STRATEGY AND GEOPOLITICS
Geopolitics denotes to the process of studying the impacts of the Earth’s geography (physical and human) on international relations and politics. Geopolitics if often used to refer to the relations that exist between countries. Moreover, it can be used to offer further explanations on the relationships that occur amid sub-national geopolitics entities, for instance, federated states which constitute confederation and federation system. Geopolitics can have a significant adverse effect on the commodities; for instance, the geopolitics played by the Organization of Petroleum Exporting (OPEC) led to a rise in the price of oil in the 1970s. However, the role of the OPEC was affected significantly by the emergence of competitors. This led to the decline of price-fixing by the organization. Hence, the price of oil is based on the demand (the higher the demand, the higher the price and the lower the demand, the lower the price). The decline on the effectiveness of the OPEC organization had a significant adverse effect on the Exxon Mobil due to the decline of the oil reserve. The report is going to offer a detailed analysis of the oil-geopolitics on the Exxon Mobil company.
Oil is a significant source of energy across the globe; it constitutes sixty-two percent (62%) of the total energy used across the world. It is a vital macro-economic variable and tends to have a significant effect on the economic growth of the countries in multiple manners. An increase in the price of oil tends to cause an increase in the inflation rate; moreover, it hurts the private consumption and disposable household income. The case study suggested that an increase in the global demand for oil above supply leads to a rise in oil prices. The higher control of oil-supply by the OPEC lead to the emergence of the oil shocks during the 1973 and 1979-1980. The OPEC organization controlled over 55% of the oil supply in the 1970s, this, in turn, made them raise prices of oil while minimizing the production to twenty-five percent (25%) and through the imposition of the tariffs and quotas.
Another oil crisis due to geopolitics occurred in 1979 during the Iranian revolution after Iran cut the production of oil. Additionally, the Iran-Iraq war led to a shock in oil supply as well as oil prices during the 1980s. This, in turn, minimized the oil exportation by the Iranians; thus, it led to a reduction in oil supply throughout the world. Consequently leads to an increase in oil prices. During the 20th century, the global oil industry had been dominated by seven companies commonly regarded as the seven sisters; Mobil, Texaco, Exxon, Gulf, BP and Shell through extracting oil from various countries throughout the world. Exxon was the biggest amongst the seven companies established through a merger amid Mobil and Exxon in 1999.
Contrary to the commercial oil companies, the national oil companies made decisions founded on the various criteria. Moreover, commercial oil companies concentrate on profit maximization; however, national oil firms concentrate more on political considerations. The CEO of the Exon company (Lee Raymond) managed to increase the performance of the organization. However, he faced various challenges due to the increase in the competition in the field of oil production. Hence, he could not work anymore for the company.
Rex Tillerson implemented more superior strategies to maintain the success of the Exxon company; he embraced a diplomatic approach and had a vast experience to deal with foreign governments. He indulged in various negotiations with the foreign governments; for instance, he engaged in a successful deal with the Russian government to escalate the gas and oil fields from Sakhalin Island. Hence, it is evident from the report that having plenty of negotiations skills helps in enhancing the performance of the oil companies. This can be deduced from the Rex Tillerson case, who was a successful negotiator. His negotiation skills enabled the company to gain access to the world’s fourth-largest oil sectors in the UAE (United Arab Emirates).
To sum up, the case study postulates the various effects that emanate from the geopolitics. Geopolitics tend to have a significant positive impact on industrial performance. For instance, Rex Tillerson managed to enhance the successfulness of the Exxon company since he was an excellent negotiator. He managed to form alliances with the global government and developed successful negotiations. This, in turn, led to the good performance of the Exxon company.
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