Hindustan Petroleum Corporation Limited (HPCL)

WAC Report

Submitted by:
Shubham Siddhant

281105

FMG-28

Section B
Case Synopsis:

 Founded in 1952 with the incorporation of Standard Vacuum Refining Company of India
Limited, it came into existence with the merger and takeover of erstwhile ESSO Standard
and Lube India Limited
 Year 1995 marked the time when HPCL was partially privatized when the government
sold 49% of its share to the private investors
 Post privatization of HPCL, the top management decided to go away with „public system
mentality‟, thus starting „vision workshops‟ to improve internal communication
 Over emphasis on internal communication causing vision fatigue
 Vision presented by the chairman in the year 2010 „to become number 1‟ came as a shock
to the employees as they only vied for 2nd position of Bharat Petroleum
 Addressing the problem and SWOT Analysis of HPCL
 Generating alternatives on the basis of the following decision criteria
1. Increase in market share
2. Feasibility
3. Cost
 Through evaluation of the alternatives generated in terms of cost, efficiency, acceptability
and predicted outcome
 Selecting the best alternative and its implementation

Situation Analysis:

The creation of Hindustan Petroleum Corporation Limited (HPCL) dates back to the year 1952
with the incorporation of Standard Vacuum Refining Company of India Limited. Later on in the
year 1962, it was changed into ESSO Standard Refining Company of India Limited. 1974,
however, marks the year when Government of India nationalized HPCL by merger and takeover
of erstwhile ESSO Standard and Lube India Limited. In the year 1991, the Government of India
decided to adopt the policy of Liberalization, Privatization and Globalization (LPG), and by the
year 1995, the HPCL was partially privatized after the Government of India sold 49% of its share
to private investors.

As the end of 20th Century approached, the government pruned more and more of the regulatory
structure that limited the competition among the three major companies; Indian Oil, Bharat
Petroleum and HPCL. The Government also allowed the private concerns to enter into the
energy market following which, companies like ESSAR Oil, Shell and Reliance Petroleum
started making their presence in the Indian Market.

This ensued HPCL‟s commitment to achieve change through internal communication and bring
about a paradigm shift in the organizational culture that involved creating a new strategic and
cultural vision for the company. The top management realized that the employees need to
castaway the „public system mentality‟. In order to remain competitive, they will have to become
more and more customer centric. They believed that they need to go to the customers rather than
waiting for the customers to come to them. So the best way to do so was to first go to the
employees of HPCL. They were needed to get involved directly and thoroughly in the task of
changing the mentality within which they had long operated. Thus enter the company‟s effort of
improving internal employee communication.

The management recruited employees throughout the organization from every department to
participate in a series of “vision workshops”, which was a part of a broad initiative, called project
ACE (Achieving Continuous Excellence). Initially, not every employee was able to participate in
these workshops, but Vision 2006 ensured that employees from all ranks and from every
business unit have their share of involvement. Employees, who earlier used to take orders from
the seniors, now offered their own opinions and suggestions as to what can be the future course
of action of the company.

This approach helped in promoting trust and collegiality among employees and familiarized
them with the aspirational style of thinking that is required in the vision making process. There
was a feeling of self-realization among the employees that their personal aspirations are aligned
with the growth and development of the company. Each vision statement featured several key
items including “customer orientation”, “work environment”, and “core values”. Interestingly,
the vision statements that were coming out from both top management and unionized employees
were almost the same. The most surprising point was when the union leaders of HPCL said that
they envision their company to be „Global‟. It startled the top management as it wasn‟t in their
vision statement. The people at large working in the company wanted the vision to be more
broad-based. They did not want their company to only be a „petroleum company‟ rather they
wanted HPCL as an „energy company‟.

Problem Identification and Problem Statement:

The vision workshop drastically improved the internal organizational culture and was successful
in changing the „public system mentality‟ of the employees. The output of organizational
communication was Intimacy, Interaction, Inclusiveness and Internationality among the
employees

However, the over emphasis on internal communication caused vision fatigue within the
organization. The company did not cater to the external stake holders of the company. It did not
tackle the issue of external communication. Whatever they improvised within, all of it came from
the employees of the company. The management did not take into consideration of the views of
the public or consumers in general.

Analysis of the problem and SWOT Analysis:

The above problem statement clearly states that though the top management of HPCL decided to
become more customer oriented, they were partially able to fulfill their goal. They aimed to
narrow the distance between the company and the customers by first narrowing the distance
between itself (HPCL) and the employees, in which they were successful. They took inputs from
every person form every department regarding everything that can be improved. This helped
HPCL in big ways. It was able to capture certain amount of market share of Bharat Petroleum
(see Exhibit 1). However, it still lagged far behind the market leader Indian Oil. In the year
2010, when the chairman called to aim for the „top spot‟, it came as a shock to the employees.
Although HPCL witnessed significant growth in past years and had long vied the second position
held by Bharat Petroleum, but its employees never thought of becoming number one.

