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HISTORY OF OIL INDUSTRY IN PAKISTAN

pendence there were no more than few companies, it was the case with oil as no oil refinery in Pakistan except a very small at Rawalpindi. At that time ent of Pakistan was 0.4 million tons. There were four foreign and one local company in Pakistan these were: BURMAH OIL BURMAH OIL CALTEX ESSO ATTOCK OIL Market petroleum products. Oil extracting company. Market petroleum. Marketing. Oil exploration company.

1952 ered natural gas at Sui in Baluchistan named as Sui gas. Before partition

oal, but at the time of partition India refused to provide coal, so railways has to convert on diesel oil. 1955 The consumption of oil shot up by 3 million tons. 1960 ast and West Pakistan shot up by 4.2 million tons OGDC was established. ked the foreign companies to set up a refinery, they agreed with following conditions: Karachi .5 million tons. rude to refinery only. ment also permitted a Pakistani company, Pakistan National Oil. 1962 ry came into being. It only produced petroleum but not lubricant. So PNO nt at Korangi (Karachi) for lubricating oil with a capacity of 0.5 million tons. 1964 Dawood petroleum was established. 1965 er 1965 India attacked Pakistan so the oil reserves came to lowest and the foreign companies to bring crude refined and provide the army but they s asked to do so, it brought the oil and the need of army was fulfilled. These panies annoyed the government and it turned against them.

1970 1% of the shareholding was transferred to Pakistani invertors. The name of nged to Pakistan Burmah shell (PBS) limited. The shell and Burmah groups of retained the remaining 49% in equal proportions. 1971 broke between Pakistan and India. All crude oil was imported from other storage was concentrated at Kemari Terminal Karachi. The enemy blasted int. So the need to spread the storage points in the whole country was felt. companies were asked to do so but they refused because of cost, then government decided to establish storage places itself. 1973 rgy crises through the world. Almost all of the countries nationalized the oil es. Everyone realized that petroleum products were very essential. 1974 akistan storage Development Corporation was established. 1976 found in December 1976 as a result of merger of here oil companies: Oil. any.

1993 1993, as a result of a decision by Burmah oil to divest in Pakistan and the

licy of the government, the shell petroleum company bought the shares of pany and 2% shares from the market and become the major shareholder in the shell Pakistan limited (SPL).

INTRODUCTION OF SHELL PAKISTAN Ltd.

ional company and in Pakistan it is operating as a public limited company by akistan Ltd. brand name with a 100 year history in this region, infect the company is still fuel storage tank from 1899. However, the documented history of the Royal the Indo-Pak subcontinent dates back to 1903 when a partnership was e shell transport and trading company and the Royal Dutch petroleum y petroleum products in Asia. e their distribution capabilities, the marketing interests of the Royal and Burmah Oil Company by limited in India were merged and the Burmah stribution and storage company of India was born. After the independence 7, the name was changed to the Burmah shell oil distribution company of of the shareholding was transferred to Pakistani invertors. The name of ged to Pakistan Burmah shell (PBS) limited. The shell and Burmah groups aining 49% in equal proportions. In February of 1993, as a result of a h oil to divest in Pakistan and the deregulation policy of the government, company bought the shares of Burmah Oil Company and 2% shares from come the major shareholder in the shell Pakistan limited (SPL).

hange programme, which will transform the company by the turn of the r implications for the petroleum industry in Pakistan. qually uncompromising, has been the change in the companys culture to which shell internationally believes will bring commercial success through a e customers. GAN/MISSION of Shell. JECTIVE n retailing, providing better facilities to customers, clean petrol pumps ational standard petrol filling stations, good advertising campaigns and mini

L rformer Of First Choice.

business environment, minimizing economic losses, and business arding the groups integrity and reputations.

mpany is to position itself as the preferred oil company in Pakistan, leading mitment to safety, customer service, quality and environmental protection. SHELL oration forms a comprehensive master plan stating how the corporation will n and objectives. It maximizes competitive advantage and minimizes antage. ell is to grow internally by expanding its operations through acquisition and . ifferentiate its products from competitors in the area of quality and services.

guideline for decision-making that links the formulation of strategy with its l is to make sure that the employees throughout the firm make decisions hat support the corporations mission, objectives, and strategies. AGEMENT ase of linkage good management to how well managers craft and execute anagers design shrewd strategies but fail to carry them out well. Others trategies but execute them competently. Both performance despite unforeseeable events, potent competition, ms.

