Theory of Strategic Management

Contemporary business organizations face fierce competition in the market due to the presence of huge number of competitors in the market offering similar set of products and services. Moreover, in the present era of globalization, major business organizations are operating in the global market and thus, they have to face various external threats in different regions. There are various challenges being faced by them internally also, which are important to identify and mitigate in order to enhance the effectiveness of the organization to deal with the business challenges. Thus, it is important for the contemporary business organizations to involve the theory of strategic management in order to identify the potential threats and challenges along with the opportunities for them (Hitt, Ireland and Hoskisson 2012). This will help them to initiate the strategies accordingly.

ExxonMobil is one of the leading and most prominent oil and gas corporations in the world. They are originated from United States and having headquartered in Texas. Currently, they are the largest company in the world in terms of the generation of revenue and second most profitable company among the fortune 500 companies (ExxonMobil 2017). Though, they are in the forefront in the global oil and gas sector, however, there are various challenges being faced by them. One of the key challenges being faced by them is the competition being emerged in this sector.

British Petroleum is another leading organization in the oil and gas sector. They are originated from United Kingdom having headquartered in London. They are considered as the twelfth profitable company in the world (bp.com 2017). However, they are having their operations in more than 72 countries that make them one of the prime examples of multinational organizations. However, in term of the market challenges, they also face the issue of competition in the global oil and gas sector. Moreover, with the increase in the competition in the market, the average profitability of these organizations is reducing. Hence, it is important for both these organizations to have effective strategies in place in order to retain the existing market share along with identifying the potentiality.

This report will discuss about the external and internal challenges being faced by both these organizations. Various elements and aspects of strategic management will be discussed in this report. In addition, the business strategies being initiated by other players in the market will also be discussed in this report. Competitive strategies will be used in order to determine the effectiveness of the product portfolio of their products in the market. In accordance to the identified issues, various recommendations will be discussed in this report.

ExxonMobil: Origin and Operations

The mission statement of ExxonMobil states that, they want to be the leader in the global energy sector by providing their customers quality products. Moreover, it also states that, they want to be a committed player in the market by maintaining the heist ethical standards in their operation along with safeguarding the interests of their external and internal stakeholders.

The objective of ExxonMobil is to enhance their organizational excellence by maintaining health and safety in the organization along with increasing the energy efficiency and effective human resource management. Moreover, their objectives also include the future planning including investments, initiation of new technologies and global operations. Hence, the objective of ExxonMobil covers all the present and future business criterions.

Resource based view will be used in order to identify the competitive advantage and disadvantages of ExxonMobil. Resource based view states the competitive advantages of the business organizations in terms of their tangibility, and other distinctive capabilities (Barney 2012).

According to the theory of resource based view, the first aspect is the value of the resource for the organization. In the case of ExxonMobil, one of the key resources they possess is their huge source of revenue and capital. According to the reports, ExxonMobil possess huge capital, which helps them to drive their global businesses along with gaining the economies of scale. It helps in attaining economies of scale by increasing the infrastructure, which is not possible for their competitors. This is due to the reason that, it is impossible for other players in the market or the new entrants to match their revenue generation and capital investment. Thus, the extent of their investment is much larger than many of their competitors (Hinterhuber 2013).

The next aspect is the rarity of the resources. In the case of ExxonMobil, they have the access to various strategic onshore and offshore facilities of natural resources. Having the access of these strategic facilities helps ExxonMobil to have the seamless flow of the raw materials. Moreover, this is rare in nature due to the reason that, the major source of the raw materials for ExxonMobil is non renewable in nature including the source of the natural gas and petroleum products. Access to these strategic facilities enables them to have the market leadership due to the reason that, their competitors will not have the access of these strategic sources and moreover due to the rarity of these resources, it is uncertain that, their competitors will have the access in future.

British Petroleum: Origin and Operations

The next aspect is the imitable nature of the particular resources. In the case of the ExxonMobil, one of the key in-imitable resources is their brand value and identity. As discussed earlier, ExxonMobil is being considered as one of the leading energy organizations among the top seven companies around the world. Moreover, they are having their market presence in every major country around the world. Thus, these brand value and identity of them cannot be matched or imitate by their competitors (Lazzarini 2015). This competitive advantage will be remained with them and it will not get diluted by increase in the competition. The huge brand value of ExxonMobil will also help them to push their newly introduced products in the market more effectively.

However, on the other hand, the source of revenue for them along with their capability of huge investment in the market is imitable in nature. This is due to the reason that, their huge source of earning is their competitive advantage, but it is also to be considered that, there are other oil and gas companies who are capable to compete with ExxonMobil. Thus, the capital is imitable in nature. This is one of their key competitive disadvantages.

The last aspect is the available substitutes for the resources. In the case of ExxonMobil, there are various competitors such as British Petroleum who are competing in the similar market. Thus, the products of ExxonMobil can be easily substitutable. Moreover, the strategic sources being with them may not be substituted by their competitors, but their competitors are also having various other strategic sources, which are not accessible by ExxonMobil. Thus, these are the key competitive disadvantages for ExxonMobil (Zekiri and Nedelea 2012).

