Exxon Mobile is one of the most successful companies in the oil and energy industries today. But what makes them so successful? In an effort to answer this question, a thorough internal investigation can be helpful in determining what aspects of this company are making it an industry leader. Two aspects of this internal analysis of Exxon Mobile are the company’s resources and capabilities.
One of the most reputable resources that Exxon Mobil has today is a strong brand name. Exxon Mobil operates all over the world and is recognized in every part of the world (Datamonitor, 2008). When people all over the world know who a company is, what they do, and where they are located, the company gains a unique competitive advantage over the rest of the industry. A good way to analyze this resource is to use the VRINE Model (Strategic Management, 2007). This breaks down in order to analyze its value, rarity, inimitability, and exploitability.
For this resource I’ll start by assessing its value. The question that must be answered is, “does this resource allow the firm to meet market demand or protect the firm from market uncertainties?” (Strategic Management, 2007). In the case of the brand name resource, I believe that it gives them ample protection against uncertainty and enables them to compete, if not lead, in the industry. Exxon operates in over 200 countries around the world (Datamonitor, 2008) The fact that this company is present all over the world, and not many other industry competitors operate in so many different regions, proves that this particular resource is very valuable to the company. If a company can possess something that another company cannot, value is inevitably created for that resource.
This resource also protects them from uncertainty because this brand is already established itself within the market and can thrive in it without too much concern about the well being of the company, thus limiting some uncertainty. Next in the VRINE model is assessment of its rarity. Do any other companies possess such worldwide recognition as Exxon Mobil’s brand name can bring? There are some companies that have come close in competing with Exxon Mobil, such as ConnocoPhillips and Chevron, but none can compare with the unique profitability and opportunities that the name Exxon can bring to a region. The name is undoubtedly trusted throughout the world and rarely rivaled.
Those aspects of the brand name recognition make this brand name a rarity. The next step in the VRINE model is to assess the inimitability. To assess this, the question of can competitors “acquire the valuable and rare resource quickly, or will they face a cost disadvantage in doing so?” (Strategic Management, 2007). The simple fact that the Exxon Mobil name is trademarked and registered makes it impossible for any other company to replicate its name. Also it would cost a substantial amount to buy out the company and gain its name. This alone makes the brand name inimitable.
Now assessment of the nonsubstitutability is needed. The question arises, “is there protection against ready substitutes?” (Strategic Management, 2007). For Exxon, their name reputation is one that substitutes have a very difficult time matching. Exxon is leading the industry and continues to be a leader of almost every aspect of the industry today. Though substitutes are present in the industry, none can surpass the reputation of Exxon Mobil. The final step in the VRINE Model is to assess the resource’s exploitability.
The question to answer is, can the firm “ nurture and take advantage of the resources and capabilities that it possesses?” (Strategic Management, 2007). For Exxon, they can bring the company anywhere in the world and use the recognizable name to establish credibility and power in that region.
This gives the company a considerable advantage when it comes to exploiting its brand name to establish the company around the world. After analyzing the resource using the VRINE Model, all aspects of the model have been met, so it is safe to say that this resource can give them a competitive advantage among its competitors. Another important resource that Exxon possesses is the presence of human expertise capital throughout the company (Datamoitor, 2008). Exxon employs many scientists and engineers that are researching and finding new ways to gain access to more energy resources and make the new innovations less harmful to the environment (Annual Report, 2007).
This human capital has proven to be a very important resource for the company as shown by their development of new ways to increase liquid natural gas supplies and “enhancing heavy oil recovery” (Annual Report, 2007). Using the VRINE model again, I will assess this resource. In analyzing the value of the human expertise capital, again we must consider whether this resource helps the company meet market demand and can eliminate some uncertainty. In this case, I believe that the unique research department that houses these scientists and engineers is one that gives the company a great capability to compete in the market, and even excel within the industry.
I believe it also eliminates some uncertainty because while the company is researching and developing cutting edge technology, it keeps them knowledgeable about all the new innovations and ideas that are throughout the industry. This makes the resource very valuable. Next, the rarity of the resource must be analyzed. I believe that this resource is rare because of the entire department (the Upstream Research Center) within the company devoted to letting these scientists and engineers use their knowledge to propel the company into the future (Annual Report, 2007). Some companies have R & D departments, but they don’t posses the funding for such expertise and capabilities within these departments like Exxon has in its Upstream Research Center (Annual Report, 2007).