THE FIVE TASKS OF STRATEGIC MANAGEMENT ng, strategy-implementing process consists of five interrelated managerial at business the company will be in and forming a strategy vision of where eeds to be headed. the strategic vision and mission into measurable objective and performance trategy to achieve the desire results. g and executing the chosen strategy efficiently and effectively. erformance reviewing new developments, and initiating corrective g-term direction objectives.

WHY COMPANY STRATEGIES EVOLVE ning and tweaking of a company strategy. First in one department or d then in another, are quite normal. On occasion, quantum changes in for when a competitor makes a dramatic move, when technological ur or when crises strikes and managers are forced to makes a radical very quickly. Because strategy move and new action approaches are e business.

strategy forms over a period of time and then reform the number of changes urrent strategy is typically a blend of holdover approaches fresh actions potential moves in the planning stage. Except for crises situations (where ves are often made quickly to produce a substantially new strategy almost company starts - ups (where strategy exists mostly in the form of plans ns), it is common for key elements of company to emerge in bits and pieces velops. OMPANYS STRATEGY CONSIST OF? ies concern how: how to grow the business, how to satisfy customers, how vals, how to response to changing market conditions, how to manage each business, how to achieve strategic and financial objectives. STRATEGIC PLANS egic vision and mission, establishing objectives, and deciding on a strategy -setting tasks. They map out where the organization is headed, its short nge performance targets, and the competitive moves and internal action used in achieving the targeted results. Together, they constitute a strategic lan seldom anticipate all the strategically relevant events that will transpire ths. Unforeseen events, unexpected opportunities or threats, plus the up of new proposal encourages managers to modify planned actions forge ions postponing the redrafting of strategy until its time to work on next years th foolish and unnecessary. MENTATIONAL EXECUTION is to create fits between the way things are done and what it takes for execution. The stronger the fits the better the execution strategy. The most etween strategy organizational capabilities, between strategy and reward strategy and internal support system, and between strategy and the re. ementing task is easily the most compacted and time-consuming part of ent. It cut across virtually all facts of managing and must be initiated from the organization. The strategy implementers agenda for action emerges sment of what the organization must do differently and better to carry out proficiently. Each manager has to think how much internal practices deviate tegy requires and how well strategy and organizational culture already es and identified, management must supervise all the details of d apply enough pressure on the organization to convert objectives into

on the amount of internal change involved, full implementation can take everal years. MANAGEMENT IS AN ONGOING PROCESS one of the five tasks of strategic management requires constant evaluation sion whether to continue or change, a manager cannot afford distraction. ut the strategic management process is final all prior actions are subject to n as conditions in the surrounding of environment change and ideas for emerge, strategic management is a process filled with motion. Changes in ation situation, either from the inside or outside or both, fuel the need for strategic adjustments. valuating performance and initiating corrective adjustments is both the end inning of the strategic management cycle. The match of the external and ts, grant that revision in mission, objective, strategy and implementation will sooner or later. It is always incumbent on management to push for better to find ways to improve the existing strategy and how it is being executed. ternal conditions add further impetus to the need for periodic revisions in a mission. Performance adjustment objective, strategy and approaches to strategy execution. sually involve fine-tuning. But occasions for major strategic re-orientation do e prompted by significance external development and sometimes by sharply al performance. Strategy managers must stay close enough to the situation changing conditions require a strategic response and when they dont. It is ne the winds of change, recognize changes early, and initiate adjustments. F A STRATEGY APPROACH TO MANAGING ave to think strategically about their companys position and impact of s. They have to monitor the external; solution closely enough to know what anges to initiate. Simply said, fundamentals of strategic management cede

