
its lowest level of revenue. However, that was during the Global Financial Crisis,
which affected all industries throughout the world. The revenue for 2014 was the
fourth lowest fiscal year in the last 10 years. The oil industry has been going
through some difficulties due to over production of oil. This has affected numerous
companies in the oil industry as well as Exxon Mobil’s sub industry.
7
2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
100
200
300
400
500
600
Exxon Mobil Fiscal Year Revenues
Fiscal Year
Axis Title
Exxo
n M
obil
Rev
enue
's in
Bil
lion
s
Exxon Mobil is a company that either meets or exceeds earnings per share
estimates by analysts. While 2014 has been a difficult year for Exxon’s revenues
Exxon Mobil is still a profitable company. For 2014 earnings per share was $7.60.
Fiscal year 2014 was the fourth highest earnings per share in the last 10 years.
8
2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
2
4
6
8
10
12
Exxon Mobil Earnings Per Share (EPS)
Year
For the last 10 years we can observe that R & D spending has been increasing
at a steady pace. Many companies in the oil industry are concerned about over
production so we could forecast that in 2015 Exxon may reduce its R & D spending
significantly to reduce costs. When you compare Fiscal year 2014 and 2013, Exxon
Mobil has slightly begun to decrease R & D spending.
9
2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
200
400
600
800
1000
1200
Exxon's Research & Development Spending
Year
Axis Title
R &
D S
pend
ing
In M
illi
ons
Exploration costs are costs we choose to discuss because it is a major cost for
an integrated oil and Gas Company Such As Exxon is. In order for an integrated oil
and gas company to grow, a company has to explore new wells currently and
previously purchased wells as well. Exxon like others in its industry, also purchases
and leases wells that are speculated of having oil. In June 2015, OPEC stated that it
would not reduce production even though there is an oversupply of oil. This
directly affects exploration costs throughout the industry. We can observe from the
graph below that Exxon has already begun to reduce its exploration costs. In 2014
the industry saw the lowest exploration costs in the last 6 years.
10
2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
500
1000
1500
2000
2500
Exxon's Exploration Costs (in millions)
Years
When we observe Exxon Mobil’s bottom line for the last 10 years we can
derive that Exxon is a profitable company. From 2005-2008 Exxon had a steady
growth in income. From 2008-2009 there was a sharp decline due to the Global
Financial Crisis, but from 2010-2012 Exxon prevailed with a significant increase in
income once again. The years 2013-2014 net income was almost the same but yet a
significant decrease from 2012. However, Exxon is not the only company with a
decrease in net income due to the over production of oil.
11
2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
5
10
15
20
25
30
35
40
45
50
Exxon Mobil Net Income (in Billions)
Year
Foreign Market-The Proper Business Etiquette:
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When planning to take your business beyond the boundaries of the local markets,
the key to success is to understand the cultural differences that exist internationally. The
sector, which the company is operating in, impacts the cultural differences, which leads to
having a major effect on the profitability. Having a detailed understanding on the
international market can be helpful to gain competitive advantage.
Germany:
To develop the business factors such as culture viewpoints, values, outlook and
individual perspectives act as building blocks for the company. Behavior and attitudes
also vary all around the globe. Germany has a population of 18 million people being the
largest economy in Europe and third largest in the world.
13
Germans are very specific and particular about getting and doing things. They
have full-fledged knowledge of the work processes and prefer to examine the project in
great detail. Proper strategic analyst is an essential part of any individual’s life as it plays
a major role in success. Germans like everything planned and do not prefer sudden
changes. Even as a business benefit they would not welcome nor appreciate any sudden
amendments. They are low in flexibility and specific about their terms and conditions.
