Businessmodel of Chevron

Customer Segments

Chevron provides crude oil, petrochemical products and natural gas products to a range of customers worldwide. The Company primarily serves industrial clients across the following sectors:

• Chemical Manufacturing, such as Dow Chemical, Monsanto, and Heron Lake Bioenergy;
• Plastics and Rubber, such as Entegris, Myers Industries, and Esp Resources;
• Automotive and Automotive Aftermarket, such as China Automotive Systems, Honeywell International, and Autoliv;
• Oil and Gas, such as Cardinal Energy Group, Occidental Petroleum, and West Texas Resources;
• Pharmaceutical, such as Abbot Laboratories, Fortress Biotech, and Johnson and Johnson; and
• Utilities, such as Edison International, Spark Energy, and Portland General Electric. Chevron also serves major conglomerates such as General Electric and 3M, and directly serves consumers through its international network of petrol stations.

Chevron’s most significant market is its native US, which accounts for more than 40% of the Company’s total sales. The Company, however, operates globally, serving customers across the Americas, Europe, Asia Pacific and Africa.

Value Propositions

Chevron provides value to its customers in the following ways:

• Its industry standing and reputation, with the Company being one of the largest and most recognisable brands in its industry, having a name associated with quality;
• Its track record for successful delivery, with the Company having successfully completed numerous projects across multiple jurisdictions;
• Its global operations and reach, with the Company operating exploration and production projects across the Americas, Asia Pacifica, Europe, and Africa, as well as operating similarly widespread sales and marketing channels; and
• Its operational expertise and experience, with the Company employing highly-trained, specialist operational staff and employing experienced industry executives. ### Channels

Chevron operates a website at www.chevron.com, through which its provides information on its activities, ongoing projects and corporate organisation. While the Company’s core oil and gas activities do not allow for the operation of an online sales channel, the Company does operate a webstore through which it sells branded merchandise.

Chevron’s sales are largely managed by the Company’s own in-house sales teams, which are organised geographically. These sales teams are focused principally on large commercial clients. In the US the Company markets petroleum products under the Chevron and Texaco brands, making sales both directly and through third-party retailers and

marketers across 7,860 Chevron and Texaco-branded service stations. Outside the US, Chevron sells petroleum products both directly and through third-parties across approximately 6,090 branded service stations.

Chevron also markets commercial aviation fuel at around 100 airports worldwide, and sells lubricant and coolant products under the names Havoline, Delo, Ursa, Meropa, Rando, Clarity and Taro. The Company also makes sales through a number of affiliates and joint ventures under various brand names. For instance, the Company’s part-owned GS Caltex in South Korea.

Customer Relationships

Consumers are able to purchase Chevron merchandise on a self-service basis through its online store, with no interaction with sales personnel. The customers also sell petroleum products directly to consumers through its network of service stations, where customers can purchase products in-person.

Sales made through Chevron’s direct sales team require a greater degree of consultation, with customers discussing their requirements with members of staff in order to fully outline a sales agreement. Sales contracts typically commit the Company to selling quantities of oil and gas based on production from specified properties, with some natural gas sales contracts specifying delivery of fixed and determinable quantities. Chevron seeks to establish long-term relationships, with contracts generally spanning multiple years.

Customers are able to contact Chevron directly with enquiries and queries over the phone and via email. The Company also provides a range of online resources to its customers, such as FAQs. Chevron is additionally able to interact directly with customers through its social media accounts with Facebook, Twitter, YouTube and LinkedIn.

Key Activities

Chevron is a multinational oil and gas company. It is engaged in various integrated energy and chemicals operations through its network of subsidiary companies and affiliates.

Chevron’s operations are organised into two operating segments: Upstream, through which the Company is engaged in oil and gas exploration, development and production activities, as well as crude oil and natural gas transportation – including by pipeline, storage and marketing; and Downstream, through which the Company is engaged in the refining of crude oil into petroleum products, the subsequent marketing and transportation of such products, and the manufacture and marketing of commodity petrochemicals, plastics and fuel and lubricant additives.

Key Partners

Chevron collaborates with a range of companies, primarily business operating within the oil and gas sector.

• Joint Venture Partners, largely comprising oil and gas operators and financial backers with which the Company operates jointly-owned entities for specific projects or regional activities;
• Distribution Partners, including marketing affiliates and retail partners that help to extend the Company’s sales and marketing reach, largely with regard to its commercial petroleum and petrochemical products;
• Strategic and Alliance Partners, including a range of companies with which the Company collaborates on joint projects and shares tools and resources;
• University Partners, with the Company maintaining strategic relationships with more than 130 colleges, universities and associations worldwide, with a view to attracting exceptional talent; and
• Supplier Partners, including suppliers of tools, resources and services that assist the Company in delivering its various project objectives. Chevron’s partnerships include a technology alliance with General Electric, an education partnership with Massachusetts Institute of Technology, and a joint-venture partnership in Kazakhstan with Exxon.

Key Resources

Chevron’s key resources are its various exploration and production projects, its tools and equipment, its physical logistics infrastructure, its sales and distribution channels, its partnerships, and its personnel.

The Company’s operations are dependent on the retention of its various exploration and production licences and its operating assets, including in relation to projects across the US, Canada, Argentina, the UK, Nigeria, Angola, Iraq, Kazakhstan, Bangladesh, China, Thailand, Indonesia and Australia. The Company also has a gas-to-liquid plant.

Cost Structure

Chevron incurs costs in relation to the operation of its various exploration and production projects, the acquisition of tools and supplies, the maintenance of its storage and logistics infrastructure, the operation of its sales and distribution channels – including its network of service stations, the management of its partnerships, and the retention of its personnel.

In 2015 Chevron’s largest cost related to the purchase of crude oil and related products, which amounted to $69.75 billion. The Company’s operating expenses were recorded at $23.03 billion, while exploration costs were $3.34 billion. Selling, general and administrative expenses for the year – including the payment of salaries and benefits to its workforce of 61,500 employees – amounted to $4.44 billion.

Revenue Streams

Chevron generates revenue through the sale of various oil and gas products and he provision of related services. The Company’s two core operating segments generate revenue as follows:

• Upstream, comprising revenue derived from the production and sale of crude oil and natural gas, as well as the sale of third-party production of natural gas; and
• Downstream, comprising revenue derived from the refining and marketing of petroleum products such as gasoline, jet fuel, gas oils, lubricants, residual fuel oils and other products derived from crude oil, as well as revenue generated from the manufacture and sale of fuel and lubricant additives and the transportation and trading of refined products and crude oil. Chevron also generates a small amount of revenue from related insurance operations, real estate activities and technology operations.

In 2015 Chevron generated total sales and operating revenue in the amount of $129.93 billion, down considerably on the $200.49 billion recorded by the Company in 2014. The Company’s downstream operations account for the majority of its revenue, recording $111.63 billion in revenue for 2015. The Company’s upstream activities accounted for $39.83 billion.