approach to managing organizations. f first-rate strategic thinking and conscious strategic management include: etter guidance to the entire organization on the crucial point of what it is and to achieve. nagers more alert to the winds of change, new opportunities and threatening nt. anagers with a rationale for evaluating competing budget requests for capital and new staff a rationale that argues strongly for steering resources y-supportive results producing areas. unify the numerous related decisions by managers across the organization. more proactive management posture and counteracting tendencies for be reactive and defensive.

EXTERNAL ENVIRONMENT f external environment following are important factors (PEST): orces s rces orces ES: -

re rapid changes of Government since poison. Each government that came ed the planning work done by the precious government. The slow to political instability but now the present government is very stable to grow roviding incentives to different industries. :consists of legislation that has been passed. This component prescribes all members of society must follow e.g. labour policy, employees social 965 Partnership Act 1932 company 1984.

CES: s 5.41 and inflation rate is very high which is 12.7. The balance of payment n is -3.5%. The employment rate is 34.94 million. RVIEW

ni Rupee e Rate (20/1/02): U.S.$1 = 60.5 rupees Product (GDP, market exchange rates, 2000E): $52.1 billion Rate (2000E): 1.8% (2001E): 2.3% 00E): 15.6% (2000E): 11.1% Balance (2000E): -$3.5 billion de Balance (2000E): -$3.0 billion bt (2000E): $38.5 billion rtners: United States, Japan, Germany, United Kingdom, and Saudi Arabia ducts: Raw cotton and textiles; rice; leather manufactures ducts: Petroleum; machinery and transport

L FORCES: tion is increasing and social values are also changing so the demand of is also increasing. People are coming from rural areas to cities and their life re also changing. They are using modern technology like care, motor cycle t to raise the living standards of its citizens has meant that economic

largely taken precedence over environmental issues. f hazardous chemicals, vehicle emissions, and industrial activity has mber of environmental and health hazards, chief among them being water the country suffers from a lack of potable water due to industrial waste and that contaminates drinking water supplies. Poverty and high population vated, and to a certain extent, caused, these environmental problems.

L FORCES: ent regarding the technology is not very advance due to the lack of gas, because of its environmental qualities, efficiency, and ances are going to play an increasingly important role in meeting energy. ET

nt

high class, low class and also middle class, because every class is used tion.

Pakistan refinery, National refinery and Attock refinery and Dhodak refinery.

NENT: ly available in Pakistan because of high unemployment rate. So skilled and are available at lower wages rate. of Shell are PSO with petrol pumps and Caltex with petrol pumps. Limited operates in the Petroleum refining sector. Shell Pakistan Limited three other petroleum refiners in Asia roleum Corporation Limited inery Limited ef & Petrochemicals Limited ONMENT n Structure n Culture STRUCTURE: largest multinational organization with many product lines. Employees tend onal specialists organized according to market/product distinction. tan is divided into five functional areas i.e. Retail, Commercial, Operations, d Human Resources. nt attempts to find synergy among divisional activities through the use of and horizontal linkages. f major impact result from strategic plans made by organizational

CULTURE: he key ingredient and commitment to quality is share by executives and

izational Culture of the Shell is based on commitment of the top nt for quality, employees, local community, innovation, and performance.

