BUAD 4980
STRATEGIC MANAGEMENT
REPORT #2: STRATEGY FORMULATION
Exxon/Mobil
Jeffrey Rosenhauer
1. INTRODUCTION
In this report, the strategies of ExxonMobil will be explored starting with the documentation and explanation of the concepts found throughout the report. Followed by a strategic analysis of one of ExxonMobil’s companies, where strategies, strategies, and strategies will be explained. The third part of the report will pose a problem being faced by ExxonMobil and a solution to avoid any faltering in strategic advancement. Finally, a conclusion, to summarize the report, and reiterate the strategic formulation of ExxonMobil.
2. CONCEPTS
These strategic concepts are the framework for how a company can obtain competitive advantage in a market, either locally, internally, or globally. These concepts help give guidance to a company on potential moves the company would take in the future to try and expand a product or service.
2.1. Generic strategies:
These are the explanation of the generic strategies a company like ExxonMobil would use to forecast the appropriate course of action to take when guiding an organization into the future.
Cost leadership is a broad strategy that focuses on low costs to a wide target of the market. Differentiation is the strategy where a company focuses on quality and product innovation to achieve gains in the market. Focused low-cost is when a company has a narrow scope of the market and tries to use low cost to bolster market share. Focused differentiation is like focused low cost, but instead of low cost, a company uses differentiation to focus on a narrow scope of the market target. The Combined Strategy is when a company tries to provide differentiation and low cost to the market and two scenarios are provided. The stuck in the middle disaster, is when a company fails to distinguish which strategic route they wish to focus on, and ends up delivering neither. The integrated combined strategy is when a company can using technology, such as robots, vendor managed inventory, or just in time inventory to achieve a balance between low cost and differentiation.
2.2. Corporate strategies:
In this section, the more focused strategic analysis of the corporate specific strategies are explained. Horizontal Integration is the contemplation of how many product lines to either create or acquire to try and maximize strength in a particular market. Vertical Integration is the strategy to acquire one or many different businesses on the company’s value chain as to do it better, to cut costs, or apply leverage to the market. Related Diversification is the strategy of having many business intersecting on a value chain to attain economies of scope, to be able to expand the company without taking on too much extra production. Unrelated Diversification is when two business’ value chains do not meet, and while risks may be diversified to allow financial gains to be made, the bureaucratic costs and size of the company may spiral out of control.
2.3. International strategies:
Finally, the international strategies are explored through defining the strategic course a company can take to expand and flourish in the international market. Exporting is the process of making a product domestically then shipping it international, placing the tariffs, marketing and distribution on the importers. Licensing is the allowance of a separate party to use a brand, product or service for a monetary fee known as a royalty that is give back to the licensor. Franchising is like licensing, but it is backed by the franchisor will managerial help, materials, and guidance for the franchisee. Joint Venture is a partnership between two companies that want to go into business together to gain access to a market, possible in another country to gain market share. Wholly-Owned Subsidiary is the most involved for an international strategy, where 100% of the company is owned by a parent company and acts as an extension of that company.
International competitive strategies are the courses of action when it comes to utilizing the global market to expand a business and reach further into the market to optimize and maximize profits and sales. First, is the international strategy that is a global strategy that uses a universally needed product or service to be able to avoid competition and provide low cost and low pressure to customers. Global strategy is utilizing economies of scale to expand across the globe to reach more potential customers in the global market and trying to keep costs low to maximize profits.
A multi-domestic strategy is adapting to the local economies of the specific business’ location to try and diversify the company and their products to specifically match the local economy.
Lastly, transnational strategy is a fairly difficult strategy to master, because of the development of low costs while also providing differentiation to their product across many geographic markets.
3. ANALYSIS
The analysis of Exxon Mobil will look through the generic strategies, corporate, and global strategies the company uses to attempt competitive advantages in the natural gas and oil markets. Using the concepts from the previous section, the analysis will provide specific direction to the inner workings of a massive global company.
3.1. Generic strategy: Exxon Mobil in the United States, has Exxon Gas Stations providing gasoline and diesel for purchase to customers in the gas and oil market. Exxon uses the cost leadership strategy to try and provide a universally needed product at low costs and to as much of the market as it can. With the gas market being so competitive with price fluctuations and never ending consumer worry, Exxon is constantly having to analyze and adjust in the market space to provide a low cost product. While the Exxon brand gas stations are centralized in America and more specifically in the southeast, the value being sought in such a small market on a global scale is constantly under scrutiny, to maximize profits while maintaining the price advantage versus competitors make the cost leadership strategy very crucial to surviving in such a market where a few cents difference in price of the product can hurt tremendously.
3.2. Corporate strategy:
Exxon Gas Station have the biggest oil conglomerate as their parent company, providing much need financial support, strategic advantages and framework for the company. Exxon gas station are fortunate to the fact that vertical integration is a given advantage built into their framework. ExxonMobil, as the parent company does all the drilling, refining, shipping, and providing all the necessary production for Exxon gas stations. Instead of selling their product through other avenues solely, ExxonMobil created Exxon gas stations to provide their product directly to the consumer, thus cutting out the middle man, cutting costs, and applying leverage in the market.
3.3. International strategies:
TRANSITION SENTANCE
In one sentence, identify ONE international entry strategy your company has used to enter foreign markets. In two to five sentences, explain your answer with specifics. Exporting.
In one sentence, identify ONE international competitive strategy your company has used to compete in foreign markets. In two to five sentences, explain your answer with specifics. While Exxon Wants a Transnational Strategy, low costs beats out diversification in the global market. International/Global Strategy…
4. EVALUATION
INTRO PARAGRAPH
4.1. Problem:
The problem that Exxon Mobil Corp. is facing is environmental concerns from its products. This problem has been caused by its transportation of petroleum products in form of pipes from one location to another, which is usually over a very long distance. During the transportation, some of the pipes might have had leakages. These leakages lead to the pouring out of the oil products, something which raises environmental concerns. In addition, natural gas is highly flammable and under pressure, very explosive. An explosion like that would not only damage the ozone layer, but would also lead to the damage of numerous products in the process.
4.2. Solution:
TRANSITION SENTANCE
In one sentence, propose ONE solution to the problem (for example: One solution to lower bureaucratic costs is to divest several models of vehicles). In two to five sentences, explain how your solution will resolve the problem.
5. CONCLUSION
Conclude your report.
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