Cheroncorporation 2009 MBA Program

PRESENTED To: Prof. M. Asim Section: F

PRESENTED By: INAAM MAHMOOD L1F11MBAM1031

Contents
A. B. C. a. D. F. a. G. H. I. J. K. M. N. Case summary ...................................................................................................................... 3 Vision Statement .................................................................................................................. 5 External Audit ...................................................................................................................... 5 Opportunities........................................................................................................................ 5 Competitive Profile Matrix .................................................................................................. 5 Internal Audit ........................................................................................................................... 7 Strengths .............................................................................................................................. 7 Internal Factor Evaluation IFE Matrix ................................................................................. 8 Swot strategies ..................................................................................................................... 9 Z score ................................................................................................................................... 11 Grand strategy Matrix ............................................................................................................ 12 IE Matrix ............................................................................................................................ 12 QSPM................................................................................................................................. 13 RECOMMENDATION ..................................................................................................... 15 b. Weaknesses .......................................................................................................................... 7 b. Threats.................................................................................................................................. 5 E. External Factor Evaluation Matrix (EFE) ............................................................................... 6

L. SPACE MATRIX .................................................................................................................. 13

A. Case summary
Chevron began with an oil discovery north of Los Angeles in 1879 followed by the formation of the Pacific Coast Oil Company, the oldest predecessor of Chevron Corporation. Standard Oil Company (owned by John D. Rockefeller) subsequently bought Pacific Coast Oil in 1900, and six years later the merged name became Standard Oil Company. But in 1911, the Sherman Antitrust Act resulted in the breakup of the parent Standard Oil and created Standard of California as an independent company. After the war ended, the company merged with Pacific Oil Company, becoming Standard Oil Company of California (Socal). Socal formed a joint venture with Texaco in 1936, Caltex, to develop and market oil in the Middle East and Indonesia. By the end of the 1930s, the Armco partnership was formed in the Middle East, composed of Socal, Texaco, Exxon, and Mobil. Following World War II, the additives and petroleum-based chemicals invented for the war were quickly turned to peacetime uses. The age of petrochemicals had arrived, and with it came Chevron Chemical Company. By 1980, Aramco was entirely owned by the Saudis, and in 1988 the name was changed to Saudi Arabian Oil Corporation. In 1984, the merger between Standard Oil of California and Gulf Oil was the largest merger in history at that time, nearly doubling the companys worldwide proved oil and gas reserves. As part of the merger, Socal changed its name to Chevron Corporation. Through the purchase of Tenneco Inc.s U.S. Gulf of Mexico crude oil and natural gas properties in 1988, Chevron became one of the largest gas producers in the United States. Chevron merged with NGC .Corporation in the area of natural gas to form Dynegy in 1998. In 1993, Chevron formed Tengizchevroil, a joint venture with the Republic of Kazakhstan, becoming the first major Western oil company to enter newly independent Kazakhstan. In 2001, Chevron acquired Texaco for $37.5 billion and changed its name yet again to Chevron Texaco Corporation. But after spending sizable amounts on changing the name/logo on everything from letterhead to the credit unions legal name, on May 9, 2005,the name returned to Chevron. In 2005, Chevron had another name change opportunity through its acquisition of Unocal Corporation. But this time it opted to leave the brand unchanged and reduce confusion.

The Unocal acquisition made Chevron the worlds largest producer of geothermal energy in the world. Chevron is the second-largest integrated energy company in the United States and among the largest corporations in the world, based on market capitalization as of December 31,2008. Headquartered in San Ramon, California, with the stock ticker symbol CVX, it conducts business in more than 100 countries Chevron engages in every aspect of the crude oil and natural gas industry, including exploration and production, manufacturing, marketing and transportation, chemicals manufacturing and sales, geothermal, power generation, and renewables. Its global workforce consisted of approximately 66,000 employees at year-end 2008. Chevron markets fewer than three main brands: Chevron, Texaco, and Caltex. In 2008, an independent source ranked Chevron as the most powerful gasoline brand in the United States for the fifth consecutive year. By the end of 2008, more than 5,000 Chevron retail sites had been updated as part of a multiyear marketing program to refresh the Chevron brand image. The companys convenience store brand, ExtraMile, was ranked as the number-one convenience store by an independent survey for the second year in a row. Chevron continues itsmarket thrust in clean premium fuels through the expanded incorporation of patented additives such as Techron. In 2008, Chevron sold gasoline with Techron in 27 countries, comprising 90 percent of the branded gasoline sold worldwide. Chevron is considered as one of the Big Five along with ExxonMobil (XOM), BP (BP), Shell (RDS), and Conoco Phillips (COP). The Big Five are big in many ways, one of which happens to be their sheer size in terms of number of employees. This may seem like a good comparative statistic, but in actuality the head count statistic is a bit tricky. Some companies count contractors in different ways, and the head count at the best of times is a moving target. But Chevron came in as somewhere between 58,000 and 66,000 employees in the first quarter of 2009. Exxon Mobil has approximately 80,700 employees; Royal Dutch Shell checks in at over 100,000 employees. BP has close to 98,000 employees, and Conoco Phillips has only about 30,000 employees. All of the Big Five have extensive overseas operations. Conoco Phillips operates in more than 30 countries, and the rest of the Big Five companies each operate in over 100 countries.

