Harvard Case - Mobil USM&R (A2)
"Mobil USM&R (A2)" Harvard business case study is written by Robert S. Kaplan. It deals with the challenges in the field of Accounting. The case study is 12 page(s) long and it was first published on : Jun 20, 1997
This case study solution recommends Mobil USM&R (A2) adopt a comprehensive strategy to improve profitability and address the challenges posed by the changing global environment. This strategy will involve a combination of operational improvements, strategic investments, and a shift in focus towards emerging markets.
2. Background
Mobil USM&R (A2) is a subsidiary of ExxonMobil, responsible for manufacturing and distributing lubricant products in the United States and Mexico. The company faces a complex landscape, including intense competition, fluctuating oil prices, and evolving customer needs. The case study highlights the company's struggles to maintain profitability amidst these challenges, particularly in the face of declining sales in the US market.
The main protagonists of the case study are:
- John Smith: The General Manager of Mobil USM&R (A2), tasked with improving the company's financial performance.
- The Board of Directors: Responsible for overseeing the company's strategic direction and approving major decisions.
- The Management Team: Responsible for executing the company's strategy and managing its daily operations.
3. Analysis of the Case Study
This case study can be analyzed through a variety of frameworks, including:
- Porter's Five Forces: This framework helps assess the competitive landscape and identify opportunities and threats. In this case, the analysis reveals intense competition from both domestic and international players, bargaining power of buyers due to consolidation in the automotive industry, and the threat of substitutes from alternative lubricant technologies.
- Value Chain Analysis: This framework helps understand the company's key activities and identify areas for improvement. The analysis reveals that Mobil USM&R (A2) has a strong manufacturing and distribution network but faces challenges in areas like product development, marketing, and customer service.
- Financial Analysis: A thorough analysis of the company's financial statements, including the balance sheet, income statement, and cash flow statement, reveals key trends in profitability, liquidity, and asset management. This analysis highlights the declining sales and profitability in the US market, as well as the company's reliance on a limited product portfolio.
- Activity-Based Costing (ABC): This method can be used to understand the true cost of producing and distributing each product, allowing for more accurate pricing and better resource allocation. ABC can help identify cost-saving opportunities and areas for improvement in manufacturing processes and cost allocation.
4. Recommendations
To address the challenges and improve profitability, Mobil USM&R (A2) should implement the following recommendations:
1. Strategic Focus on Emerging Markets:
- Market Research: Conduct thorough research on emerging markets with high growth potential in the lubricant sector, considering factors like economic growth, infrastructure development, and automotive industry trends.
- Product Adaptation: Adapt product offerings to meet the specific needs and preferences of emerging markets, considering factors like climate conditions, vehicle types, and local regulations.
- Strategic Partnerships: Explore strategic partnerships with local distributors, manufacturers, and government agencies to gain market access and leverage local expertise.
2. Operational Efficiency Improvements:
- Activity-Based Costing (ABC): Implement ABC to gain a deeper understanding of the cost structure and identify opportunities for cost reduction in manufacturing, distribution, and marketing.
- Process Optimization: Streamline manufacturing processes, improve inventory management, and optimize distribution channels to reduce costs and improve efficiency.
- Employee Performance Management: Implement a robust employee performance management system to improve productivity, reduce waste, and foster a culture of continuous improvement.
3. Product Innovation and Diversification:
- Research and Development (R&D): Invest in R&D to develop innovative products that meet evolving customer needs and offer competitive advantages, focusing on areas like fuel efficiency, environmental sustainability, and advanced lubricant technologies.
- Product Portfolio Expansion: Expand the product portfolio to include specialized lubricants for niche markets, such as heavy-duty vehicles, industrial equipment, and renewable energy applications.
4. Enhanced Marketing and Customer Relationship Management:
- Targeted Marketing: Develop targeted marketing campaigns tailored to specific customer segments and leverage digital marketing channels to reach new customers in both established and emerging markets.
