VALUE CREATION AND COMPETITIVE ADVANTAGE SUSTENANCE
Environmental Scan
Chelsie Kelly
STR 581
Professor Wynne
5/8/17
VALUE CREATION AND COMPETITIVE ADVANTAGE SUSTENANCE
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Introduction
Every organization aims at creating value for its products as it helps in the selling of
goods and services and hence profitability. In the creation of value by organization’s customers
by increasing stock prices, the availability of future capital investments for significant operations
funding. Value is created in cases where an organization earns a return on its capital which
exceeds all the expenses incurred by the business. Value creation can also be defined by
intangible profit players like the availability of innovation, ideas wrought by employees as well
as company brands available.
The initial step in the achievement of value is striving to understand all the factors that
contribute to value creation within the organization or the marketplace. A proper understanding
of the factors that led to the creation of value assists managers to focus capital on the
opportunities that are highly profitable and rewarding to the organization (Pederson, 2011).
Competitive advantage allows an organization to compete with all its competitors and
remain at the top. The attributes that contribute to competitive advantage include the availability
of the necessary resources, the presence of highly skilled labor, the geographic location of the
organization and in some instances the access to new technologies. Therefore competitive
advantage refers to the leverage possessed by an organization over its chief competitors.
Total Company Overview
The petroleum industry is composed of different firms which function independently in the
provision of oil products and services to customers. Each of the oil companies has independent
managerial staffs that make decisions on behalf of the firm different from the other companies.
Total Company is one of the enterprises in the petroleum industries. The company is a
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multinational French-based Oil and Gas Company which engage in the distribution of oil and gas
products across the world (Pederson, 2011).
For decades the Total Company has been dealing with different services that have made it
fulfill its goals and achieve its set objectives. The company has laid down measures that ensure
that its products and services are accessible to all customers around the globe in the most
fulfilling and efficient means. There are so many strength and opportunities that the company
can exploit to achieve more success as well as weaknesses and Threats it has to work on to
ensure it remains to stand out among the other businesses in the industry.
Total Company Value and Competitive Advantage
The Total company has the potential of creating value for its customers to ensure that they
are always satisfied by the products and services the company offers them.
Through the
observation of the environment that surrounds the company, it can be seen that it has a potential
of extending the availability of products services. The company can create value by ensuring
that its products and services are made available throughout the world in a convenient and
efficient way. This is possible through the use of suppliers and forming mergers with other
companies that can be helpful in the distribution process. The company is known in most
countries because of its products and should, therefore, form a basis of retaining customer’s
loyalty and satisfaction.
The company is among the six companies that are considered as the major oil and gas
distributors. With this fact in mind, it can be seen that the company face stiff competition from
the other businesses and therefore it has the burden of ensuring that it remains to be the best
among them all to sustain its competitive advantage.
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Competitive advantage can be gained by the company through the differentiation of its
products to ensure that it offers its products and services in the state preferred by the customers.
Differentiating products makes them look attractive and hence to stand out from competitor’s
products, the company has the opportunity of creating differentiated products by using its
innovative staff and employees, carrying out research and then making appropriate developments
to its products. The benefit of differentiated products is that customers can pay more when they
see products and services as being different from those offered by other firms
It should also strive to gain the advantage of cost leadership by offering its products and
services at lower prices in comparison to the competitors. The Total Company have a wellestablished market is in a position to distribute its products at a lower price then it will have the
advantage of retaining customers. Adoption of methods of distribution which are less expensive
will ultimately have the result of high-profit realization and maintenance of competitive
advantage.
The company can also adopt the focus strategy where it aims at a particular target; the
target may be some customer needs to be seen in the environmental scan. Through the narrowing
down of the market into segments, the company will be in better positioned to meet all the needs
the customers have in an efficient manner
Total companies have recently made an announcement that it has invested € 30 Million to
take advantage of the UK shale gas industry. It is considered as one of the companies that make
up the Big Oil Group; if it utilizes the UK shale gas investment appropriately, it will benefit a lot.
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Total Oil Company External Environment
External environment refers to the factors that are outside the scope of business yet they
affect its ability to function either positively or negatively. Some of the factors can be altered by
the organization while others are not in the control of the business at all. Some of the examples
of the external Environment factors include customers, the government, the economy,
competition and public opinion.
Total Company faces stiff competition from the other firms in the petroleum industry
which pose a threat to its survival and profitability. Some of the main competitors are the six
members of the big oil groups which are Anglo- Iranian Oil Company popularly known as BP,
Gulf Oil which was the later part of Chevron, Standard Oil Company of California which is the
today's Chevron and the Standard Oil Company of New York Esso (Exxon).The Company has
an excellent public reputation which makes its customers remain loyal to them, and therefore it
should be maintained.
