Sample Economic Research Paper on ExxonMobil

 

ExxonMobil

Introduction

A multinational enterprise (MNE) or multinational corporation (MNC) refers to an organisation with control over the production of services or goods, or that that has ownership over goods and services in one or several countries, besides its home country (Schermerhorn 387). Although ExxonMobil is incorporated in the United States, it has operations in nearly every continent where it has partnered with other companies in the oil and gas sector in the form of joint ventures, or subsidiaries. In this respect, ExxonMobil qualifies as an MNE.  In this essay, focus shall be on undertaking the background assessment of ExxonMobil, its history; and the different operations that the organisation is involved in. In addition, the company’s revenue, market share sales, and profit will also be examined, relative to those of its leading competitors, such as BP, Royal Dutch Shell, and Chevron, among others.

Background

ExxonMobil is an American-based multinational enterprise (MNE) that is mainly involved in the exploration, production, transportation, and marketing of oil and gas. ExxonMobil has its headquarters in Irving, Texas, in the United States, although it also has regional offices across the world where it runs its upstream or downstream operations. ExxonMobil came into being on November 30, 1999, following the merger between Mobil and Exxon (ExxonMobil n.p.). In January 2010, ExxonMobil began undertaking an internal study to explore potential merging of facilities to northern Houston in what would become the company’s corporate campus. The new campus would have its own laboratories, office buildings, a wellness centre as well as multiple parking garages. However, later the same year, the company ruled out moving its headquarters.

History

Although ExxonMobil came into being following a merger between Mobil and Exxon, the company has a long and rich history. The two companies descended from the Standard Oil, part of the John D. Rockefeller Corporation whose formation can be traced as far back as 1870.  While Standard Oil went on to enjoy tremendous growth in the years following its successful inception, an expose published in 1904 painted a gloomy picture of the company, and its reputation started to plummet at a very fast rate (ExxonMobil n.p.). By 1911, there was a huge public outcry to have the company dissolved and eventually, the United States Supreme Court yielded to the mounting pressure and passed out a ruling that the company be split into a total of 34 companies.

The “Standard Oil Co of New Jersey” (Jersey Standard) and “Standard Oil Co., of New York” (Socony) were part of the 34 companies split from standard Oil. Eventually, the companies became Exxon Mobil, respectively. The two companies enjoyed phenomenal growth in the next few decades. Jersey Standard went on to acquire a 45% stake in a leading refinery, pipeline transporter, and marketer by the name of Magnolia Petroleum Co., effectively becoming the leading oil producer on the globe (ExxonMobil n.p.).  It further bought a 50% controlling stake in a Texas oil producer known as Humble Oil & refining Co. Socony also entered into a merger with Vacuum Oil Co., in 1931.

A deficiency in effective management of operations in the Asia-Pacific region led to the first of many mergers between the two companies. Jersey Standard lacked a marketing network in Indonesia, despite its production and refineries facilities. On the other hand, Socony-Vacuum boasted of various marketing outlets in the Asian-Pacific region.  Thus, the two companies entered into a 50-50 joint venture in 1931 (ExxonMobil n.p.). In 1950, Mobil Chemical Co. was formed. Five years later, Socony-Vacuum was transformed into Socony Mobil; Oil Co., and a decade later, it was named Mobil Oil Corp. in another 10 years, and Mobil Oil subsidiary was wholly acquired by Mobil Oil Corp. In 1972, Jersey Standard became Exxon Corp.

In 1998, an agreement worth $ US 73.7 billion was reached and signed by representatives of Exxon and Mobil with a view to merging the two companies, effectively leading to the establishment of Exxon Mobil Corp, the largest MNE on the globe. However, it took time to get the approval of both the regulatory authorities and shareholders but eventually on 30th November 1999, the merger was completed. Moreover, ExxonMobil has also entered into strategic alliances and joint ventures with various oil companies across the globe. For example, it has a controlling stake of Imperial Oil with an ownership of 70 percent.

ExxonMobil has also entered into a joint venture with Royal Dutch Shell and formed a company called Infineum that is involved in the production and marketing of fuel additives and lubricants (ExxonMobil n.p.). In 2011, ExxonMobil and Rosneft, a leading oil company in Russia, entered into a joint venture worth $ 3.2 billion. The joint venture would enable the two companies to develop two Russian offshore oil fields.

Operations

ExxonMobil’s operations are divided into upstream, downstream, and the chemical division. Upstream operations entail the exploration, extraction transportations (mainly shipping) as well as the wholesale operations of oil and gas. These operations are based at the company’s premises in Houston, Texas. On the other hand, downstream operations entail refining of oil, as well as the marketing and retail operations of the company. ExxonMobil’s downstream operations are based in the company’s complex located at Fairfax, Virginia (Coll 15). The chemical division of the company is also located on the same premises as its upstream operations in Houston, Texas. The upstream operations of ExxonMobil accounts for the largest share of the company’s cash flow whereby ExxonMobil gets nearly 70% of its annual revenue from its upstream division.

