INTERNATIONAL ISLAMIC UNIVERSITY

ISLAMABAD

FINAL PROJECT
ON
Pakistan State Oil
Strategic Management
Time Period for Project 18-Nov-2013 to 24-Dec-2013

Dated: December 24, 2013
Submitted By
Sameera Zaman
Maria Bibi
Qurat ul Ain

Submitted To
Mam Tasneem Fatima



























First of all we would like to thank ALLAH almighty for providing us
with strength and giving us hope in the time of difficulties.
Secondly we would thank Mrs. Tasneem Fatima for his
guidance and encouragement. To all group members for their
hard work which make completion of this project. Last but not the
least we would like to thanks our families for their moral and
financial support.
At the end we are thankful to unknown people who gave us
inspiration in any way.





TABLE OF CONTENTS
1. Introduction.4
2. Organizational Structure...6
3. Vision and Mission Statement.7
4. Internal and External Factors Evaluation10
5. Competitive Profile Matrix...12
6. TOWS Analysis Matrix.....14
7. SPACE Matrix...16
8. BCG Matrix....17
9. Grand Strategy Matrix......18
10. Decision Matrix.19
11. Qualitative Strategic Planning Matrix...21
12. Discussion and Conclusion..23
13. Bibliography and References...24











1. COMPANY PROFILE
Pakistan State Oil (reporting name: PSO), is a multi-million and global competitive state-
owned megacorporation and the leading oil market presiding entity in Pakistan.
Headquartered in Karachi, Sindh Province of Pakistan, it has several state divisions in
the different cities in Pakistan, with administrative management business network
infrastructure well expanded, built at par with international standards, represents 82% of
countrys national energy sources.
The PSO is horizontally integrated and is the largest state-owned energy
megacorporation active in the oil and gas industry especially distribution and marketing.
The PSO conducts major renewable energy activities, including in biofuels, hydrogen,
solar, nuclear and wind power as well as defense management. The megacorporation is
the largest entity in the country, with well expanded business presence in abroad.
1.1 History of PSO
The formation of PSO began in 1974. The megacorporation started when the
government took over and merged Pakistan National Oil (PNO) and Dawood Petroleum
Limited (DPL) as Premiere Oil Company Limited (POCL) on 1 January 1974. On 3 June
1974, the government owned Petroleum Storage Development Corporation (PSDC)
was established as the umbrella corporation; it was renamed as State Oil Company
(SOC Ltd) on 23 August 1976. A vested integration was carried out with the forceful
purchasing of Esso Eastern and the control was taken over by the State Oil Company;
the government amalgamated all integrated corporations to one single category, called
the "Oil Marketing Companies" (OMCo.)
On 30 December 1976, the Premier Oil Company and State Oil Company was
horizontally integrated into one single incorporation, giving way to Pakistan State Oil
(PSO). The strategic integration of all private oil enterprises into one single
megacorporation was considered the pivotal success of the Nationalization Programme
of Pakistan Peoples Party.
Since then, the PSO has been under the directives of government-ownership and
proposals have been rebuffed to privatization process have been rebuffed. From 1999
to 2004, the PSO had undergone radical changes, both internal and external and has
emerged with a new look and as a market presiding entity with a long term vision. The
PSO is the only public sector entity in Pakistan that has been competing effectively with
three foreign multinationals, Shell, Caltex and Total.
A typical PSO station in Pakistan
The PSO is currently enjoying over 73% share of Black Oil market and 59% share of
White Oil market. It is engaged in import, storage, distribution and marketing of various
POL products including mogas, high speed diesel (HSD), fuel oil, jet fuel, kerosene,
liquefied petroleum gas (LPG), compressed natural gas (CNG) and petrochemicals.
PSO also enjoys around 35% market participation in lubricants and is
blending/marketing Castrol brands, in addition to a wide array of its own.
It is considered as one of the most successful mergers in the history of Pakistan. The
megacorporation has retail coverage of over 3,800 outlets, representing 80%
participation in total industry network. The company has been the winner of Karachi
Stock Exchange top companies award for many years and is a member of World
Economic Forum. The PSO serves a wide range of customers throughout Pakistan
including retail, industrial, aviation, marine and government/defense sectors. The PSO
has been meeting the countrys fuel needs by merging sound business sense with
national obligation.







