Title: Pakistan State Oil
1 Pakistan State Oil Case Analysis
2Summary
3WHAT WE ARE
- Largest Company in Pakistan with turnover of
around Rs 200 billion (US 3.4 billion)
- Only Public Sector Company competing with 3
multinational OMCs very effectively
- Contributes approx. Rs. 55 billion (around US 1
billion) to national exchequer
- First Pakistani company to become a member of the
World Economic Forum, Davos, Switzerland
4OUR VISION
To excel in delivering value to customers as an
innovative and dynamic energy company that gets
to the future first
5MISSION STATEMENT
6OUR VALUES
EXCELLENCE Passion for Customers, Total Quality
Management, Corporate Leadership COHESIVENESS Tea
mwork, Effective Communication RESPECT Respect
for Individuals, Valuing Contribution, Equal
Opportunity INTEGRITY Business Ethics,
Honesty INNOVATION Creative ideas, New products
and processes CORPORATE RESPONSIBILITY Health,
Safety, Environment, Community Development
7LONG TERM OBJECTIVES
- Get recognized as an Energy Solutions Company
- thru diversification integration
- Retain market leadership in all key products
- Maximize share holders wealth by sustainable
- growth in earnings
- Establish PSO as a brand of choice for customers
- Utilize all available resources optimally
- Fulfill corporate social responsibilities
8 MARKETING - RETAIL NETWORK
NUMBER OF RETAIL OUTLETS ALL PAKISTAN BASIS AS OF
JUNE 30, 2004
New Vision
Total
PSO Shell Caltex Total 3,880
1,270 499 5,629
PSO Shell Caltex Total 1,000
800 420 2,220
9STATUS OF CNG DEVELOPMENT
20
80
PSO TOTAL June 30, 2001 26
168 June 30, 2004 105 521
10ENVIRONMENTAL SCANNING (BACKGROUND)
RETAIL
- Prior to 90 Caltex, Shell (PBS) and PSO had
similar level of shabby products and services
- In 90 Caltex started improving its retail
stations
- In 94 Shell embarked on its International
Retail Visual Image project
- In 97 Caltex launched its New Retail Image
program
- In 99 PSO built its first flagship retail
outlet in Karachi
11ENVIRONMENTAL SCANNING (BACKGROUND)
LUBES
- From early 90s competitors focused on their lube
business, introducing high-grade, high-priced
lubricants in attractive plastic packages
- In 97, Lube Marketing was established as a
separate core business
- All along PSO neither upgraded its retail network
nor improved its range of products and services
as no investment was made in modernization - PSO remained focused on low margin products and
lost market shares in high margin products
12PSO AILMENTS
INTERNAL
EXTERNAL
- Obsolete Systems / Weak controls
- Dearth of Quality professionals
- Myopic Business Vision
- Bureaucratic Management
- Ineffective Organizational Structure
- Profits dependent on Inventory Gains
- Malpractice corruption
- Aggressive Marketing Development by Competition
- Political Intervention
- Economic Factors
- Highly Regulated Environment
- Products Substitution
- New Players
- Tarnishing image declining market share
13MULTIDIMENSIONAL 7S MODEL
14MANAGEMENT HUMAN RESOURCE PHILOSOPHY
- Consider Human Asset - the only asset which
appreciates with the passage of time - Right Person at the Right Place
- Make Organization lean flexible to become more
responsive - Handle HR issues with all fairness transparency
15MANPOWER STRENGTH
August 2004
January 1999
Professionals Others (mgmt) Non
Management Total Jan, 1999
260 608 1787
2655 Aug, 2004 475 382
1136 1993
The company is operating within the approved
manpower strength
16 MULTIDIMENSIONAL INITIATIVES(HR AREA)
- Equal Opportunity Employer
- All hiring approved by COED committee
- Offered VSS in April01750 employees opted for
the scheme on free will - Open Candid communication culture
- Performance based system
- Recognizing the smart work thru incentives
awards, promotions, appreciation letters - Professional work environment with emphasis on
extra curricular activities - Ongoing employee development program
17 MANAGEMENT INITIATIVES IN HUMAN RESOURCE AREA
(Contd)
- Inducted high quality professionals (CAs, MBAs,
Engineers, etc) to fill the vacant slots strictly
on merit and stipulated policies procedures - Practicing Zero Tolerance for Corruption
Malpractice - Promptly handled employees found in intellectual
dishonesty and malpractice to discourage unfair
practices - Promoted talented and outstanding employees
strictly on performance - Accommodating employees request for transfer
subject to vacant slot and genuineness of request
18MULTIDIMENSIONAL INITIATIVES
- Conducted Business Process Reengineering (BPR) to
streamline processes and remove unnecessary
layers - Revamped corporate architecture and implemented
business unit concept - Instituted business planning and reporting
system PSO to enter online real-time Enterprise
Resource Planning (ERP) regime - Developed team work group dynamics thru
empowered Cross Functional Teams (CFTs) - Continuously introducing innovative products and
services - Aggressive marketing with rapid expansion of New
Vision outlets over 1000 outlets in 5 years - Built Business partner concept with all
stakeholders - ISO 14000 9000 Certification of key storages,
retail outlets, offices etc.
