Market Model Patterns of Change (Essay Sample)

Market Model Patterns of Change
Student’s Name:
Institution:
Market Model Patterns of Change
ExxonMobil
Exxon Mobile is an American multinational gas and oil corporation and a direct descendant of Standard Oil Company of John D. Rockefeller. The company was formed following a merger of Mobil and Exxon with its headquarters in Irving, Texas. It is an affiliate to Imperial Oil, which is located in Canada. By revenue, ExxonMobil is the largest company in the world and among the largest publicly traded corporations by market capitalization. Globally, the company is ranked number one in the Forbes Global 2000 list.
The company reserves were seventy-two billion barrels with rates of production expected to last for fourteen years. Of the six oil supermajors, ExxonMobil is the largest with daily production of approximately four million. ExxonMobil employs a business model focused on attaining excellence in its daily operations, creating long-term shareholder value and generating superior cash flow. Following the consistent application of this already proven business model, the company possesses competitive advantages, which support strong results. Discussed are elements, which support the business model. The organization’s employees are committed to excellence in health, safety and the environment. Safety is the organization’s core value, and one, which shapes every day’s decisions and every level of its operations. The cornerstone of responsible operations is the commitment to safety and leads to a better result. In addition, the company expects its operations to deliver superior performance in the area of environmental protection (Gibson, 1986).
In the past, many industries in the United States were dominated by monopolies, and this was encouraged by the many barriers of entry, such government regulations and high costs of setting up business. However, the government moved to get rid of monopoly to encourage competition. This was mainly to protect consumers in the United States. Corporations were required to follow rules and regulations as stipulated under the Antitrust Act, which was passed in 1890, which banned monopolies, as well as trusts. Monopoly is an economic condition in the market where one seller/producer dominates the market. Following a lack of competition, high prices are charged. These industries are characterized of high barriers of entry because of patents, technology, overheads, government regulations, capital intensive nature of technology, and distributions (Yeomans, 2004).
In the United States, the oil industry dates back to early ninetieth century with oil first being discovered in Pennsylvania. Currently ExxonMobil is the dominating company, which produces oil, refines, transports, and market. It remains the largest oil refiner with the United States with monopolistic dominance. Over the years, the petroleum industry, in the United States, is characterized by new entries (both local and foreign), acquisitions, mergers, and split-offs, as well as break ups between companies. The multiple corporations have now changed market structure from monopolistic to perfect competition.
Current Status of the Industry
Perfect competition
Similar products in the Market
Normal profits are earned
Absence of barriers to entry or exit
Abundant market knowledge of products and price in the market
Basic Short-Run and Long-Run Behaviors of the Model in the Oil Industry
Short-run behavior of ExxonMobil
In the short run, since the demand for products is low, new entrants must decide they quantity they wish to supply in the market. Because of low demand forces, the company is necessitated to price its products below the current market price. At first instance, costs of production are usually high, and the company should make use of shut-down rule-when revenue falls below the overall costs. Because the prices are lower than those of the competitors, it takes longer to break even. Market share apparently are low during start-up periods. Because of set-up costs, research costs, staffing and marketing expenses of the new product, the cost of production is usually high (Wells, 2004).
Long-run behavior of ExxonMobil
At this moment, the company has already acquired market knowledge and understands the quantity to produce and change for their product. The market demand for the company’s products is high because of increased consumer awareness of the company’s existence and its operations. Costs of production tend to be lower because the company benefits from economies of scale and cost cutting measure. As far as economies of scale is concerned, there is a decrease in the cost of producing a single unit because of the increased level of production. Profit tends to increase because of the increasing product’s prices, as well as a decrease in the cost of production, and thus, the company breaks even. The cost of marketing reduces because many consumers are now aware of the company and the products it offers (Yeomans, 2004).
Major Factors Affecting the Degree of Competitiveness in the Oil Industry
The degree of competitiveness is affected by a...