7 million on community environmental projects. In my opinion, these are unnecessary costs that can be eliminated in the future with an adequate financing for research and development in environmental protection and pollution reduction.
The marketing segment also needs an increased attention in 2006. For example, on the gasoline market, EXXON brands such as Mobil or Esso are already well-known throughout the world. Nevertheless, the specificity of the industry brings about the necessity to constantly promote these brands. How is an Esso gas station different from a Shell or Texaco one? EXXON needs to think out marketing campaigns deemed to bring out the main competitive advantages over other companies on the market: excellent service, better quality gasoline (going hand in hand with the spending in research and development in this segment, previously discussed), qualified personnel. These assets need to be constantly in the attention of the consumer.
Additionally, we have the smaller EXXON brands to consider. On the Run, the franchise system, or Speedpass are smaller brands in the EXXON portfolio on which increased marketing spending needs to be considered.
If properly attended to, both in terms of time and financial resources, these brands can bring in the future a more consistent contribution to overall company revenues.
Finally, there are general and administrative expenses to be referred to. The level of revenues, as well as the company's profit, is sufficiently high so as not to bring any additional issues related to unexpected general or administrative expenses. We are to expect general and administrative expenses to be more or less the same as in 2005, with the exception of human resources related expenses. This is because I am proposing an Incentive Bonus Plan (40%) to be given to the management staff for attaining objectives proposed in the company's strategy and budget.
In my opinion and this was previously mentioned at some of the points in this evaluation, EXXON should already embark on a transition phase. This will imply repositioning some of its activities, paying more attention to others that only generate minimal revenues nowadays, but could be an important source of income in the future etc. This is a very delicate process, because it means relocating and training some of the
In order to be able to cover this strategy, the management team will have to be keen in respecting the most important point in a strategy aimed at reaching this diversification objective.
The incentive plan and levels of reward should be determined by the performances reached in these developing industries. As such, a growth in the income generated by one of the growing sectors should receive a certain financial reward. Periodic evaluations will also determine whether the tactics applied by the managerial team are adequate.
The incentive project will refer to an essential part of human resource management: MOTIVATION. As previously pointed out, the important of the transformation process is an explanation of an increase in incentive for the teaming coordinating and, in the end, bearing the entire responsibility for the project's failure or success. In this sense, given the excellent financial figures realized by the management team in 2005, I suggest that the 2006 budget includes under the general and administrative expenses this incentive bonus plan.
As you can see from this memo, the 2006 budget for EXXON is thought out so as to profit from the operational areas where the company is already relying on a huge success (crude oil, recognized brands), while planning to develop and sustaining secondary areas of activity where it can become highly successful in time (smaller brands, the chemical industry, gasoline refining). In my opinion, this kind of strategy will provide a balanced approach to long-term development.
Bibliography
1. Exxon Mobil to spend $571m upgrading refineries. Reuters. October 2005. On the Internet at http://www.financialexpress.com/fe_full_story.php?content_id=105423
2. Blum, Justin. Exxon Mobil's first quarter earnings shoot up. Mail Tribune. April 2005. On the Internet at http://www.mailtribune.com/archive/2005/0429/biz/stories/04biz.htm
http://www.exxonmobil.com/corporate
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