Capstone Project Part 4: Exxon Mobil Ranks Number Three ✓ Solved

14capstone Project Part 4exxon Mobil Ranks Number Three On The Fortune

Exxon Mobil ranks number three on the Fortune 500 list. Exxon Mobil is an American multinational oil and gas company headquartered in Irving, Texas. It was formed on November 30, 1999, through the merger of Exxon (originally Standard Oil Company of New Jersey) and Mobil (originally Standard Oil of New York). The company supplies its products under various brands including Mobil, Esso, ExxonMobil Chemicals, and Exxon. Renowned for its financial strength, Exxon Mobil has consistently been among the world's largest corporations by revenue and market capitalization, ranking between 1st and 6th from 1996 to 2017 and being ranked 2nd in the Fortune 500 list of 2017.

The majority of Exxon Mobil’s shares are held by institutional investors. One key market of interest for expansion is China, due to its large and growing population, which results in increasing energy demands. This presents an opportunity for Exxon Mobil to expand its customer base and boost revenue, especially considering the global shift towards renewable energy sources. Although many countries are adopting environmentally friendly energy sources, the transition away from oil and gas is gradual, providing a window for sustained demand. China’s large and expanding energy market, coupled with its economic growth, makes it an attractive target for Exxon Mobil’s international expansion.

Mode of Entry

Franchising emerges as the most suitable mode of entry for Exxon Mobil into the Chinese market. This approach minimizes market entry challenges by partnering with local companies, thereby reducing resistance from competitors and consumers. Franchising allows Exxon Mobil to share financial risks with franchise partners, making it a cost-effective and less risky method of market penetration. Furthermore, leveraging local partners will facilitate cultural integration and streamline operations, which is crucial when entering a vastly different market like China where local knowledge and acceptance matter significantly.

Cultural Differences and Challenges

Expanding into China requires understanding and adapting to significant cultural differences. Chinese business practices emphasize gift-giving, respecting hierarchy, and indirect communication, contrasting with American business customs. Gift-giving acts as a means of relationship-building in China and must adhere to specific etiquette to avoid misunderstandings. Respect for hierarchy is also crucial, with leaders and managers expected to command obedience without questioning authority. Such cultural nuances influence negotiations, management styles, and consumer interactions, posing challenges for American companies unfamiliar with Chinese traditions (John, 2017).

Failure to adapt to these cultural standards can hinder market acceptance and operational success. For instance, mishandling gift exchanges or disrespecting hierarchical protocols may damage relationships and impede business growth. Therefore, Exxon Mobil needs culturally sensitive strategies, including training for managers and local staff, and establishing relationships that respect Chinese customs and etiquette, to ensure smooth integration and acceptance in the Chinese energy market.

Distribution Methods

Given the cultural context, franchising remains the most effective distribution method. Partnering with domestic Chinese companies through franchising allows Exxon Mobil to benefit from local market expertise and established networks. Employing local personnel fluent in Chinese language and culture will also help mitigate communication barriers, ensuring smoother market operations and customer engagement. Local partners will be better positioned to navigate regulatory requirements and consumer preferences, enabling Exxon Mobil to expand its presence efficiently and effectively.

Internal and External Environmental Factors

External factors such as the Chinese economy are critical. A strong and stable economy will support the company’s expansion efforts by providing a conducive environment for investments and consumer spending. Conversely, economic downturns or regulatory changes could pose risks. Internally, Exxon Mobil’s skilled management and experienced workforce are vital to adapting to new markets, ensuring high operational standards, and fostering innovation. Employee expertise and effective communication are integral to successfully executing international expansion strategies (Al-Mascati & Al-Badi, 2016).

Strengths of Exxon Mobil

Exxon Mobil’s core strengths include its history of product innovation, financial stability, extensive distribution network, and reliable supplier relationships. Its ability to develop new products rapidly positions it favorably against competitors, while its strong cash flow allows sustained investment in growth initiatives. Its global presence, technological capabilities, and brand trust further reinforce its market dominance. Additionally, a broad dealer network enhances product accessibility and promotes brand recognition worldwide (Kassem, Khoiry & Hamzah, 2019).

Problems and Recommendations

A significant challenge for Exxon Mobil during expansion is the risk of running out of stock to meet increasing demand in China. To mitigate this, the company must develop robust supply chain management strategies, forecast demand accurately, and establish reliable sourcing and logistics partnerships. Investing in inventory management systems will help ensure an uninterrupted supply chain, essential for customer satisfaction and revenue growth. Compliance with local regulations and securing necessary permits are also critical primary steps for successful market entry.

Furthermore, implementing a comprehensive cost analysis and establishing a clear plan for operational costs—including setting up bank accounts, hiring personnel, and acquiring legal licenses—is vital. These measures will ensure seamless functioning of the new operations, minimizing delays and costs associated with bureaucratic hurdles (Tang, Leiliabadi & Olugu, 2017).

Implementation and Cost Considerations

The implementation process involves securing legal approvals, registering the business, hiring staff, and establishing operational systems like record-keeping and accounting. The development of a local team—including managers familiar with Chinese market dynamics—will facilitate smoother operations and cultural integration. Budgeting for these activities, including costs for licensing, staffing, training, and infrastructure, is essential. Exxon Mobil must also allocate resources for marketing and promotional activities tailored to Chinese consumers to establish brand presence and trust.

Conclusion

Expanding Exxon Mobil into China via franchising presents a strategic opportunity to capitalize on the country’s expansive energy market, driven by a large and growing population. Success hinges on understanding and respecting Chinese cultural practices, building strong local partnerships, and implementing meticulous operational and supply chain strategies. Addressing environmental and regulatory challenges proactively will ensure sustainable growth and enhance Exxon Mobil’s global footprint. As the company continues to evolve in a transitioning energy landscape, its adaptability and strategic alliances will determine its long-term success in China and beyond.

References

  • Al-Mascati, H., & Al-Badi, A. H. (2016). Critical success factors affecting the adoption of cloud computing in oil and gas industry in Oman. In 3rd MEC International Conference on Big Data and Smart City (ICBDSC), 1-7. IEEE.
  • John, P. (2017). The challenges and benefits of expanding a business to China. LinkedIn. Retrieved from https://www.linkedin.com
  • Kassem, M. A., Khoiry, M. A., & Hamzah, N. (2019). Using probability impact matrix (PIM) in analyzing risk factors affecting the success of oil and gas construction projects in Yemen. International Journal of Energy Sector Management, 13(4), 911-931.
  • Kaplan, M. (2019). Six challenges of doing business in China and how to overcome them. Kaplan Financial Education. Retrieved from https://kaplanfinancial.com
  • Reynolds, K. (2020). How cultural differences impact international business. Hult Blog. Retrieved from https://hult.edu/blog
  • Sherrards. (2017). Overcoming cultural barriers when working with Chinese businesses. Sherrards Solicitors. Retrieved from https://sherrards.com
  • Tang, D. K. H., Leiliabadi, F., & Olugu, E. U. (2017). Factors affecting safety of processes in the Malaysian oil and gas industry. Safety Science, 92, 44-52.
  • Exxon Mobil Corporation Home Page. (2020). Retrieved from https://corporate.exxonmobil.com
  • Revenue of ExxonMobil 2019. (2020). Statista. Retrieved from https://statista.com
  • Population, total - China. (2020). Data.gov.cn. Retrieved from https://data.gov.cn

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