This makes the breadth of their scientists and engineers and rare resource among it competitors. Following the VRINE Model, inimitability is the next aspect to analyze. I believe that it would be very difficult for any company to gain the human expertise capital that Exxon has. Exxon pays particular attention to its scientists and engineers by providing opportunities to use their knowledge to help solve every day problems that the company is facing. Many of these scientists and engineers had PhDs in their respective fields, thus making their ideas more credible and valuable to the company (Annual Report, 2007).
This make the human expertise capital an inimitable resource because it makes it hard for other companies to replicate the magnitude of the distinguished human capital that Exxon possesses. The next step in the VRINE Model is nonsubstitutability. It would be nearly impossible for a competing company to substitute an equally effective team of engineers and scientists. The cost would be too great for the company. Exxon is leading the way in Research and Development trends, and substitutes for the quality of employees that Exxon has would be very difficult for other companies, making the nonsubstitutability of Exxon’s human capital very high. The final step is to analyze the exploitability of the human expertise capital.
Exxon has proven that the expertise that is present can be exploited to develop new and innovative ideas that help Exxon maintain as an industry leader. One example of the result of this exploitation is the development of Metallyte UBW-ES, which is a new polypropylene film for packaging that has unprecedented sealing power (Datamonitor, 2008). This example proves that the exploitability of this human expertise capital makes this resource a valuable asset to the company. After analysis of the human expertise capital resource using the VRINE Model, it can be said that this resource gives Exxon Mobil a competitive advantage in the industry.
After assessing the resources that Exxon has available to them, it is now easier to illustrate what Exxon’s capabilities are because of the acquisition and ownership of these resources. One of Exxon’s important capabilities is their extensive research and development capabilities. Exxon’s research and development capabilities are very dynamic in the sense that as new energy conservation and developments arise, they can adapt their research and development departments to meet the new technologies and innovations. Their research and development capabilities go insofar as to “improve existing products, and enhance service” (Datamonitor, 2008).
Using the VRINE Model again, it can be easy to see if this capability really gives Exxon a considerable competitive advantage. First we have to look at the value of this capability. Exxon has utilized the company’s valuable resource of human expertise capital do help head the research for new improvements and innovations that help lead the way for Exxon to grow (Annual Report, 2007).
One such innovation is the development of Enable mPE, which has “substantially reduced waste and energy consumption across a wide variety of film applications” (Datamonitor, 2008). This capability allows them compete within the market and gain headway in developing potentially high profit innovations, thus giving value to their research and development capability.
Next the rarity needs to be assessed. Though almost all of Exxon’s competitors have research and development departments, none have invested the amount that Exxon has. Also there are only a handful of top competitors within the energy industry so that alone makes Exxon’s R & D department rare. In fiscal year 2007, Exxon invested $814 million in R & D. Though the idea of an R & D department is not a rarity in its own right, the amount invested and products produced because of their extensive R & D work makes this a rare capability among its competitors.
The next assessment in the VRINE Model is the inimitability of this capability. As mentioned before many other companies have a R & D department, but not to the extent that Exxon’s is being funded and operated. In the past 5 years, Exxon has invested upwards of $3.5 billion in research and development alone (Annual Report, 2007). Very few of Exxon’s competitors can match that without having an almost impossible financial obligation afterward. That is one feat that few companies can imitate.
The next step is to analyze its nonsubstitutability. Exxon’s R & D capabilities far surpass the capabilities of their competitors, and for companies to match the funds that have been introduced to Exxon’s R & D department would put them at a huge disadvantage financially. So, the nonsubstitutability of Exxon’s R & D capabilities is high.
The final step in the VRINE Model is to assess the exploitability. Exxon has proven that they are able to exploit its R & D capabilities by the development of new innovative products like Enable mPE and Metallyte UBW-ES (Datamonitor, 2008). Both of these new products have substantially lowered waste and energy consumption, one of Exxon’s key goals (Annual Report, 2007). This proves the exploitability of this capability. After analyzing the R & D capabilities of Exxon using the VRINE Model, it is safe to say that it meets all the standards of the model and can be considered a competitive advantage among its competitors. These resources and capabilities have proven to be a valuable part of the value chain of Exxon Mobil. If Exxon continues to utilize these competitive advantages, they will undoubtedly remain an industry leader for years to come.
- ExxonMobil Summary Annual Report 2007. Retrieved September 18, 2008, from www.exxonmobil.com Web site: http://ir.exxonmobil.com/phoenix.zhtml?c=115024&p=irol-reportsAnnual
- Carpenter, M. A. (2007). Strategic Management. Upper Saddle River, New Jersey: Pearson Education, Inc.. ExxonMobil Corporation Company Profile. (2008). SWOT Analysis. In Datamonitor [Web]. New York: Datamonitor. Retrieved 09/18/08, from www.datamonitor.com