1Name:University:Course:Tutor:Date: 18th February 2011, Strategic Marketing & Planning Use of strategic plans in effecting strategic change for Exxon Mobil Corporation Introduction Exxon Mobil Corporation is a multinational oil and gas company that is based inAmerica. It’s a descendant at of the Rockefellers standard oil company and it was formed in1999 from the merger of the Exxon and Mobil companies. It’s headquartered in Irving, Texas.The company is one of the world’s largest publicly traded companies and has been ranked thenumber one or number two for the last five years. By the end of the year 2007 the company’sreserves stood at 72 million oil equivalent barrels while its production rates were expected to lastfor more than 14 years (Hrebiniak & William, 1984). The company has 37 oil refineries in more than 21 countries constituting a combineddaily refinery of approximately 66.3 million barrels. Exxon Mobil is recognized as the world’slargest refineries and this title has been associated with the former standard oil since the incorporation in the 1870s. In addition to that the company is largest of the six recognized oil supermajors. Exxon Mobil owns hundreds of other similar subsidiaries including the imperial oillimited in Canada and the sea river maritime which is a petroleum shipping company.Functionally the company is organized into several global operating categories including the
2upstream, down stream, chemical Exxon Mobil global services company, XTO and finally theimperial oil (Neil,1974). Many organizations experiences a lot of stresses as well as difficulty when it comes tocoping with change and lack of innovation especially from within the organization has beenrecognized as one of the critical problems that most of the modern businesses face in the UnitedStates and Canada. Therefore to be successful in the competitive business world theseorganizations have fewer options than to embrace to these diverse inevitable changes. Mostcompanies have in the past been used to illustrate success that comes with embracingorganizational change as a strategic measure (Holmstrom, &. Kaplan, 2001). Some of them include the Hewlett Packard, general electric and the Motorola.When it comes to describing organization changes it mainly focuses on different examplesranging from franchising, partnerships, mergers and acquisition and joint ventures which usuallyvary when it comes to its outlook, method of initiation, method of implementation and on itsgoals. Generally organizational strategic changes involve two components which are planningand analysis processes which are studied in details through a keen look at the porters five forcesmodel as well as careful analysis of various environments that are critical before implementingnay organizational change. This paper will therefore critically appraise the utility of strategicplans in the effecting of the strategic change in the Exxon Mobil Corporation (Drucker, 1995). Critical appraisal of change in the Exxon Mobil Corporation Organizational change is often defined as the process of an organization adopting a newidea or behavior. In order for organizations to survive and prosper in this highly complex world,they must continuously adapt to new situations and move in line with the developing trend oflearning organizations which are able to engage each an everyone of tits employees in its process
3of solving problems as well as foster its improvement based in lessons gained from experience(Glueck, 1980). Before undergoing any organization change plans to carryout an analysis regarding thecompany’s reading its legal political environments and socio-economic environments. theeconomic environments focuses on the economic conditions in the countries where theorganizations are operation al and focus on factors like infrastructure, economic development,products markets ,resource ,interest rates, ,inflation, exchange rates and economic growth. Thesocio-economic environment concerns with the core values including uncertainty, howeverdistance, collectivism, individualism and masculinity or femininity while the social values serveto influence organizational functioning as well as management style (Hax, 1988). All the stated factors have to be considered if any organization change has to be initiatedand implemented successfully. in addition to that some concerns have to be satisfied beforeadopting any organization change for instance the players in carrying out, the evaluation of theeffects of the changes in both the strategy and structure of the performance of the organization.Measurement of the effects of the organization changes strategy is conducted using indices likestock market price or even market share. Exxon Mobil and Strategic Change By 1999, the Mobil chemical company which was established in 1960 was a great namein the oil industry with its principal products including basic olefins and aromatics, polythenesand ethylene glycol. The company basically produced lube additives as well as synthetic lubebase, catalysts and propylene packaging films and thus enjoyed the benefits of manufacturing inmore than ten countries (Hax, & Majluf, 1996).
4 The Exxon chemical company in 1965 became a world’s wide organization and by 1999it was it was market of its major products like the polythene and aromatics. In addition t tat thecompany also had added specialty in production of plasticizers, elastomers , solvents and processfluids. The Exxon and Mobil in 1999 merged to combine three operations to become ExxonMobil corporation a strategy which its top management targeted to achieve various goalsincluding combining their us based businesses into the largest non governmental oil company inthe world, ensure that the expectations of the merger in terms of near term cost savings as well asthe long term strategic benefits exceeds their previous values, improved competitive levels withother multinational oil companies as well as the state owned oil companies that are expandingrapidly outside their areas of origin (Robert,1993). The merger between the Exxon and the Mobil was one of the uses of its strategic plans toaffect a change in the company that will eventually lead to increased benefits and improvedperformance of the business operations. The plan to merge both companies was a strategicchange in that it had its business strategies at the root of change which it wanted to enter newmarkets as well as foster its expansion of the six of its operations which are the basicscharacteristics of an organizational strategic change. This further evident in that the companymanagement had conducted an initial through analysis of the oil industry’s competitive forcesand even came up with two main factors of the merger which were the need to reduce the costsof its products considering the face of the low prices and the changes witnessed in the oilindustry. In addition to that the effect of the organizational change was fostered by the growthexperienced by the state owned oil companies as well as the emerging low cost independentmarketers and refiners in the United States markets (Hill, & Charles,1995).
