ExxonMobil is the world’s largest publicly traded international oil
and gas company. They are the world’s largest refiner and
marketer of petroleum products, and their chemical company
ranks among the world’s largest.
They operate in most of the world's countries and are best
known by their familiar brand names: Exxon, Esso and Mobil.
They make the products that drive modern transportation, power
cities, lubricate industry and provide petrochemical building
blocks that lead to thousands of consumer goods.
ExxonMobil uses innovation and technology to deliver energy
and petrochemical products to meet the world’s growing
demand. Extensive research programs support operations,
enable continuous improvement in each of business lines, and
Upstream business - It is a capital intensive business
dealing with exploration, development and production
of crude oil and natural gas.
Mid-Stream - Oil and gas produced from E&P
operations is collected and delivered to a processing
plant, where it is further refined and processed. The
midstream industry stores and transports the finished
products to the Downstream industry
Downstream business - It is large and diversified; it
deals with refining and marketing across the globe.
Business Portfolio Continued..
Unlike the Upstream business, the Downstream
business is a low margin business where
operational efficiency and cost reduction makes a
In order to obtain the most economical feed stocks,
the company’s major petrochemical plants are
integrated with its refineries.
ExxonMobil’s chemical business has a number of
less-cyclical business lines that help reduce the
volatility and deliver consistent results.
BCG – Star
(Exploration and production (E&P)
It is the leading business segment and generates
plenty of cash.
E&P also uses large amounts of cash. More
specifically, conventional oil E&P has been a “star,”
though growth rate has been declining compared to
that of natural gas.
BCG – Cash cow
ExxonMobil’s Chemical operation has been
generating a proportionally high profit with
relatively low investment, typical characteristics of
a “cash cow”.
Chemical business has been growing at a healthy
BCG – Dog
(Refinery and manufacturing business)
The refinery and manufacturing business is
fundamentally a narrow margin business.
Factoring in the low growth rate makes this segment
The coal operation and the oil transportation
businesses are not as attractive as the rest of the
BCG – Question Mark
E&P (e.g. shale oil and gas E&P) is capital
intensive and time consuming with technology
The gas E&P is not as profitable as the oil E&P
due to lower natural gas prices.
The innovations in E&P technology would make
unconventional oil and gas production more
affordable in the next few decades, but for now it
is not cost effective.
For these reasons, non-conventional E&P and
gas E&P are classified as “question mark.”
ExxonMobil is a narrowly diversified company
with few lines of related business that operate in
The Upstream business segment - Largest one
(>70 percent of earnings).
The Chemical operation – 2nd in profit generation
at 16 percent
Downstream business segment - 12 percent.
The average capital employed by the Upstream
business segment is four to six times that of other
Clearly, the Upstream business is ExxonMobil’s
center of gravity.
Business Portfolio Performance
Performance is affected significantly by changes in
oil and gas prices.
A key measure of performance - Return on Capital
Chemical business - 26 percent ROCE
Upstream business - 23 percent ROCE
Downstream business - 14 percent ROCE.
Capital and Exploration expenditure on Chemical is
Strong cash flow from operations and asset sales is
more than sufficient to fund a growing level of
investments in the business.
ExxonMobil acquired XTO Energy for $24.6
billion in June 2010 for the following strategic
Growing need for natural gas in the next several
Most of the company’s Upstream assets are
abroad, and the merger represents a move
toward the U.S. market.
Value Chain Synergies of XTO
The acquisition enhanced shareholder value by
capturing cross-business synergies such as:
Transferring competitively valuable expertise and
technological know-how from its oil exploration and
production to the natural gas exploration and
production businesses of XTO
Sharing of exploration facilities and resources to reduce
the costs of finding, discovery and development
Leveraging ExxonMobil’s leading brand name to deliver
Combining the value chain activities of XTO and
ExxonMobil to improve operational efficiencies in
marketing, shipping and distribution.
The company has been managing downstream
assets carefully, as the refining industry is in a
declining phase with low margins and profitability
is heavily dependent on the oil price.