Total Company General Environment
Total Company has been operating for several decades and has remained to make profits.
It has a well-established corporate social responsibility that ensures that its operations are in the
most appropriate manner. The company observes ethical measures as well as codes to make sure
that its customers, stakeholders, and affiliates are satisfied with all its services and products. It
has been able to leverage over its competitors through the adoption of different strategies
(Pederson, 2011).
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Total Industry Operating Environment
The Total company management comprises of a Board of Directors and has a group of
employees. The employees make sure that all the operations of the organization are carried out
appropriately. It has its headquarters in France and hundreds of establishments in other countries
around the world.
References
VALUE CREATION AND COMPETITIVE ADVANTAGE SUSTENANCE
Cheong, S. F. (n.d.). Implementing total quality management in Oil Distribution company.
doi:10.5353/th_b3196855
In Pederson, J. P. (2011). International directory of company histories: Volume 118. Detroit,
MI: St. James Press.
Switzerland: Trans Tech Publications.
The process of strategic planning. (n.d.). Process-based Strategic Planning, 45-64.
doi:10.1007/978-3-540-68583-8_5
Total Global Homepage - Oil, Natural Gas, and Solar Energy Company | total.com. (n.d.).
Retrieved from http://www.total.com/en
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Running head: INTERNAL ENVIRONMENTAL ANALYSIS
Internal Environmental Analysis
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INTERNAL ENVIRONMENTAL ANALYSIS
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Total's Internal Environment
The company has a number of internal aspects that helps it to operate efficiently. The
internal environment fosters optimal productivity as well as utilization of capacity (Total, 2017).
The company's internal environment usually has an effect on its external operations. It means
that if the company does not emphasize on a highly efficient internal environment, then it is hard
for it to realize its overall business objective.
To begin with, Total believes in corporate governance. It has in place a board of directors
and four management committees. The board of directors' role is to come up with strategic
planning and oversee the implementation of various strategies that are in line with the company's
vision. After the strategic planning, the company's management committee assists the BOD in
implementing the various strategies. The four committees are audit, ethics and governance,
strategy and compensation. In general management, the company has an executive committee
and group performance committee. The two management committees have several duties
including overseeing the business and financial performance.
Total has in place an ethics policy that provides guidance on the employees' behavior.
The company operates internationally where it faces complex, diverse, sociocultural and
economic environments (Total, 2017). It is against this backdrop that the company should have
in place an ethics policy that addresses the needs of all stakeholders. Additionally, the company
applies its ethics policy to avert security, health, safety, ethical and environmental risks that are
associated with globalization. Subsequently, the company has in place three values:
responsibility, respect and exemplary behavior. The company applies three guiding principles
that help it to meet the three values. The first principle is ensuring that the company meets the
highest standards of safety, health, security and environment. The second principle entails having
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stringent integrity standards in place. Lastly, the company seeks to respect human rights, and it
has made this principle to be one of its topmost priority issues.
In addition to the organizational structure and ethics policy, Total adheres to three
commitments. The first commitment entails the production of energy that contributes to social
and economic development (Total, 2017). This commitment helps the company to deliver energy
that safe, available and more affordable to the ever growing population. The second commitment
is to foster integration of climate in the company's strategies. Given that the company has an
interest in fossil fuels that are known as pollutants, it endeavors to lower the carbon levels of its
products through coming up with a viable mix. The company also pursues energy efficiency
through producing energy that meets its intended objectives without wastage. The last
commitment that the company upholds is to reinvent customer relationship. The company
identifies that products and services have become closer to consumers, digital and more
responsible. Subsequently, the company seeks to remain relevant to its customers.
Total's Important Strengths and Weaknesses
One of the most important strength that the company has is expertise that falls into three
categories: explore and produce, transform and develop, and ship and market. Under explore and
produce category, the company has a mission to produce oil and gas that can sustain the needs of
the world (Total, 2017). It can manage to operate deep shore and LNG expertise into use to
produce oil and gas. The company also has an efficient project management expertise that has a
basis on key success factors of innovation, operational excellence, and it adheres to budgetary
allocations and timeliness. Total believes in sustainable and shared development, and it always
seeks to limit the impact of its industrial operations. The company also produces solar power,
where it has the cutting edge technology expertise. It liaises with SunPower affiliate to produce
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high-quality solar panels. Total has invested in solar value chain through producing cells,
designing solar plants, and installing solar panels in residential homes. Lastly, Total has expertise
in Bioenergy, which is a renewable source of energy. The company makes bio-lubricants,
biofuels, and bioplastics. It also produces biomass conversion pathways, and it also seeks to get
an environmental and social license in every project that it handles.
