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  • 8/7/2019 CHEVRON - Rakshit Upadhyay

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    ASSIGNMENT

    on

    BUSINESS STRATEGIES

    of

    CHEVRON

    SUBMITTED By: Submitted To:RAKSHIT UPADHYAY Dr. R.J.BhattMBASEM 4 (SFI)Roll No: - 11

    Department of Business Administration,Bhavnagar University,

    Bhavnagar.

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    Company Roots:

    They trace their earliest roots to an 1879 oil discovery at Pico Canyon, north of Los

    Angeles, Calif., which led to the formation of the Pacific Coast Oil Co. That company

    later became Standard Oil Co. of California and, subsequently, Chevron. They took on

    the name "Chevron when they acquired Gulf Oil Corp., in 1984, nearly doubling their

    worldwide proved oil and gas reserves. Their merger with Gulf was at that time the

    largest in U.S. history.

    Another major branch of the family tree is The Texas Fuel Company, which was formed

    in Beaumont, Texas, in 1901. It later became known as The Texas Company and

    eventually Texaco. In 2001, their two companies merged. The acquisition of UnocalCorporation in 2005 strengthened Chevron's position as an energy industry leader,

    increasing their crude oil and natural gas assets around the world.

    Global Scope

    Our diverse and highly skilled global workforce consists of approximately 60,000

    employees and about 4,000 service station employees.

    In 2009, Chevron produced 2.7 million barrels of net oil-equivalent per day, 7 percent

    higher than in 2008. About 73 percent of that volume occurred outside the United States.

    Chevron had a global refining capacity of more than 2 million barrels of oil per day at the

    end of 2009.

    Our marketing network supports retail outlets on six continents. And we have invested in

    13 power-generating facilities in the United States and Asia.

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    SWOT ANALYSIS:

    Strengths

    Steady financial performance

    Cash generator

    Presence across entire energy value chain

    Strong market position - upstream (exploration and production) and downstream

    (refining, marketing & transportation)

    Weaknesses

    Declining sales of refined products

    Declining oil and gas reserves

    Legal action by the Iraqi Government

    Employee unrest in Nigeria

    Opportunities

    Increasing demand from China, India

    Increasing demand for liquefied natural gas (LNG)

    Capital investments

    Biofuels initiatives

    Threats

    US and EU economic slowdown

    Environmental regulations

    Tax regulations in the US

    Increasing focus of green fuels & automobiles in the US

    Competitors

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    STRATEGIES

    GENERAL STRATEGY:

    Chevron's goal is to be No 1 in total stockholder return relative to its peers and to achieve

    a minimum 12 per cent return on capital employed while continuing to grow. Success

    requires profitable earnings-per-share growth greater than their competitors', and they are

    convinced that they have the organization and the will to succeed.

    Achieving the goal will require superior performance in four areas: operational

    excellence, cost reduction, capital stewardship and profitable growth - all driven byorganizational capability.

    1. Operational excellence: Safe, reliable, efficient operations companywide are essential

    to achieving their objectives. They are, in fact, the foundation for growth. This is Job No.

    1 for all of them day in and day out. They are committed to ensuring continued and

    sustainable improvements in their operations.

    2. Cost reduction: they will build on last year's $500 million cost-reduction effort, muchof which will continue to show rewards in the coming years. For example, they are just

    starting to reap the benefits from their new global procurement process and from their

    restructured support functions.

    3. Capital stewardship: They reinvest about $5 billion annually in their business. It's

    essential that they be wise stewards of their investors' money. They have a world-class

    project-management process that is helping them improve greatly in two areas: decision

    quality - ensuring that the right people have the right data when deciding whether a

    project should proceed; and project execution - excelling in engineering, construction and

    start-up so that they employ capital most efficiently. The start-up of Angola's deepwater

    Kuito Field - under budget and just two and a half years after discovery - was a

    remarkable achievement and is evidence of progress in this area.

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    4. Profitable growth: Delivering on operational excellence, cost reduction and capital

    stewardship will provide earnings growth. But they must do more.

    They will seek continued profitable growth in their core businesses, particularly

    international upstream. They will seek acquisitions and alliances that enhance growth. In

    February, They announced a joint venture between their chemicals business and that of

    Phillips Petroleum Company. The new $6 billion company will be a world-class

    competitor in petrochemicals. They will also capture new opportunities. Currently,

    they're growing in the power and gas business through Dynegy, in which they hold a 28

    per cent interest. They're also investing in new process technologies, including a method

    for converting natural gas to liquids.

    Their Strategic Plan translates their vision into action. It aligns and integrates their

    organization, inspires confidence, and differentiates them from the competition.

    MAJOR BUSINESS STRATEGIES:

    Their major business strategies will develop leading integrated positions in growth areas

    of the world:

    Global Upstream- grow profitably in core areas and build new legacy positions

    Global Gas- commercialize their equity gas resource base while growing a high-impact

    global gas business

    Global Downstream- improve returns and selectively grow with a focus on integrated

    value creation

    Renewable Energy - invest in renewable energy technologies and capture profitable

    positions

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    ENABLING STRATEGIES:

    Three enabling strategies apply to all parts of the company:

    1. Invest in People to achieve their strategies

    2. Leverage Technology to deliver superior performance and growth

    3. Build organizational capability ("4+1") to deliver world-class performance in

    operational excellence, cost management, capital stewardship, and profitable

    growth

    Underlying and aligned with each of their Major Business and Enabling Strategies are

    more detailed plans, tactics, and metrics targeted to guide them to success in each of the

    specific business areas where they choose to compete. These detailed plans are

    continually tested against the competition and refreshed to achieve sustained competitive

    performance.

    INNOVATION STRATEGY:

    They categorize innovation in three different ways: First, there is radical innovation.

    Radical innovation is a game changer. In product terms, it is a radical new product --

    Post-its for 3M was a radical diversion, for example. The problem is that of the hundreds,

    maybe millions, of ideas that surface in a company, how many make it to becoming an

    actual product? It is minimal.

    Second, they look for reapplied innovation. Reapplied is where an idea or a solution to a

    problem in one area actually might be radical when you bring it into a new area. You're

    not reinventing the wheel, but you're adapting something to a new area or new product.

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    There is some great stuff out in the industry where companies like Procter & Gamble set

    targets for the number of reapplied ideas that they generate. Reapplied might be bringing

    a cost-saving initiative you saw over in finance and applying it in the IT operations.

    And then there is incremental. This is the hardest one for people to understand.

    Incremental changes happen all over the place and innovations in this area are plentiful,

    but they are the least recognized. So, by having people understand that if you take your

    idea and add a couple things to it and somebody else takes your idea and improves it, that

    is actually innovative thinking.

    All three of them add up to a pipeline that gets you more of the radical [innovation] down

    the road.

    They built a space that is about 2,000 square feet where they can bring people together.

    They have six purposes for this thing:

    Collaborative thinking;

    Training on innovation;

    Experiments;

    Business engagement;

    Creative networking; and

    Coaching and mentoring.

    They use techniques from IDEO, the creative design company, on how to reconfigure

    rooms and walk people through breakthrough thinking.

    What they try to do is give people techniques they can utilize after they walk away from

    this space.

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    Process of innovation at Chevron:

    The first step is to really understand what you are working on.

    The next step is to observe: Go out and look at how the problem is affecting people and

    how they respond to it -- what the real problem is, not just what you think it might be.

    The next step is the one everyo