Introduction of Chevron Corp

Chevron Corporation is an American multinational energy corporation. It is the second

largest oil company in America. One of the successor companies of Standard Oil, it is

headquartered in San Ramon, California, and active in more than 180 countries. Chevron is

engaged in every aspect of the oil and natural gas industries, including hydrocarbon

exploration and production; refining, marketing and transport; chemicals manufacturing and

sales; and power generation. Chevron is one of the world's largest companies; as of

March 2020, it ranked fifteenth in the Fortune 500 with a yearly revenue of $146.5 billion

and market valuation of $136 billion. In the 2020 Forbes Global 2000, Chevron was ranked

as the 61st-largest public company in the world. It was also one of the Seven Sisters that

dominated the global petroleum industry from the mid-1940s to the 1970s.

The company's exploration and production (upstream) operations consist of exploring for,

developing, and producing crude oil and natural gas and also marketing natural gas. Its

refining, marketing, and transportation (downstream) operations relate to refining crude oil

into finished petroleum products; marketing crude oil and the products derived from

petroleum; and transporting crude oil, natural gas and petroleum products by pipeline,

marine vessel, motor equipment, and rail car. Its chemical operations include the

manufacture and marketing of commodity petrochemicals, plastics for industrial uses, and

fuel and lubricant oil additives. The company's upstream, downstream, and chemicals

activities are located in North America, South America, Europe, Africa, the Middle East, Asia,

and Australia.

Chevron's downstream operations manufacture and sell products such as fuels, lubricants,

additives, and petrochemicals. The company's most significant areas of operations are the

west coast of North America, the U.S. Gulf Coast, Southeast Asia, South Korea and Australia.
In 2018, the company produced an average of 791,000 barrels of net oil-equivalent per day

in United States.

Chevron has interests in gas to liquid facilities in its operating regions. The company has

operational presence in North America, South America, Europe, Asia, the Middle East and

Africa. Chevron is headquartered in San Ramon, California, the US.

SWOT Analysis of Chevron

Strengths of Chevron

 Distribution and Reach: Chevron has a large number of outlets in almost every state,

supported by a strong distribution network that makes sure that its products are

available easily to a large number of customers in a timely manner.

 Cost Structure: Chevron’s low cost structure helps it produce at a low cost and sell

its products at a low price, making it affordable for its customers.

 Dealer Community: Chevron has a strong relationship with its dealers that not only

provide them with supplies but also focus on promoting the company's products and

training.

 Financial Position: Chevron has a strong financial position with consecutive profits in

the past 5 years, along with accumulated profit reserves that can be used to finance

future capital expenditures.

 Chevron has a large asset base, which provides it with better solvency.

 Return on Capital Expenditure: Chevron has been successfully able to generate

positive returns on the capital expenditure it has incurred on various projects in the

past.
 Automation: of various stages of production has allowed the more efficient use of

resources and reducing costs. It also allows for consistency in quality of its products

and provides the ability to scale up and scale down production as per the demand in

the market.

 Skilled Labor force: Chevron has invested extensively in the training of its employees

that has resulted in it employing a large number of skilled and motivated employees.

 Chevron has a diversified workforce, with people of many geographical, racial,

cultural and educational backgrounds that help the company by bringing in diverse

ideas and methodologies of doing things.

 Chevron has qualified and accredited professionals working under in its team.

 Entering new markets: Chevron’s innovative teams have allowed it to come up with

new products and enter new markets. It has been successful in past, in most of the

initiatives it has taken in new markets.

 Social Media: Chevron has a strong presence on social media with more than millions

of followers on the three most famous social media platforms: Facebook, Twitter and

Instagram. It has high levels of customer engagement on these platforms with low

customer response time.

 Website: Chevron has a well-functioning and interactive website that draws a large

number of internet traffic and sales.

 Product Portfolio: Chevron has a large product portfolio where it provides products in

a large range of categories. It has a number of unique product offerings that are not

provided by competitors.

 The geography and location of Chevron provide it with a cost advantage in serving

its customers, when compared to that with the competition.

  Chevron has a well-established IT system that ensures efficiency in its internal and

external operations.