Germans take punctuality for business meetings and social occasions seriously as
tardiness is viewed as thoughtless and rude. Germans appreciate the courtesy of a
handshake at the beginning and at the end of a meeting. While having business meets
they do not prefer humor as they view business as a serious matter. In addition,
counterparts do not need or expect to be complimented. Dressing up nicely is an
important factor for the Germans regardless of what the occasion or the position they
hold. Germans have a clear distinction between their personal lives and professional
lives and do not appreciate when counterparts share their personal lives at meetings of
business. Treating Germans with respect is very essential as the nation is strongly
individualistic. They are opposed to unethical behavior and do not conduct business with
those known to be corrupt. Sending information for the business meeting such as
company profiles and proposals to German colleagues before your visit will add a
positive impression. While doing business with the Germans the fore mentioned
etiquettes is to be kept in mind so as to comply with the cultural differences.
Russia:
14
Russia is large country that covers nine time zones. It is a country of
cultural contradictions. The older generations are more on the conservative end having a
group mentality. Whereas the younger generation has a dynamic and individualistic
outlook. The country has a general sense of pessimism about the present as well as the
future with a mentality of not trusting outsiders as the country keeps itself isolated from
the rest of the world.
Russians by nature are very punctual and consider time precious. Appointments
are necessary and should be made as far in advance as possible. One should confirm the
meeting once you arrive in the country and again a day or two in advance. Russians do
not apologize unless they feel it is important and worthy of an apology. When shaking
hands with someone from Russia, gloves should be taken off otherwise it is considered
rude. Business cards are handed out liberally in Russia as they always exchange them and
do not take it lightly. One must have plenty of business cards with both sides filled with
information. One side should be printed in English and the other side in Russian. When
having a meeting with the Russians the presentation should be made by an expert having
prepared thoroughly and should be detailed and factual with less focus on salesmanship.
Russians being new to capitalism might not understand the western culture so they expect
to have proper reasoning of your demands. Business over the phone with Russians is not
a wise choice as the telecommunication in Russia is inadequate. Personal bonding and
relations have an important role when doing business with Russians. To help with this,
gifts, money or other items are often a good idea when doing business in Russia.
15
As one can see there are many similarities as well as differences shared between
these two countries. One must take into account the proper understanding of the
etiquettes that is accepted in each one of these countries.
Economic Analysis-GDP, FDI, Imp/Exp:
The sharp decline in GDP for Germany and Russia occurred during one of the
biggest Global Financial Crisis. Due to globalization, the world was affected severely by
the economic downturn in the US. As globalization increases foreign companies are
more reliant on the United States economy as well as the United States GDP is reliant on
foreign country spending.
2005 2006 2007 2008 2009 2010 2011 2012 2013
-10
-8
-6
-4
-2
0
2
4
6
8
10
Real GDP GROWTH RATES (ANNUAL AVG. GROWTH RATES)
Germany Russia
16
The chart below is in reference to the balance of trade in Germany and Russia. If
there is too much importing, small businesses could be negatively affected by foreign
competition of goods. Government intervention may occur due to an increase in
importing. To reduce such behavior, the government may increase tariffs on foreign
goods. If a country exports a lot, it may serve to increase GDP as well as foreign direct
investment within its country. However, that country could be subject to tariffs that may
hurt further increase in GDP. As we can see Germany has an increasing balance of trade.
The merchandise trade balance in Russia from 2011 to 2013 has been decreasing.
As of 2014 we saw a minor increase trade balance.
2005 2006 2007 2008 2009 2010 2011 2012 2013 20140
50
100
150
200
250
300
350
Merchandise Trade Balance (In Billions)
Germany Russia
The graph below is the Foreign Direct Investment (inward) graph where we are
comparing direct investment between Germany and Russia. The trend is showing that
countries are investing a lot more capital into Germany than Russia. While Russia has
been served with economic sanctions, due to its invasion of the Crimeria region yet
Russia still has rising trends.
17
2005 2006 2007 2008 2009 2010 2011 2012 20130
100
200
300
400
500
600
700
800
900
Foreign Direct Investment (Inward in billions)
Germany Russia
Below, you will see the Foreign Direct Investment (outbound). Again, Germany
has had a lot of foreign direct investment when compared to Russia. Even though Russia
has had ongoing conflicts, in the near future Russia could receive a significant investment
within its borders.