BOARD OF
DIRECTORS
MANAGING
DIRECTOR
MDS
SECRETARIAT
INTERNAL AUDIT
PURIFICATION
AND
TRANSMISSION
DIVISION
DISTRIBUTION
DIVISION
ENGINEERING
SERVICE
DIVISION
KARACHI
PLANNING &
DEVELOPMENT
PURIFICATION
TRANSMISSION
COMPRESSION
SINDH
(EXCL
KARACHI)
CONSTR
UCTION
BALOCHISTA
N
SERVICES

INFORMATION

LEGAL
SERVICES
EXTERNAL
RELATIONS
PROCUREMENT
& INVENTORY
MANAGEMENT
CONSUMER
SERVICE
PRIVITIZA-
TION
TREASURY

BILLING
ADMININIS-
TRATIVE
SERVICES

BUDGET
SALES
HUMAN
RESOURCE
ACCOUNTS
COMMERCIAL
DIVISION
MANAGEMENT
SERVICE
DIVISION
FINANCE
AND
MATERIAL
DIVISION
MEASUREMENT &
METER
MANUFACTURING
SAFETY,
HEALTH &
ENVIRONMENT
ORGANIZATIONAL CHART OF PSO
3. VISION AND MISSION STATEMENTS
3.1. Vision Statement
To excel in delivering value to customers as an innovative and dynamic energy
company that gets to the future first.

Proposed Vision Statement
To be leading company in delivering dynamic and innovative value to energy
customers.

3.2. Mission Statement
We are committed to leadership in energy market through competitive advantage in
providing the highest quality petroleum products and services to our customers, based
on:
Professionally trained, high quality, motivated workforce, working as a team in
an environment, which recognizes and rewards performance, innovation and
creativity, and provides for personal growth and development
Lowest cost operations and assured access to long-term and cost effective
supply sources
Sustained growth in earnings in real terms
Highly ethical, safe environment friendly and socially responsible business
practices











Mission Statement Analysis
There are nine essential components of Mission Statement of any organization. We will
be analyzing the mission statement of the Pakistan State Oil to see if it has these
components.
Component of Mission
statement
Pakistan State Oil
Customers our customers based on .... The term is
quite vague and it does not identify the target
customers of the company.
Products or Services providing the high quality petroleum
products and services to .... This component is
correctly defined in the mission statement
Markets The geographic market is not specified in the
mission statement.
Technology This component is not specified in the mission
statement of PSO.
Concern for Survival, growth and
profitability
Sustained growth in earnings in real terms.
This component is specified in the mission
statement.
Philosophy This component is not specified in the mission
statement.
Self-Concept We are committed to leadership in the energy
market through a competitive advantage in
providing This component is defined in the
mission statement.
Concern for Employees A professionally trained, highly qualified. For
personal growth and development. This
component is specified in the mission
statement.

Concern for Public Image Highly ethical, safe, environment-friendly and
socially responsible business practices. This
component is specified in the mission
statement.





Proposed Mission Statement
We are committed to leadership in the energy market of Pakistan through a competitive
advantage in providing the highest quality petroleum products and services to our retail
and industrial customers based on:
A professionally trained, high-quality, motivated workforce that works as a team
in an environment which recognizes and rewards performance, innovation and
creativity, and provides for personal growth and development.
Excellence in our core activities and a passion for satisfying our customers
needs in terms of total quality management.
Innovative and technologically advanced systems and procedures.
The lowest-cost operations and assured access to long-term and cost-effective
supply sources.
Sustained growth in earnings in real terms.
Achieving higher collective and individual goals through teamwork
Highly ethical, safe, environment-friendly and socially responsible business
practices.