Under transform and develop category, the company has the expertise to refine oil and
come up with petrochemical products. This expertise seeks to empower the company to meet
global energy needs (Total, 2017). In its activities, the company seeks to meet operational
excellence through pursuing safety and energy efficiency, among other values. Lastly, the
company seeks to form lasting partnerships and become a responsible industrial player. The
company also has the expertise on polymers development and marketing. Polymers are used for
several purposes including making industrial product packaging materials and construction
materials. Lastly, the company has the expertise to make specialty chemicals. Under ship and
market category, Total has the expertise to in trading and shipping. It also has expertise products
that are used mostly in the transportation industry.
Total is a publicly traded company, and it prides in having investors. It means that the
company has addressed its capital needs efficiently. It uses dividends and shares as its rewarding
system on its investors. The company also identifies its employees as one of its strengths.
Currently, it has 98,000 employees, and the number represents 150 nationalities and 500
professions (Total, 2017). The other strength entails an integrated business model that enables
the company to operate efficiently. The company has the ability to explore, produce, process and
market its oil, gas and solar products. This is an integrated business model that emphasizes on
covering the entire value chain.
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On weaknesses, the company faces several challenges, but it has not conclusively
addressed them. The company faces a challenge in ensuring people's safety and security, climate
change, and integration with the local community (Total, 2017). However, Total has made
several commitments that seek to reduce the effects of the challenges that it faces.
The Most Important Internal Environmental Factors in the General, Industry, and
External Analysis
In general, the most important internal environmental factors include organizational
structure, expertise, and resources. It takes a company to have a strong managerial team that can
oversee the entity's operations efficiently. The entity should also have the expertise to carry out
the various processes that its operations feature. The processes ranging from production to
marketing should be savvy enough for the company to meet its social and economic objectives.
In the industry, the most important internal environmental factor is the business model. While it
is possible to produce piecemeal and pass a product to another company that exists in eth value
chain, the adoption of an integrated business model ensures that the company meets the vision
that it has for its customers. In return, the customers make such a company their preferred
choice. Lastly, the internal environmental factor that affects the external analysis includes a
commitment to environmental preservation and societal well-being. Elements such as ethics play
a significant role in ensuring that an entity performs well in its external environment.
Competitor Analysis
According to Cunningham (2015), Total ranked seven among ten biggest oil companies. The
leading company is China's Sinopec oil company that is valued at $455.06 billion. China's CNPC
comes second with a value of $432 billion, and the third one is Royal Dutch Shell with $422
billion. The fourth one is ExxonMobil with $394 billion while the fifth one is Saudi Aramco with
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$378 billion. The sixth one is BP with a value of $358.7 billion, and Total SA takes the seventh
position with a value of $260 billion. Kuwait Petroleum Corp, Chevron Corp, and Russian
Lukoil take the eighth, ninth and tenth positions with a value of $252 billion, $192 billion, $144
billion respectively.
Structure of the Organization and Its Influence on its Performance
Total's organizational structure is made up of the board of directors and four management
committees. The board of directors' role is to come up with strategic planning and oversee the
implementation of various strategies that are in line with the company's vision. After the strategic
planning, the company's management committee assists the BOD in implementing the various
strategies. The four committees are audit, ethics and governance, strategy and compensation. In
general management, the company has an executive committee and group performance
committee. The two management committees have several duties including overseeing the
business and financial performance. This organizational structure helps the company to operate
internationally effectively.
Total's Competitive Position and the Possibilities This Provides
Total ranks seventh among the world's largest oil producing companies. The rating has a
basis on the total value of companies, and it also represents the production capacity of the said
oil companies. It means that the production capacity of Total cannot outwit the one that the
leading company has. Subsequently, Total has to seek more resources to rise up the ranks. More
resources translate to a higher production capacity.
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References
Cunningham, N., (2015). Big Oil: Which Are The Top 10 Biggest Oil Companies? Oil Price.
Web. Retrieved from http://oilprice.com/Energy/Crude-Oil/Big-Oil-Which-Are-The-Top-10Biggest-Oil-Companies.html.
Total, (2017). Global Homepage - Oil, Natural Gas, and Solar Energy Company. Web.
Retrieved from http://www.total.com/en.
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