Sep 9, 2020 in Management

Strategic Management and Competitiveness: Chevron

Chevron is an American multinational corporation dealing in oil, natural gas, and geothermal energy exploration. Before its creation, it had several predecessors such as Star Oil, Standard Oil, and Texas Fuel Company. It has its head office in San Ramon, California with subsidiaries such as Texaco, Chevron Nigeria Ltd, Chevron Pakistan Ltd, Chevron Pipeline Company, and operates in over 180 countries around the world. Its operations include manufacturing and selling petrochemicals, lubricants, additives, and fuels. Chevron has also ventured into renewable energy sources such as solar, wind, and bio-fuel business. Thus, the paper seeks to discuss how Chevron has managed to improve its strategic management, returns, and competiveness in the market, particularly through globalization, technology, and the impact of its vision, mission statement, and stakeholders.

 

How Globalization and Technology Changes Have Impacted Chevron

Over the years, there has been a tendency among businesses and investment funds to move beyond their home and national markets to regional and overseas markets, increasing the interconnection of international markets. Globalization has had its advantages and disadvantages and greatly affected American corporations (Kachru, 2009). Though based in the United States, Chevron now conducts business in various countries around the world, including Australia, Brazil, Kuwait, South Africa, and the United Kingdom. This has seen the company grow its revenues and sales volumes backed by successful global market penetration. Chevron has been able to invest in many oil and gas producing countries, thanks to direct foreign investment pacts]. Foreign direct investments have risen hand in hand with globalization, enabling most companies to invest overseas. Globalization also saw the company invest in cheap labor in countries of Asia, Africa, and Latin America, which was seen as an efficiency boosting and cost cutting move.

Globalization, however, has led to other oil and gas companies investing in the United States, the home of Chevron, which in turn has led to stiff competition and mergers and acquisitions. European companies such as BP, Royal Dutch Shell, and Norway’s Statoil have a very high percentage of oil market in the United States. Chevron has been able to counter this foreign penetration by investing in a vast network of oil facilities overseas and venturing into a wider variety of upstream and downstream businesses within the United States of America (Kachru, 2009).

Chevron has adopted state-of-the-art technology in exploration, extraction, and processing of petroleum products as well as production of solar and geothermal energy. Chevron Technology Ventures (CTV) is an agency mandated with innovation, commercialization, and integration of new and emerging technologies into the company. It pursues externally developed technologies, assesses them, and then champions for their adoption into Chevron. The company has always focused on innovation in six most dominant technology streams including subsurface and base business, power systems, information technology, production enhancement, emerging materials, and water management (Clark & Cooke, 2011). The corporation has adopted innovative technologies that have enabled it to differentiate its performance and stay ahead of other players in the industry. From deep-water exploration to seismic imaging to chemical fingerprinting to IT, Chevron has invested heavily in modern technologies. The innovations adopted have greatly enhanced the cost effectiveness of commercializing new gas and oil fields and has helped to curb negative environmental impact of the company’s operations. Effective alignment of technology and business strategies of Chevron has also aided its success in the energy industry. The Chief Technology Officer of the corporation was quoted as saying: “Chevron is using technology to extend our operating limits beyond where the industry has ever gone before- differentiating our performance and economically delivering the energy that fuels human progress.” This has proven to be true especially in times of low commodity prices (Kachru, 2009).

Industrial Organization Model of Chevron and Resource-Based Model

Industrial organization model is used to deal with the strategic behavior of firms, market competition, and regulatory policies. Major strategies of Chevron are categorized into enterprise strategies and business strategies. Enterprise strategies include investing in people, executing with excellence, and growing profitably. Partner technologies are used in both the upstream and downstream businesses, raking in substantial earnings for the company as well as ensuring sustainable above-average returns on investment (Inkpen & Moffett, 2011).

As a result, Chevron is informed about possible actions and strategies the competitors are likely to adopt. Through this, Chevron have an opportunity to set competitive prices and output targets that will earn a competitive advantage in the market. Additionally, the information allows Chevron to select appropriate strategies that can bring returns even higher. In this respect, Chevron’s marginal revenue will be equal to its marginal cost, optimizing the total profits.

