TEXACO: A STRATEGY ANALYSIS

The industry analysis is presented in the contexts of an industry description and a review of the structure of the industry. A Porter's Five-Forces analysis is included as an appendix to support the review of the industry structure.

Texaco competes in the integrated petroleum industry (Mitkowski, 1994, p. 401). Industry sales in 1994 were $600 billion. Sales are projected at $645 billion in 1995, and are expected to swell to $800 billion by 1998. The major product base of the industry is comprised of refined petroleum products for use in motor vehicles, industry, and home heating. Petrochemical products such as chemicals, plastics, solvents, detergents, and fertilizers also are important industry products. The industry serves both consumers and industrial customers. The total industry market is projected to growth by 33 percent from 1994 through 1998.

The strongest influences on industry profitability are competition between the major firms operating within the industry, and the general economic environment within the world's industrial countries. The economic environment within the industrial countries determines to a great extent the intensity of demand for the products of the integrated petroleum industry. During period of stable o

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lders' investment in the company. The unstated mission at Texaco is to improve the financial positions of the company's senior management. Key Issue The key issue confronting the company in early-1995 is the declining trend in the company's competitive position. As Porter's five-force analysis (refer to Appendix A) indicated, internal competitive forces within the integrated petroleum industry have the greatest impact on profits within the industry. A weakness identified in the SWOT analysis (refer to Appendix B) is a recent downward trend in the company's profitability at a time when the industry averages for profitability are moving upward. As the financial ratio analysis (refer to Appendix C) indicates, both return on equity and return on assets at the company declined over the 1992-1994 period. While the company's ratios are not substantially below industry averages, the problem is that the company's ratios are moving downward while the industry averages are trending upward. The liquidity ratios at Texaco are also below industry averages. Liquidity ratios in the integrated petroleum industry traditionally are lower than in most industries; however, the Texaco ratios are substantially below the already low industry av
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Approximate Word count = 1765
Approximate Pages = 7 (250 words per page)

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