 Chevron owns a number of intellectual property rights that include trademarks and

patents. These allow it exclusivity over its products and competitors cannot copy or

reverse engineer them.

 Chevron is a brand that has been in the market for years, and people are aware of it.

This makes its brand awareness high.

 Its products have maintained quality over the years and are still valued by

customers, who find it as good value for the amount of money that they pay.

 Partnerships: Strategic partnerships are established by Chevron with its suppliers,

dealers, retailers and other stakeholders. This allows it to leverage them if need be in

the future.

Weaknesses of Chevron

 Research and Development: Even though Chevron is spending more than the

average research and development expenditure within the industry, it is spending

way less than a few players within the industry that have had a significant advantage

as a result of their innovative products.

 High Day Sales Inventory: The time it takes for products to be purchased and sold

are higher than the industry average, meaning that Chevron builds up on inventory

adding unnecessary costs to the business.

 Rented Property: A significant proportion of the property that Chevron owns is

rented rather than purchased. It has to pay large amounts of rent on these adding to

its costs.
 Low current ratio: The current ratio that shows the company’s ability to meet its

short term financial obligations, is lower than the industry average. This could mean

that the company could have liquidity problems in the future.

 The company has low levels of current assets compared to current liabilities, and this

can create liquidity problems for it in operations.

 Cash flow problems: There is a lack of proper financial planning at Chevron

regarding cash flows, leading to certain circumstances where there isn’t enough cash

flow as required leading to unnecessary unplanned borrowing.

 Integration: Chevron's current structure and culture have resulted in the failure of

various mergers aimed at vertical integration.

 Diversification in the workforce: The workforce at Chevron is concentrated with

mostly local workers, and low amounts of workers from other racial backgrounds.

Lack of diversification makes it difficult for employees from different racial

background to adjust at the workplace, leading to loss of talent.

 Market Research: Chevron has not conducted market research within the market that

is serves since the past 2 years. As a result, it is making decisions based on 2 years

old data, while customer needs may have evolved over time.

 High employee turnover rates: Chevron has a higher employee turnover rate

compared to competitors. This means that it has more people leaving the job, and as

a result, it is spending more on training and development as employees keep leaving

and joining.

 Quality Control: Chevron has a lower budget for its quality control department than

competitors. This leads to lack of consistency and the possibility of damage to quality

across its various outlets.

  Lack of legal experience and legal department employees are not highly qualified.

 A few products have a high market share, while most of the products have a low

market share. This reliance on a few products makes Chevron vulnerable to external

threats if these few products suffer for any reason.

 The workload is a high per worker as there are fewer workers than the actual work

required. This puts workers under psychological stress and is likely to be less

productive.

 Worker morale is low due to company culture and politics that have grown in recent

years.

 Competition and qualified employees have been leaving the organisation in recent

years, which could mean a shortage of good talent for the company in the upcoming

years.

 The decision making is highly centralized, and decisions by teams need to be

approved by certain officials. This reduces efficiency in operations by making them

more time consuming. It also leads to reduced innovation.

 The performance appraisal is not in a systematic manner. People are often not

appraised for their performance. This leads to lower work morale and lack of

promotion opportunities for employees.

Opportunities of Chevron

 Internet: there has been an increase in the number of internet users all over the

world. This means that there is an opportunity for Chevron to expand their presence

online; by using the internet to interact with its customers.

 E-commerce: There has been a new trend and a growth in sales of the e-commerce

industry. This means that a lot of people are now making purchases online. Chevron

can earn revenue by opening online stores and making sales through these.

 Social Media: there has been an increase in the number of social media users

worldwide. The three social media platforms; Facebook, Twitter and Instagram, have

shown the greatest number of increase in monthly active users. Chevron can use

social media to promote its products, interact with customers and collect feedback

from them.

 Technological developments: technology comes with numerous benefits among

many departments. Operations can be automated to reduce costs. Technology

enables better data to be collected on customers and improves on marketing efforts.

 There has been an increase in average household income along with an increase in

consumer spending following the recession. This will result in growth in Chevron’s

target market with new customers that can be attracted towards the business.

 Population: the population has been growing and is expected to grow at a positive

rate for the upcoming years. This is beneficial for Chevron as there will be an

increase in the number of potential customers that it can target.