A resource-based model is a model that puts emphasis on resources as being critically important in a firm’s performance. For Chevron, these resources include shale oil deposits, upstream, downstream, and chemicals. Major capital projects in natural gas exploration, deep-water exploration, and shale resources are a part of the resource-based model of Chevron and a significant contributor to its future growth plans. Chevrons’ resources are mobile. This facilitates the process of identifying feasible strategies that can increase sales without incurring much costs. The company will be able to link its internal resources with the external opportunity to improve its capability to earn above average returns. With these, Chevron has been and will be able to compete successfully in the energy industry and ensure above average returns on investments in the long run.

Influence of Chevron’s Vision Statement and Mission Statement on its Overall Success

A vision declares the goals and objectives of an organization, which are the basis of its policy, decisions, and future plans. Chevron’s Vision statement is “To be the global energy company most admired for its people, partnership, and performance.” This vision statement has earned Chevron the admiration of all stakeholders and has enabled them to deliver excellent performance. It also means that they safely provide energy products that are vital to sustainable development the world over (Inkpen & Moffett, 2011). Chevron is a corporation of people with superior capabilities and high levels of commitment. Chevron’s mission statement is embedded in its vision statement and focuses on “Doing Business the Chevron Way” coupled with seven values that guide their employees on how to do things “The Right Way.” The company’s foundation is based on values such as integrity, trust, ingenuity, diversity, environmental and social protection, and high performance. The vision and mission statements guide the company in choosing the appropriate and feasible strategies. The employees are motivated to meet the company’s mission and vision, thus improving the company’s general performance. 

Stakeholder Impacts on Overall Success of Chevron

Chevron puts its customers at the center of everything they do. The company’s key stakeholders include investors, customers, local communities, employees, and governments of countries where the company has invested. Investors in Chevron comprise of institutional investors who have invested their own assets and assets held by them under stewardship. Such institutions include banks, brokerages, endowment funds, mutual funds, pension funds, insurance firms, etc.  Chevron has benefited a lot through use of such assets to conduct its business operations (Clark & Cooke, 2011). As a result, the relationship between the management and investors improves and this motivates the shareholders to invest more.

Chevron, being a multinational firm, has customers all over the world. The company sells oil and natural gas to customers under certain contractual arrangements with varying prices depending on the customer. Therefore, Chevron has earned customer loyalty, which has boosted its brand recognition in the market. Customer loyalty and brand recognition guarantees more sales to Chevron. 

Chevron has tens of thousands of employees across the globe. The corporation has invested in people and developed a talented workforce globally that does things the right way. The employees are an integral part of the success of the corporation, considering their skills and talents. The company remains committed to contributing to its employees’ career goals and professional progress. Chevron’s employees are motivated through better working conditions and remuneration packages. As a result, the employees work along the core values to meet company’s mission and vision, thereby improving Chevron’s success.

Most countries which Chevron has invested in have favorable government policies that allow smooth registration and operations, and tax holidays and capital deductions in some places (Inkpen & Moffett, 2011). This creates an enabling environment for the corporation to establish its investments and operate profitably in those countries.

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Chevron’s good relations with the local communities in the regions where it operates have bolstered its success. The corporation’s values and respect for human rights and culture as well as concern for the environment of local communities have been a priority. This has ensured continued support and acceptance by the communities. Employee safety and good working conditions has also been a fundamental commitment of Chevron (Clark & Cooke, 2011). 

Corporate social responsibility (CSR), which refers to non-financial activities that an organization engages in for social and environmental reasons, has been a major part of Chevron’s policy towards its stakeholders. Environmental stewardship and diversity have been at the center stage of Chevron corporate social responsibility strategy. The company has over time made great progress in these areas (Clark & Cooke, 2011).

In conclusion, through globalization and technology, practical mission and vision statements, and a good stakeholder’s relationship Chevron has been a force to reckon with in the global energy industry. It has consistently been ranked among the top ten oil and gas multinational companies in the United States of America. According to industrial organization and resource-based models, Chevron’s ability to match its internal resources with external opportunities has allowed the company to set appropriate strategies, which facilitate it to earn above average returns. The company’s mission and vision statements are clearly defined and practical, which has guided the company towards its present success. Finally, Chevron has established a perfect relationship with all of its stakeholders and this has boosted its competitive advantage over rivals.

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