In 2010, ExxonMobil sold its interest in a lube oil
refinery in France and restructured its retail
activities to convert to a more efficient branded
wholesaler model as in the United States.
Joint venture & alliances
ExxonMobil often seeks foreign partners to:
Surmount tariff barriers and import quotas.
Gain local knowledge about customs and cultural factors and
access to distribution outlets.
Overcome governmental regulations and political pressures.
For example, BP was the only company in Iran for a
considerable length of time. However due to governmental
intervention, BP was forced to share their stake with other
The Downstream business is highly competitive and risky with
tight margins. Any unused refining capacity would result in
reduced margin. To deal with this problem, many oil companies
form alliances to optimize the plant utilization, thereby
Resources & Capabilities
(Path Dependence & Dynamic View of
ExxonMobil through its years of operation in the oil and
gas industry have accumulated a number of key
resources and capabilities that enable it to be
operationally and financially effective:
Skills, Expertise and Competence – Global integration,
operational excellence, technological innovation
Valuable physical asset – Oil and gas acreage, reserves
(proven and unproven), balanced mix of portfolio, long-
term oil and gas field rights, diversity and geographic
Rock-solid financial base
Valuable human assets and intellectual capital – Proven
managerial know-how, experienced and capable work
Valuable intangible assets – Great brand name,
disciplined investment with long-term focus
Capturing the highest-quality
Strong research and development
Diversified revenue stream
Integrated refining & chemical
Declining net liquids production
Litigation and contingencies
Demand for shale gas
Rising global energy demand
Strategic cooperation with Rosneft
Risks concerning instability in
Capturing the highest-quality exploration Opportunities:
The company uses its geosciences capabilities and understanding of the
global hydrocarbon potential to identify, evaluate, and prioritize the highest
quality resource opportunities.
Strong research and development Capabilities:
Seismic and reservoir modeling technologies enable it to identify new
resource opportunities, drill more accurately, and improve recovery.
Advanced molecule management technology optimize the value of every
hydrocarbon molecule, while minimizing energy use.
Currently focusing on the use of solvents to access undeveloped resources,
improve bitumen recovery, lower water use, and reduce greenhouse gas
Diversified revenue stream (Geographical diversification):
The company’s revenue stream is diversified in terms of geographies.
Exxon Mobil divides its geographic divisions as US and non-US. The non-US
region covers Canada, the UK, Belgium, France, Italy, Germany, Singapore,
and Japan, among other countries. Its worldwide presence reduces
exposure to economic conditions or political stability in any one country or
Declining net liquids production and oil
The upstream division of Exxon has been
recording a consistent decline in its production
volumes. The production has declined at a CARC
of 3%, from 2.6 million barrels per day in FY2007
to 2.2 million barrels per day in FY2012
Litigation and contingencies:
The company is involved in various lawsuits,
claims, and legal proceedings arising out of the
conduct of its business. Claims - Damages, fines,
or penalties in substantial amounts or remediation
of environmental contamination.
Demand for shale gas:
• The production of shale gas is expected to form a large
component of petroleum production.
• Shale gas production (expected to grow by 113% from 2011 to
2040), is the greatest contributor to natural gas production
growth. Its share of total production is expected to increase from
34% in 2011 to 50% in 2040.
• ExxonMobil, during FY2012, completed 1,142.7 net exploration
and development wells in the inland lower 48 states.
• Exxon Mobil is well positioned to leverage the increasing
demand for shale gas in the US and to exploit opportunities for
further market penetration in other countries.
Rising global energy demand:
Energy demand in developing nations (Non OECD) will
rise 65% by 2040 compared to 2010, reflecting growing
prosperity and expanding economies. While overall global
energy demand will grow 35%.
As economic progress drives demand higher, increasing
penetration of energy-efficient and lower-emission fuels,
technologies, and practices are expected to contribute to
significantly lower levels of energy consumption and
emissions per unit of economic output over time.