ORGANIZATIONAL RESOURCES ed 1404 petrol filing station in different areas of Pakistan. But now the to reduce the number of petrol filling station because they do not need that se monthly sales are less than 500000 liters. Up till now about 50 pumps eferent cities of Pakistan. OTS IN PAKISTAN epots in different areas of Pakistan. URCES

development ces

stem

istribution channels. Their market size is very large. Therefore, marketing nt and their main objective is satisfying the customer and people have the RSHIP DUE TO INNOVATION d to be the market leader in innovation. It was the first company to get legal e Mini-Market. It was the first among its competitors to introduce (rainbow) erv) branded oil change facility. It provides suggestive literatures to its unching a new product such as Helix super and Helix Lubricant etc.

t company to introduce the concept of Mobile Training Unit (MTU) for the the workers and introducing quality and quantity control units, which check antity of motor gasoline at various filling stations. HE KEY TO OPPORTUNITY f technology is the key to other possible opportunities related to ves that remain stranded due to the prohibitive cost of

onths ending 6/30/01, earnings per share totaled 30.12 Pakistan re. Thus, the Price / Earnings ratio is 5.48. Earnings per share fell rom 2000. , the company's long-term debt was 63.90 million Pakistan Rupees es (i.e., all monies owed) were 6.68 billion Pakistan Rupees. The o equity ratio of the company is very low, at only 0.01. , the accounts receivable for the company were 2.45 billion s, which is equivalent to 14 days of sales. This is slightly higher of 2000, when Shell Pakistan Limited had 12 days of sales in able.
DEVELOPMENT: elopment strategy deals with product and process innovation and ll spends on research and development more than most in the other rentiate the performance of its products to its competitors. APID GROWTH: pidly since 1993 and its volume of sales has rapidly increased in all the Shells have 20.3% market share in 1996. t share of approx 21% for all petroleum products in Pakistan. Pakistan ales of 3.51 million tones of petroleum products from July 2000 to June the same period amounted to Rs.74.996 billion and profit after tax was 56 million. CES: training facility to their labour and management to create the good relation

. Shell Company also motives its employees and provides different good performance

ompany is based on continues improvement is the acknowledgment that es and knowledge can help to show production problem and contribute variances and reducing error. YSTEM: ange high-class information system that improve the productivity and In organization information may be collected, stored and synthesized in answers important operational and strategic questions. is one of the strength of the organization. It provide aid in environmental ntrolling activities, it can also used as a weapon in gaining competitive

FINANCIAL PERFORMANCE

imited reported sales of 63.63 billion Pakistan Rupees (US$1.06 scal year ending June of 2001. This represents an increase of 000, when the company's sales were 36.12 billion Pakistan Rupees.

During 2001, the company's sales increased at a faster rate than all three comparable ile Shell Pakistan Limited enjoyed a sales increase of 76.2%, the s saw smaller increases: Chennai Petroleum Corporation Limited 9.1%, National Refinery Limited increased 15.9%, and Mangalore micals Limited experienced a sales decline of 6.3%. Shell Pakistan y has 608 employees. With sales of 63.63 billion Pakistan Rupees ), this equates to sales of US$1,742,581 per employee. RISONS (FISCAL YEAR ENDING 2001)
Year Ended ited m Corporation Limited Jun 2001 Mar 2001 Jun 2001 Sales/ Sales Sales Emp (US$blns) Growth (US$) 1.059 1.442 0.572 0.577 76.2% 29.1% 15.9% -6.3% 1,742,581 817,968 553,885 N/A Largest Region Pakistan (100.0%) India (100.0%) Pakistan (100.0%) India (100.0%)

Petrochemicals Mar 2001 PERFORMANCE

this stock has performed terribly. In fiscal year 2000, the stock s 367.50 Pakistan Rupees, versus 165.15 Pakistan Rupees on s ending 1/18/02, the stock of this company was down 42.5% tan Rupees. During the past 13 weeks, the stock has fallen 8.3%.

onths ending 6/30/01, earnings per share totaled 30.12 Pakistan re. Thus, the Price / Earnings ratio is 5.48. Earnings per share fell rom 2000. currently trading at 0.09 times sales. Shell Pakistan Limited is imes book value. The company's price to book ratio is higher than comparable companies, which are trading between 0.25 and 0.97 e.