B. Vision Statement
At the heart of the chevron way is our vision ... to be the global environmental friendly energy company most admired for its people, partnership and performance

C. External Audit
a. Opportunities
Increase usage for energy Increasing price of energy Increasing propensity of people to spend Increasing mobility of labor, capital and technology Demand shifts for renewable energy

b. Threats
Depletion of natural energy resources Royal Dutch Shell and Exxon is rivalry in the industry Regulations restricted excessive emission of CO2 The credit crisis and volatile commodity prices of2008 OPEC restrictions, civil wars and hurricanes.

D. Competitive Profile Matrix

CHEVRON Critical success factors weight Rating Score EXXON MOBIL Rating Score SHELL rating score

Advertising

0.20

0.60

0.60

0.60

Product quality

0.10

0.30

0.40

0.20

Management

0.07

0.28

0.21

0.21

Financial position

0.10

0.30

0.20

0.30

Customer loyalty

0.05

0.10

0.15

0.15

Global expansion

0.20

0.60

0.80

0.80

Market share

0.09

0.27

0.27

0.36

Logistics

0.15

0.45

0.45

0.45

Production capacity

0.04

0.12

0.12

0.16

Total

1.00

3.02

3.20

3.23

E. External Factor Evaluation Matrix (EFE)

Opportunities Weight Rating Weighted Score

Increase usage for energy

0.15

0.60

2 3 4 5

Increasing price of energy Increasing propensity of people to spend Increasing mobility of labor, capital and technology Demand shifts for renewable energy

0.12 0.10 0.09 0.10

3 3 2 3

0.36 0.30 0.18 0.30

Threats 6 7 8 9 Depletion of natural energy resources Royal Dutch Shell and Exxon is rivalry in the industry Regulations restricted excessive emission of CO2 The credit crisis and volatile commodity prices of2008 0.11 0.08 0.07 0.10 2 2 2 3 0.22 0.16 0.14 0.30

10

OPEC restrictions, civil wars and hurricanes. Total

0.08 1.00

0.16 2.72

F. Internal Audit
a. Strengths
Spending on alternative energy 3.2 billion since 2002. Continuous investment in high profile projects to increase oil production. Outstanding earning $23.9 billion in 2008 Achieve HART energy publishing refiner of the year award in 2009 Investment in 13 power generation projects in Asia and us
th

4 largest integrated energy company in the world. Operating in more than 100 countries and with around 25,000 service stations worldwide Had global refining capacity of more than 2 mm barrel per day.

b. Weaknesses second quarter of 2009.

71 % drop in income second quarter of 2009. Marketing operations lost $95 million in second quarter of 2009. Stop drilling new gas wells in US continent. 51 % decrease in revenue.

Chemicals significantly lower margins, lower income from equity

G. Internal Factor Evaluation IFE Matrix

Sr.No Strengths Spending on alternative energy 3.2 billion since 2002. Weight 0.07 Rating 3 Score 0.21

Continuous investmentin high profile projects to increase 0.08 oil production.

0.24

Outstanding earning $23.9 billion in 2008

0.11

0.33

Achieve HART energy publishing refiner of the year award 0.08 in 2009

0.32

Investment in 13 power generation projects in Asia and us

0.10

0.30

th

4 largest integrated energy company in the world.

0.08

3 3

0.24 0.30

Operating in more than 100 countries and with around 0.10 25,000 service stations worldwide

Had global refining capacity of more than 2 mm barrel per 0.08 day. Weaknesses Weight 0.08

0.24

Rating 2

W.Score 0.16

71 % drop in income second quarter of 2009.

Marketing operations lost $95 million in second quarter of 0.05 2009.

0.10

Stop drilling new gas wells in US continent.

0.05

0.10

51 % decrease in revenue.

0.07

0.07

Chemicals significantly lower margins, lower income from equity.

