Chevron-Brief Discussion Case Studies Examples
Globalization is driving force which is doing an exceptional job to promote the productivity as well as the level of efficiency of an enterprise (Amireh and Majaj, 2000). At one place globalization increases the level of competition among the companies, but it also manages the effectiveness and well-being of the entity at the highest level. One of the best strategies that currently associated with the term of Globalization is Internationalization in which an organization will start to move its physical location from one place to another place. Internationalization strategy is also known or referred as Going Global Strategy for an entity.
Entry modes always bring effectiveness t the companies as far as having an internationalization decision into act. However, there are certain models and theoretical framework that can be used for the Internationalization purpose that include both financial and non financial indicators (Ellis, 2005).
The main objective of this assignment is to analyze a real time in which a chosen company has expanded their core operations in the market of Australia. There are numerous models and functions that needed to be applied on the company to have a powerful and effective expansion of the company in the Australian region. The company which has been chosen for the same analysis is Chevron. There is a complete structure available to complete this piece of work in an organized manner. In the next section, a small description relates to the company will be described followed by other analysis by implicating relevant models of internalization in the Australian region.
Chevron Corporation is an American multinational energy corporation. It is known as one of the successful companies of Standard oil with its headquartering location in California, the United States of America (USA). The company its active recognition in almost 180 countries of the world, and the company is currently engaged with number of oil and gas industries. Chevron has been termed as one of the largest companies of the world in the year 2013. Fuels, Lubricants and Petrochemicals are some of the major products in which Chevron is committing their core operations. It is a big multinational company with a strong recognition on the research and development (R&D) stance (Ellis, 2005).
The company is very effective within the eyes of most of their consumers. Apart from the petroleum products, the company is also having their operations in Natural Gas as well in terms of exploration and distribution. The collective revenue of the company in the financial year 2014 was US$ 211.97 billion while the net income of the company in the same year was US$ 19.241 billion. There are more than 64,000 employees are currently working with the company which is appreciating their net income in a well organized and perfect manner. The shares of the company are actively trading in the New York Stock Exchange (NYSE), and it is a regular candidate of Standard and Poor (S&P) 500 Index. In the next section of the report, special emphasize will be pulled on the expansion of the company in the Australian region.
Analysis of Host Country
Australia with an official name of the Commonwealth of Australia is basically an Oceania country that comprises the mainland of the continent. It is known as the sixth (6th) largest country of the world in terms of size. The political aspect of Australian region is extremely powerful as the country has elected government which is very eager to maintain strong significance within the functions of the country (Aip.com.au, 2015). It is a politically safe and sound country of the world which is doing an exceptional job in maintaining their resiliency to a high level. Chevron will certainly get an added advantage with the political behavior and situation of Australia.
The thing which induced Chevron to enter in the region of Australia is its economical well being and cheap labor than that of the United States. Economical well being is very significant for the sake of the organizations to take powerful actions (Ibisworld.com.au, 2015). Australia is a developed country of the world, and known as one of the wealthiest countries in the world. It has 12th largest economy in the world with 5th largest per capita income. With effective amount of economic freedom, the country has a high Health & Development Index (HDI) from which they are operating with a great zeal and appreciation in the market. In the year 2014, the country reported a net Gross Domestic Product (GDP) of US$ 1.100 Trillion in the financial year 2014 with per capita income of US$ 46,631. It is clearly manifesting that the power and propensity of consumption of the Australian Citizen is very effective and powerful which will be effective for Chevron while maintaining and expanding their operations in this respective region.
The thing that induced Australian Government to allow Chevron to enter in the region and flourish is their escalating and growing Oil Extraction Market. The revenue generation capability of this industry in Australia is very high and effective as it is nearly AUD$ 41 billion. The revenue of the oil and gas industry of Australia is expected to increase by 5.8% annually for the next five years of their operations (Miningoilgasjobs.com.au, 2015). According to the report presented by the officials of KPMG, Australian petroleum industry contributed around AUD$ 6.2 billion per annum in their GDP. Major players which are operating in the market of Australia re the Multinational Companies such as Chevron, BHP, BP and others, which are giving their hundred percent efforts to tap such a strong market (the Guardian, 2015). Australian share in the oil market has decreased heavily due to the fall of oil prices in the entire world. It influenced over the energy stocks as well, as the Australian Stock Exchange (ASX) had fallen by 1.6% due to this incident. Therefore, the region desperately needed new and powerful companies to fill out this gap, which they will get in the face of Chevron. By considering this particular aspect, the Australian market will bring success for Chevron (the Guardian, 2015).
In terms of environmental function, Australia is a powerful country in particular. The country has about 0.3% of the oil reserve of the entire world, and it is a strong member of the Organization for Economic Cooperation and Development (OECD). Due to the perfect environmental factors and resources, Australia has invested heavily in the oil and gas sector. Apart from that, the environmental factors are also attractive for the international players to do investment in the sector, as the Coal Seam Gas has received AUD$ 31 billion of direct investment in the year 2010. Therefore economical well being and environmentally friendly are two important factors that induced Chevron to enter in this market of Australia.
Internationalization is one of the most important aspects that associated specifically with the organizations which are intending to expand their core operational network within different organization of the world. There are certain models that used in the internationalization strategy such as Uppsala Model, FDI model and Diamond Model (Lundby and Jolton, 2010).
