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Analysis of External and Internal Environments in Chevron Corporation

Case Study Analysis Agenda:

To be able to distinguish Chevron Corporation from its competitors and to administer its environmental, social, human rights, political, and public policy that are relevant to the corporation's activities and performance and determine where they can make greatest contribution and work with key partners, communities and industry groups to maximize positive outcomes and continually deepen their understanding of sustainable development and put their profits into good use.

Description of the organization

Chevron Corporation is an American global corporation. It is one of the companies that replaced Standard Oil and it is headquarters are in San Ramon, California.  Chevron is involved in all aspects of the oil, geothermal and gas energy industries, including investigation, manufacture, refining, selling and transportation and power generation and the company is active in more than 180 countries.

Chevron is one of the world's largest companies that dominated in the global petroleum industry from the mid-1940s to the 1970s. Chevron's oil industry operations is manufacturing and selling products such as fuels, lubricants, additives, and petrochemicals.

The future of the companies in the energy industry seem positive due to the drastic rise of oil prices over the past years. However, despite the oil prices going up and remaining high, there are a number of serious threats that face for the Chevron Corporation. These challenges could potentially limit the company's long-term earnings or revenue and can hinder to its growth and stability in the market.

Chevron Corporation strengths and weaknesses

Strengths

• Financial stability

Chevron Corporation has a good record of financial strength. Chevron's balance sheet is strong enough to allow the company to invest in sizable, long-term projects that will enable them to compete on a global level. The company has money to also hire experts and invest in research and development to ensure that they produce high quality products at the lowest cost possible while eliminating or reducing negative environmental impact. By doing so, the company can expand, grow exponentially hence securing its future.

• Popularity

Chevron Corporation is one of the largest energy company in the world that gives it a competitive advantage over other companies in the industry.

Weaknesses

• Cost of environmental hazards

Chevron has been a recipient of criticism by both environmental institutions and human rights activists due to its operations and practices in the a number of countries including United States, Ecuador, Burma, Nigeria, Angola, and Chad( country in central Africa). The company had a number of lawsuits in which it has paid big fines. The company has also been investing in campaigns and activities in their effort to diverge attention from its poor record of over two decades.

• Cost of new technology to be environment-friendly

The company should invest in technology that helps reduce emissions and other negative environmental outcomes that might result to liabilities such as oil spills. Through advanced technology, the company can also act quickly in the event of such outcomes to reduce the level of damage caused. The Company should also take part in communal activities so as to build a relationship with the communities they operate in. Fostering a strong relationship will help the company settle any disputes that may arise civilly thus reducing the costs incurred. Chevron Corporation should try to improve its image through advertising more and investing in producing more environmental friendly energy such as biofuel, wind, and solar energy.

Assess the external threats affecting Chevron Corporation and the opportunities available to the corporation.

Chevron, like any other company in the energy industry is faced by a number of external environment threats and opportunities. The threats includes:

• Maintaining Chevron's key asset, Tengiz Field is technologically challenging and capital extensive. This makes the risks associated to it, such as market delivery options and renewal of government contracts, substantial.
• The company also faces threats of political instability of its countries of operations, such as Nigeria and Venezuela, which could potentially result to huge losses .

There are however several opportunities for the company to gain an edge in the industry that includes:

• They secure more Asia Pacific domestic natural gas supply agreements as the markets ripen. The company has world-class research advantage potential, which can be attributed to its strong financial position.
• The company can seize new enhanced oil recovery projects, in Libya and Middle East, and heavy oil projects in Venezuela and Canada.

Environmental Factors That Influence Chevron Corporation

• Economic Factors

Population also can affect the demand too. The changing population size can affect the economy, which in turn affects oil demand. With the world population expected to rise, the demand for oil and oil products is expected to surge. When a country's working age changes, the country's economic performance also changes hence affecting the demand for energy.

• Social and Political Factors

Social and political factors such as rules and regulations affect oil companies and their operations. Typically, legal regulations that limits on where, when and how mining is done and how oil companies conduct their operations. In addition, how laws are interpreted is different in every country. Big oil companies such as Chevron Corporation that operates across states and countries have to deal with different rules and regulations, social and political environments, which make their operations.

Forces Of Competition That are Most Significant in Chevron Corporation

• Threat of New Competitors

The oil industry is very profitable that is why more investors are getting into this kind of business. This has increased the number of new competitors entering the market. New competitors in the market have increased the supply of oil products and bringing in their fresh ideas and modern technology hence threatening to reduce Chevron Corporation's market share. It is expensive for Chevron Corporation to upgrade all their systems to match the new technology of the competitor.

• Availability of New Substitutes for Oil

Electricity is one of the major substitutes threatening the use of oil in America today. Invention of products such as electric cookers, electric trains and electric cars have reduced demand for oil, coal and gas thus reducing Chevron Corporation's market share. Environmental organizations have been conducting campaigns against the use of emission products. This has made Chevron Corporation's target customers look for substitutes for oil and oil products hence reducing demand. Substitutes for oil include nuclear energy, coal, solar power, gas, wind power, and hydroelectricity. Companies that offer oil substitutes are also on the rise therefore encouraging more people to switch from oil and oil products to other sources of energy. If this invention trend continues, the company may suffer low due to limited market for its products in the future.

Recommendation

The promotional strategy of different companies are through the use of social media and sending of e-mails and text messages. Chevron can use this as their marketing strategy so that consumers or customers can have easy access to compare the prices of their oil products from different companies. This also will made price competition more pronounced hence other suppliers or competitors can be forced to provide high quality products and services at lowered prices too. Chevron Corporation, is a big corporation and can employ strategies that will help lower its production costs and help it lower the costs for its products to overcome the threat of new competitors. The company can apply price lining; offer the same merchandise at different price and earn points from it which can exchange for free products. In this way, they could earn customer's loyalty while meeting their needs and hence, gaining a competitive advantage over their competitors.

Another strategy that Chevron Corporation can use is innovation and introduction of niche or their particular product in the market. The company could focus on advancing the production of alternative energy in order to counteract the threat of substitutes. By so doing, the company would be able to retain their environmental sensitive customers and attract new customers too. Providing products to a small market means that the company can charge premium prices for its products and services.

Conclusion

Most companies in the energy oil industry undervalue the need to analyze environmental and social factors affecting the process of manufacturing and marketing oil and its products.

An effective customer service, an effective promotion, motivating and empowering employees, an effective use of management practices, ability to predict the future of oil market and investing in research and development for innovation and technology can add up to Chevron Corporation's success to remain as the one of the largest company in the oil industry serving the people, the development of the community and for the good of the environment.

Reference:

https://en.wikipedia.org/wiki/Chevron_Corporation