19 MULTIDIMENSIONAL INITIATIVES
BRAND IMAGE ENHANCEMENT
- Launched successful aggressive marketing
campaigns - Highly cost-effective company as compared to
Shell despite its sheer size and market share
- 24 Hours Customer Care department established
with Toll Free number
- Company-Owned Company-Operated (CoCo) sites
network expanded to 30
- Launched new product lines in improved
packaging free delivery thru c-tracked
vehicles
20MULTIDIMENSIONAL CHANGE PROCESS (Contd)
Key Accomplishments for Brand Image Enhancement
- Leader in innovative products services
- Plastic card technology in Pakistan (Loyalty,
Corporate, Fleet Prepaid cards)
- 800 Internet Kiosks dotted across the country
- 19 Mobile Quick Testing Units to ensure the best
quality product
- Oil change facility at the customers door step
- First-ever auto car wash plants in all major
cities
- Monolith price displays at retail outlets
- Pioneer in installing Tallest Signs / Largest
Hoarding in Pakistan
- Business centers at retail outlets
- First OMC to install Easy Payment Centers at
gas stations (19)
21MULTIDIMENSIONAL CHANGE PROCESS (Contd)
22FINANCIAL PERFORMANCE
23SHARE PRICE TREND
27 Jul 2001
30 June 2004
Daily Share Price Trend
24PSO TRANSFORMATION
from a typical public-sector company to a
market-driven company
Distribution oriented Large and
centralized Government control Operational
myopia Diffused responsibility Technical
orientation Risk averse Hierarchical
and bureaucratic setup Reliance on
managerial authority Petroleum sale only
Customer service oriented Lean and
decentralized Managerial autonomy Strategic
vision Ownership and accountability Commercial
orientation Entrepreneurial attitudes Task
driven organization Teamwork and delegation of
responsibility Broader business base Business
diversification vertical integration
25Key issues
26Key Issue 1 Image of PSO was badly affected
specially in the consumer market
- Caltex got success in its retail image program
and specially general consumers were attracted to
the new look and services, offered over there - Shell started an aggressive marketing in response
with its International Retail Visual Image
project. - Shell spent more than Rs 5 billion on building
new and improving existing outlets.
27Key Issue 1 Image of PSO was badly affected
specially in the consumer market
- Strategic Moves
- Mr.Tariq Kirmani brought systematic change in
corporations culture and processes. New
management, in the direction of Tariq Kirmani,
took some major crucial steps to transform the
organization - PSO also introduced its additized diesel Green
XL plus to ensure greener and safer environment.
Along with this they offered easy payment through
cards into four categories. - Prepaid card Loyalty Card
- Fleet Card Corporate Card
28Key Issue 1 Image of PSO was badly affected
specially in the consumer market
- Strategic Moves
- In 1999, built its first flagship retail outlet
in Karachi. Then targeted to renovate or rebuild
at least 200 outlets per year. - This change was not confined to the civil works
but they introduce many distinctive facilities to
their outlets, some of which are still their
competitive edge on the competitors
29Key Issue 1 Image of PSO was badly affected
specially in the consumer market
- Strategic Moves
- For example Internet kiosk (at 800
- Outlets), 15 business centers, auto car wash,
electronic dispensing units, convenience stores,
easy payment center for utility payments,
Citibank credit cards bills, and most recently
launched a co-branded card with UBL. - Offering JAZZ recharge on the outlet. PSO signed
a corporate MoU with Pizza hut to establish
their Deco Outlets to provide their
Take-away and Home Delivery services.