2005 2006 2007 2008 2009 2010 2011 2012 20130
200
400
600
800
1000
1200
1400
1600
1800
Foreign Direct Investment (Outward in Billions)
Germany Russia
18
Competitive Position-In Host Country For Future Growth:
Studies have shown that Exxon has revenue of $14,816.00 in Germany, which
was reported on December 30, 2014. This revenue only makes up around 3% of the
company’s total revenue. The company delivered earnings of $32.6 billion and a return
of capital employed of 17%, which tells about the financial stability of the company and
the strength of its investment decisions. The strong cash flow helped the company to fund
$42.5 billion to expand the business and invest in new projects that led to bringing energy
to markets globally. WinterAshall, Germany’s largest oil and gas producer when
compared to CSI market show that the companies have bloomed in the last 2 to 3 years
due to strong German economy.
The companies will be rising as crude oil and natural gas are important and will
stay important for decades being the major source of energy. As the natural resources for
the industry natural gas plays a significant role long-term as an environmentally friendly
and reliable partner of renewable energies. Traits like being inexpensive, safe, flexible,
climate friendly and available in ample amount helps to obtain public acceptance. The
studies show natural gas will have a boom in importance as a source of energy resulting
of the energy transition. Germany is one of the most important regions for the company
in the examining and the producing of crude oil and natural gas. Since 1930 Winter
Ashall has been producing domestic crude oil. Winter Ashall, has a 50% share in the
largest German crude oil field and operates the only gas production platform in the
German North Sea.
19
Economic Analysis of MNE and Competitors:
The below is a graph of some of Exxon Mobil’s top competitors worldwide. The
graph is based on fiscal year 2014. Exxon is ranked number 4 in revenues out of 6 major
competitors. Petro China exceeded Exxon Mobil’s 2014 revenue by a mere 6 billion
dollars.
Exxon Mobil Corp Sinopec Corp-H Royal Dutch SH-A Petro China-H BP PLC Total SA0
50
100
150
200
250
300
350
400
450
500
Industry Revenue 2014 (In Billions)
Company
20
2012 2013 20140
100
200
300
400
500
600
3 Year Revenue Trend for Exxon & Competitors (In Bil-lions)
Exxon Mobil Chevron BP Petrobras
Royal Dutch Shell China Petrol Total 'B' ADS
The graph above shows the three-year revenue trend for Exxon Mobil and its
competitors. While Exxon is number four in revenue, Exxon and its competitors have
been experiencing a decline in revenue. Petrobras seems to remain at a flat trend.
The graph below is based on the three-year trend of net income. According to this
graph, Exxon and Exxon’s competitors are all experiencing declining net income.
However, Exxon Mobil has the number 1 net income for the last 3 years. From this graph
we can derive that Exxon could be managing its operating expenses better than its
competitors.
21
2012 2013 2014
-20
-10
0
10
20
30
40
50
3 Year Net Income for Exxon Mobil and Exxon Competi-tors (Billions)
Exxon Mobil Chevron BP Petrobras
China Patrol Total SA Royal Dutch
The Core Competencies:
Technology:
Exxon Mobil Corporation pursues high-impact technologies that unlock new
energy sources, reduces the cost of their projects, improve the efficiency of their
operations and increase the value of their products. Exxon Mobil is an industry
leader in the development and application of technology.
Today, wells can be drilled horizontally as well as vertically beginning miles
from the oil and gas they are intended to reach. This is referred to as extended/long
reach technology. This technology allows ExxonMobil to develop long-reach wells
that can extend horizontally for miles in the subsurface. By using this technology,
previously inaccessible resources can be accessed often in complex and challenging
environments such as the Arctic. Extended reach technology also reduces Exxon
Mobil’s environmental footprint.
22
These advances in technology have allowed the industry to produce more oil
and gas while reducing the environmental impact of energy production. This
technology has made it possible for previously inaccessible resources to be
accessible. At their Sakahlin-1 development offshore eastern Russia, wells are
drilled from a location on land to the oil and gas under the ocean.
ExxonMobil has a very impressive record of completing successful
developments and has multiple patented technologies that have positioned them as
the industry leader in extended reach technology. They have drilled 26 of the
world’s 30 longest-reach wells and continue to advance extended reach technology
by progressing several additional drilling and completion technologies.