As an MNE, ExxonMobil has on more than one occasion engaged in foreign direct investment (FDI). Such a move has been necessitated by the rapid rise in demand for energy. Accordingly, ExxonMobil has endeavoured to replenish its existing oil reserves by either buying oil fields from other companies, or by exploring new ones. For instance, in 2012, Total SA, ExxonMobil’s subsidiaries in Nigeria, Nexa Petroleum and Chevron Petroleum established a joint venture that would enable the companies to undertake deep-water oil exploration on the coast of Nigeria (Verbeke 32). In 2011, ExxonMobil and Rosneff, a major petroleum company in Russia, also signed an agreement that would enable the two companies to explore oil in the Black Sea and Kara Sea.

Workforce

ExxonMobil has a large workforce of almost 75,000 employees who are dedicated to the success of the company. In turn, ExxonMobil is dedicated to the professional development and advancement of the career goals of its employees. The company also boasts of a diverse workforce, with women accounting for 28 percent of its total employees globally (ExxonMobil n.p.). In 2013, women accounted for 30 percent of the professional and management new hires by ExxonMobil

Revenue

Among the various global players in the energy sector, ExxonMobil is ranked as the largest in terms of production, whereby the company’s production accounts for 3 percent of the global oil production. Even since the merger, ExxonMobil has also been enjoying a rise in its annual profits and revenue. In 2005, the company overtook Wal-Mart, the leading retail chain, to become the number one public held corporation in the world in terms of revenue. However, Wal-Mart still beat ExxonMobil in terms of number of employees. In that financial year, ExxonMobil recorded revenue of $ 340 billion to record a 25.5% growth in revenue, compared to the previous year (Coll 86).  However, its revenue reduced somewhat in 2006, to $ 335.1, but increased to $ 404.553 billion in 2007. At the same time, the company had a net income of $ 40.61.

Competitor Analysis

ExxonMobil is among the leading gas and oil companies in the world, based on such key indicators as production, profits, revenues, as well as exiting oil and gas reserves. However, it faces stiff competition in the global oil and gas industry from other players like Royal Dutch Shell, BP, and Chevron. The table below depicts how ExxonMobil compared against its competitors in terms of revenue, net income, and total assets in the 2011/2012 financial year.

Company Revenue (in US $ Billions) Net Income Total Assets
ExxonMobil 486.429 41.060 349.000
Royal Dutch Shell 470.171 31.186 345.257
Chevron 253.706 26.895 209.474
BP 386.46 25.70 290.92

(Source: Forbes 2012)

As can be seen from Table 1 above, ExxonMobil compares favourably with its leading competitors in the oil and gas sector in terms of revenue, net income, and total assets.

Market share

A comparison of ExxonMobil’s upstream market share reveals that it is at 17.75 percent, against that of the competition, at 82.25 percent. This is a good indication, considering that there are numerous oil and gas companies involved in upstream operations. On the other hand, ExxonMobil has a downstream market share of 36.82 percent, more than half of the market share held by the competition, at 63.18 percent (CSI Market n.p.). The company further has a 22.02 percent market share of the chemical segment, against the 77.98 percent held by the competition. In the last 3 quarters of 2014, ExxonMobil’s year on year net income grew by 2.54 percent, while the net income growth of its competitors was at 31.27 percent. At the same time, ExxonMobil experienced a -4.34 percent decrease in total revenue in the last three quarters of 2014, while its competitors recorded a -3.43 percent decrease in total revenue over the same period (CSI Market n.p.).

 

Conclusion

ExxonMobil is a leading player in the global oil and gas industry. The company was incorporated in 1999, following the merger between Exxon and Mobil, although the two companies have their roots in the Standard Oil Company that was associated with J.D Rockefeller.  It has its headquarters in Irvine, Texas, in the United States. However, ExxonMobil also has regional offices globally where its upstream and downstream operations take place.  In this respect, it qualifies as an MNE. It has a large workforce of more than 75,000 employees with women accounting for 28 percent of the total employees. The company’s market share, sales revenue, total assets, and income compare favourably relative to those of its key competitors such as Royal Dutch Shell, Chevron, and BP.

Works Cited

Coll, Steve. Private Empire: ExxonMobil and American Power. New York: Penguin Books,

  1. Print.

CSI Market. ExxonMobil Corporation. 2014. Web. 30 November 2014.

<http://csimarket.com/stocks/compet_glance.php?code=XOM>.

ExxonMobil. Diversity and Inclusion. 2014. Web. 30 November 2014.

<http://corporate.exxonmobil.com/en/company/careers/employment-policies/diversity>.

ExxonMobil. Our History. 2007. Web. 30 November 2014.

<http://corporate.exxonmobil.com/en/company/about-us/history/overview>.

Forbes. Forbes Earnings Preview: ExxonMobil. January 26, 2012. Web. 30 November 2014.

http://www.forbes.com/fdc/welcome_mjx.shtml

Schermerhorn, John R. Exploring Management. London:  John Wiley and Sons, 2009, Print.

Verbeke, Alain. International Business Strategy. Cambridge, UK: Cambridge University Press,

  1. Print.