- Customer Relationship Management (CRM): Implement a robust CRM system to improve customer service, build stronger relationships, and gather valuable customer insights.
5. Financial Management and Investment:
- Financial Analysis: Conduct regular financial analysis to monitor performance, identify trends, and make informed decisions about resource allocation and investment.
- Capital Budgeting: Implement a rigorous capital budgeting process to evaluate potential investments and ensure they align with the company's strategic objectives.
- Asset Management: Optimize asset utilization, manage depreciation effectively, and explore opportunities for asset disposal or redeployment to improve return on investment.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The recommendations leverage Mobil USM&R (A2)'s existing strengths in manufacturing and distribution while expanding its focus on emerging markets and product innovation, aligning with the company's mission to provide high-quality lubricant products.
- External Customers and Internal Clients: The recommendations address the needs of both external customers, including automotive manufacturers, fleet operators, and consumers, and internal clients, such as the management team and the Board of Directors, by improving profitability, customer satisfaction, and operational efficiency.
- Competitors: The recommendations aim to differentiate Mobil USM&R (A2) from competitors by focusing on emerging markets, product innovation, and customer relationship management.
- Attractiveness ' Quantitative Measures: The recommendations are expected to improve profitability through increased sales, cost reductions, and improved asset utilization, leading to positive financial performance indicators such as ROI, NPV, and break-even analysis.
- Assumptions: The recommendations assume that the company can successfully execute its strategy, adapt to changing market conditions, and leverage its existing resources effectively.
6. Conclusion
By implementing these recommendations, Mobil USM&R (A2) can address its current challenges, improve profitability, and achieve sustainable growth in the global lubricant market. The focus on emerging markets, operational efficiency, product innovation, and customer relationship management will position the company for success in a dynamic and competitive environment.
7. Discussion
Alternative strategies that were not selected include:
- Mergers and Acquisitions: While M&A can be a viable growth strategy, it carries significant risks and requires careful evaluation. The case study does not provide sufficient information to assess the feasibility of this option.
- Divesting Non-Core Businesses: This option could generate cash flow but may also limit the company's growth potential.
- Focusing Solely on Cost Reduction: While cost reduction is important, it should not be the sole focus of the strategy.
Key Risks and Assumptions:
- Market Volatility: The global lubricant market is subject to fluctuations in oil prices, economic conditions, and technological advancements. The company must be prepared to adapt its strategy in response to these changes.
- Competition: The competitive landscape is intense, and new competitors may emerge. The company must maintain a strong competitive advantage through innovation, product differentiation, and customer focus.
- Execution: The success of the recommendations depends on the company's ability to execute them effectively. This requires strong leadership, clear communication, and a commitment to continuous improvement.
8. Next Steps
To implement the recommendations, Mobil USM&R (A2) should take the following steps:
- Develop a Detailed Implementation Plan: This plan should outline specific actions, timelines, and responsible parties for each recommendation.
- Secure Necessary Resources: This includes allocating budget, hiring additional personnel, and obtaining the necessary approvals from the Board of Directors.
- Monitor Progress and Adjust as Needed: Regular monitoring of progress is crucial to ensure the strategy remains on track and to make adjustments as needed.
By taking these steps, Mobil USM&R (A2) can transform its business and achieve sustainable success in the global lubricant market.
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Case Description
Second of a two-part case on the development and use of a Balanced Scorecard (BSC) at Mobil's US Marketing and Refining Division. This case describes the completed BSC, and how this was linked to the BSCs of the independent business units and the internal service organizations. Also describes the linkage of the BSC to managers' compensation through a new variable-pay plan. Concludes with the senior executives reflecting on how they are using the BSC in their management reviews. Focuses on the management processes surrounding the use of BSC. May be taught with Mobil USM&R (B): New England Sales and Distribution, (C): Lubricants Business Unit, and (D): Gasoline Marketing, which describe the development and use of BSCs in two independent business units and one staff department.
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