ExxonMobil is an experienced leader in the application of advanced
techniques that enable safe, reliable and cost-effective well drilling and completion.
Their strength lies in the ability to bridge the gap between fundamental science and
operational practices to lower costs, enhance production and reduce environmental
impacts. In addition to the Extended Reach Technology, Exxon Mobil has also
23
created The Fast Drill Process. This process is a physics-based process combining
real-time digital analysis of the drilling system’s energy consumption with a
structured approach to well planning and design. The Fast Drill Process ensures that
every well is drilled as efficiently as possible. ExxonMobil’s drilling rate has
improved more than 80 percent since introducing the Fast Drill Process that has
resulted in an annual energy savings equivalent to removing 1,200 cars from the
road. The additional reduction in fuel consumed also means a proportionate
decrease in emissions.
Marketing:
The reason Exxon Mobil has managed to secure their position in the industry
is because they have such a comprehensive knowledge of global energy markets.
That knowledge has allowed them to capitalize on the growing natural gas and
power markets. In 2013, they sold more than 14 billion net cubic feet per day of gas
across 35 countries including those participating in LNG operations that delivered
more than 62 million tons to global markets. Exxon Mobil is very active across the
natural gas value chain in most major markets. Their global presence combined with
the ability to leverage expertise across their Upstream, Downstream, and Chemical
businesses enables them to create innovative integrated solutions. This provides an
extremely important competitive advantage and positions Exxon Mobil in a top
position to help meet the world’s growing natural gas and power demands.
24
ExxonMobil focuses on sustainable solutions based on proven business
practices. They use a business model focused on achieving excellence in daily
operations, generating superior cash flow, and creating long-term shareholder
value. Their business model is supported by the following 10 elements:
1. Operate in a safe and environmentally responsible manner
Their employees are committed to excellence in safety, health, and the
environment. They conduct business using an approach that is
compatible with both the environment and economic needs of the
communities that they operate in. Their commitment to safety is the
cornerstone of responsible operations and leads to better business
results. They expect each of their businesses to deliver superior
performance, lower incidents toward zero and achieve industry-
leading results.
2. Uphold high standards
Exxon Mobil has established a wide range of management systems that
address critical aspects of their business. They expect disciplined
application of those systems throughout the organization. Directors,
officers and employees must all comply with Exxon’s Standards of
Business Conduct.
3. Attract and retain exceptional people
Exxon Mobil focuses on merit-based, long-term career development
and commitment to maintaining a diverse workforce. They recruit
talented people from around the world and provide them with formal
25
training and a broad range of global experiences to develop them into
the next generation of Exxon Mobil leaders.
4. Maintain financial strength
Their financial strength gives them the capacity to pursue and finance
attractive investment opportunities.
5. Competitive advantages
ExxonMobil has established competitive advantages that are evident
across all three of their business lines – Upstream, Downstream and
Chemical. These competitive advantages set Exxon apart from the
industry and serve as the foundation for ongoing superior
performance and the creation of long-term shareholder value.
6. Balanced portfolio
Provides them with the flexibility to take advantage of opportunities,
supports future growth and leads to strong financial and operating
results.
7. Disciplined investing
Their approach to investing is to advance only those opportunities that
are likely to provide long-term shareholder value. They focus on the
efficient use of capital to achieve superior investment returns.
8. High impact technologies
They pursue high-impact technologies that can significantly improve
Exxon Mobil’s projects, operations and products. Their ongoing
technology investments supported by dedicated technology centers
26
provide the company with competitive advantages in key aspects of
their business.
9. Operational Excellence
They use management systems that are rigorously applied to their
worldwide operations. These systems are designed to enable the
consistent application of the highest operational standards.
10. Global Integration
The global integration of Exxon Mobil’s business lines and functional
organization allows them to capture significant value across the
supply chain, at manufacturing sites and more broadly in the
management of critical shared activities. The level of integration
results in structural advantages that is very difficult for competitors to
replicate.