4. INTERNAL AND EXTERANL ANALYSIS:
4.1 IFE (Internal Audit):
STRENGTHS weight rating weighted score
Brand name 0.03 4 0.12
Nationwide expansion 0.02 4 0.08
42% of petrol business 0.04 3 0.12
Product lines 0.02 3 0.06
Technology 0.03 4 0.12
Transportation system 0.03 4 0.12
HR practices 0.025 4 0.1
Employee orientation 0.03 4 0.12
Employee incentives 0.03 3 0.09
Trained Employees 0.02 3 0.06
Market Share 0.03 3 0.09
Largest retailer 0.03 3 0.09
Sole provider of Furnace Oil
to Power Companies
0.02 3 0.06
ISO certified Management
Information System
0.02 3 0.06
R & D 0.03 3 0.09
Largest market share in
aviation business
0.06 3 0.18
Customer Loyalty 0.02 3 0.06
WEAKNESSES
Low prices 0.065 1 0.065
International market share 0.03 2 0.06
Marketing not rigorously 0.025 2 0.05
Subsidiary charges 0.1 2 0.2
Franchise network 0.1 2 0.2
Customer relationship
management
0.05 1 0.05
Environment pollution 0.10 2 0.20
Decision power 0.02 2 0.04
Labor healthy and safety 0.02 2 0.04
Wastage management 0.025 2 0.05
Total 1 2.575

Interpretation:
Each factor indicate a weakness (rating=1), average (rating=2), above average
(rating=3) and Good (rating=4).
Overall PSO receives a 2.575 total weighted score, which on a 1-to-4 is exactly
average, indicating there is definitely room for improvement in strategies, policies and
procedures.
4.2 EFE (External Audit):
OPPORTUNITIES weight rating weighted score
Largest energy consuming
market
0.15 4 0.6
CNG Consumers largest chain 0.05 4 0.2
Increasing demand of energy 0.02 3 0.06
Oil Industry deregulations 0.01 3 0.03
Other sources of energy 0.15 4 0.6
Growing number of Cars 0.02 4 0.08
Corporate Social
Responsibilities
0.02 4 0.08
THREATS
Circulation debt 0.12 1 0.12
Unreliable suppliers 0.04 2 0.08
Devaluation of Rupee value 0.15 2 0.3
Decline in white oil products 0.05 2 0.1
Scarcity of CNG 0.05 2 0.1
Forward integration of other
competitive
0.05 1 0.05
Terrorism attack 0.10 2 0.20
Laws and regulations of
Green environment
0.02 2 0.04
Total 1 2.64

Interpretation:
Each factor indicate a weakness (rating=1), average (rating=2), above average
(rating=3) and Good (rating=4).
Overall PSO receives a 2.64 total weighted score, which on a 1-to-4 is exactly average,
indicating company should use all the opportunities in order to get more market share in
the energy market but exploring new opportunities and taking precaution steps to avoid
the companys threats.


5. COMPETITIVE PROFILE MATRIX CPM



PSO SHELL ATTOCK
PETROLEUM
Critical Success
Factors
Wts Rating W.
Score
Rating W.
Score
Rating W.
Score
Market Share .15 3 0.45 4 0.6 2 0.3
Product Quality .15 3 0.45 3 0.45 2 0.3
Customer Service .10 2 0.2 3 0.3 2 0.2
Customer Loyalty .10 3 0.3 4 0.4 2 0.2
Storage Capacity .10 4 0.4 4 0.4 3 0.3
Social
Responsibility
.08 4 0.32 4 0.32 1 0.08
Environmental
Issues
.07 3 0.21 4 0.28 2 0.14
Marketing &
Advertisement
.1 3 0.3 4 0.4 1 0.1
Profit Margins .1 3 0.3 3 0.3 3 0.3
Number of Outlets .05 3 0.15 3 0.15 2 0.1
Total 1.00 3.08 3.6 2.02

Interpretation:
The company performance is much better among the competitors through CPM we
analysis that company performed much better than Attock petroleum but still follow
market leader strategy in order to compete and get more market shares







