Introduction:
Exxon Mobil is among the leading petrochemical companies in the world with a global footprint. It is also the largest publicly traded oil company in the United States. Throughout the United States, the company has established several refineries to cater to the demand for petrochemical products in the economy. Exxon Mobil was incorporated in New Jersey in 1882 and has its headquarters in Irving, Texas, United States.
It started its operations as a small regional marketer of Kerosene and grew into one of the largest publicly traded oil and petrochemical companies in the world. Now, Exxon Mobil operates throughout the globe in nearly every nation through a large sales and distribution network. It has also established refineries in various parts of the world outside the US including Canada. It has divided its business operations into three main segments that include upstream, downstream and chemicals. Its upstream operations include five businesses: unconventional, deepwater, heavy oil, liquefied natural gas (LNG), and conventional.
The company has continued to improve its exploration and refining capabilities through a firm focus on research and development. However, during recent years, the company has experienced a heavy decline in revenue and profits. It experienced a net loss of more than $22 billion in the year 2020. However, the company has still remained among the top four in the Fortune 500 list for the past several years and is focused aggressively on growth. Apart from competition and declining oil prices as well as the growing demand for renewable energy sources, the company is facing more challenges.
In this swot analysis, we will discuss the strengths and weaknesses of Exxon Mobil as well as the key opportunities and threats affecting its future.
Strengths:
- Leading position :
One of the leading strengths of the company is its leading position in the petrochemical industry. It is not just the leading company in the US but also among the largest in its industry throughout the globe. The company has grown from being a regional US-based marketer of Kerosene to one of the largest petrochemical brands in the industry. It has remained among the top four brands in the Fortune 500 list for the past several years.
- Large product range:
Exxon Mobil deals in a large product range of petrochemical products. It has divided its business into three main segments that include Upstream, downstream, and chemicals. Its upstream operations include five businesses: unconventional, deepwater, heavy oil, liquefied natural gas (LNG), and conventional. The downstream operations of the company mainly include fuels and lubricants. Apart from it, Exxon Mobil is also among the largest chemical producers in the world with annual sales of chemicals of more than 25 million tonnes.
- Global presence:-
Exxon Mobil is a global company with operations across several regions. Apart from that its products sell across nearly all the countries in the world. ExxonMobil sells about 5 million barrels per day of petroleum products, through a global network of more than 20,000 retail stations and commercial channels. Exxon Mobil has also established refineries across the globe in various parts. It has established refineries in the United States, Canada, Europe, Asia Pacific, and the Middle East. In the United States, it has refineries in Joliet, Baton Rouge, Billings, Baytown, and Beaumont. In Canada, its refineries are located at Strathcona, Nanticoke, and Sarnia.
- Research and development:
The company has maintained a strong focus on research and development to grow the attractiveness of its product portfolio and its sales and revenue.
Since 2000, the company has invested more than $16 billion in research and development. The company is working to develop next-gen energy solutions including advanced biofuels; carbon capture and storage; natural gas technologies; and new energy efficiency processes. The company has its own robust in-house research and development capabilities but it also collaborates with leading research and technology companies, national labs and universities, and others involved in breakthrough energy research.
- Extensive refining operations:
The company has established extensive refining operations throughout the globe. Apart from the US, where the company has established a large number of refineries, it has opened more across the world in various parts of the globe. Its refineries operate in the United States, Canada, Europe, Asia Pacific and Middle East. In the United States, it has refineries in Joliet, Baton Rouge, Billings, Baytown, and Beaumont. In Canada, its refineries are located at Strathcona, Nanticoke and Sarnia.
- Strong position in the US market:
In the US market, the company has maintained a very strong position. The company is the largest in the United States and has established a strong production, sales and distribution network in this market.
Weaknesses:
- Declining revenues and rising net loss:
Over the past two years, the company has experienced a heavy drop in sales and revenue. Starting 2019, the losing streak of Exxon Mobil has continued in 2020. In 2020, the company experienced a net loss of more than $22 billion. In 2019, the company’s net income declined to $14.34 billion from $20.84 billion in 2018. In 2020, however, the company experienced a heavy net loss when its net loss reached $22.4 billion.
