ExxonMobil PESTLE Analysis

Published in Companies category by MBA Skool Team

Here is a detailed PESTLE analysis of ExxonMobil which examines political, economic, social, technological, legal & environmental factors.

Political Factors:

The political factors in the ExxonMobil PESTLE Analysis can be explained as follows:

There are a number of political factors influencing the long-term profitability of an oil and company, ExxonMobil. This company operates in a number of countries and exposes itself to different types of political environment and associated risk factors. Some countries have trade restrictions implying limits on the foreign investment in the oil and gas sector. Even some countries have policies on export-import imposing trade barriers on certain products based on country origin. In India specifically, this company tied up with ONGC by offering its technology and expertise in exploring offshore blocks. It also signed MOU with Indian Oil Corporation Limited to explore ways to supply highly demanded LNG in India.

In recent times, this company is looking for a stake in Indian Oil and gas fields. Indian government is focusing on formulating policies to raise domestic outputs to cut imports. The policies and intent are to involve a lot of small and mid-size companies to reduce dependency and cut prices. The investment friendly, open and transparent policies is a big opportunity for this company with a huge Indian market in place.

Image: Wikimedia

Economic Factors:

Below are the economic factors in the PESTLE Analysis of ExxonMobil:

Global economic conditions and supply -demand equation for this commodity impacts the business of ExxonMobil significantly. The economic factors such as inflation, recession, rising price, trade tariffs, foreign exchange rate affect the demand for energy in any operating country.

With rising prices, the demand tends to decline since the consumer’s disposable income is limited. But the products being an essential commodity having an inelastic demand, people are forced to cut down their consumption. Since globally population growth is on a rise, hence demand also increases for oil and gas. In India the slow economic growth rate during Covid-19 lockdown, the demand was quite low. People are price sensitive with slowly shifting to growing alternatives such as renewable sources of energy. Even the competition with alternative hydrocarbons and other energy sources needs to be considered during the strategy making process. The supply disruption due to uncertain macro environmental factors and even the adherence to OPEC quotas and govt. intervention in the free-market economy is crucial to take into account. This company needs to work at macro as well as micro level in all business operating countries to remain profitable and earn high revenues.

Social Factors:

Following are the social factors impacting ExxonMobil PESTLE Analysis:

The changing demographics such as age, gender, education level, employment etc. affects the lifestyle choices and the demand for more energy consumption. As high disposable income makes people travel as well as spend more, their demand is also more. The society has a role to play in influencing the consumption decision and their preferences. Consumers today have a choice to make with alternate sources of energy present in the market. ExxonMobil can attract consumers with lawfully monitoring prices and associated supply. The consumer behavior in the target market for industrial and individual segments should be well accounted for making business decisions. This can guide this company to win over competitors in the industry.

Technological Factors:

The technological factors in the PESTLE Analysis of ExxonMobil are mentioned below:

The technological factors play an imperative role for this oil and gas company, ExxonMobil. With the limited availability of crude oil in its natural form with high scarcity, it is important to have continuous research and development in this oil, gas and energy-based industry sector. Even the consumer demand gets affected by technological improvements in energy efficiency. The changes in technological advances in energy storage systems and processes have shifted many consumers towards alternative sources. The wind and solar have become a major source of supply and a competitive alternative for power generation. As the consumers today prefer E-transportation, it poses a threat for ExxonMobil.

But this company can turn this into an opportunity by adapting itself to new and emerging technologies for drilling, production and exploration in the industry to become more profitable and undertake competitive advantage.

Following are the legal factors in the ExxonMobil PESTLE Analysis:

The legal frameworks and systems in all countries are different for business operations by ExxonMobil. Some countries have strict legal rules and regulations related to their energy market like environmental laws, waste management, recycling, copyrights, patents and intellectual property rights etc. These countries can also impose trade restriction laws in action, they can impose sanctions on ExxonMobil which prohibits it from doing its business and many more. These legal factors can impact the business and dip the profitability to an uncertain extent. Sometimes there are countries which lack a proper legal system having proper frameworks for oil and gas development. The non-disclosure laws and policies mandated by certain countries need to be adhered for avoiding any legal battle in the court of law. The laws related to price control in the form of price ceiling and price flooring, adoption of regulations mandating efficiency standards are some really important laws which can influence the strategies and business operation for ExxonMobil. Even the change in regulations and laws related to offshore drilling operations, hydraulic fracturing, laws on alternate supply sources, FDI etc. can affect its position in the industry. Laws related to the consumer protection, health and safety, work environment for employees, disaster management laws and rules etc. are highly critical in this industry. This company should follow all litigations properly for enhancing its brand equity and win customer loyalty. This ultimately leads to incurring high sales and growing profit margins.

Environmental Factors:

In the ExxonMobil PESTLE Analysis, the environmental elements affecting its business are as below:

The environmental factors related to climate change; greenhouse gas emissions have a major role in the non-renewable energy sector as a whole. Today as the consumers are becoming more environment conscious, there is an increasing demand for renewable sources of supply for fulfilling needs. There is an attitudinal shift to more green products. A number of countries are adopting regulatory framework to reduce emissions which includes cap and trade regimes, carbon taxes, incentives for renewable energy etc. All these frameworks can impact the business model of ExxonMobil in different countries with different environment laws and regulations. This company is also leveraging its R&D for innovating environment friendly products and processes such as algae-based biofuels, carbon capture and storage etc.

to bring low emission energy in the market. These environmental factors considerations can give this company a competitive edge over other firms in the industry. This is beneficial for the society, environment and the company itself in a cost competitive manner.

To conclude, the above ExxonMobil PESTLE Analysis highlights the various elements which impact its business performance. This understanding helps to evaluate the criticality of external business factors for any brand.

This article has been researched & authored by the Content & Research Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.

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