Strategic Inititative Paper Essay
Strategic Inititative Paper
ExxonMobil is identified as one of the world’s leading oil and gas businesses. It manages market commodities and means countrywide. ExxonMobil is entail in “marketing, gas, and oil exploration, transportation and production in roughly 200 nations” (ExxonMobil, 2015). This company furnishes assistance and products under label names such as “Mobil, Esso, and Exxon. ExxonMobil is known as one of the biggest oil industrial installation where a substance is refined in the nation” (ExxonMobil, 2015). This essay discusses ExxonMobil’s strategic initiative from the 2013 Summary Annual Report. The following details the company’s initiative, financial planning surrounding that initiative, the effect of cost and revenues on the supply chain, as well as the ethical concerns associated with this idea.
ExxonMobil is a vertically integrated oil and gas company that’s mission is to “find safe, efficient, and responsible ways to bring affordable energy to the dynamic global markets. This success will be “built on long-term planning, disciplined investment, new leading-edge technologies, unmatched risks management and operational excellence” (ExxonMobil, 2014, p. 1). In the 2013 annual report, ExxonMobil outlined a strategic initiative of new leading-edge technologies such as “collaborating with XTO, who has a strong acreage position and operational expertise, to increase its Brakken recovery, enhance drilling, completion (the process of making an oil well ready for production), and operational excellence, in tight rock formation in the United States”. This collaboration gives Exxon “numerous opportunities to test its new technologies as well as implement its proven technologies for immediate benefits, such as the XFrac” (ExxonMobil, 2014, p. 19).
The XFrac technology was designed to set a new industry standardfor hydraulic fracturing completion. The current standard requires placing dozens of plugs in the well to achieve the most effective completion. The downside to the plugs is that they have to be drilled out and removed before the well can be produced. These steps are time consuming and expensive. The XFrac will remove the need for these plugs, making it more cost efficient to complete the well than compare to the current industry standards. Ideally, this new technology will increase Exxon’s ability to produce more oil-equivalent barrels per day by 45 percent, meaning a higher return on shareholder equity and profitability (ExxonMobil, 2014, p. 19).
Financial planning ensures that any great company operates successfully. ExxonMobil has put different measures in place for the financial means of the business by expanding across the country to increase product sales. Exxon has made it a point to focus more on expanding and creating jobs across the country. According to the 2013 summary annual report, “We look for opportunities to create jobs, build local supplier capacity, and make strategic community investments that will generate sustainable economic growth. This is good for communities and good for our business (2013).” ExxonMobil performed extremely well in 2013 with earnings of 32.6 billion, despite the conditions of the industry during that time.
ExxonMobil takes advantage of every opportunity to financially plan for the future of the company. Exxon is preparing the business for future growth by investing in new technologies in which, currently, the company is considering new technology such as new ways to extract oil from the Bakken formation. Measures such as trading energy and the expansion of liquid and natural gas are also being put in place as ExxonMobil continues to grow. This company is continually brining innovative ideas to the table to ensure the financial growth of the company.
Effects of the Supply Chain
Supply chain management is defined as an activity of controlling the operations, planning of operations, and implementing the operations of the supply chain to ensure customer satisfaction requirements. ExxonMobil relies on approximately 160,000 suppliers of services and goods to uphold its commitment to operational integrity. In the countries where the organization operates has given a significant positive impact on that countries living standards and economies. Global supply chains are used with the procurement of materials, services, and third-party goods. Good practices are applied in a standardized procurement approach that allows it to share in the same accountability, and rigorous standards worldwide (ExxonMobil, 2003-2015). According to ExxonMobil (2003-2015), “this organization is a part of a commodity business.
Its operating and financial condition depends on many risk factors what are not within its control” (para. 4). There are many risk involved in being part of company where margins and prices vary depending on supply and demand. Increases in the industry petrochemical manufacturing and refining capacity tend to increase margins on the products affected. “The occurrence of natural disasters, hostile actions, disruptions in competitors’ operations, adherence by member countries of OPEC production quotas, and the unexpected unavailability of channels that distribute factor in the disruption of supplies.” Changes in technology like the changes in the way that the industry standard extracts oil from the Bakken formation, will also change the cost in which its competitors will extraction this oil (ExxonMobil, 2013-2015).
The ethical concerns of ExxonMobil are “to ensure operational excellence through continual efforts to increase drilling completion and efficiency of its operations” (ExxonMobil, 2014). The company’s ongoing dedication to its safety and environmental performance are critical to increasing its value. The current industry standard for hydraulic fracturing is detrimental to the environment. Over 700 different types of chemicals are pumped into the ground during the drilling process. This has a negative impact on the nearby communities because of the possibilities of water contamination. Exxon’s XFrac was designed to reduce the need to inject these chemicals into the ground reducing the impact on the environment. Exxon has developed its own environmental policy. It states that Exxon will conduct business in a manner that is compatible with balancing both environmental and economic needs of each community in which it operates (ExxonMobil, 2003-2015).
ExxonMobil Corporation is an example of how an organized and well-managed company can continue to grow even in an uncertain economy. Investing in new technologies is the most productive way to affect pricing structures, cut costs and promote positive long-term growth. Exxon continues to have a clear understanding of what is needed of it to drive long-term value and deliver its mission. This company takes all of its risks into account, uses prudent financial practices in order to leverage short-term opportunities in achieving its long-term goals.
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