On the other hand, the internal management of ExxonMobil including the effective management of their human resources is one of the key comp0etitive advantages for them. This is due to the reason that, the skill and expertise of their employees are exclusive to the ExxonMobil and they are not be substituted by their competitors. Moreover, ExxonMobil provides training to their employees across different levels in order to equip them to deal with the organizational challenges along with enhancing their expertise. Thus, the internal management of ExxonMobil can be considered as their competitive advantage.

Political	· Economical is having their operations in different countries around the world. Thus, they have to adhere to the different political scenarios. · Due to the fact that, oil and gas sector involves huge investment; it will be risky affair for ExxonMobil to face the change in the political scenario (Mackay and Munro 2012). · Risk of terrorism is having negative impact on them due to the fact that, it poses threats to the facilities as well as to the pipeline of the oil and gas organizations.
Economical	· Involves huge investment in building up new facility. · Various global organizations are already present in the market. · Price is normally determined by the governments. · Increasing demand of the energy around the world.
Social	· People are moré aware about the implications of burning petroleum products. · Electric vehicles are becoming more popular in the market, thus, potentiality is decreasing for ExxonMobil. · However, the extensive corporate social responsibilities of ExxonMobil help them to gain positive image among the communities (Du and Vieira 2012).
Technological	· ExxonMobil involves huge investment in the field of research and development. · It helps them to identify new resource field onshore and offshore. · Technology up gradation is one of the key aspects in the oil and natural gas industry. · It is important for ExxonMobil to involve the initiation of the latest technologies in order to extract resources from their raw materials as much as possible.
Legal	· More governments are coming up with stringent regulations for the oil and gas sector due to the huge risk involved. · Lawsuits can be attracted from the higher possibility of accidents in this sector. · Risk of penalty due to the mismanagement of the organization, which will cause social impact.
Environmental	· Pollutions are associated with the oil and gas sectors. They emits huge of pollutants. · Thus, ExxonMobil is more prone to the environmental legislations. · Risk of oil spills will also have negative impact on the ExxonMobil.

Determination of the competitiveness of ExxonMobil 

Threat of new entrants	· Threat of new entrant is low due to the reason that, huge investment is associated with this sector. · However, small organizations are operating in this sector and they are rapidly enhancing their market share.
Bargaining power of suppliers	· Huge number of suppliers is operating in the oil and gas sector. · However, they are having the upper hand due to the reason that, the cost of them will determine the profitability of the organizations such as ExxonMobil.
Bargaining power of Buyers	· Numerous companies are operating in this sector offering similar products. · Thus, buyers are having the bargaining power by switching from one product to another. · Switching cost is low.
Threats of substitutes	· Similar offerings from all the competitors of ExxonMobil. · Threat of substitute is high. · It will reduce the profitability of ExxonMobil.
Industry rivalry	· Industry rivalry is intense due to the presence of number of players. · This will cause reduction in the profitability.

Analysis of the internal environment

Strengths	· Huge market and brand value. · Huge market coverage around the world. · Access to the strategic facilities.
Weaknesses	· Huge cost of development being involved. · Negative social perception regarding the oil and gas sector. · Involvement of various legal suits.
Opportunities	· Increase in the demand for natural gas. · Increase in the global fuel price. · Discovery of reserves for natural gas by ExxonMobil.
Threat	· Increase environmental regulations. · Emergence of alternative fuels. · Intense competition and threat of new entrants.

According to the mission statement of BP, three elements are being stated. These three elements are “What we do”, “What we stand for” and “What we value”. The first element refers to core activities of them that denote that they provide high quality products and energy solutions to their customers. The second element refers to the organizational excellence of them. The third element refers to the ethics being maintained by them. Thus, their mission statement covers all the areas in their operation.

Resource-Based View of ExxonMobil

The strategic objective of BP is to be the market leader in the global oil and gas industry. In addition, they also aim to introduce more sustainable products in the market, which will adapt with the change in the global business scenario. Moreover, they also aim to be the top employer in their business sector by effectively managing their internal stakeholders.

As discussed earlier, BP is also being considered as one of the top organizations in the oil and gas sector in the world. Thus, they also have huge capital for investment, which helps them to compete in the global market. Thus, similar to ExxonMobil, one of their competitive advantages is their access to huge capital and revenue (Morschett, Schramm-Klein and Zentes 2012).

The resources including the natural resources of BP is rare in nature due to the reason that, they are all non renewable source of energy and thus, they are prone to extinction. Hence, it will difficult for their competitors to have the access in abundance of these resources. Thus, the more rare and supply will be the natural resources will be with BP, the more will be their competitive advantages.

The capital and business strategies being initiated by BP can be imitated by their competitors, but internal management system of them cannot get imitated. Moreover, the brand value being gained by them cannot get imitated by their competitors. Thus, their brand value is one of the key competitive advantages of them. However, their competitive disadvantage can proved to be their disadvantage due to the reason that, if their brand value get affected by any reason.