OMPANY EVALUATIONS

Date istan Limited etroleum Corporation Limited efinery Limited

Price/ Price/ 52 Wk P/E Book Sales Pr Chg 0.09 0.04 0.08 0.20 42.50% 43.31% 3.00% 21.86%

1/18/02 5.5 1.07 1/18/02 N/A 0.25 1/17/02 3.5 0.97

e Ref & Petrochemicals Limited 1/18/02 N/A 0.73

lization of this company is 5.79 billion Pakistan Rupees (US$96.42 million). s (i.e., those held by officers, directors, pension and benefit plans and s who own more than 5% of the stock) amount to over 50% of the total g: thus, it is impossible for an outsider to acquire a majority of the shares t of management and other insiders. The capitalization of the floating stock not closely held) is 2.33 billion Pakistan Rupees (US$38.83 million). s

onths ending 6/30/01, Shell Pakistan Limited paid dividends totaling

Rupees per share. Since the stock is currently trading at 165.15 s, this implies a dividend yield of 7.6%. The company has paid a traight years. e 12 month period ended 6/30/01, the Company reported earnings n Rupees per share. Thus, the company paid 41.5% of its profits as
ANALYSIS

llion Pakistan Rupees in sales reported by the company in 2001, the ld totaled 44.75 billion Pakistan Rupees, or 70.3% of sales (i.e., the 29.7% of sales). This gross profit margin is significantly better than hieved in 2000, when cost of goods sold totaled 91.1% of sales. imited's 2001 gross profit margin of 29.7% was better than all three panies (which had gross profits in 2001 between 3.9% and 5.1% of earnings before interest, taxes, depreciation and amorization 1.96 billion Pakistan Rupees, or 3.1% of sales. This EBITDA margin e company achieved in 2000, when the EBITDA margin was equal . The three comparable companies had EBITDA margins that were een 3.2% and 4.8%) than that achieved by Shell Pakistan Limited. s before extraordinary items at Shell Pakistan Limited were 1.06 Rupees, or 1.7% of sales. This profit margin is lower than the level hieved in 2000, when the profit margin was 3.6% of sales. return on equity in 2001 was 22.1%. This was significantly worse high 32.0% return the company achieved in 2000. (Extraordinary n excluded).

Y COMPARISON

any akistan Limited akistan Limited Vs. al Refinery Limited

Gross Earns Profit EBITDA bef. Year Margin Margin extra 2001 29.7% 3.1% 2000 8.9% ----- ----2001 3.9% 5.6% ----4.8% 3.2% 4.3% 1.7% 3.6% ----1.8% 2.3% -9.4%

ai Petroleum Corporation Limited 2001 5.1% lore Ref & Petrochemicals Limited 2001 4.7%

LYSIS

, the value of the company's inventory totaled 2.76 billion Pakistan the cost of goods sold was 44.75 billion Pakistan Rupees for the ny had 22 days of inventory on hand (another way to look at this is ompany turned over its inventory 16.2 times per year). In terms of er, this is an improvement over June 2000, when the company's .44 billion Pakistan Rupees, equivalent to 27 days in inventory. inventory is lower than the three comparable companies, which had een 39 and 99 days at the end of 2001.
TION

accounts receivable at Shell Pakistan Limited are lower than all le companies: Chennai Petroleum Corporation Limited had 35 days, ry Limited had 107 days, while Mangalore Ref & Petrochemicals days outstanding at the end of the fiscal year 2001.
any Pakistan Limited nal Refinery Limited LT Debt/ Days Days Year Equity AR Inv. 2001 0.01 2001 0.00 14 35 107 51 22 47 39 99

nai Petroleum Corporation Limited 2001 0.60 alore Ref & Petrochemicals Limited 2001 5.12

COMPETITOR ANALYSIS

imited operates in the Petroleum refining sector. This analysis Pakistan Limited with three other petroleum refiners in Asia:
Corporation Limited of India (2001 sales of 69.56 billion Indian

44 billion] of which 100% was Oil & gas exploration).


imited (34.33 billion Pakistan Rupees [US$571.61 million] of which

etrochemicals Limited, that is based in India (27.85 billion Indian

7.35 million] of which 100% was Petroleum products).