As a result of the consistent application of this proven business model, Exxon Mobil
possesses competitive advantages that support strong results today and positions
them to remain in that position in the future.
Management Capability:
ExxonMobil remains dedicated in its commitment to excellence in safety,
security, health and environmental performance (SSH&E). This is referred to collectively
as Operations Integrity. Many of Exxon Mobil’s operations and products present potential
risks to people and to the environment. Recognizing these risks is essential in their
business and they believe the best way to meet their commitment to excellence in safety,
security, health and environmental performance is through a capable, committed
27
workforce and practices designed to enable safe, secure and environmentally responsible
operations.
Exxon Mobil accomplishes this through clearly defined policies, practices and
most importantly with a rigorously applied management system designed to deliver
results. Management systems are positioned throughout Exxon Mobil’s global operations
to ensure the high operating standards are consistently being met. Exxon Mobil’s
Operations Integrity Management System (OIMS) forms the foundation of their
commitment to operational excellence and provides a solid framework to achieve safe
and reliable operations.
Since the implementation of OIMS and Exxon’s SSH&E performance has greatly
improved and the industry-leading lost-time incident rates have been significantly
reduced. OIMS has also resulted in a reduction in environmental risks, a significant
decline in marine spills and continuing reductions in emissions.
All operating organizations are required to maintain the systems and practices
needed to conform to the expectations described in the OIMS Framework. OIMS
establishes the framework for managing the safety, security, health and environmental
risks and provides the structure to help Exxon Mobil meet or exceed applicable
regulations. They continually assess the framework and its effectiveness and incorporate
learning to further improve performance.
Customer Service:
Exxon Mobil’s online customer service system (OCS) gives them a unique
advantage over other companies. OCS consists of convenience, efficiency,
intelligence and security.
28
Convenience:
The OCS allows global access for entering, changing and canceling orders. It
makes it possible so that you can retrieve your documents and do business
wherever and whenever is right for you. The website offers instant document
retrieval whenever you need. The documents that record retrieval support includes:
acknowledgement of orders, order confirmations, bills of lading, certificates of
analysis, advanced shipping notices, other delivering and shipping documents and
invoices.
Efficiency:
Exxon Mobil chemical OCS keyboard was newly designed with efficiency in
mind. Customers can complete OCS orders faster and easier than ever with a
streamlined experience built around a simple three-step ordering. Customers just
need to enter order details, review and submit. Personalized menus automatically
load the customer’s information, material availability tracking for some shipment
types, automatic optimal load quantity checks where utilized, faster order entry
with custom order templates, fast order entry with ability to copy existing orders,
railcar consumption reporting and contracts or quotation based orders.
Intelligence:
Their new OCS is faster than ever and can keep up with pace of your business
decisions. The website offers detailed order data, account activity history, Railcar
Status Reports for shipment tracking, tank Car Outage Tables retrieval, marine cargo
tracking with link to freight forwarder and material safety data sheets.
Security:
29
Data security is very important and their new OCS lets you order with
complete confidence that your data is protected. Exxon Mobil’s OCS offers securely
encrypted portal, employee access controls and user-defined password reset
questions.
Growth Strategies:
International Business Strategy:
Exxon Mobile is heavily involved in the exploration and production of oil and gas
reserves and is making significant long-term investments to secure the future of global
energy supplies. As an energy company, it focuses on sustainable solutions based on
time-tested business practices. The core element of its business strategy include:
Consistent focus on delivering operational excellence
Build technology leadership
Benefit from integration
Invest with intelligence and discipline
M&A and Strategic Partnerships:
Political and cultural landscape across the world are very diverse, especially when
a multinational company in the energy sector has to navigate those rough waters. There
are a greater number of new oil and gas resources located in remote areas. Major
challenges are operating environments; major projects are more capital intensive; and
operating complexity places even greater emphasis on execution excellence.
Branding, Targeting and Product Position:
A commitment has been made by ExxonMobil to make a long lasting and a
positive contribution to every community where it operates. As a multinational company
it has a proven record of job creation, outstanding training and career development for
our national staffs, and support for energy sector industry.