STRATEGY FORMULATION

6. TOWS ANALYSIS MATRIX:
STRENGTHS:
Brand name
Nationwide expansion
42% of petrol business
Product lines
Technology
Transportation system
HR practices
Employee orientation
Employee incentives
Trained Employees
Market Share
Largest retailer
Sole provider of Furnace Oil to Power
Companies
ISO certified Management Information System
R & D
Largest market share in aviation business
Customer Loyalty
WEAKNESSES:
Low prices
International market share
Marketing not rigorously
Subsidiary charges
Franchise network
Customer relationship management
Environment pollution
Decision power
Labor healthy and safety
Wastage management
OPPORTUNITIES:
Largest energy consuming market
CNG Consumers largest chain
Increasing demand of energy
Oil Industry deregulations
Other sources of energy
Growing number of Cars
Corporate Social Responsibilities
THREATS:
Circulation debt
Unreliable suppliers
Devaluation of Rupee value
Decline in white oil products
Scarcity of CNG
Forward integration of other competitive
Terrorism attack
Laws and regulations of Green environment

SO STRATEGIES:
Use the tracking system feature to capture the logistics market. (S9, O11)
Use the various cards to increase the customer loyalty. (S6, O2)
Use the dedicated staff to gain edge in the construction and other
infrastructure.(S7, O8)




WO STRATEGIES:
Use the loyal customers to market and advertise the company.(W3, O2)
Turn the company focus from only fuel sector and gather the lubricant market as
well.(W2, O5)
Use the growing number of the stations to increase customer relationship.(W1,
W9, 03)

ST STRATEGIES:
Use the law enforcing contacts to put an end to the smuggling of oil and other
lubricants. (S1, T8)
Use the countrywide storage network to buy oil at bulk prices in order to escape
the oil crisis. (S6, T10)
Use the large customer base and quality of products to put barriers for other
OMCs entering the market such as Bakri, OOTC, HASCOL, Attock & Admore.
(S9, T11)

WT STRATEGIES:
Prepare the employees in order to retain customers or else other competitors will
take over the market. (W1, O11)
Improve the distribution network to counter the low prices of the local blenders.
(W5, T6)
Transfer the focus from only the fuel oil market and cover other lubricants in
order to make them more competitive with other brands.(W2, T9)






IE (Internal & External Matrix):

THE IFE
Total weighted Score
Strong
3.0-4.0
Average
2.0-2.99
Low
1.0-1.99
High
3.0-4.0

Medium
2.0-2.99

Low
1.0-1.99


Interpretation:
The company has a combined score of 2.575 & 2.64 from the IFE EFE matrixes which
mean that the company lies in the high external and medium internal factor. From this
the company is suggested to focus on the internal factors and its competitive advantage
and try to put barriers for any upcoming competitors.










T
H
E

E
F
E

T
O
T
A
L

W
E
I
G
H
T
E
D

S
C
O
R
E
S



7. SPACE MATRIX:
Financial Strength (FS)
Earnings Per Share 3.0
Inventory Turnover 2.0
5.0
Industry Strength (IS)
Growth Potential 3.0
Financial Stability 4.0
7.0
Environmental Stability (ES)
Rate of Inflation -3.0
Technological Changes -2.0
-5.0
Competitive advantage (CA)
Control over suppliers and distributors -3.0
Market Share -5.0
-8.0
Industry Strength Average is: 7.0/2 = 3.5 Competitive Advantage Average is: -5.0/2 = -2.5
Financial Strength Average is: 5.0/2 = 2.5 Environmental Stability Average is: -8.0/2 = -4

Directional Vector Coordinates:
x-axis = IS + CA = 3.5 2.5= 1 y-axis = FS + ES = 2.5 4 = -1.5

Competitive
Strategies

Interpretation:
The graph shows that company falls in 4
th
Quadrant of SPACE Matrix which indicates
that PSO should not ignore environmental stability while making strategies. Company
should follow competitive strategies in which it includes integration and intensive
strategies.

