Local Global Relations Research Paper

Total Length: 1160 words ( 4 double-spaced pages)

Total Sources: 4

Page 1 of 4

Exxon Corporation is a multi-national American oil and gas corporation. It has its roots in the John D. Rockefeller's Standard Oil Company established in 1870. In November 30, 1999, Exxon and Mobil merged and became ExxonMobil. ExxonMobil keeps its headquarters in Irving, Texas. From Rockefeller to ExxonMobil, the company has developed and chosen vertical integration (the combination in one company of two or more stages of production normally operated by separate companies (450)

) across the entire supply chain including upstream and downstream directions to encourage and facilitate exchange of information. Constant and effective communication aids in improving sales strategy, promote efficiency, and minimize costs on a local, regional, and global scale. Although, based on the events of the Baton Rouge location, ExxonMobil does not seem to realize the importance of communication on all scales.

The first scale analyze is the global scale. The industry is characterized by globalization of commodity market as well as global scope. International demand for quality and affordable prices drive the supply chain and secondary unit operations. ExxonMobil tries to compete within this industry by offering vertically integrated function with emphasis on exploration and production through refining, marketing, and retail sales. Regionally speaking, the Baton Rouge complex or the ExxonMobil complex, contains a "502,000 barrel-per-day refinery and a chemical plant next to the Mississippi River. The refinery is the second largest in the nation, following the company's Baytown, Texas operation."

It provides a large amount of the products the company ships around the globe.

The way the refinery is structured is through direction from the corporate office, as they negotiate long-term and short-term crude supply contracts.The product supply and distribution department is responsible for sales of crude oil products among other products such as feedstock and this in turn is distributed into a global network of manufacturing plants, transportation systems, etc. Examples of high-value products the Exxonmobil sells are lubricants which are sold to millions of customers worldwide. The Baton Rouge complex of Exxonmobil, among other oil companies, have long been innovative in developing techniques to leverage their supply chain infrastructures, but fail to carry concern over other issues.

They achieve successful development techniques through the use of carefully constructed and scheduled exchanges and meetings with suppliers to promote and drive efficiency that focuses on reduction of costs in order to improve process cycle time along the supply chain.

In order for a company like Exxon Mobil to compete not just on a national scale, but a global scale, they must implement management strategies to handle several factors. These factors may include political, economic, social, technological, and environmental.
Within the Baton Rouge complex, evidence shows interconnections from the local, regional, and global scale are off, specifically on the local scale.

Referencing back to the introduction, the upstream sector shares characteristics of oligopolistic tendencies. This means without the competition from a high amount of sellers and a need from buyers for what is regarded as an "essential" product, companies like ExxonMobil have more control then a company facing more competition. With few alternatives to oil and gas energy, high barriers to entry, low supplier bargaining power; all these factors contribute to high prices and strong control over pricing as explained by Meyer (2004), on page 2 of his report.

Additionally, with the merger by ExxonMobil, their influence and power within the industry grew.

The downstream sector is similar, but different. Transit duties or taxes breed significant issues during pipeline distribution and marketing playing a direct link to pricing. Transit duties are a type of duty levied on commodities originating from one country which then crosses to another, and are consigned to a third. Transit duties are then levied by the country where the products are sold/passed. As SCRC states: "Such duties are no longer important instruments of commercial policy, but, during the mercantilist period (17th and 18th centuries) and even up to the middle of the 19th century in some countries, they played a role in directing trade and controlling certain of its routes."

The most immediate and direct effect from transit duties is reduction in the amount of commodities traded internationally including price and cost increases to the importing country. These kinds of interactions in a global market fuel profits at the same time drive costs for consumers.

Although oil and gas companies have a great deal of control and power in relation to their products, companies like ExxonMobil can easily plummet without development of new technologies. Transportation technology is crucial for the economies of scale and margin in relation to the oil industry. Economies of scale are the cost advantages that enterprises gain through size, throughput, or scale of operation, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output.

Typically the relation between increasing scale and operational efficiency leads to lower variable cost. A margin is a set of constraints conceptualized as a border and acts as an indicator for companies. When oil prices rise and stay high, the absence of substitutes that might have offered competition, highly globalized supply chain, low buyer power, and barriers that make it difficult….....

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