Global Marketing + R&D:
30
R&D expenditure in the oil and gas industry is not as high as in some other major
industries. For example, the chemical industry spends around three percent of its revenue
for R&D purposes. In 2013, ExxonMobil spent around one billion US dollars on
research and development. Meeting growing global energy demand requires sustained
investments through periods of both low and high commodity prices. ExxonMobil plans
to invest about $38 billion per year through 2017.
Outsourcing and Global Supply Chain:
The company’s global footprint often reaches beyond our own fence line. Anyone
who does business with ExxonMobil can affect their operations and their reputation.
Exxon relies on approximately 165,000 suppliers of goods and service. Their business
depends on how well it manages those who work on its behalf. ExxonMobil takes pride
in building long-term relationships with a number of companies globally along with
minority and women-owned businesses, increasing their capacity to be long-term and
competitive members of the company’s extensive supply chain.
Growth Strategies in Germany and Europe:
International Business Strategy:
ExxonMobil’s activities in Europe have been there since 1885. It markets fuel and
lubricant to business-to-business segments and consumers through a network of Esso
service stations. It sells chemical products, such as polymers and intermediates that touch
every European’s daily life in the form of packaging wraps, tires and other end products.
ExxonMobil is also Germany’s largest natural gas producer. It is one of Europe’s largest
suppliers of oil and gas, a major refiner of crude oil for fuels and lubricants and one of
the continent’s leading petrochemical companies. ExxonMobil is heavily involved in the
exploration and production of Europe’s oil and gas reserves and is making significant
long-term investments to secure the future of Europe’s energy supplies. Between 2005
31
and 2009, it spent over $17 billion in capital and exploration investment in Europe. It
supplies about ten percent of Europe’s gas demand and about ten percent of Europe’s oil
demand. A significant amount of this demand is met from fuels produced within Europe.
With around 6,000 service stations across Europe, Exxon sells high quality products and
services to over two million customers each day. As discussed in the outline section, their
core elements of its business strategy include:
- Consistent focus on delivering operational excellence:
They recognize the song business strategies only work with superior execution, to
increase production and efficiency while preserving product excellence
- Build technology leadership:
Leading the way in new product development while improving existing products
through technological innovation is essential to strengthening their premier
industry position
- Benefit from integration:
Their global scale creates an enormous pool of resources and opportunities to
integrate. For example, more than 90% of their chemical capacity is integrated with
their refining and natural gas operations.
- Invest with intelligence and discipline:
Looking beyond market fluctuations to identify long-term trends that will shape the
industry. That is why they invest in high-growth areas in the Asia-Pacific region and
expanding our presence in the Middle East.
M&A and Strategic Partnerships:
In 2012, PRD Energy Inc. announced that its wholly owned subsidiary, PRD
Energy has entered into two definitive agreements with ExxonMobil Production
Deutschland to license all seismic, geological and production data held by
ExxonMobil relating to PRD’s five production licenses covering approximately
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28,300 acres in the state of Lower Saxony, Germany. The first agreement gives PRD
the use of all seismic, geological and production data held by ExxonMobil relating to
three of its existing production licenses in Germany. The agreement significantly
cuts the risks and initial cash outlay to PRD of evaluating and bringing the oil fields
back into production. As part of the deal, PRD agreed to disclose results from its
evaluations of the seismic, geological and production data to ExxonMobil.
ExxonMobil also has the right to become a partner, with a 50% stake in each field
the Calgary-based company decides to develop. Before starting development, the
junior oil and gas company is required to present a feasibility study and
development plan to ExxonMobil.
The second agreement grants PRD the use of all seismic, geological and
production data held by ExxonMobil relating to two of PRD's existing production
licenses covering approximately 2,200 acres in the state of Lower Saxony. PRD has
agreed to disclose results of its evaluations and pay ExxonMobil fixed cash amounts
based on the volume of seismic data and well-production files it opts to use. PRD
Energy is engaged in the exploration, development and acquisition of natural gas
and crude oil mainly in Europe.