Exxon Mobil continues to expand and diversify its resource
base promote efficiency, and develop new energy
Strategic cooperation with Rosneft:
In August 2011, entered strategic cooperation
agreement to undertake joint exploration and
development of hydrocarbon resources in Russia, the
US, and other countries, and commence technology
and expertise sharing activities.
Signed an agreement to jointly develop tight oil
production technologies in Western Siberia.
Both agreed to conduct a joint study on a potential
LNG project in the Russian Far East . Will help Exxon
Mobil to expand its geographic reach and also help
the company to take advantage of Rosneft’s
Risks concerning instability in some oil-producing
Political instability in the exploration and production areas
of interests including Africa, the Middle East, and South
Company’s investments in the Egypt, Libya, and other
countries could be adversely affected by heightened
political and economic environment risks.
Political unrest in Middle Eastern and North African
countries is likely to have an impact on Exxon Mobil's
production capacity. This is because the company derives
the majority of its revenue from production of crude oil and
natural gas liquids, and the Middle East and North Africa
regions account for a sizable portion of its portfolio.
Exxon Mobil’s businesses are subject to numerous
laws and regulations relating to the protection of the
In 2005, the US Environmental Protection Agency
(EPA) issued a Clean Air Interstate Rule (CAIR), to
reduce the emission levels.
Significant investment in refining infrastructure and
technology to manufacture clean fuels as well as
projects to monitor and reduce nitrogen oxide, sulfur
oxide, and greenhouse gas emissions and
expenditures for asset retirement obligations.
Occurrence of recessions
Changes in population growth rates, periods of civil unrest,
government austerity programs, currency exchange rate fluctuations
Sovereign debt downgrades, defaults, inability to access debt
markets due to credit or legal constraints, liquidity crises, the breakup
or restructuring of fiscal, monetary, or political systems such as the
European Union, and other events or conditions that impair the
functioning of financial markets and institutions also pose risks to
Exxon Mobil, including risks to the safety of the company’s financial
assets and to the ability of the partners and customers to fulfill their
commitments to Exxon Mobil.
Strict regulation for offshore drilling Water contamination concerns
Porter’s 5 Forces Model
Threat of new
•High capital cost
•Economies of scale
•High levels of industry
expertise needed to be
competitive in the areas
of exploration and
•Fixed cost levels are
Degree of Rivalry
•Commodity-based nature of the
•Competition with other industries
that supply chemical, energy, and
fuel for both industrial and
•Ability to produce products at a
lower cost via operational
•ExxonMobil, BP, Chevron,
Conoco Philips, and Royal Dutch
Bargaining power of Buyer
(Industrial consumers and
Bargaining power of Supplier (oil mining and
•OPEC controls 40% of world’s supply of oil and, thus, has a
strong influence on the price of oil
•Unstable countries that host Exxon oil reserves can seize
Exxon’s assets at any time
are limited by
sources are limited by
SBU Unit : Exxon Mobil
ExxonMobil Chemical is among the top three global petrochemical
companies with earnings of $4.6bn and sales volumes of 27m
tonnes in 2007. It has manufacturing locations in more than 20
countries and products are marketed in more than 150 countries.
Leadership positions in some of the largest-volume and highest-
growth commodity petrochemical products in the world.
Largest global manufacturer of aromatics, including paraxylene and
Largest producers of olefins, such as ethylene and propylene, and
polyolefins, including polyethylene and polypropylene.
Global leadership positions in butyl polymers that help tires maintain
proper pressure resulting in improved fuel economy.
Hydrocarbon fluids with high-performance characteristics for
applications such as water treatment, coatings, and oil drilling fluids.
In addition, our synthetic base stocks are key components for
The company says its competitive advantage is derived from a
combination of low-cost feedstocks, proprietary technology and
application expertise. A key component is the emphasis on
petroleum integration in which much of its manufacturing capacity is
located in large integrated refining and chemical complexes.
