TOTAL S.A. Savino Bartolomeo Paula Biste Mathieu Picca Lucas Pilleri Raffaele Triggiano
Nov 16, 2014
TOTAL S.A.
Savino Bartolomeo
Paula Biste
Mathieu Picca
Lucas Pilleri
Raffaele Triggiano
AGENDA
COMPANY PROFILE
BUSINESS MODEL NALYSIS Value preposition
Key activity
SBU
SEGMENTATION
INTERNAL ANALYSIS Resourced Based view
ESTERNAL ANALYSIS KSF Analysis Competitive Analysis Attractiveness McKinsey
SWOT ANALYSIS
STRATEGY
ORGANIZATION
COMPANY PROFILE TOTAL is one of the leading integrated oil and gas companies in the world. The company is engaged in all aspects of the petroleum industry, including upstream and downstream operations.
TOTAL is also active in the chemicals, coal mining, and power generation businesses.
Total at a glance:
Fifth largest publicly-traded integrated international oil and gas company in the world
96 104 employees.
Operations in more than 130 countries
Exploration and production operations in more than 40 countries.
Producer of oil and gas in 30 countries.
2011 sales: €184.6 billion.
BUSINESS MODEL ANALYSIS
BUSINESS MODEL
Value proposition Enable as many people as possible to access energy in a world of constantly growing demand
BUSINESS MODEL
Key Activities
Upstream
Exploration and production activities in more than 40 countries
Production of oil and gas in 30 countries.
Production: 2.34 million barrels of oil equivalent per day.
Proved reserves: 11.4 billion barrels of oil equivalent as of December 31, 2011 (2).
Refine & Chemicals
Marketing & Services
Key Activities
Downstream
No. 1 Western European Refiner-Marketer and No. 1 Marketer in Africa.
One of the leading traders of crude oil and refined products worldwide
Refining capacity: approximately 2.1 million barrels per day.
Retail network: nearly 14,819 service stations.
Sales of petroleum products: approximately 3.8 million barrels per day.
Brands: TOTAL, Elf, Elan, AS 24
BUSINESS MODEL
Key Activities
Chemicals
Total is one of the world’s largest integrated chemical producers and a leader in each of its markets - Petrochemicals and Fertilizers, Specialties
BUSINESS MODEL
BUSINESS MODEL
Summary
Vertical Integration
All activities fully integrated, advantage of sinergy effects
Total controls all stages of the value chain from exploration till the delivering of the product to the customer
BUSINESS MODEL
SBU
Upstream
Downstream
Chemical
SEGMENTATION
Oil & Gas
• Exploration, production and refining
Green energies
• R&D
• Promotion
Chemicals
• Oil and gas derivates
• Fertilizers
• Resins
Supply & Marketing
• Sales of refined products
• Retail
INTERNAL ANALYSIS
RESOURCE BASED VIEW
Tangible
•Infrastructure (off-shore platform, pipelines, equipment)
•Means of transport
•High end technology
•Distribution p.o.s
intangible
•Perforation agreements
•100 year of experience
•Global mindset
•CSR values
human
•Local employees
•Trading network
•Engineering expertise
•Public relation policy
Company know how
•Exploration; explotation
•R&D development
Org. routine
•Logistic process
•Local recruitment
RESOUCES
COMPETENCES
EXTERNAL ANALYSIS
KSF - UPSTREAM
KSF – DOWNSTREAM
KSF – CHEMICAL
ATTRACTIVENESS
Total is involving in project in order to develop biofuels in partnership with the leading companies in this sector
Expanded production of solar photovoltaic power
Investing in Renewable Energies
COMPETITION ANALYSIS: WEIGHT AND PERFORMANCE
Net results 2011
Revenues 2011
35 000
30 000
25 000
20 000
15 000
10 000
0
50 000 100 000 150 000 200 000 250 000 300 000 350 000 400 000
Exxon Mobil
Royal Dutch Shell
BP
Chevron
TOTAL
Conoco Philips Eni
THE EVALUATION OF THE ATTRACTIVENESS OF THE SEGMENTS
Global oil, gas & consumable fuels market
Year $ billion € billion % Growth
2007 433.1 311.3
2008 450.1 323.6 3.9%
2009 461.8 331.9 2.6%
2010 484.9 348.6 5.0%
2011 500.3 359.6 3.2%
CAGR: 2007–11 3.7%
Global renewable energy market value
Year $ billion € billion % Growth
2007 691.3 496.9
2008 733.9 527.6 6.2%
2009 683.7 491.4 -6.9%
2010 735.0 528.3 7.5%
2011 767.5 551.7 4.4%
CAGR: 2007–11 2.7%
Global specialty chemicals market value
Year $ billion € billion % Growth
2007 300.7 216.2
2008 361.9 260.2 20.3%
2009 256.5 184.4 -29.1%
2010 313.3 225.2 22.1%
2011 399.8 287.3 27.6%
CAGR: 2007–11 7.4%
Global oil & gas marketing and supply market value
Year $ billion € billion % Growth
2007 5,883.5 4,231.1
2008 6,431.2 4,625.0 9.3%
2009 6,967.1 5,010.5 -35,8%
2010 9,026.9 6,491.8 29.6%
2011 5,797.6 4,169.4 38,3%
CAGR: 2007–11 10%
INTERNAL ANALYSIS: MCKINSEY MATRIX
Low Medium High
Low
M
ediu
m
Hig
h