In this case, the competitive advantage of BP is similar to the ExxonMobil. This is due to the reason that, they both are operating in the same field. In addition, the source of their raw materials is same for the both organizations. However, their branding and business strategies along with their strategic resources will help them to compete in the market.

Political	· They will also face the issue of different political scenario in different countries. · Moreover, they are being accused of having secret understanding with the UK government. Thus, it gain them negative image in the market.
Economical	· Increased number of competition in the market. · Requirement of more market coverage. · Huge investment is required to identify new reserves and developing that.
Social	· Negative image of having confidential understanding with the government. · Emergence of unethical business practices. · Causing pollution for the communities (Spencer and Fitzgerald 2013).
Technological	· Huge cost involved in development of the technologies. · Up gradation of technology is required to compete with the established players in the market.
Legal	· Similar to ExxonMobil, they will also face the issue of stringent legal regulations. · Risk of accidents and mishaps will draw legal suits.
Environmental	· Should face the regulations regarding the reduction of carbon emission. · Introduction of more eco-friendly alternatives to the conventional fuels.

Determination of the competition in the industry 

Threats of new entrants	· Risk of entrant is low due to the involvement of huge investment. · However, different global brands are willing to enter the sector.
Bargaining power of suppliers	· Numerous suppliers are available in the market. · Major section of raw materials is being sourced from them. · Price charged by them impacts the price of the fuel.
Bargaining power of buyers	· Presence of numerous companies provides more options for the buyers. · Buyers switch at any point of time.
Threats of substitutes	· More companies offering similar products. · Market determined price.
Industry rivalry	· Intense competition among the players. · Initiation of aggressive market strategy in order to cut off the competition.

Analysis of the internal environment 

Strengths	· Access to the huge capital. · Brand and market value.
Weaknesses	· Ethical issues. · Environmental impact.
Opportunities	· Entering in the market of renewable energy. · Increased demand of the fuel and energy.
Threats	· Change in preference from fossil fuel to renewable energy. · Stringent government regulations.

Competitive analysis 

Star · BP lubricants · Mobil lubricants	Question mark · AmPm · ExxonMobil chemicals
Cash cow · Exxon · Aral	Dog · Esso · Bp Plus

Identification of the challenges 

• Rapid extinction of the non renewable source of energy (Tugcu, Ozturk and Aslan 2012).
• Increase in the rate of emission (Ajugwo 2013).
• Emergence of stringent rules and regulations by the governments in different countries.
• Incidents such as pipeline accidents and oil spills involve huge cost and create negative impression in the market (Andersen 2012).
• Emergence of more competitors in the market is reducing the profitability of the oil and gas organizations.
• Non renewable source of energy is fast depleting and thus it will reduce the revenue generation for these oil and gas organizations.

• Entering in the market of alternative energy sources will have huge market opportunities.
• Strategic partnerships between the companies will help both the organizations to tap every corner around the world.
• Having diversified product portfolio for both the companies will help them to meet the varied requirements of the customers.
• More oilfields and reserves are being discovered in the recent times.
• Both the organizations have entered the market of natural gas, which is having huge source and potentiality (Weinhold 2012).

• It is being recommended that diversification process should be initiated in order to foray in other products also. Both ExxonMobil and BP should introduce more alternatives fuels in the market. The brand value of them will help them to push the new products in the market. Thus, it will help them to maintain their market share in the global market.
• Technology should also be developed in order to enhance the convertibility of the end products from the crude sources. This will help them to enhance their production efficiency along with increasing the productivity. Moreover, it will also help them to increase their profitability.
• Should enhance the activities related to social responsibilities. This will help them to create positive image in the market, which will help them to reduce the emergence of lawsuits from different external stakeholders.
• There are various types of renewable source of energies being invented. Thus, it is being recommended that, both ExxonMobil and BP should further invest in developing these technologies. This is due to the reason that, these energies are the future and investing more will help them to be the first mover in this category.
• Currently, both these organizations are having their market presence in the tier I cities around the world. Thus, it is being recommended that, they should also target the tier II and III cities. This will help them to enhance their market opportunities along with reducing the dependency on their existing market.
• Co-branding should also be initiated by both these organizations. This will help them to target heir customers effectively along with enhancing their customer loyalty. With the initiation of the Co-branding, they can introduce different service and product. Thus, the market share and presence will get enhanced.

Conclusion 

Thus, from the above discussion, it can be concluded that, both ExxonMobil and BP are having huge market presence and capital currently in the global market. Moreover, the sector they are operating is having huge potentiality for the future also. However, in this report, there are few issues being identified for both the organizations, which may have negative impacts on their future operations. One of the key issues being identified is the impact on the environment. This report also identifies the key impacts of the issues in the organizational performance of both these companies. It will been seen that, de-gradation of the environment and depletion of the natural resources including the petroleum sources will significantly reduce the competitiveness and business revenue of these companies. Various challenges and opportunities are being identified in this report from the analysis being done in this report. It is being seen that, these companies are having huge market potentiality if they can transform their business towards more alternative source of energy. In accordance to that, a few recommended steps are being discussed, which will help to effectively overcome the identified issues and enhance their future opportunities in the global market.

Reference 

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