- Growing debts:
The total debt of the company has grown over the past few years. In 2019, the total debt of the company grew sharply compared to the previous year and then rose further in 2020. The total debt of the company rose to $46.9 billion in 2019 from $37.8 billion in 2018. Again in 2020, its total debt grew to $67.6 billion. The company has accumulated heavy debt in the past three years while its net income has continued to fall.
Stock Decline:
Exxon Mobil’s stocks declined heavily in 2020 falling by around 40%. The company was forced to cut down on its capital spending program and operating expenses in the year.
Opportunities:-
- Renewable energy:
The demand for renewable energy around the world has grown and Exxon Mobil must grow its focus on this segment. With the pandemic, the demand for renewable energy is expected to grow even faster. Investing in renewable energy will not only help the company grow its sources of revenue but also expand its product portfolio. Apart from that, investing in renewable energy can help the company strengthen its brand image. It could help the company achieve faster growth and control the losses it is experiencing right now.
- Innovation:
Focusing upon innovation will also help the company strengthen its market position and grow its sales worldwide. Apart from that, it is the most important time for the company to grow its focus on innovation since it has been experiencing a swift decline in net revenue and profits over the past few years. While on the one hand, it helps the company improve its operational efficiency, on the other, it also helps reduce costs and grow profitability.
- Focus on digitalization:
This is the era of digital technology and investing in digital technology can be helpful for Exxon Mobil in several ways. Investing in digital technology is important for the company in various business areas including marketing, supply chain management and productions. This will help the company further streamline its business operations. Apart from that, the company can also grow its brand awareness faster using digital technology.
Threats:-
Competitive threats:-
The oil and petrochemical industries are highly competitive and apart from the private firms, Exxon Mobil also faces heavy competition from the state-owned oil companies. There are many state-owned companies that are competing for opportunities outside their home countries. They are also partnering with other private firms in this regard. Many times the focus of these state-owned companies is higher on achieving the strategic objectives of their government owners and less on generating financial returns.
There are many large and influential companies competing with ExxonMobil in the oil and petrochemical industry including Chevron, Valero Energy, Shell, BP, and other companies. There are several state-owned companies like Saudi Aramco and Sinopec group of China that compete with ExxonMobil in the global market.
Pandemic:
Demand for oil fell heavily with the pandemic and is expected to fully recover at least by 2023. The impact of the pandemic is expected to last long. Oil prices fell heavily in the March April period in 2020. While prices rebound in the third quarter of 2020, it will still take a lot of time for the prices of oil to fully recover from the impact of the pandemic. The impact was severe on the sales and revenues of Exxon Mobil in 2020. It recorded a heavy net loss. In 2021, while the situation may slightly improve, demand and sales will recover fully at least in 2023.
Regulatory threats:-
Regulatory risks also pose a major threat to the business of Exxon Mobil worldwide. Even in countries having a well-developed legal system, the risks and legal uncertainty remain high for ExxonMobil. Changes in the legal or regulatory framework in its leading markets can have a severely adverse impact on the financial results of the company. For example, increases in taxes, royalties, government royalty rates, and price controls can also have an adverse impact on the financial results of the company. Apart from that, outside the United States, governments can also limit access to their oil and gas resources for Exxon Mobil, resulting in lower production and sales.
Conclusion:
Exxon Mobil is among the leading oil and petrochemical businesses in the world and has ranked among the top three in the fortune 500 list consistently for the past several years. However, the company is currently struggling to maintain its ,growth rate due to the pandemic which has adversely impacted oil production and sales worldwide.
Recovery is going to take time and according to experts demand and prices will recover fully by 2023. The company has experienced heavy losses during 2020 and the situation is expected to improve in 2021 but returning to the pre-pandemic level of demand and sales will still take time. The company will have to maintain a strong focus on research and. development to maintain its growth and profitability in a highly competitive and challenging industry environment.