Total S.A Business strategy

Total S.A Business strategy

Total S.A Business strategy

Total S.A. is a French oil company and one of the six "Supermajor" oil companies in the world. Its businesses cover the entire oil and gas chain, from crude oil and natural gas exploration and production to power generation, transportation, refining, petroleum product marketing, and international crude oil and product trading. Total is also a large-scale chemicals manufacturer.

PEST Analysis

Total's French origins give the company an advantage over many western oil majors, as it has larger reserve and production bases in young, high-yield regions like Africa and the Middle East; Total is even one of the few companies that has operations in Iran. These regions, however, are associated with high risk because of their political violence and associations with terrorists. For the most part, its familiarity with regional cultures and the dependence of impoverished nations on international capital has allowed Total to avoid problems in these regions. Total's lack of experience across the pond, however, has led to problems in Latin America, like the nationalization of some of the company's Venezuelan assets. The downstream portion of the oil and gas industry, involving chemicals and refining, is a traditionally volatile sector as margins can shift in two directions: changing input costs (oil prices) and changing product prices. For this reason, Total had been focusing much of its capital expenditures on upstream development; in a price environment where a barrel of oil traded at over $100, the margins for this sector were at historical highs. These high oil prices, however, have combined with worries about climate change to threaten significant portions of Total's business. For example, costs for the company's Canadian oil sands operations will skyrocket if that country's proposed greenhouse gas emissions mandates are passed, and the oil sands projects are far less profitable in an environment where oil prices are soft. Since hitting a barrel of oil hit record highs of over $140 dollars during the summer of 2008 there has been a significant pull back in the price, bottoming out at roughly $40 a barrel during the depths of the recession, and by the beginning of 2010 had returned to trade between a range of $70-80, but still well off its highs. Economic and environmental worries are also driving the development of a booming alternative energy sector, and Total is one of the few oil majors that has jumped on the bandwagon to use and develop clean energy alternatives like wind, solar, and tidal. Total's competitors are the other international oil majors, including Exxon Mobil, ConocoPhillips, BP, Chevron, Royal Dutch Shell, and Eni S.p.A.. Another aspect of Total is its diversification. The company produces fertilizers and petrochemicals and makes specialty chemicals for a variety of markets. Total is also involved in performance polymers and products that are made from petroleum. The fact that Total pumps its own crude for these purposes help cuts costs while providing revenue streams.Energy demand will increase by almost 60 percent with alternative energy ...