Branding, Targeting and Product Positioning:
Since 2006, ExxonMobil has been moving to comply with the new European
Union regulation commonly referred to as REACH (Registration, Evaluation and
Authorization of Chemicals). REACH was adopted by the European Parliament and
the Council in 2006 and entered into force in 2007. Its regulations are consistent
33
with Exxon Mobil’s existing philosophy. Using science to understand the risks
associated with the products, Exxon sells and then communicates it their customers.
To prepare and ensure compliance with REACH, ExxonMobil established a
dedicated REACH integration team to co-ordinate and integrate activities across the
Corporation’s business lines. While the new regulation creates a large effort,
ExxonMobil has the resources, the commitment and much of the data that is
required under REACH. They are working actively with industry associations such
as CEFIC and CONCAWE to develop and deploy standard tools and processes which
will allow Exxon to implement the requirements for REACH with minimal disruption
to ExxonMobil or to their customers and supplier operations.
Global Marketing and R&D:
Research and Development (R&D) also known as Research and Technical
Development (RTD), is a general term for activities in connection with corporate or
government innovation. On the other hand Global Marketing is marketing on a
worldwide scale reconciling or taking commercial advantage of global operational
differences, similarities and opportunities in order to meet global objectives.
ExxonMobil conducts cutting-edge R&D through in-house efforts, via
partnerships with other industries and by funding academic and other nongovernmental
research projects. As technology moves from concept to research and application,
ExxonMobil applies a consistent management approach. The company’s successful
exploration program continues to yield discoveries and new acreage additions that
contribute to their large global hydrocarbon resource base. ExxonMobil is making
targeted investments to strengthen the portfolio and increase production of high-value
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products, such as; ultra-low sulfur diesel, jet fuel, and lubricants to meet growing
consumer demand. They also continue ongoing investments to improve feedstock
flexibility and energy efficiency, which in turn improves business profitability. The
advanced technologies that enable us to find, develop and produce energy sources, as
well as manufacture transportation fuels and chemical products, are rooted in an ongoing
commitment to research. With the ingenuity of its 18,000 scientists and engineers and $1
billion annual investment in research and development, ExxonMobil is dedicated to
pioneering the science and technology of energy.
Outsourcing and Global Supply Chain:
Exxon Mobil’s global footprint extends through a vast number of regions across
the world. They rely on approximately 165,000 suppliers of goods and services to uphold
our commitment to operational integrity. Purchases from these suppliers have made a
significant positive impact on the economies and living standards in the countries where
they operate. The supply chain management process begins when any ExxonMobil
business line identifies project or operational needs requiring the procurement of third-
party goods, services or materials.
ExxonMobil has had a continuous business presence in Russia for more than 20
years across upstream, downstream and chemical operations. They had bought up an
enormous amount of real estate in Russia, and had planned to begin drilling in several
locations. The Artic was one of these areas, a location where oil had only been theorized
to exist until its presence was recently confirmed. The deal was complex, because
Rosneft got part of ExxonMobil real state in Alaska, the Gulf of Mexico and various U.S
35
shale fields. Exxon own 30% of the Sakhalin Island oil fields, as well as four other
locations totaling more than 63 million acres. Those are now all commingled assets. Alas,
the West hit Russia with economic sanctions because of the unrest in Ukraine. Those
sanctions include a prohibition on U.S. companies doing business with Russian oil and
gas drillers. ExxonMobil reported in its 10-K filling that this little hiccup would cost the
company $1 billion. The company cannot collect revenues from these locations while
sanctions remain in place. The Arctic deals went away, but Roseneft gets to explore the
region anyway. The Russian oil sanctions come at a particularly bad time considering that
oil prices have plummeted, which affects ExxonMobil’s to line. The way we see it,
eventually sanctions will be lifted and the project will continue. Russia will find some
way to juice the deal so that ExxonMobil does not end up too disadvantaged. It is a
mutually beneficial deal, so Roseneft would not want to anger its U.S counterpart
Keys To Success Globally:
Exxon has grown into one of the most successful companies both locally and
globally. This success did not happen by chance or luck of the draw. Exxon has strong
principles that have led them to a path of past present and most importantly guaranteed
future growth locally and abroad.
