Natural Gas and Oil Case Study

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EXXON

Upstream Division: ExxonMobil

Although ExxonMobil remains a successful company, like all oil and gas organizations, it remains highly dependent upon market conditions, including shifts in the price of crude oil and natural gas. "A decline in oil or gas prices lowers ExxonMobil Upstream business profit margins, whereas an increase in oil and natural gas prices lowers ExxonMobil Downstream and Chemical business profit margins" (Miglani, 2016, par.14). While the size and diversification of the Exxon Corporation has permitted it to mitigate the severity and degree to which such conditions impact its profits on one hand, on the other hand, it still must review its operations and total quality management (TQM) policies to ensure that it is maximizing its opportunities as an organization.

Inputs and Outputs

ExxonMobil is one of the largest and most famous oil and gas companies in the world. Its upstream segment engages in the exploration of and the production of crude oil and natural gas (Priester, Hopson & DeMetz, 2015, par.2). Although it is also involved in so-called downstream operations, including the production of petroleum-based retail and chemical products, its upstream products are integral to its success as an organization. However, the return on upstream investments are always somewhat uncertain as well as are very costly. According to analysts at the business evaluation site Seeking Alpha, the Exxon corporation must be "flexible in their operation through their diverse upstream portfolio of opportunities that includes both conventional and unconventional plays, deep-water, shale gas, natural gas, liquid natural gas, heavy oil, and sour gas" (Priester Hopson & DeMetz, 2015, par.2). These outputs are likely to expand in the future, given the rapid changes in technology and ability to use different types of fuel.

Regardless, even though it has diversified investments, the input costs of experienced and technically skilled manpower; the necessary equipment for extraction; and even the legal challenges of ensuring continued access to existing and future areas for extraction are significant. The significant costs incurred to survive in the oil and gas industry are one of the reasons the behemoth-sized Exxon has become so dominant. The difficulty of entering the marketplace and competing with Exxon and overcoming such logistical and regulatory barriers ensures Exxon's likely future success as a company.

Customers and Suppliers

The majority of Exxon's customers come from the United States, Germany, South Korea, India and France. Some major customers in its diverse portfolio include Metwood, Inc., a "manufacturer of commercial and residential mixed-material structural products" and Osaka Gas Co. Ltd. "one of the oldest and largest energy suppliers in Japan with seven million natural gas customers in the country" (MacDonald, 2016, par.1-2).

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Exxon also serves the largest suppliers of gas in France and Italy. Thus its international presence is significant.

As well as having a wide outreach of customers, Exxon has similarly tried to cultivate a significant base of suppliers. According to its own website, it notes: "in areas where we are growing our business, we conduct business process training covering topics such as health, safety and security; business ethics; costing and tendering; finance and credit; and international standards and codes" ("Supplier Development," 2017). Suppliers are often located in areas of the world such as Russia which may have substantially different business ethics and practices than those embraced in the United States and Exxon strives to bridge the gap with such educational programs.

Customer Value

Exxon's primary value it can offer its customers is access to a corporation of vast size and operational outreach. It can operate on significant economies of scale and has the resources to swiftly transport its raw materials whenever and wherever they may be needed. Although the supply of crude and Exxon Upstream's many products may still be contingent upon Exxon's ability to find, develop, and mine a naturally occurring, nonrenewable source of fuel, the company offers reliability and value because of its history and technological capacity.

Mission

As noted by Miglani (2016), the mission of ExxonMobil's Upstream division can be understood as comprising three core components: that of exploration, development and production. Exploration involves identifying new potential sources to mine for oil and gas; development involves the actual drilling as well as creating the necessary platforms to process, store, and transport the raw materials; production involves the actual extraction of the oil and gas to the surface (Miglani 2016). At all levels of the company, sophisticated and technical knowledge is needed for workers, from operating machinery to advancing the production of crude oil through superior technology. In some instances, sophisticated and technical legal knowledge is needed to navigate the regulatory landscape regarding the transportation of crude.

TQM Principles

Exxon was one of the earliest organizations to embrace the philosophy of total quality management. TQM principles are applied to every facet of the organization. These principles do not simply affect traditional areas such as the development of the actual products sold by the organization and development, but also the management of the product via transportation channels, system management, and sales ("Global Product Quality Management System," 2017).….....

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