 Inflation: The inflation rate has been low and is expected to remain low in the next

two years. This is an opportunity for Chevron as its cost of inputs would remain low

for the next two years.

 Interest rate: Lower interest rates than compared to previous years provides an

opportunity for Chevron to undergo expansion projects that are financed with loans

at a cheaper interest rate.

 Green government drive: this provides an opportunity for Chevron for the sale of

Chevron's products to federal and state government contractors.

 Transport Industry: the transport industry has been flourishing in the past few years,

and shows growth potential in the future. This has reduced the costs of

transportation, which is beneficial for Chevron as it will lower its overall costs.

 Tax policy: the governments’ reduction in tax rate is beneficial for Chevron as a

lower amount would be expensed out as a tax.

 The government has also announced a subsidy on the sale of environmentally

friendly goods in this sector. Chevron can focus on these environmentally friendly

products and make use of this opportunity.

 Tourism: growth in tourism is beneficial for Chevron as it will provide new potential

customers that it can target in order to gain market share.

 Skilled workers: increase in education and training by numerous institutes has

increased the amount of skilled labor available within the country. This means that if

Chevron is able to hire skilled labor, it would have to spend less on training and

development, therefore, saving costs.

 The growth in consumer spending in the economy is likely to increase consumption

for Chevron's products.

 A number of new niche markets have opened up that are growing. Chevron can sell

products in these markets and take advantage.

 Globalisation: Increased globalisation does not restrict Chevron to its own country. It

can extend its operations to other countries, entering into these markets and making

use of the opportunities that lie in these markets.

  Consumers within the industry are becoming more conscious of health, and this is a

segment that is growing. Chevron can take advantage by manufacturing products

that are beneficial to customer's health.

 Trade barriers have been reduced on the import of goods. This will reduce the costs

incurred on inputs for production.

 Regulations have loosened in recent years making it easier for businesses to carry

out their operations.

Threats of Chevron

 Technological developments by competitors; New technological developments by a

few competitors within the industry pose a threat to Chevron as customer attracted

to this new technology can be lost to competitors, decreasing Chevron’s overall

market share.

 Suppliers: The bargaining power of suppliers has increased over the years with the

decrease in the number of suppliers. This means that the costs of inputs could

increase for Chevron.

 New entrants: there have been numerous players that have entered the market and

are gaining market share by gaining existing companies’ market share. This is a

threat to Chevron as it can lose its customers to these new entrants.

 Increasing competition: there has been an increase in competition within the

industry putting downward pressure on prices. This could lead to reduced revenue

for Chevron if it adjusts to the price changes, or loss of market share if it doesn’t.

 Exchange Rate: the exchange rate keeps fluctuating and this affects a company like

Chevron that has sales internationally, while its suppliers are local.
  Political uncertainties in the country prove to be a barrier in business, hindering

performance at times and making the business incur unnecessary costs.

 The fluctuating interest rates in the country do not provide a stable financial and

economic environment.

 Consumer tastes are changing, and this puts pressure on companies to constantly

change their products to meet the needs of these customers.

 Regulations on international trade keep changing, and this requires compliance by

companies if they are to operate globally.

 Substitute products available are also increasing, which is threat collectively for the

whole industry as consumption of current products decrease.

 The rise in prices of fuel has increased in the input costs for Chevron. These costs

have also increased as other industries that provide inputs for this company also

have suffered from increasing fuel prices, thereby charging more.

 Increased promotions by competitors have been a threat for Chevron. On most

media, there is more clutter than ever, and customers are bombarded with multiple

messages. This reduces the effectiveness of promotional messages by Chevron.

 Constant technological developments require the workforce to be trained accordingly

as the inability to keep up with these changes can lead to loss of business for

Chevron.

Limitations of the SWOT Analysis of Chevron

Even though the SWOT analysis is an effective tool, it has certain limitations as well.

 Its major limitation is the fact that there can be an overlap of strengths and

weakness, with a single factor being both a strength and a weakness. For example, a
 large number of outlets can be a strength in a growing economy or a weakness if the

economy is going through a recession.

