Exxonmobil Case Study for Pestel & Swot Analysis

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ExxonMobil PESTEL Analysis

ExxonMobil PESTLE analysis examines the brand on its various business strategies and tactics. Via this analysis, you analyse external factors related to a business, namely political, economic, social, technological, legal and environmental factors. Here is a sample ExxonMobil PESTLE analysis for you:

Political Factors

Since this oil and energy company operates in several countries, it exposes itself to different political scenarios and conditions. On the one hand, some countries have trade restrictions in the oil and gas sectors, especially regarding foreign investments; on the other hand, some countries have export-import issues imposed on specific products and specific countries. This clearly means that the company has to deal with many severe political scenarios to ensure successful business continuity. Therefore, the company needs to develop policies that cater to all the country-specific political needs while staying investment friendly. This will give a massive scope of smoother business continuity.

Economic Factors

Inflation, price hike, recession, rate of foreign exchange, and trade costs are a few factors that directly impact the demand for energy and the company's operation irrespective of the country. Here you have to understand that the product is an essential commodity. But still, with rising prices, the demand tends to fall. In such a situation, people are bound to take initiatives like controlling their power consumption or even cutting down their power consumption. Another crucial factor to be noted here is that the world is witnessing population growth which naturally is hyping the demands for oil and gas. Keeping all these factors in mind, people are changing their choices, and shifting to renewable sources of energy. Therefore, it makes it necessary for the company to work in a manner in all business operating countries that remain profitable. Some recent losses were primarily due to these economical parameters.

Social Factors

The constantly changing demographics, namely age, gender, education level, nature of employment etc., impact energy consumption excessively. It involves the demand for energy consumption as well. Today, because people have alternative choices when it comes to consumption decisions, society has a pivotal role to play in influencing the same. ExxonMobil has to walk a little extra mile to attract consumers with lawfully guided prices and well-monitored supply. This will also help the company win over its competitors as well.

Technological Factors

Firstly, technological advancements and improvements affect the consumers regarding energy efficiency. Besides this, the oil, gas and energy-based sector demand constant research, which requires many technical appliances and methods. But apart from these, the main threat lies in the fact that changing technological advances in energy storage systems and processes have influenced many customers to shift towards alternative sources. But the twist here is that if required, the company can use this as a scope of adopting new and emerging technologies and use them for production. This will be both profitable and will undertake competitive advantage.

Legal Factors

Having a business in several countries exposes the company to several legal frameworks. Some countries have strict legalities related to their energy sector. These countries can also impose trade restriction laws and sanctions on ExxonMobil, which prohibits its business. These legal factors can impact the business and impact the profit margins to a considerable extent. Sometimes there are countries that lack a proper legal system having appropriate frameworks for oil and gas development. But these non-disclosure laws and policies mandated by the governments also need to be adhered for avoiding any legal obstacles. The laws related to price control adoption of regulations requiring efficiency standards are some fundamental laws that can influence the strategies and business operation of ExxonMobil. Even the change in rules and laws related to offshore drilling operations, hydraulic fracturing, laws on alternate supply sources, FDI etc.

Environmental Factors

The environmental factors related to climate change and greenhouse gas emissions have a major role in the non-renewable energy sector. Today as consumers are becoming more environmentally conscious, there is an increasing demand for renewable sources of supply for fulfilling needs. A number of countries are adopting a regulatory framework to reduce emissions, including cap and trade regimes, carbon taxes, incentives for renewable energy, etc. All these frameworks can impact the business model of ExxonMobil in different countries with different environmental laws and regulations. This company is also innovating environment-friendly products and processes such as algae-based biofuels, carbon capture and storage etc.

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ExxonMobil SWOT analysis

Strengths of ExxonMobil

The market position of ExxonMobil is quite strong in the fuel and energy industry. It is referred to as the largest refiner in the world. It operates in most countries and has explored every continent for crude and natural gas. As of 2015, Exxon has 23 refineries in 14 countries and has a distillation capacity of 136000 barrels per day.

Exxon has exhausted and sold almost every product obtained from crude refining. It is safe to say that it has extensive upstream and downstream operations. It is the world’s largest seller of fuels and lubes. Being the largest refiner has its perks. It has strong financial backing and hence has various projects that include conventional, heavy oil, light gas, shale gas, LNG (Liquefied Natural Gas), deep water, Arctic and sour gas projects.

Weaknesses of ExxonMobil

Exxon Mobil is involved in many litigations and lawsuits around the world. These legal proceedings range from seeking claims for damages, fines, and penalties. To name one, it agreed to pay $225 million as a settlement for its New Jersey trial involving contamination at refineries and pollution. These kinds of lawsuits impact the company's image and result in huge financial losses. As a result, Exxon suffered a decline in revenues by 34.2%in 2015. Its profits have also declined by 50.3%.

Opportunities for ExxonMobil

Rising Demand: The demand for energy is rising and is expected to keep rising in the future as well. This gives Exxon Mobil a huge potential to grow. The expected rise in demand from 2014 to 2040 is about 40%.

Other Sources of energy: The demand for energy in the future is going to have a huge percentage of renewable sources involved. Exxon needs to understand this change and act accordingly. Around 40% of the growth in energy demand will be met by renewable sources.

Increase in LNG demand: Exxon is currently heavily invested in LNG R&D. By 2040, nearly half of the natural gas demand will be met by LNG. Exxon Mobil needs to be ready for this and start commercial sales for the same to take the first advantage of this change.

Threats to ExxonMobil

Competitions: ExxonMobil is facing huge competition from other companies, and this has led to a massive fall in its revenues and profits.

Environmental Regulations: Environmental laws are becoming stricter. This has made their work more challenging in terms of reducing global warming, greenhouse gases, water usage, etc. This poses a massive challenge in front of them.

Economy: The world economy has undergone several challenges recently and has made many countries cut oil imports. Apart from this, falling oil prices also pose a huge threat.

Conclusion

ExxonMobil has a strong customer base with a lot of opportunities. Still, in recent times, the environmental and climate change factors are making people shift towards renewable energy and fuel sources. Hence the company should now start thinking of ways to resolve such issues to maintain a profit margin and yet cause no harm to the environment.

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