Uppsala Model Analysis
The Uppsala Model is a theoretical model that explains how a firm should increase their intensification. The key features of the Uppsala Model works on four different aspects and elements which are as follows
According to the Uppsala Model, companies should have detailed knowledge about the market they are about to enter (Lundby and Jolton, 2010). Chevron required having strong market knowledge of Energy consumption and potential herein the Australian market before their flourishing. Strong market knowledge is the one that will assist the company to have significant and strong market commitment to provide effectiveness in the market. The main crux of this model is to set strategies of the company in terms of internalization after having a closer look over the knowledge of the market.
Foreign Direct Investment (FDI) Model is an important model that used in the entry modes in terms of having their tendency in the market (Lundby and Jolton, 2010). FDI is the direct ownership of the facilities in the target country. It usually involves the transferring of resources that include technology, capital and other personnel aspects which are essential. Direct Investment can be entertained by having a strategic alliance with an already existing company or establishing a new enterprise within the country. It usually provides a high and strong degree of ownership. Chevron has the opportunity and chance to use this model for their future consequences and references to bring economic prosperity in their core functionality.
Diamond Model Application
Diamond Model is yet another important model of entry that used by the organizations to have a perfect competitive advantage over them (Lundby and Jolton, 2010). The approach took over the stance of having competiveness in the market that relates specifically to the performance of other companies. The diagram of the same model is as follows
Demand Condition is the one that will be very effective for Chevron to complete their effectiveness in the market, because it will be more worthwhile for them. In the Demand Condition, the local country will help the company to grow positively and substantially in the market. This particular aspect can be perfect for Chevron in the near future, as the company will meet with the increasing demand of oil in the region.
Barlett & Ghoshal Model
It is also an important model that used by the companies to have internationalization in the market with efficacy. Basically these models are the drivers which are essential for the companies to maintain their level of operations (Rickard, Baker and Crew, 2009). The model has four different elements and each of the elements has its own significance. Chevron is more towards the internationalization element because it will surely fulfill their core appetite in the market.
There are four different models have been defined in the aforementioned discussion for the internationalization of Chevron within the Australian market, and it is very important for the company to have a single strategy from these strategies to apply on their function. After having a critical and thorough look over the four models, the company is recommended to have FDI model into their consideration, as it will be more towards their proposed aspect (Stiasny and Gore, 2012). FDI is a perfect strategy for the financial stable companies to maintain their market efficacy and tendency in an international market. Chevron is a financially stable company of the United States (US), and the company has enough capital from which they can enter in the region of Australia and flourish positively. Therefore, the company should take this aspect into consideration and come up with strong FDI strategy to enter. It means the company will shift the technology, capital and even the human resource capital as well with them in the Australian region to become effective in the market. This particular strategy can be very attractive and effective for the company to maintain their operations in the Australian market with a positive mindset. After seeing the potential in the Australian Market, it can be said that the chance of effectiveness to grow in the market is very high and positive which is gaining effectiveness positively.
Analysis of Country Entry Mode
Expansion and continuous development is very important and significant for the sake of an organization in terms of having their long run effectiveness and significance, and in the end of the day only those organizations can get appreciations which are having a positive attitude towards the expansion based function.
There can be number of entry modes are available for the companies to enter in a new region. Some of the major types of entry models are Strategic Alliance, Partnerships and others, however it totally relates to the organizational effectiveness in particular. It is very important for the organizations to have the effectiveness of a perfect entry mode that associated specifically with their power. The country mode which can be used in this particular aspect is Greenfield Investment (Stiasny and Gore, 2012).
In this particular type of entry mode, the organization will invest in the new country through their investment and have their subsidiary in the market. Usually, manufacturing and exploration companies have this particular types of entry mode investment within the organization, and Chevron is also an exploration company which has entered in the region of Australia with full of their potential, capital and human resources. Greenfield is an alternative name of Foreign Direct Investment (FDI) which has been defined in the aforementioned section as well, as it will be very essential and effective for the company to strengthen their roots in the region with a positive mindset. It is more essential for Chevron to have this particular entry mode into consideration instead of having a cross border acquisition, as the financial position of Chevron is very powerful, and they should use it during their investment.
Experience Gained and Recommendations
There are numerous experienced grids have been attained through this entire analysis by implementing different models and theoretical frameworks which are essential for the companies. Diamond Tool analysis is found one of the incredible tools that used to analyze the rationale of choosing a new country for the expansion purpose. Apart from that Greenfield Investment is also taken into consideration for the entry mode. The company didn’t work much on the 4Ps of marketing that should be taken into account by the companies to flourish their effectiveness in a global market with zeal
First of all, the company has to make sure that the products they are offering in the Australian market should be quality wise perfect, and it is not an easy ask for the companies to tap a market which is already saturated from the domestic and international players.
Secondly, there is a need to make new and perfect pricing strategy because the products which are already having in the market needed to be compete. Chevron has a huge financial aspect, and they can minimize the amount of their products to a lower level. Initially, the company has to have the PENETRATION pricing strategy; however with the passage of time, the company can change this strategy accordingly.
It is also recommended to the company to have powerful promotional skills that include both electronic and paper medium sources from which they can tap a new and powerful market like Australia
International Expansion has now emerged as a strong and powerful weapon for the companies to have their recognition in international markets as well. After the current economic crisis, international expansion emerged as an important aspect that delivers effectiveness to the companies in particular. In this particular analysis, the objective of Chevron has been selected which has entered in the region of Australia. Different theoretical aspects and models have been applied on this particular analysis that includes sophisticated models and applications which are significant for their effectiveness. The entire analysis is also revealing that the idea of expansion would be very effective and worthwhile for Chevron, as the market of Australia has a perfect potential, however the company has to follow the recommendations for their betterment
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