Porter’s 5 Forces Model
Threat of new
is capital-intensive by
Degree of Rivalry
Competition within the domestic market
is limited, as there are only a handful of
players with world-class capacities.
Low import duties, there is threat of
imports from Middle East and the Asia
Refineries are getting integrated,
reducing the industry concentration in
terms of market share and in turn fuel
Bargaining power of Buyer
(Industrial consumers and
(MODERATE TO LOW)
, the downstream user industry is
fragmented, which reduces their
Bargaining power of Supplier (oil mining and
(MODERATE TO LOW)
This is due to the fact that the suppliers are concentrated
required for substitute
Strategic Group Overview
The companies which are in the strategic group of
ExxonMobil Chemical SBU:
Royal Dutch Shell (RDS)
British Petroleum (BP)
Conoco Phillips (COP)
Chevron Corp (CVX)
These five major integrated O&G are public-owned
ExxonMobil is the leader in the strategic group. All of its
core lines of business are doing well. ExxonMobil is able to
generate high revenue in both the product lines of oil and
gas. In Downstream, ExxonMobil’s refineries are performing
well to their production and capacity. ExxonMobil’s
resources are well deployed.
Chemical Business Strategy
Capitalizing core competencies to build propriety
technology positions, Capture full benefits of integration
across ExxonMobil operations
Consistently deliver best-in-class performance
Selectively invest in advantageous projects
ExxonMobil’s Chemical division employs a best-value
strategy to leverage its leadership in production, costs
and proprietary chemical and polymer Offerings. The
Company achieves cost leadership through synergies
gained by combining refining and chemical production
Petrochemicals are fundamental building blocks used in
the production of a variety of consumer and industrial
Petrochemicals are affected by their production volatility,
as well as the prices of oil and gas, which are used as
raw materials to produce the intermediary.
U.S. producers are being adversely affected by the
development of large-scale, low-cost export-oriented
plants located in the Middle East
South Korea and China have also invested considerable
resources in growing their petrochemical industries to
become significant petrochemical exporters.
Industry Key Success Factors (
For the oil and gas industry, the five main Key
Success Factors (KSFs) are:
Exploration and Oil discovery
Marketing & Distribution
Short term Recommendations
Increase investments in oil exploration, production
Expand chemical operations internationally. Target
Focus on increasing supply (wholesale) sale and
retrenching retail sale
• Invest in natural gas exploration and production
• Invest in unconventional oil and gas plays
• Organizational Impact
• ExxonMobil is a company with long-term vision, and is
much more conservative than its Competitors.
• Executing this recommendation would require the
company to take calculated risks which in turn would
require leadership commitment and an organizational
and cultural mind shift
• Invest in renewable energy sources
• The growth in renewable energy is projected to be the
fastest among various energy sources.
• This will also help ExxonMobil stay competitive and will
ensure that it will not be left behind due to technological
innovation or blindsided by any disruptive innovation in
Major Strategic Problem
Major Investment decisions which are like Should
ExxonMobil increase its investment in oil, or
should it step up its commitment to natural gas
more than ever?
Is ExxonMobil’s action going to help it maintain its
leadership, or will this move give its competitors
an opportunity to overthrow ExxonMobil’s
The natural gas market is currently oversupplied,
keeping the price of natural gas low, resulting in a
lower level of sustained profitability.
Additionally, the adoption of natural gas across
the globe is part of a very long-term strategy
The energy industry is a mature industry with
conventional, fossil-fuel-based energy sources,
such as oil and coal, dwindling slowly
Therefore, boosting investment in unconventional
oil exploration and processing technology is
important to building a sustainable competitive
ExxonMobil is a long-term oriented company, and
as such, it is not unusual for ExxonMobil to invest
in a long-term prospect ,where it can acquire
growth cost effectively, especially in light of the
company’s strategic intent to be the leading
supplier of global energy.
Hence the strategic decision of Boosting
investment in unconventional oil exploration and
processing technology is important to building a
sustainable competitive advantage