I have come across the term “strategy” at various occasions ranging from match-ups in English Premiere League, military attack on Iraq last year to the latest beauty contests like miss world in China few months ago. All need strategy to win a “battle” for each occasion. It is sure that that “strategy” has a deep meaning that just a way to reach or accomplish a thing. In “Strategy: Definitions and Meaning,” Fred Nickols says that “the concept of strategy has been borrowed from the military and adapted for use in business.
In business, as in the military, strategy bridges the gap between policy and tactics. ” In many situations, we often use the word “corporate” and “business” exchangeable. However, when it comes to the corporate and business strategy, the meaning is quite difference. In “Exploring Corporate Strategy,” Johnson G. and Scholes K. says that corporate strategy is concerned with the overall purpose and scope of the organization to meet the expectations of owners or major stakeholders while business strategy is about how to compete successfully in a particular market.
In this paper, I will discuss about the Valero’s corporate strategic planning such as mission statement and its competitive advantage in the industry the Valero exists. II. Valero Energy: Mission Statements In addition to strategy definition, companies are common to conduct strategic planning that is the way to identify and go towards desired future condition (“Strategic Planning”). This kind of planning is important for companies since it becomes a step to develop, implement, and achieve goals and objectives. Similar to the concept of strategy, the strategic planning also comes from military terminology.
While in military the planning called military strategy, in business it refers to strategic management. The strategic planning usually comes in three forms: goals and objectives, mission, and vision statements. However, in this paper, I will only analyze the Valero’s mission statement. Valero is a well-known company in the production of premium, environmentally save products including such as reformulated gasoline, California Air Resources Board (CARB) Phase II gasoline, low-sulfur diesel and oxygenates . II. 2 Mission Statements
Mission statement is the statement that explains what action a company will do in order o achieve the company’s goals and mission. Considering the nature of a mission statement, therefore, a mission statement should be clear and concise and should avoid being verbose since it might lead to different implementation. However, the mission statement should clearly describe what will be done, by whom, for whom, and why . According to official website of Valero, I see that the company’s mission statement comes in eight actions as following:
1. “The safety of our employees and our operations as a core business value. 2. Producing environmentally clean products in environmentally clean facilities. 3. Aggressively pursuing growth opportunities, both domestically and internationally. 4. Continued development of all employees, our number-one asset. 5. Providing a challenging, rewarding environment that facilitates creative thinking, teamwork and open communications. 6. Customer satisfaction by providing reliable and responsive products and services. 7.
Ensuring a positive retail experience for consumers by focusing on convenience, value and quality service. 8. Taking a leadership role in our communities by providing company support and encouraging employee involvement” (Valero Marketing and Supply Company, 2006) Based on the definition of a company’s mission statement, what Valero says about its mission statement, in general, lacks of the sentence determining why the mission is done so. At some actions, Valero also do not mention for whom the action is intended such as in the point number 3.
In addition, some of Valero’s mission statement is also short of the description about who does the action whether top managements or all employees of Valero. III. Suggestion of Valero Energy’s Mission Statement Based on the analysis of Valero’s mission statement, the critical point is that the company is short of reasons of why the mission is done so and for whom the action is intended. In addition, the Valero’s mission also lacks of the description about who does the action whether top managements or all employees of Valero.
Under such circumstances, I suggest that Valero could set clearer mission statement. For example, the mission number 3 can be changed into following sentences to fulfill the criteria of a good mission statement that has who, whom, and why. Old sentence: “Aggressively pursuing growth opportunities, both domestically and internationally” New sentence: “Valero managements and staffs are committed to pursue growth both domestically and internationally to increase revenue and enhance employees’ benefits. ” IV. Valero and Vertical Integration
By definition, vertical integration is the practice to integrate various parts of business, upstream and downstream, in order to increase the effectiveness of a company. For example, a oil company that deals with the exploration of crude oil might decide to do vertical integration by doing merger and acquisition with a refineries and distribution network companies . I see from historical text of Valero that the company has evolved from a gas exploration company into an energy company that does not only deal with the exploration but also the refineries and distribution of energy.
Below are some mergers and acquisitions that mark the development of Valero into an energy company: • In 1981, Valero commenced its first vertical integration through the expansion into energy sector. The expansion was recorded through the acquisition of a small crude refining operation in Corpus Christi, Texas. In order to speed up the production, at that time, Valero decided to spend over $1 billion to develop the state-of-the-art refining unit in the U. S. . • Moreover, the process to achieve the vertical integration objectives of Valero also happened in 1998 when the company decided to acquire Mobil’s Paulsboro refinery.
By completing the transaction, Valero became the U. S. second-largest independent refining company with a total production about 735,000 BPD. • The vertical integration process continues in 2000 when Valero acquired ExxonMobil Corporation’s Benicia, California. The acquisition gave Valero with additional 270-store retail distribution chain and 80 company-operated retail sites. This acquisition is the example of the integration that enriches the process of the company’s sales and distribution network.
• Moreover, in June 2001, Valero also committed to buy a refinery in Corpus Christi, previously owned by subsidiaries of El Paso Corporation • Dec. 31, 2001 became the historical date for Valero as the company completed its largest transaction by doing a merger with San Antonio-based Ultramar Diamond Shamrock Corporation. The ‘married’ company greatly adds Valero strengths as a company that grows through a series of vertical integration since Valero became one of the nation’s top three refining and marketing companies at that time. V. Diversification of Valero Energy
Concerning the diversification of Valero, I notice that company is pursuing the related diversification by acquiring another energy companies that are in line with Valero core competencies. Historically, Valero evolves from a natural gas gathering subsidiary, crude oil refining operation, and distribution and marketing of refined oil and other crude oil derivatives such as aviation gasoline, petroleum coke, kerosene etc. By pursuing related diversification, I notice that Valero gains many benefits since the company has opportunities to increase their revenue while sticking on its competence.
To dat, for example, Valero has about 18 refineries with total throughput capacity about 3. 3 million barrels per day (BPS). In addition, by conducting related diversification, Valero gains benefits of reducing costs that are incurred from one operation. Since Valero have their own distribution and marketing division, they can reduce costs of distribution, resulting in the competitive price to customers. This is because the distribution of gasoline composes of 3 major components as shown in the figure 1. Since Valero have two of three components, they can minimize unnecessary costs.Sample Essay of Edusson.com