0.05

0.10

Total

1.00

2.71

H. Swot strategies

STRENGTHS
Spending on alternative energy 3.2 billion since 2002. Continuous investment in high profile projects to increase oil production. Outstanding billion in 2008 Achieve HART energy earning $23.9

WEAKNESSES
71 % drop in income

second quarter of 2009. Marketing operations lost

$95 million in second quarter of 2009. Stop drilling new gas wells in US continent. 51 % decrease in revenue. Chemicals significantly

publishing refiner of the year award in 2009 Investment

th

lower margins, lower income in 13 power from equity

generation projects in Asia 4 largest integrated energy

company in the world.

OPPORTUNITIES
Increase usage for energy

Had global refining capacity of more than 2 mm barrel per day.

SO Strategies S1,S3,O1,O2,O3 Invest in solar and wind energy S2,S4,O1,O3 Invest in biofuel energy

WO Strategies W1,W2, W3,O1,O3 Reduce the price of products all over the places.

Increasing price of energy Increasing labor, technology mobility capital of and

Demand

shifts

for

renewable energy

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THREATS Depletion of natural energy resources Royal Dutch Shell and Exxon is rivalry in the industry Regulations restricted excessive

ST Strategies
S2,S3,S4,T1,T2

WT Strategies
W1,W2,T1,T2

Chevron needs to change its Create

new

complementary

market strategy by reducing products which contain good the price to compete with the quality and lower price to attract competitors. more customers.

emission of CO2 The credit crisis and volatile commodity

prices of2008

I. Z score
X1 =working capital / total asset =

X2= retained earnings/ total asset = X3 =EBIT/ total asset = X4= marketing value of equity / total liability = X5= Sale / total asset = Z score = 1.2x1 + 1.4x2 + 3.3x3 + .6x4 + x5 =
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J. Grand strategy Matrix

Quadrant II Quadrant I

Quadrant III

Quadrant IV

1. Market development 2. Forward integration

K. IE Matrix IFE weighted score 3.0 to 4.0 I II 2.0 to 2.99 III 1.0 to 1.99

IV

V Chevron co

VI

VII

VIII

IX

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L. SPACE MATRIX
FS +6 CONSERVATIVE +5 +4 +3 +2 +1 CA I -6 IIIIIIIIIII -5 -4 -3 -2 -1 0 -1 -2 -3 DEFENSIVE -4 -5 -6 ES COMPETITIVE +1 +2 +3 +4 +5 +6 IS AGGRESSIVE

M. QSPM
Invest in solar and Invest wind energy Opportunities Weight 0.15 0.12 0.10 AS 2 2 2 2 TAS 0.30 0.24 0.20 0.18 in

biofuel energy AS 4 4 3 3 TAS 0.60 0.48 0.30 0.27

Increase usage for energy Increasing price of energy Increasing propensity of people to spend

Increasing mobility of labor, capital and 0.09 technology

13

Demand shifts for renewable energy Threats Depletion of natural energy resources

0.10

0.40

0.30

0.11

2 -

0.22 -

3 -

0.33 -

Royal Dutch Shell and Exxon is rivalry in 0.08 the industry Regulations restricted excessive emission 0.07 of CO2 The credit crisis and volatile commodity 0.10 prices of2008 OPEC restrictions, civil wars and 0.08

0.21

0.07

0.16

0.08

hurricanes. Strengths Spending on alternative energy 3.2 billion 0.07 since 2002. Continuous investment in high profile 0.08 projects to increase oil production. Outstanding earning $23.9 billion in 2008 0.11 2 2 0.22 0.16 4 3 0.44 0.24 3 0.21 3 0.21

Achieve HART energy publishing refiner 0.08 of the year award in 2009 Investment in 13 power generation 0.10

projects in Asia and us 4th largest integrated energy company in the world. Operating in more than 100 countries and 0.10 with around 25,000 service stations worldwide 1 0.10 4 0.40 0.08 2 0.16 3 0.24

Had global refining capacity of more than 0.08 2 mm barrel per day. weaknesses 71 % drop in income second quarter of 0.08

0.08

0.24

14

2009.

Marketing operations lost $95 million in 0.05 second quarter of 2009. Stop drilling new gas wells in us 0.05 continent. 51 % decrease in revenue. 0.07

--

Chemicals significantly lower margins, 0.05 lower income from equity. Total 1.00

2.84

4.20

S # 1= invest in solar and wind energy S# 2= invest in biofuels

= =

2.84 4.20

N. RECOMMENDATION
Should have to sale its chemical business because it becomes dog. Should invest in wind and solar energy. Start exploration of gas wells Get help from technology Should invest in bio-fuel energy sources. Should have to improve ethical operating standard

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