Professional Documents
Culture Documents
1. Introduction
A company's primary objective is to perform in such a manner that will enable it to
gain a competitive edge over its rivals. A company is said to have a competitive
advantage if it is able to maintain a profit that exceeds the average for its industry.
The essence of formulating a strategy is to enable a company to configure its
activities so that it can outperform its rivals. This involves the aim of creating a
sustainability of the company's position, in order to secure a long-term advantage
over rivals. In trying to understand the sources of competitive advantage, it might be
appropriate to consider the example of a company called TAX Ltd. The company is in
such a state of disorder that it cannot file annual accounts, and it has been unable to
pay council tax demands because it cannot invoice. TAX Ltd would be regarded as
less efficient in comparison to a company that is able to complete these activities.
This effectiveness leads to the company being more profitable by establishing a
competitive advantage. In order to understand why a company is able to perform at
a higher level than its rivals, it is necessary to carry out an internal analysis. This
involves considering the company's strengths and weaknesses. An ideal framework
for performing such an analysis is the resource-based view (RBV). RBV is a way of
viewing the performance of a company in which its principal assets and skills can be
a source of competitive advantage. An influential work by Wernerfelt (1984) began
a line of literature that led to the foundation of the RBV as a field of study.
TotalEnergies is a multinational energy company with its principal business
activities in the oil and gas, refining, petrochemicals, and the trading and shipping of
crude and refined products. The company was established in 1993 and is currently
ranked at number 26 in the Fortune Global 500 list. It is currently headquartered
with operations in more than 130 countries. In light of the recent uncertainties in oil
and gas markets, TotalEnergies is seeking new ways to provide energy for the
expanding population, and the company is increasingly investing in renewable
energy in the form of solar and biofuels. The aim of this present paper is to critically
evaluate TotalEnergies' resources and skills to assess whether they are a source of
sustainable competitive advantage. It will begin with a brief history of the company
and an outlook on the latest energy sector. This will provide a context to the
company's current environment. The next section will define RBV as a field of study
and consider the significance in choosing a particular resource. This is followed by
an analysis of TotalEnergies' tangible and intangible assets. The paper will conclude
by offering suggestions to any potential problems as well as making an overall
conclusion to the company's potential source of sustainable competitive advantage
with respect to RBV.
The ability to secure fuel transportation globally at a lower cost than its rivals grants
TotalEnergies more flexibility in terms of accessing substitute resources and
changing its choice of products. This is mainly due to the ownership of a large fleet
of double-hulled supertankers and even larger capacity in contracted oil refined
product shipping space.
TotalEnergies has forecasted cash flows decades into the future, allowing them to
borrow at more favorable terms than many competitors. This has earned the firm a
credit rating of AA from Standard and Poor's and an Aa1 rating from Moody's
Investor Service.
The tangible resources have amassed in TotalEnergies are divided into two broad
categories: general and secondary. The energy firm has an impressive array of
tangible assets and financial holdings, including offshore oil derricks, oil processing
facilities, and transportation resources. They also have large amounts of cash,
available credit, and valuable tradable securities. These assets are of high value and
relatively rare among firms in the energy industry.
5. Conclusion
Strategic management is essential to the growth and performance of any industry.
This essay critically analyses the resource-based view (RBV) on the company of
Total Fina Elf. RBV has helped us understand this company in a different and more
specific and descriptive manner. We are better able to understand the competitive
advantage of Total Fina Elf through the resources and capabilities with tools like
VRIN, VP, and SWOT analyses. This framework tells us that competitive advantage
comes from the possession of resources that are valuable, rare, difficult to imitate,
and non-substitutable. Total Fina Elf's strategic management has sought to preserve,
internalize, externalize know-how, and innovation to differentiate products and
hold cost advantages. This has been very well accessed with the Donges' know-how
internalization in the steel industry. It has also been seen in the development of
goods and services that add customer value and differentiation for a product for
specific uses. This is demonstrated by the development of Elf lubricants and
specialty chemicals. The identification of resources and capabilities being a primary
thrust to strategic management is well done in this RBV framework. With regards to
the "identification of resources," we identify the case between market share and
cuts in research and development spending due to constraints from the French
government and increasing competition, which is a resource-based decision amidst
stressing concern from a loss of Total Fina Elf's competitive advantage. RBV also
helps us understand the competitive advantage of a company vis-a-vis others in the
same industry. The resource-based theory of integrated oligopolistic firms helps us
understand that an attempt by a company to engage in profit-taking competition
rather than limit pricing is because of the gathered profits of competitive advantage
and not price competition. This is seen with the case of NFL and TOT, who both tried
to defend their competitive advantages in the petrol industry in France. Simulation
of a price war between markets in northern and southern France led to goal
incongruence as both tried to defend their market territories and to change game
strategies due to an unspoken understanding that price competition may be
dangerous to lose existing market territories. This was then followed by the
agreement to liquidate the price war and reallocate the market, cutting losses
netting away from the price war with the end of the better off being the same
market share.