Below is a breakdown of some of those key principles that Exxon relies on for
success and growth:
1. Learning The Business- Before Starting Exxon’s leaders had a thorough
knowledge of the business before investing time and money into it. This gave
Exxon the knowledge and the insight required to deal favorably with the
stakeholders in the industry and to recognize opportunities when they came.
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2. Saving To Invest-As a business, Exxon continually saved a good part of its profits
to be able to explore business opportunities that arise later. Rockefeller and his
partner were able to tap into the highly lucrative oil industry because they had
saved money from their commodity trading business. Additionally, Exxon looks
beyond market fluctuations to identify long-term trends that will shape the
industry. That is why they are investing in high-growth areas in the Asia-
Pacific region and expanding presence in the Middle East.
3. Forming Partnership For Success-Working and pulling resources together with
other people in partnerships can enable one to achieve their goal faster and easier.
Getting into partnership is a great way to leverage on other people’s talent, skill,
energy, and money. Partnering with the right people, Rockefeller’s rise in
business was largely due to his going into partnerships with other people who
possessed the talent or funding necessary for growth.
4. Cutting Cost to Increase Profit- By incorporating cost cutting measures in the
operation, Exxon was able to not only save money but also record increased
profits. Cost cutting was Exxon’s top strategy for remaining profitable in the
face of falling oil prices in the ‘80s and ‘90s. By ‘96, the company’s operating
cost had been reduced by $1.3 billion yearly, allowing it to make profit of
$7.51 billion that year.
5. Benefit from integration -Exxon’s global scale creates an enormous pool of
resources and opportunities to integrate. For example, more than 90% of
Exxon’s chemical capacity is integrated with their refining and natural gas
operations.
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6. Value of excellence- A consistent focus on delivering operational excellence.
Exxon recognizes that strong business strategies only work with superior
execution, so Exxon strategies to increase production and efficiency while
preserving product quality excellence.
Conclusion:
Exxon’s commitment to safety performance, unwavering ethical behavior,
first-class corporate citizenship, operational excellence, and technology leadership
fortify Exxon’s success. Its efforts help generate prosperity and improve living
conditions for people around the world by providing safe, reliable, and affordable
energy. Like every business and industry there are challenges that Exxon will have
to overcome even more so because it is a global company. However, Exxon has a
clear mission, a superior business model and core key principles that it does not
stray away from. With that being said, Exxon is here to stay, it is here to compete
and it is here to be profitable and reliable for everyone from anywhere.
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References:
Learn about extended reach technology (ExxonMobil)http://corporate.exxonmobil.com/en/engineering/extended-reach-technology/about/overview
Efficiency (Online Customer Service (OCS))http://www.exxonmobilchemical.com/Chem-English-Micro/online-customer-service/efficiency.aspx
Our strategy (Our strategy)http://www.exxonmobilchemical.com/Chem-English/about/our-strategy.aspx
Learn about Natural Gas and Power Marketing at ExxonMobil (ExxonMobil)http://corporate.exxonmobil.com/en/company/worldwide-operations/business-divisions/gas-and-power-marketing
Operations Integrity Management Systemshttp://corporate.exxonmobil.com/~/media/global/Brochures/2009/OIMS_Framework_Brochure
Business Model And Competitive Advantageshttp://ir.exxonmobil.com/phoenix.zhtml?c=115024&p=irol-model
EXXON MOBIL CORPORATION Sales by Geography (Exxon Mobil (XOM) Sales per Country and Region, Dec. 30. 2014 Annual Report)http://csimarket.com/stocks/segments_geo.php?code=XOM
EXXON MOBIL CORPORATION Sales by Geography." Exxon Mobil (XOM) Sales per Country and Region, Dec. 30. 2014 Annual Report. N.p., n.d.
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Germany Business Etiquette, Culture, & Manners." Germany. N.p., n.d. Web. 07 June 2015.
Kerper, Markus. German Business Customs And PracticesThe Road To Global Success (n.d.): n. pag. Web.
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