5 Exxon Mobil has strategic plans that had reduced is costs by more than 4 billion dollarsand had to effect the strategic change of merging the companies to make the achievement of itsfuture as goals much easier. Therefore the effecting of the strategic changes was one of the waysin which the company would use to reduce it costs as mergers are generally considered aseffective ways of doing so especially when considering the act that the new resources that thesemerger companies shares goes greater way to cutting significant costs. In addition to that the plans of Exxon Mobil merging has made the company to be theworld class undisputed leader in its business enterprises and thus has strengthened itstechnological leadership thus coupled wit its two century experiences in the industry and itsoperations in more than 200 countries has definitely made it redefine the meaning of efficiencyand world class scale when t comes to the oil industry. Thus the plan to merge has helped thecompany to effect its strategic change (Roeber,1994). The plans of Exxon Mobil to expand its business operations was another trademark ofeffecting its organizational strategic changes the company required to acquire a broader portfolioof opportunities in the high growth markets, attractive upstream areas as well as the business inthe world at large. This strategic plan has therefore enabled it to optimize its choices to furtherimprovement of its returns hence an efficient strategic change for its businesses to execute plansin capturing the targeted opportunities.Another way in which the strategic plans of Exxon Mobil has helped the company to effect itsorganizational change is the ability to effectively maintain its leadership position in the corebusiness as the most efficient competitor in almost every aspect of its business. This hasfacilitated capturing of the quality investment opportunities which as being able to maintain aselective as well as disciplined approach, a high quality portfolio of its productive assets,
6development and employment of the best technology, ensuring of a safe as well asenvironmentally sound operations and finally being able to continuously improve its already highquality workforce in highly performing organization while maintaining a strong financialposition and proper use of its financial resources. Therefore the company has been able to initiateand implement its gradual strategic change successfully over time (Davidson, 1995). Exxon Mobil cooperation has used its strategic plans to maintain an investment disciplinein terms of maintenance of high investment standards as well as adhering to fundamentalstrategies to produce along term returns. The company has also been able to maintain a stableinvestment profile through out it business cycle which has minimized in efficiencies (David,1995). In addition to that it has also been keen in testing its potential investments covering a vastrange of economic scenarios thus acting only on those capable of providing resilient returns. Inimplementing this strategic plan the cooperation has been able to successfully effect its strategicchange (D’Aveni, 1994). Also the effective plans of Exxon Mobil to mange its assets throughemployment of a disciplined review process have ensure that all of its assets contribute to thecompany’s financial and strategic objectives (Daft, 1997). These plans enable the management to focus on improving the performance of itsexisting assets by reducing the costs while at same time enhancing its productivity. These plansstrategic plans has seen the company through changing business conditions as some assetsbecome candidates for divestment and high grading while those which are no longer or worthless than others are considered of disinvestment as well hence the successful initiationimplementation of its strategic organizational change (Byrne, 1996). Another strategic plan utilized by Exxon Mobil in effecting its strategic change is theability of the company to merge the two companies while staying focused on its original business
7objectives of being unique and easily differentiated from competition. This included havingleadership positions in all of its core businesses and technology demanding a flawless executionin the company’s base operations and rigorous discipline in the process of projectimplementation. Through combination of the stated priorities coupled with an efficient financialand corporate structure the company has been in a good position to produce superior businessresults as well as strong returns to its shareholder thus successfully adopting its strategic change(Quinn,1980). Prior to the merger the company was able to take strategic decisions which facilitatedavoidance of possible pitfalls through effective and accurate forecasting which ensuredsuccessful completion of the company’s mainstream and chemical projects, selectivity/efficiencybenefits in exploration options and lowered lease bonuses. The effectiveness of these company’sstrategic plans help the effecting of the strategic changes during the period of merger (Renato &Grant, 1992).Exxon Mobil also implemented its strategic planning through initial development of itscomprehensive inventory management of its long term projections and upstream developmentprojects long way before the merger was actualized. These initial strategic has effected thesuccessful initiation and implementation of the organizations strategic change in that thedevelopment plans that had been put forward with the natural gas production, liquid and mergerpredicted that the production was to grow by three percent through the year 2005. Ina addition tothat these plans had also predicted the new coverage of new geographical markets and keygrowth areas as well as an increase and continuous growth beyond 2005 given the new numerousdevelopments projects that were in the current design and planning stage Steiner, 1979).
