Pestle Analysis of Chevron Corp

Table of Contents

INTRODUCTION 3

PESTLE ANALYSIS 4

General Overview 4

P- Political issues 5

E- Economical issues 6

S- Social issues 7

T- Technological issues 8

L- legal issues 9

E- Environmental issues 10

CONCLUSION 12

RECOMMENDATION(S) 14

REFERENCES: 16

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INTRODUCTION

This report seeks to provide a consideration of an engineering company's pursuit of its corporate goals while navigating the Political, Economical, Social, Technological, Legal and Environmental dynamics surrounding the industry it operates in. The chevron corporation has been selected for this analysis as it represents a truly global engineering company with its operations, workforce and offices spanning many diverse cities and regions of the world. In evaluating the company's external stakeholders, the PESTLE analysis will be used, however, focus will be more on company operations in the Nigeria Mid Africa Strategic Business Unit.

Chevron Corporation is an American publicly quoted oil and gas corporation with its headquarters in San Ramon, California but active in more than 180 countries round the world through various subsidiaries and joint venture partnerships. It is engaged in every aspect of the oil, gas, and geothermal energy industries, including exploration and production; refining, marketing and transport; chemicals manufacturing and sales; and power generation. The company's page describes its operations as involving virtually every facet of the energy industry. It 'explores for, produces and transports crude oil and natural gas; refines, markets and distributes transportation fuels and lubricants; manufactures and sells petrochemical products; generates power and produces geothermal energy; provides renewable energy and energy efficiency solutions; and develops the energy resources of the future, including research into advanced biofuels'.(1)

Chevron is one of the world's six "supermajor" (3) oil companies; as of 2013, it ranked eleventh in the Fortune Global 500 list of the world's largest companies (2) with an average net production of 2.61 million barrels of oil equivalent per day in 2012- about 75% of this production occurred outside the United States (1). The company's global workforce consists of approximately 61,900 'highly skilled' employees.

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PESTLE ANALYSIS

General Overview

Prices of oil and gas skyrocketed a while back, a trend which reversed in the second half of 2008. The prevailing global recession has cut down oil demand and caused prices to plunge. Worldwide, oil companies are continually pressured to replace depleting oil reserves, which has become harder than ever to accomplish. Climate change and environmental concerns are further constraining companies' profitability in the industry. Consequently, oil companies' stocks have seen corresponding declines in recent years.

David Needle (2009) asserts that businesses have an environmental context. In the course of its normal operations, like other companies, the chevron corporation has to interact with different interest groups designated broadly as stakeholders who influence and are influenced by the company's corporate decisions. This report will attempt to analyse chevron external environment and how it may affect the company. The company's main stakeholders include:

A. Owners and Shareholders

B. Banks and Creditors

C. Partners and Suppliers

D. Buyers and customerslabor Unions

E. Competitors

F. Governments

G. Media

H. Professional Associations

I. NGOs/ Civil Societies

J. Operating communities

The company's trade in Oil and Gas is indeed a sensitive topic and one of increasing importance to governments and nations. For some nations, their Oil reserves contribute the most part to their Gross Domestic Product (GDP) and without their oil exports, their foreign reserves would suffer significantly with added ripple effect on their economy and thence the perception by its people of the prevailing ruling regime and their competence at governance.

Freeman (1984) presents the stakeholder model as a map in which the firm is the hub of a wheel and stakeholders are at the ends of spokes around the wheel. This view has become the convention from which stakeholder theory has developed. In light of this, stakeholder theory views the firm as an organizational entity through which numerous and diverse participants accomplish multiple, and not always entirely congruent, purposes

P- Political issues

Political risks are a strategic concern for corporations especially those operating internationally. For Oil and Gas corporations, this risk is further amplified by the sensitivity of the focus of their trade, thus governments are the major stakeholders of note.

Insecurities in government policies and legislation often significantly elevate political and project risks and thus make capital projects less favourable to execute. Governments have both high interest and influence in the company's operations and are thus best treated as ‘Allies'.

In pursuant of its primary goal of increasing returns to its shareholders, Chevron recognizes that governments are major stakeholders in its continued viability as they dictate the laws and regulations of operating in their various countries. Through its subsidiaries and representatives, chevron "exercises its fundamental right and responsibility to participate in the political process", by "lobbying ethically, constructively and in a bipartisan manner through direct communication with public officials" (6). The organization emphasizes that it is "committed to adhering to the highest standards of ethics and transparency in engaging in any political activities and to complying with the letter and spirit of all laws and regulations governing political contributions and lobbying. As a matter of practice, Chevron makes only limited contributions outside the United States". The question of ethics in securing and maintaining assets in foreign countries has been more in the lime light since the Haliburton bribery scandal thus offering more incentives for companies to stay ethical.

Current events typically end up becoming political as the political institution has established channels and machineries in place by which it exerts pressure on businesses to institute change. For example, global warming and the eventual directive from governments to put an end to flaring. Through ongoing engagements, the company through its various subsidiaries constantly involves government representatives in discussions seeking to make the directive more fiscally favorable to them (7). Delays in the passage of industry specific legislation being deliberated has been sighted as a deterrent to the company committing more funds to closing out these directives.

Trade groups, Unions and pressure groups are also major stakeholders politically as their activities can impact negatively on the company. In 2008, over allegations of anti-labour practices, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) called its members out to a prolonged industrial action to compel the corporation to sack the Managing Director of the Nigeria operations r. Fred Nelson. (8)

National Content development and Local Content Inclusion in the company's value chain continues to be a sensitive issue across board with local governments demanding that more work be retained and reserved for its local pool of professionals while the company strives to balance this with the complexity of its scheduled capital projects.

Present company direction in working with local regulatory bodies to chart policies for the industry in local content development is a good way forward with multiple positive ripple effects (9)

E- Economical issues

The company's primary interest as a going concern is to return profit to its owners. This mandate is at the core of all of the organization's dealings. It is the desire to secure its economic advantage that acts as the biggest driver to invest in its operating environment, its people and even to continually engage governments and their agents via numerous lobbyist fronts.

Often, political factors spill over into economic factors. For example, tax regimes and rates are set by politicians. (14)Crude oil taxes in Nigeria for example are as high as 85% while for gas is as low as 5%. This does not constitute an obvious advantage or not as each case must be considered on its own merits. The company has had to divest and sell of its shares in some oil blocks which it