8. BCG MATRIX:

HIGH

Interpretation:
According to BCG Matrix, PSO use intensive and integration strategies for their product
in order to get more market share as well as higher growth rate. Company can use
strategies such as Backward Integration, Forward Integration, Horizontal Integration,
Market Penetration, Market Development and Product Development.
STAR QUESTION MARK
CASH COW DOG
BCG
FURNACE
OIL
LIGHT
DIESEL
OIL
LUBRIC
ANT
PETROL
AND
DIESEL
LOW
HIGH
LOW

9. GRAND STRATEGY MATRIX:


Rapid Market Share



Weak Strong
Competitive Competitive
Position Position




Slow Market Share
Interpretation:
On the basis of Grand Matrix PSO lies in 1
st
Quadrant as PSO have rapid growing
market in Oil and energy industry secondly PSO have strong competitive position in
industry. Company can use strategies such as Backward Integration, Forward
Integration, Horizontal Integration, Market Penetration, Market Development, Product
Development and related Diversification.






10. DECISION MATRIX:

Generic
Strategies
SPACE
Matrix
Grand Strategy
Matrix
BCG
Matrix
IE Matrix Total
Forward
Integration
Y Y Y Y 4
Backward
Integration
Y Y Y Y 4
Horizontal
Integration
Y Y Y Y 4
Market
Penetration
Y Y Y Y 4
Market
Development
Y Y Y Y 4
Product
Development
Y Y Y Y 4
Concentric
Diversification
N Y N N 1
Conglomerate
Diversification
N N N N 0
Horizontal
Diversification
N N N N 0
Joint Venture N N N N 0
Retrenchment N N N N 0
Divestiture N N N N 0
Liquidation N N N N 0

Interpretation:
From the analysis of Decision Matrix, PSO must follow the integration and intensive
strategies. It was also observed through decision matrix that concentric diversification
strategy is not recommended.







Strategy A
In this strategy, PSO should use backward integration as company has to overcome the
debt and make its financial position stronger.
Purchase the majority of share of Pakistan refinery oil
Operation reengineering Process
Oil reserved by introducing new oil refinery
Government policies and regulation work out for it.
Strategy B
In this strategy, PSO should use Market penetration strategies
Aggressive marketing
Introducing new CNG along with white oil in existing
Focus on lubricant products in order to improve market shares
Strategy C
In this strategy, PSO should use market development strategies
Introduce new oil and gas station in new areas of Pakistan
Research development
Introduce more energy resources to the public
For respective strategies evaluation we are going to develop Qualitative Strategic
Planning Matrix








11. QUALITATIVE STRATEGIC PLANNING MATRIX
Key Factors Strategy A Strategy B Strategy C
Weight AS TAS AS TAS AS TAS
OPPORTUNITIES
Largest energy
consuming market
0.15 3 0.45 2 0.3 4 0.6
CNG Consumers
largest chain
0.05 4 0.2 3 0.15 3 0.15
Increasing demand of
energy
0.02 3 0.06 2 0.04 4 0.08
Oil Industry
deregulations
0.01 4 0.04 2 0.02 4 0.04
Other sources of
energy
0.15 2 0.3 3 0.45 4 0.6
Growing number of
Cars
0.02 3 0.06 2 0.04 4 0.08
Corporate Social
Responsibilities
0.02 2 0.04 3 0.06 3