30Key Issue 2 Sales were declining drastically
- The rapid changes in business scenario, affected
the image of PSO and at time it was considered as
an in efficient, stagnant and obsolete
organization, which is failed to serve the
customer according to their changing requirements
- Steps in key issue 1 also helped in solving this
issue
31Key Issue 3 Market share was declining
- Sales of PSO start declining in the facet of its
strong products i.e. Petrol and Diesel from 47
to 39 and 73 to 60 respectively. - Sales of PSO, although started declining after
1993 but in 1996 it was drastically dropped down
from 48 to 39 in MoGas (1994-2000), and 76 to
60 in HSD (1994-2000)
32Key Issue 3 Market share was declining
- Strategic Moves
- Competition analysis is the system to monitor and
analyze the competitive environment of the
industry. - These people are responsible to collect current
information of market insights and competitors. ,
Analyzing economical, legal situations of related
industries. - On the basis of in-depth analysis, PSO is
successful in sustaining its competitive
advantage over its rivals
33Key Issue 4 Organizational Structure was not
able to compete with rapidly changing environment
- Shell launched huge promotion through media and
emphasis more on its Lubricants. - Shells lubricants have already a strong position
in the market and along with new image of their
retail outlet Shell offered improved services,
while developing a network of Company-operated
sites. - Another customer service, the 'Shell Genie' fast
and free oil change facility was introduced at
their outlets
34Key Issue 4 Organizational Structure was not
able to compete with rapidly changing environment
- Strategic Moves
- The new management adopted the system of
conducting weekly meetings on two levels. One is
MANCOM (Management Committee) and the other is
EX-COM (Executive Committee). - EX-OM is responsible to discuss all current
issues regarding policy of the company at the
executive level, while MANCOM is the platform for
all employees to participate at their department
level
35Key Issue 4 Organizational Structure was not
able to compete with rapidly changing environment
- Strategic Moves
- Besides these psychological practices, the team
of DMD Tariq Kirmani, formulated the corporate
planning framework. - First they renewed Vision, Mission, and The
Values. Instead of vertical Hierarchy, developed
cross-functional teams and delegate them
authority to device their own strategies to
achieve their targets. - With the help of these cross-functional teams,
processes were analyzed and organization started
moving towards lean operation.
36Key Issue 4 Organizational Structure was not
able to compete with rapidly changing environment
- Transfers the whole manually handled data on the
computers and designed a strong database system,
which was accessible for all employees. The
Corporate plan was started from FY 2003. - It contains operational plans, capital budgeting,
Business-wise investment plans, and
profitability. - This projections Corporate Plan of PSO is widely
appreciated by national and international
institutions and regarded as the key to success
for PSO
37Key Issue 5 There was a need for skilled and
trained people to work efficiently
- Strategic Moves
- Organizational culture of PSO was as typical as
the govt enterprises have. To bring change in it,
management devised strategy to gain the
confidence of employees first. - Corporate Planning department developed a
corporate transformational model to keep an eye
on flow of policies and behavior from top to
lower level employees performance
38Key Issues for Future
- Shell has an edge in Lubricants market over PSO.
- Issue solved Castrol GTX has taken over the
market share from Shell through increased
marketing efforts.
39Key Issues for Future
- Uncertain supply network (Shell, Caltex and Total
have their own Refineries while PSO rely on the
contracts). - Reason Government put restriction on PSO to buy
its own Oil refinery because there is a condition
that any Public limited company cant buy another
Public limited company. After Privatization they
may become able to buy an oil refinery ( if new
management agree to do it). While Shell, Total,
and Caltex have their own refineries like NRL,
PARCO. - Solution One possible remedy for this is the
privatization of the company, which is in
process. Another can be a creation of stronger
relationship with suppliers, help the suppliers
by making joint ventures in building their
infrastructure etc.
40Key Issues for Future
- A huge network all over the country (especially
in remote areas) is the burden on PSO because in
some areas, providing oil products is more
expensive to the company but being a public
limited company they have to bear it. - Solution Reduce costs by making centralized
storage system in different regions/ territories.
Find innovative ways of distribution (perhaps
setting up a distribution pipeline).
41Business Balanced Scorecard BBS
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44Thank You