Business strength (competitive position)
Industr
y a
ttra
ctiveness
Chemicals
Marketing and
supply
Renewable energies
Oil and gas
NB: The size of the circles represents the market value
SWOT ANALYSIS
Helpful Harmful In
tern
al o
rig
inal
Exte
rn
al o
rig
inal
•A strong market presence coupled with integrated operations •Strong R&D capabilities •Leadership position in refining and marketing
•Oil spill in the Atlantic •Violation of anti-competitive laws
•Environmental regulations •Regulations concerning Iran •The US credit downgrade may impact the future oil prices, placing a downward pressure on Total’s sales
•Expanded production of solar photovoltaic Power •Strategic initiatives in the area of biofuels •Establishment of Jubail Refining and •Petrochemical Company
STRATEGY
STRATEGIC ANALYSIS OF THE TOTAL GROUP
Factors influencing strategy decisions
The fluctuation of gas and oil prices
The increasingly more difficult access to reserves
The scarcity of resources
The increasing of geopolitics risks and petrol nationalism
The change in global demand for petro products
And the environmental issues
Strategy in upstream
Investment policy in exploration and extraction activities
Geographic and technical diversification in the production of hydrocarbons
Integration into LNG
Objective of becoming the 2nd world producer
Huge investments in new projects to diversify supplying
STRATEGIC ANALYSIS OF THE TOTAL GROUP
Restructuring activities
Adaptation of activities of refining in Europe to oil demand
Development of markets in Asia and Middle-East
Reorganization of different poles in the Group
Enlarging the energetic value offer
Prepare the after-oil
Improve the group image
Development of biofuels, solar energies and nuclear energy
ACTIVITIES REORGANIZATION
Upstream Exploration and production of hydrocarbons
Downstream Refining and distribution
Chemicals Fabrication of petrochemical
products
Current organization of Total’s activities
Upstream Exploration and production of hydrocarbons
Downstream-industrial Refining and fabrication of petrochemical
products
Downstream-commercial
Distribution, marketing-
supply
New organization of Total’s activities
STRATEGY FOR THE LONG TERM
Development in the solar and biofuels sectors
Long term strategy because preparation of the change in demand for the next decades
Nuclear Alliance with EDF GDF Suez but Fukushima events put a threat on this project
Solar Acquisition of 50% in Tenesol, and 100% of Photovoltech, agreement with Sun power to develop solar panels
Biofuels Production of methanol and dimethyl ether
Eolian Central built in Mardyck in the Flandres
CORPORATE STRATEGY FOR UPSTREAM: VERTICAL INTEGRATION
Upstream
To answer the increasing demand in oil globally, Total wants to develop the activities of extraction and exploration of new reserves through vertical integration, which provides the company with a good supply chains control and improve efficiency
CORPORATE STRATEGY FOR UPSTREAM: VERTICAL INTEGRATION
Three main factors reinforce the interest for this integration:
The average annual price of the barrel reached in 2011 an historic price of 120 dollars and made profitable the exploitation of reserves that require complex technology;
The events in Libya and Iran encouraged Total to diversify and to integrate its supplying;
The exploitation margins have been reduced in refining (the capacity of refining is greater than demand in Europe).
In October 2010 Acquisition of 60% of Yam’s petroleum, an Ivoirian oil company, to get access to offshore reserves
In January 2011 Exploitation agreements in Argentina to exploit shale gas in Neuquen Lake
In March 2011 Acquisition of 33% in three agreements to exploit Albert Lake reserves
In December 2011 Agreement with Novatek to exploit a field in Russia by 2015 for 65,000 barrels a day
In January 2012 Acquisition of 25% of oil sands in Ohio, USA, by creating a joint-venture with Chesapeake and EnerVest
CORPORATE STRATEGY FOR DOWNSTREAM: VERTICAL INTEGRATION AND GEOGRAPHICAL DIVERSIFICATION
Downstream
Improve presence in Liquefied Natural Gas (LNG) and obtain greater market share
Presence in North America, Algeria, Angola, Nigeria, Australia, Pacific Asia
Development of liquefaction, regazification, maritime transport, stockage
CORPORATE STRATEGY IN DOWNSTREAM: LINKED DIVERSIFICATION
Due to low refining margins in Europe, Total decided to remove its activities progressively in this sector and implanted them into the new emerging markets of Asia and Middle-East.