0.06
THREATS
Circulation debt 0.12 3 0.36 4 0.48 4 0.48
Unreliable suppliers 0.04 4 0.16 2 0.08 3 0.12
Devaluation of Rupee
value
0.15 3 0.45 3 0.45 3 0.45
Decline in white oil
products
0.05 2 0.1 2 0.1 3 0.15
Scarcity of CNG 0.05 4 0.25 3 0.15 3 0.15
Forward integration of
other competitive
0.05 3 0.15 2 0.1 3 0.15
Terrorism attack 0.10 2 0.2 3 0.3 4 0.4
Laws and regulations
of Green environment
0.02 4 0.08 2 0.04 3 0.06
STRENGTHS
Brand name 0.03 4 0.12 2 0.06 3 0.09
Nationwide
expansion
0.02 3 0.06 3 0.06 4 0.08
42% of petrol
business
0.04 4 0.16 3 0.12 3 0.12
Product lines 0.02 3 0.06 2 0.04 3 0.06
Technology 0.03 3 0.09 2 0.06 4 0.12
Transportation
system
0.03 3 0.09 2 0.18 4 0.12
HR practices 0.025 3 0.075 3 0.075 3 0.075
Employee orientation 0.03 2 0.06 2 0.06 4 0.12
Employee incentives 0.03 3 0.09 3 0.09 4 0.12
Trained Employees 0.02 3 0.06 2 0.04 4 0.08
Market Share 0.03 3 0.09 3 0.09 4 0.12
Largest retailer 0.03 2 0.06 3 0.09 3 0.09
Sole provider of
Furnace Oil to Power
Companies
0.02 3 0.06 4 0.08 4 0.08
ISO certified
Management
Information System
0.02 4 0.08 4 0.08 3 0.06
R & D 0.03 3 0.09 3 0.18 3 0.09
Largest market share
in aviation business
0.06 4 0.24 4 0.24 4 0.24
Customer Loyalty 0.02 4 0.08 3 0.06 3 0.06
WEAKNESSES
Low prices 0.065 4 0.26 3 0.195 3 0.195
International market
share
0.03 3 0.09 2 0.06 4 0.12
Marketing not
rigorously
0.025 3 0.075 3 0.075 2 0.05
Subsidiary charges 0.1 3 0.3 4 0.4 2 0.2
Franchise network 0.1 2 0.2 3 0.3 3 0.3
Customer relationship
management
0.05 3 0.15 2 0.1 2 0.1
Environment pollution 0.10 4 0.4 3 0.3 3 0.3
Decision power 0.02 4 0.08 4 0.08 2 0.04
Labor healthy and
safety
0.02 3 0.06 3 0.12 2 0.04
Wastage
management
0.025 3 0.075 2 0.5 3 0.75
Total 2 6.965 5.97 7.39

Strategy Selection:
Through this matrix we suggest PSO to use strategy C as through this company will
able to get more competitive advantage as well as market share. Strategy C is the most
successful strategy which company should adopt as it shows growth potential for the
company by Introducing new oil and gas station in new areas of Pakistan exploring
opportunities for expansion. Through R and D PSO will able to introduce new energy
resources having less cost as the demand of energy increases with the time. Its a great
chance for a company to introduce new product in the market.





12. DISCUSSION AND CONCLUSION:
PSO is one of the leading companies in oil and energy industry. From the past few
years, the performance of the company is also getting better. For competing in the
industry PSO should know about its internal strengths and weaknesses and their
external available opportunities and Threats. PSO develop strategies in keeping
customers demand and other factors that directly or indirectly influence company
decision. Environmental stability is the most observing area for PSO while making and
implementing strategy. We suggest that PSO should follow market development
strategy in order to get more profit margins and become number 1 in the respective
industry. Other strategies such as backward integration will not be recommended
because of the higher debt and government policies and pressure group involvement.
Other area such as lubricant sectors need to be focus as PSO is not performing well in
that market. Lubricant Products should be improved as well as awareness should be
created to the customers through marketing. PSO lacks its interest in this area. This will
be new opportunity for the company to get more customers from this market. PSO
should make strategies for this as well.
Some of the recommendations and suggestions will be focused in this study.
1. PSO should improve the quality of the services that was offered at the stations.
2. Proper Marketing and advertisement of PSO product especially lubricant.
3. Target more customers through introducing new energy products.









13. BIBLIOGRAPHY AND REFERENCES:
http://www.psopk.com/
http://en.wikipedia.org/wiki/Pakistan_State_Oil
http://www3.psocl.com/
http://www.brecorder.com/brief-recordings/0:/1243740:pakistan-state-oil/
http://download-reports.blogspot.com/2009/10/marketing-report-on-pakistan-state-oil.html
http://www.slideshare.net/frqali/pakistan-state-oilpresentation
http://www.pakinvestorsguide.com/index.php?topic=221.0
http://www.brecorder.com/company-news/235/1189969/
http://privatisation.gov.pk/PDF-Files/PSO%20website%20material.pdf
http://pkfinance.info/kse/stock/pso