ExxonMobil Growth Strategy: McKinsey Staircases Analysis
This paper evaluates ExxonMobil's corporate growth strategy through the lens of McKinsey's seven staircases to growth and three-horizons framework. Drawing on the 2015 ExxonMobil Annual Report, the analysis examines why the company prioritizes attracting new customers and geographic expansion over innovation and new business areas, connecting revenue declines to hydrocarbon price volatility rather than strategic failure. The paper also critically assesses ExxonMobil's heavy reliance on Horizon 1 core-business defense, its limited engagement with Horizon 2 emerging opportunities (primarily its chemicals segment), and its near-total absence of Horizon 3 strategic options, particularly in alternative energy — an area the author argues represents the company's greatest long-term missed opportunity.
- McKinsey's Seven Staircases and ExxonMobil's Revenue Context: Introduces growth framework and revenue decline context
- Customer Growth and Geographic Expansion as Core Strategy: New customers and expansion as primary growth levers
- Creating New Demand in Underserved Markets: Raising living standards to generate new energy demand
- The Case for Alternative Energy Innovation: Alternative energy as underexploited long-term opportunity
- Three Horizons Framework Applied to ExxonMobil: Mapping ExxonMobil strategy across three strategic horizons
✍️ How to write this paper — guide, tools & examples ▾
What makes this paper effective
- Applies two well-known strategic frameworks — McKinsey's seven staircases and the three-horizons model — systematically to a single real company, grounding abstract concepts in concrete evidence from ExxonMobil's own annual report.
- Moves beyond description to critique: the paper not only maps the company's strategy onto the frameworks but identifies where the strategy falls short, particularly the absence of Horizon 2 and Horizon 3 thinking.
- Uses precise financial data (revenue decline from $438 billion to $268 billion) to contextualize strategic choices, avoiding vague generalizations.
Key academic technique demonstrated
The paper demonstrates framework-driven critical analysis: it uses established consulting and strategic management tools as analytical lenses rather than merely describing company activities. By working through each staircase and each horizon, the author creates a structured argument that builds toward a normative conclusion — ExxonMobil should prioritize alternative energy innovation — without abandoning the evidentiary base.
Structure breakdown
The paper opens by introducing the McKinsey staircases alongside ExxonMobil's revenue context. It then narrows to the company's dominant growth levers — new customers and geographic expansion — before distinguishing geographic expansion from demand creation in underserved markets. A counterargument section raises the alternative energy opportunity. The paper closes by mapping the entire strategy onto the three-horizons model, concluding that ExxonMobil is heavily anchored in Horizon 1 with little strategic attention to Horizons 2 or 3.
McKinsey's Seven Staircases and ExxonMobil's Revenue Context
According to McKinsey & Co., the seven staircases to growth are: maximizing existing customers, attracting new customers, innovation of products and services, innovation of the value delivery system, improving industry revenue, geographic expansion, and stepping out into new business areas (McKinsey, no date). ExxonMobil has seen steep declines in its revenues in recent years, falling from $438 billion in 2013 to $268 billion in 2015 (2015 ExxonMobil Annual Report). This does not mean the company has no growth strategy; ExxonMobil's revenues are closely tied to fluctuations in the price of hydrocarbons, especially crude oil. The company also notes that "global economic growth has slowed, leading to a market that is oversupplied" (p. 2), citing this as a reason for lower revenues.
The company relies primarily on attracting new customers. This may seem counterintuitive, but it is not. Existing customers already consume enormous amounts of fossil fuels, so there is little incremental gain to be made there. ExxonMobil does invest in innovation, but this is not the key business driver for a couple of reasons. First, innovation does not have a strong influence over the cyclicality of its industry. Second, with its downstream chemical business and broad geographic scope, ExxonMobil is fairly well-diversified for a petroleum company. As such, its growth is tied far more to broader trends in energy price and consumption than to anything else the company does. It is not focused on new business areas, mainly because of the overwhelming size of its core business — there is no new business in which it could invest that would meaningfully affect core operations worth hundreds of billions of dollars. Improving industry revenue is certainly a goal, but it is not sufficient to counter the power of broader demand and price variables on the income statement.
Customer Growth and Geographic Expansion as Core Strategy
Geographic expansion is closely tied to the new customers argument. The case ExxonMobil makes is that the developing world still has approximately one billion people without adequate energy access. Pulling people out of poverty through energy access — even for basic needs such as clean water and electricity — is something that helps the company grow. A billion new customers may not match the four or five billion the company has served since the end of the Second World War, but it remains the opportunity on which the company bases its growth outlook, at least according to the annual report.
Creating New Demand in Underserved Markets
This strategy is more about attracting new customers than it is about geographic expansion in the traditional sense. ExxonMobil already sells to most countries in the world. Adding a few new markets — Cuba, for example — would not make a meaningful difference. What would make a difference is raising living standards in underdeveloped countries. This means growth in private vehicle ownership, robust economies with global supply chains, and, most importantly, much higher per capita levels of energy consumption. This does not necessarily mean entering new countries; it means creating new demand within existing markets by tapping into unserved and underserved populations — in other words, new customers within existing geographic footprints.
References
2015 ExxonMobil Annual Report. Retrieved November 26, 2016, from http://cdn.exxonmobil.com/~/media/global/files/summary-annual-report/2015_Summary_Annual_Report.pdf
McKinsey & Co. (no date). Staircases to growth. McKinsey & Co. In possession of the author.
Create your account
Always verify citation format against your institution’s current style guide requirements.