8 Strategic plans has also en utilized by Exxon Mobil in implementing some of its strategicorganization change was through implementation of it plans to improve the company’s returnsthrough the self help initiatives as well as profitable growth through the focusing on themarketing programs and customer focused strategies which were targeted at making the ExxonMobil the true leader in the industry (Mitchell& Mulherin, 1996).These plans thereforefacilitated the company to successfully implement its organizational strategic changes. Inaddition to that there was a strategic change considering the fact that both companies involved inthe merger were distinguishable in their own right and just planned to change their organizationalstrategically to become high and stronger force in the very competitive industry. Through thisthey were able to achieve through the utilization of their long standing core strength which istheir technology which has differentiated them from the competition hence the complementarystrategic of the technology used by both companies has enabled them to progress through theorganizational changes through the merger successful (Mintzberg, 1994). Anther plans that the Exxon Mobil utilized in implementing its strategic changes is thecorporate strategy which includes organizing of its business along two dimensions that is onmarket share and business growth rate which is increasing as it pertains to the rapid increase inthe entire industry (Porter,1980). Therefore the successful implementation of the pans of bothcompanies ensured that they successfully under go the organization change as the combination ofboth the high and allow market share and business got provided several categories for acorporate portfolio hence making the companies able to add star into their business units thuscreating a visibility, attraction and hence generating profits and positive cash flows even duringthe maturity of the industry and slowing of the market growth (Pare, 1994).
9 The plans of merging and restructuring of the company reflected the strategic changes inthe organization as a result of shocks that include technological changes, intensification of roomsas well as sources of competition that lead to deregulation in the major industries, globalizationof market and the changing f the financial market dynamics that characterized the business worldof the time between 1994 and 2000. Therefore such plans fostered successful changes in theorganization (Porter,1985). The action of Exxon Mobil regarding outlook on energy for instance the public documentthat is used by the company to help in forecasting of both the middle and the long term apply aswell as the demand for energy serves a for the purpose of its strategic planning. This has enabledthe company to be in good position especially to adopting of alternative sources of energy as acounter measure to the impending shortage of fossil fuels. Tin doing this the company’s strategicplanning has helped in the effecting of its organizational change as the company has continuedto focus on the next decreased especially on issues concerning extraction and refining of oil andgas. In addition to tat the company’s strategic plan to sustainably respond to the increasingdemands of energy and increasing availability of alternative sources of energy helps thecompany to invest in areas of low decreasing demand for fossil energy hence could successfullyimplement the organizational changes with ease (Porter,1996). The company’s strategic plans like analysis of past data and accurate and reliableforecasts ahs made the company more confident that it will be able to manage any organizationchanges that any arise as the speculations of exhaustion of fossil fuels persists (Breslow, 1998).From its planning the company can sustainably fit to the changing demands and utilization of theproducts tat the company is offering thus remains profitable even in rapidly and constantlychanging world of business. The adoption of new approaches by the company is as a result of its
10effective strategic plans. The plans to counter shortage of the fossil fuels are the increased andadvanced technology and technical expertise that facilitates extraction of oil from ground placeswhere it was not possible in the previous years Berkovitch & Narayanan, 1993). The Exxon Mobil Company strategically plane the recruitment of eighty new graduates inwhich more than half of them have a technical background while others have educationbackground relating to economics. In ensuring that this plan is effectively executed the companyis able to implement its strategic change as these employees are able to fit in the companycooperate culture with ease hence effecting any organization change is possible and henceincreasing chances of success in its implementation process (Courtland & Dovel, 2000). At Exxon Mobil everything done is based on figures and facts hence ensuring thateverything done is sustainable and nothing done on strict terms hence the company is able to takea conservative approach. This is achieved through keen look at the company’s analytical skillswhich its long term investments depends on thus such strategic plan has foster theimplementation of the organization change through years (Andrade, & Stafford, 2001). The company also strategic plans that ensures that the company relies on networks in itsoperations hence whatever an member of staff develops whether new or ingenious as long as itpromotes a faster and efficient operations it is then circulated to all other parts of thus promotinglearning from each other. This strategy has utilized the benefits of group work hence has helpedthe company effect it strategies to dealing with organizational changes. In addition to that atExxon Mobil the management has strategic plane that has a primary control of peoples directionwhen it comes to their careers in tat there are plane that ensures that their a rigorous careerplanning which is very organized and reflected in the annual job rotation and performancereviews which guarantees that no staff member escapes. Such strategic plans make individuals to
11achieve their potentials and develop personally and hence the company has been able to use suchemployee plans to foster a strategic change in the organization (Adamson & Marks,2001).Finally the company has strategic plans for almost each an operation it undertakes this hasutilized them fully in ensuring that the organization successfully survive the turbulent andinconstant business environment through the decades.
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