Furthermore, in order to improve the profitability of downstream activities, Total announced in October 2011 the fusion of refining and petrochemicals activities. This operation will allow industrial synergies with economies of scope. They put in common the key resources and competencies of both the refining and petrochemicals activities in order to create synergies
February 2010 Closure of refinery in Dunkerque, France
January 2011 Modernization of the refinery in Normandie to readjust the production of diesel
February 2011 Selling of 48% of the Spanish CEPSA equity for $3 billion in order to reduce the refining capacities in Europe
October 2011 Announcement of the fusion between refining and petrochemicals activities + creation of a marketing-supply division, in order to create synergies
CORPORATE STRATEGY FOR CHEMICALS: VERTICAL INTEGRATION AND MARKETING DIVERSIFICATION
• Vertical integration: as for the other segments, Total wants to reduce its costs and get higher market share through a lot of acquisitions, and alliances, as illustrated in the chart below.
• Moreover, they intend to diversify their products within this particular segment by proposing a higher range of petrochemical products
SBU STRATEGY
Breaktrough strategy
Reference offer Low and differentation
High & differentiation
M&S
CHEMICALS OIL&GAS
GREEN ENERGY
VALUE
PRICE
+
-
- +
Oil & Gas
• The need for oil and natural gas is steadily rising throughout the world. Production tests are used to evaluate the feasibility and profitability of the project. Total’s forecasts are based on an expectation of strong production growth by 2015
Chemical
• We aim to unlock synergies to be more competitive, optimize the management of feedstock streams, capital expenditures and maintenance turnaround at certain production sites and pool support functions
Green
• TOTAL has developed expertise in the power generation sector, especially through cogeneration and combined cycle power plant projects. TOTAL has committed to developing innovative technologies to improve its portfolio, becoming more specialized and provide special product to the market
Marketing & Services
• Total is developing its activities in line with several objectives. We aim to maintain our commercial competitiveness, In every region of the world, the Marketing & Services organizes the sale of products to meet local requirements.
LIMITATION
IMPROVEMENT PURIFICATION
FOCALISATION
M&S
GREEN ENERGY
NICHE
WHOLE
LOW HAND
HIGH HAND
FOCUS ON DIFFERENTIATION
MULTIDIVISIONAL ORGANIZATION
ADVANTAGES
•Flexible (external influences and factors)
•Possibility to track the performance
• each branch is specialized in its own activities and competences.
DISADVANTAGES
•Duplication of central and divisional functions
•Likely to lose the central control
What do we do better: Sharing BCP (best case practice)
Long term training policy: Personal developement & skill developement
Doing more to reward all aspects of performance
MULTIDIVISIONAL ORGANIZATION
CORPORATE GOVERNANCE
Total has been actively examining corporate governance matters, with a:
Board of Directors
The Executive Committee
Management Committee
CULTURE
National
Functional division
Funds Pilot project could be funded, and with future management development
Organizational
•Attracting Talents
•Diversity
•Employee Relations
•Fair Compensation and Benefits
•Developing Skills
Organizational field
Take in care of Environment issue
The individual
Christophe de Margerie (CEO)
ETHICAL BUSINESS CONDUCT
The core principles underpinning Total’s Code of Conduct are:
Upholding human rights.
Preventing corruption and fraud.
Promoting free competition.
Promoting financial transparency.
Respect for people.
In all host countries where Total does business, Total educates and shares
with our employees our business principles and rules of individual behavior
— which are based on the values of respect, responsibility, integrity
and exemplary behavior — and requires employees to apply these
principles.
INITIATIVES AND PARTNERSHIPS
The United Nations created the Global Compact in 2000 following a call by its Secretary-General urging businesses to play an active role in the globalization process.
Partner companies must annually reaffirm their commitment and report their progress on one or more principles on the UN’s Global Compact web site through a Communication on Progress.
Total is involved even in: Extractive Industries Transparency Initiative (EITI) Voluntary Principles on Security and Human Rights (VPSHR) International Chamber of Commerce (ICC) International Petroleum Industry Environmental Conservation Association (IPIECA) Institute of Business Ethics (IBE) Global Business Initiative on Human Rights (GBI)
STOCKPRICE DEVELOPMENT
STOCKPRICE DEVELOPMENT
Compared to the market (CAC 40) Total’s stockprice shows a paralel development with only one critial price-fall in the last five years by the end of 2008 due to the financial crisis.
Total S.A. makes 12.55% of this market index, a fact which explains the similar development of the firms stockprice.
STAKEHOLDERS
Total S.A.
Employees
CEO
Owner
Shareholder
Suppliers
Society Governments
Creditors
Customers
Activist Groups
PRO SHAREHOLDER
Strong shareholder policy
Constant dividend growth
Constant investment in new projects inspite of their controversial nature
Construction of a pipeline in Mianmar condoning the use of civil sclavage inspite European’s Union’s sanctions
Acusations on corruption
Corruption in the Italian division of the company
Acusation of having done payments to Irqui officers during Sadam Husseins regime to secure oil supply
PRO STAKEHOLDER
Strong engagement in CSR initiatives:
Global Compact
GRI: Global Reporting Initiative
Due to local recruitment policy Total S.A. contributes in the countries of operation by creating jobs and enhancing economic growth
Strong commitment in R&D investment in new energies to gradually leave energy production based in fossil energies although this sector doesn’t bring hughe revenue yet (long term vision)