 The matrix is not an end as it does not show how to achieve the objectives. It should

be used as a starting point to make strategic decisions.

 The assessment done through a SWOT analysis is a static one and does not take into

consideration the changes that take place in the competitive environment.

 The factors listed down in a SWOT analysis may be overemphasized by the

company.

 There are certain interrelationships between the internal and external factors that

the SWOT Matrix overlooks.

Weighted SWOT analysis of Chevron

In response to the above mentioned limitations, a weighted SWOT analysis can be

conducted for Chevron that involves assigning weightage to each of the strengths and

weaknesses mentioned in the SWOT analysis for Chevron. It also involves estimating the

probability of an event occurring in the external environment. This allows managers to focus

on the important factors, and give less consideration to the less important ones.

The limitation of the weighted SWOT analysis is that it does not look at how holistically

different factors affect the business when combined.

Advanced SWOT analysis/SWOT Matrix

Chevron SWOT analysis lists down the strengths, weaknesses, opportunities and threats to

any organisation, but does not tell management what can be done by these. To overcome

this limitation and help develop strategies that are appropriate, an advanced SWOT analysis

or TOWS matrix is used. This lists down the Strengths-Opportunities (SO) strategies that

involve using strengths to take advantage of opportunities. It lists the Strengths-Threats

(ST) strategies that involve using strengths to fight of threats. It involves the Weaknesses-

Opportunities strategies that involve converting weaknesses to strengths by using

opportunities. Lastly, Weakness-Threats (WT) strategies involve overcoming weaknesses to

avoid threats.

Strengths Weaknesses

1. Chevron has a Strong 1. A high proportion of

Distribution network with a property in use by Chevron

large number of outlets. is on rent, and rental

charges need to be paid.

2. It has a low-cost structure,

which provides it with an 2. Low amounts of spending

advantage over the on research and

competition. development as compared

to the competition.
3. It has a strong financial

position with positive 3. It has a high employee

profits reported in the past turnover rate, with low

few years. It also has a employee motivation and

strong asset base. working morale.

4. It has a skilled labour force 4. It has liquidity problems

that is highly qualified, with low quick ratio; the

innovative and diversified. level of current assets is

less than current liabilities.

5. It has a strong presence
It also faces cash flow
on social media.
problems.

Opportunities SO Strategies WO Strategies

1. Internet users are  Increase marketing to  Finance ownership of the

 increasing around the attract consumers to spend property through low

world. E-commerce is (S1, S3, O3). interest rate to increase

also growing with the the proportion of owned

 Use its presence on social
increase in internet property to rented property
media for marketing and
usage. (W1, O5).
to attract customer

2. Social media users are towards its website (S5,  Increase payrolls, provide

increasing worldwide. O2, O3). incentive packages and

benefits to employees to
3. Household income is  Develop environmentally
reduce turnover and
increasing and so is the friendly products through
improve work morale. This
consumer spending. innovation, at a low cost
could be possible as costs
Inflation in the economy so that they could be sold
are low currently. (W3,
is expected to remain at a low price (S2, S4, O4).
O3)
low.
 Market products at low

4. Growth in prices by offering

environmentally friendly discounts. This would help

products and services. increase sales in volumes

Government is offering and is feasible due to low

subsidies on these. inflation and cost (S2, O3).

5. Interest rates are low,

which provides an

investment opportunity

for large projects.

Threats ST Strategies WT Strategies

1. There is a threat of new  Use a strong distribution  Increase spending on

entrants coming into the network to reach out to research and development

market. customers and fight off to enable Chevron to

new entrants into the better compete with

2. The exchange rate has
 been devalued. market (S1, T1). competition (W2, T4).

3. Fuel price has risen in  Use its strong financial  Provide incentives,

recent years making position to invest in increase engagement, or

inputs expensive. intellectual property rights. provide a better work

This would help compete environment to retain

4. Competition within the
with increasing talent. This will ensure that
industry is increasing.
competition in the market employees don’t leave and
5. More substitute
(S3, T4). join competitors (W3, T4).
products are now
 Use its innovative teams to
available.
find cheaper alternatives

to fuel so that these could

be used, thereby reducing

costs (S4, O3).

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