Cheroncorporation 2009

MBA Program

PRESENTED To: Prof. M. Asim

Section: F

PRESENTED By:

INAAM MAHMOOD

L1F11MBAM1031

ContentsA. Case summary.......................................................................................................................3

B. Vision Statement...................................................................................................................5

C. External Audit.......................................................................................................................5

a. Opportunities........................................................................................................................5

b. Threats..................................................................................................................................5

D. Competitive Profile Matrix...................................................................................................5

E. External Factor Evaluation Matrix (EFE)................................................................................6

F. Internal Audit...........................................................................................................................7

a. Strengths...............................................................................................................................7

b. Weaknesses...........................................................................................................................7

G. Internal Factor Evaluation IFE Matrix.................................................................................8

H. Swot strategies......................................................................................................................9

I. Z score....................................................................................................................................11

J. Grand strategy Matrix............................................................................................................12

K. IE Matrix.............................................................................................................................12

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

M. QSPM.................................................................................................................................13

N. RECOMMENDATION......................................................................................................15

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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

company’s 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 union’s 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.

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The Unocal acquisition made Chevron the world’s 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

company’s 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.

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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 EXXON MOBIL SHELL

Critical success factors weight Rating Score Rating Score rating score

Advertising 0.20 3 0.60 3 0.60 3 0.60

5

Product quality 0.10 3 0.30 4 0.40 2 0.20

Management 0.07 4 0.28 3 0.21 3 0.21

Financial position 0.10 3 0.30 2 0.20 3 0.30

Customer loyalty 0.05 2 0.10 3 0.15 3 0.15

Global expansion 0.20 3 0.60 4 0.80 4 0.80

Market share 0.09 3 0.27 3 0.27 4 0.36

Logistics 0.15 3 0.45 3 0.45 3 0.45

Production capacity 0.04 3 0.12 3 0.12 4 0.16

Total 1.00 3.02 3.20 3.23

E. External Factor Evaluation Matrix (EFE)

Opportunities Weight Rating Weighted Score

1 Increase usage for energy 0.15 4 0.60

2 Increasing price of energy 0.12 3 0.36

3 Increasing propensity of people to spend 0.10 3 0.30

4 Increasing mobility of labor, capital and technology 0.09 2 0.18

5 Demand shifts for renewable energy 0.10 3 0.30

6

Threats

6 Depletion of natural energy resources 0.11 2 0.22

7 Royal Dutch Shell and Exxon is rivalry in the industry 0.08 2 0.16

8 Regulations restricted excessive emission of CO2 0.07 2 0.14

9 The credit crisis and volatile commodity prices of2008 0.10 3 0.30

10 OPEC restrictions, civil wars and hurricanes. 0.08 2 0.16

Total 1.00 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

4thlargest 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

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G. Internal Factor Evaluation IFE Matrix

Sr.No Strengths Weight Rating Score

Spending on alternative energy 3.2 billion since 2002. 0.07 3 0.21

Continuous investmentin high profile projects to increase

oil production.

0.08 3 0.24

Outstanding earning $23.9 billion in 2008 0.11 3 0.33

Achieve HART energy publishing refiner of the year award

in 2009

0.08 4 0.32

Investment in 13 power generation projects in Asia and us 0.10 3 0.30

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th largest integrated energy company in the world. 0.08 3 0.24

Operating in more than 100 countries and with around

25,000 service stations worldwide

0.10 3 0.30

Had global refining capacity of more than 2 mm barrel per

day.

0.08 3 0.24

Weaknesses Weight Rating W.Score

71 % drop in income second quarter of 2009. 0.08 2 0.16

Marketing operations lost $95 million in second quarter of

2009.

0.05 2 0.10

8

Stop drilling new gas wells in US continent. 0.05 2 0.10

51 % decrease in revenue. 0.07 1 0.07

Chemicals – significantly lower margins, lower income

from equity.

0.05 2 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 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

4th

largest integrated energy

company in the world.

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

lower margins, lower income

from equity

9

Had global refining capacity of

more than 2 mm barrel per day.

OPPORTUNITIES

Increase usage for energy

Increasing price of energy

Increasing mobility of

labor, capital and

technology

Demand shifts for

renewable energy

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.

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

ST Strategies

S2,S3,S4,T1,T2

Chevron needs to change its

market strategy by reducing

the price to compete with the

competitors.

WT Strategies

W1,W2,T1,T2

Create new complementary

products which contain good

quality and lower price to attract

more customers.

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THREATS

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

=

J. Grand strategy Matrix

Quadrant II Quadrant I

Quadrant III Quadrant IV

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1. Market development

2. Forward integration

K. IE Matrix

IFE weighted score

3.0 to 4.0 2.0 to 2.99 1.0 to 1.99

I II III

IV V

Chevron co

VI

VII VIII IX

L. SPACE MATRIX

FS

+6 -

CONSERVATIVE AGGRESSIVE

+5 -

+4 -

+3 -

+2 -

+1

CA IS

I IIIIIIIIIII

-6 -5 -4 -3 -2 -1 0 +1 +2 +3 +4 +5 +6

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-1 -

-2 -

-3 -

DEFENSIVE -4 - COMPETITIVE

-5 -

-6 - ES

M. QSPM

Invest in solar and

wind energy

Invest in

biofuel energy

Opportunities Weight AS TAS AS TAS

Increase usage for energy 0.15 2 0.30 4 0.60

Increasing price of energy 0.12 2 0.24 4 0.48

Increasing propensity of people to spend 0.10 2 0.20 3 0.30

Increasing mobility of labor, capital and

technology

0.09 2 0.18 3 0.27

Demand shifts for renewable energy 0.10 4 0.40 3 0.30

Threats

Depletion of natural energy resources 0.11 2 0.22 3 0.33

Royal Dutch Shell and Exxon is rivalry in

the industry

0.08 - - - -

Regulations restricted excessive emission

of CO2

0.07 3 0.21 1 0.07

The credit crisis and volatile commodity

prices of2008

0.10 - - - -

OPEC restrictions, civil wars and

hurricanes.

0.08 2 0.16 1 0.08

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Strengths

Spending on alternative energy 3.2 billion

since 2002.

0.07 3 0.21 3 0.21

Continuous investment in high profile

projects to increase oil production.

0.08 - - - -

Outstanding earning $23.9 billion in 2008 0.11 2 0.22 4 0.44

Achieve HART energy publishing refiner

of the year award in 2009

0.08 2 0.16 3 0.24

Investment in 13 power generation

projects in Asia and us

0.10 - - - -

4th largest integrated energy company in

the world.

0.08 2 0.16 3 0.24

Operating in more than 100 countries and

with around 25,000 service stations

worldwide

0.10 1 0.10 4 0.40

Had global refining capacity of more than

2 mm barrel per day.

0.08 1 0.08 3 0.24

weaknesses

71 % drop in income second quarter of

2009.

0.08 - - - -

Marketing operations lost $95 million in

second quarter of 2009.

0.05 - - - -

Stop drilling new gas wells in us

continent.

0.05 - - - -

51 % decrease in revenue. 0.07 - - - -

Chemicals – significantly lower margins,

lower income from equity.

0.05 - - -- -

Total 1.00 2.84 4.20

S # 1= invest in solar and wind energy = 2.84

S# 2= invest in biofuels = 4.20

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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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