SWOT Analysis

Strengths:

 Hindustan Petroleum operates the largest Lube Refinery in India

 Large product portfolio including fuel, lubricants, natural gas etc.
 Strong human resource, more than 11000 employees
 Financial stability as it is backed by the Indian Government

Weaknesses:

 Government intervention within the management disrupting efficiency of operations

 Environmental hazards from wastes

Opportunities:

 Increasing demand for natural gas

 Developing ethanol as a substitute for petroleum
 Focus on international mergers and acquisitions for expansion
 Discovering oil wells with the help of ONGC

Threats:

 Government regulations effecting profitability

 Tough competition from private as well as public players
 Fluctuating crude prices

Generating Alternatives:

The alternatives would be based on the following Decision criteria:

 Increase in market share

 Feasibility
 Cost
Alternatives:

1. Opening of retail outlets, restaurant chains, ATMs, and Motels alongside the expressway
petrol stations. It will create a differentiating factor for the company as people would
prefer to visit HP pumps more often for additional benefits. It can also merge or tie-up
with any international oil company like Saudi Aramco, to enter into international market
as well as building up a strong goodwill within the country.
2. Focus on the cooking fuel segment. HPCL can focus on catering to this lower segment of
the society under the flagship programme of the government PRADHAN MANTRI
UJJWALA YOJANA (PMUY) under which every BPL household is getting subsidized
LPG cylinder through Direct Benefit Transfer (DBT).
3. It can tie-up with several national and international aviation companies as well as Indian
airport to provide them with aviation fuel at a lower rate than its competitors, thus
creating a substantial market share in this sector.

Assumptions:

I. The infrastructural projects within the country are growing at an exponential

rate. Construction of highways, expressways, tier-2 and tier-3 airports are
underway, thus creating a high demand for energy. If HPCL can capitalize this
opportunity, then there is a high possibility it can attain the second position
dethroning Bharat Petroleum. It can also devote a substantial amount in R&D
of ethanol as a substitute for petrol and diesel.
II. PRADHAN MANTRI UJJWALA YOJANA (PMUY) has gone a long way in
reducing the dependency on timber and coal for cooking purposes of the BPL
section. There has been a tremendous effort from the part of the government to
reduce pollution and deforestation. HPCL can help the government big way to
achieve its objectives by catering to the lower segment of the society.
III. India is world‟s third largest aviation market. Indian Oil is the market leader in
this segment as well. However, since the market is dynamic and growing,
HPCL can initiate market expansion strategies to establish itself as a major
challenger to Indian Oil.
Evaluation of Alternatives & Preferred Alternative with Rationale:

Alternative 1

It will need a huge amount of capital investments but the returns are also expected to be huge. As
far as the response of the customers is concerned, there is a high possibility that the consumers
are going to respond positively. This alternative will make HPCL a „pure goods‟ category brand.
There will be an additional aspect of service which will pull consumers towards HPCL petrol
stations specifically whenever they need fuel. The tie up with foreign energy giants will likely
enhance the goodwill of HPCL among public and help them in creating a niche among the
consumers. R&D for ethanol as a substitute for petrol and diesel can slingshot the position and
market share of the company in unexpected ways. The government has recently announced its
plan to curb reduction and willingness to adopt ethanol as an alternative for petrol and diesel. If
HPCL gets success in producing ethanol in bulk, it is expected to grow in leaps and bounds.

Alternative 2

Cost wise, this alternative will require much less investment, but the returns cannot be accurately
predicted. This will help HPCL to penetrate into the new market but we cannot be oblivious to
the fact that the risk of loss will also increase in case the Government decides to stop DBT and
asks the company to provide LPGs to the poor in subsidized form temporarily.

Alternative 3

This alternative seems less capital intensive as compared to the first one. But the returns will also
be limited considering the fact that it will focus on only one set of consumers i.e., aviation. India
is set to become the 2nd largest aviation market in the world by the year 2024, still the scope of
growth and expansion would be limited until and unless HPCL finds ways for global expansion
in this sector.

Preferred Alternative

Preferred alternative, according to me would be Alternative 1. Although this alternative seems

capital intensive and will probably require more time, but it guarantees the holistic development
and growth of HPCL. This alternative synchronizes with the vision of HPCL to become numero
uno in the energy sector.
Implementation Plan:

Alternative 1 will require a substantial amount of time and money, so a proper market research
followed by adept planning is the key to success. The company will have to take all its
employees, whether management or unionized, into confidence and motivate them to be prepared
to work harder. A thorough market research must be followed by a proper analysis of crude oil
exporting markets. The management will have to be aware of and take corrective measures of
fluctuating crude oil markets as it can severely hamper the profitability of the company, thus
effecting its operations. They will have to devote a substantial amount of their net revenue to the
R&D department and venture into oil exploration with companies like „ONGC Overseas‟.

References:
 https://embapro.com/frontpage/swotcase/9050-hpcl-hpcl-s
 https://management.ind.in/forum/hindustan-petroleum-swot-analysis-310595.html
 https://www.mordorintelligence.com/industry-reports/jet-fuel-market
 https://economictimes.indiatimes.com/industry/energy/oil-gas/india-becomes-worlds-
2nd-largest-lpg-consumer-after-governments-ujjawla-push/articleshow/67849012.cms
 https://www.iocl.com/Products/AviationTurbineFuel.aspx
 https://www.sciencedirect.com/science/article/pii/S0921344918300120
 https://www.business-standard.com/article/economy-policy/india-to-achieve-7-2-of-
ethanol-blending-with-petrol-this-season-119040300816_1.html
 https://www.hindustanpetroleum.com/LPGHome
 https://www.hindustanpetroleum.com/
Exhibit 1: Market share of HPCL in selected product categories

50%

40%

30% HPCL
IOC
20%
BPC
10%

0%
2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10