PAKISTAN STATE OIL

NEW SPIRIT

arketing company of Pakistan, PSO is engaged in the storage, import, arketing of petroleum products, petrochemicals, Aviation & Bunker fuels, minates the countrys fuel and energy need. Since its inception in 1976 the n meeting more than 70% of the countrys fuel needs. ts all across the country markets more than 12 million tons of fuel products work is supported by PSOs 28 storage facilities with a capacity of more than

took a major step in improving its distribution facilities by acquiring 12% m long Karachi-Mehmood kot White Oil Pipeline. olicy of providing better customer service it has embarked upon its New opment program. Equipped with the most modern facilities like electronic uto car wash, convenience stores, internet facilities and business centres rt designed stations provide greater customer confidence and a friendlier manifestation of PSOs greater customer focus a PSO 24hr PSO Customer launched where customers can lodge their queries and suggestions about ucts and services. il network PSO is playing an equally important role in the industrial sector. ves of Pakistan Railways to the giant turbines of power projects, all are its responsibilities towards the agriculture sector PSOs 700 strong agency p the farm machinery running. Further, its kerosene sales are a major or the rural and lacking gas facilities. ally strong in Aviation and Bunker Sales. PSO has been constantly ties to serve a wide range of commercial aircrafts. f eight Aviation Service Stations scattered all across the country PSO fuels ny local and international airlines. Acquisition of new Lahore Terminal hore International Airport has enabled PSO to serve the busiest corridor of flights benefiting the airlines in shape of time saving and lesser fuel burn off. g facilities at all the major ports of country fill up the ocean liners of many ating the nations international trade. provide quality lubricants, PSO has formed an alliance with world-renowned hose products are manufactured at PSOs own ISO 9000 certified facilities st quality standards for both retail and industrial sales. onship with its dealers is one of the important objectives of PSOs New . To give them a sense of participation PSO has instituted Top Dealer on Liter Awards whereby efforts of the high performing dealers are lth Safety & Environment (HSE) as the corner stone of PSOs corporate es to its commitment to environmental protection. Complete HSE ts facilities and installations is one of its major goals for the coming months rously pursued.

SWOT ANALYSIS ity control and quantity control team visit and inspect the quality and asoline of their petrol pump regularly.

ms its position as a leader in the gas and power business with a ign the world's first large scale Gas to Liquids plant. sing effective means for the promotion of its products. It is heavily g on advertisement and other promotional tactics. es in time deliver to their petrol pumps. olicies of Shell are its strengths; its incentive based policies are motivating es. ives the proper attention to their customers. ternational standard petrol pump. ing units side keeping staff up to date on a whole range of topic including tant issues of health safety and environment. e heavy budget for the promotion activities. fitted with special tamper-profit seals to ensure that only the highest quality ered to all company operation sites.

no proper shades and sitting arrangements at the filling stations because came for oil changing and car washing face difficulties in this regard. proper drainage system at filling station.

ry little empowerment of employees. eight regional retail managers who are watching the activities of petrol ll over the Pakistan that is insufficient to handle the problems.

maintained a tradition of introducing new innovation as compare to its . The example being the mobile, training unit, quality and quantity unit, Miniect, Jet was (Rianbow), oil change. Lubricants (Rumila C.D.X,) Helix that is for Shell to maintain these facilities. rceptions are changing and they prefer digital pumps. So they should eir petrol pumps. Shell also has an opportunity to enter in the nice market. trong financial position so it has opportunity to avail a new market share in ess. e market leader due to innovation so it can easily win the customer .

ling of petrol in Baluchistan form Iran is one of the greats threats to the

l makes up a large share in the market, if such practices are not prohibited it disastrous effects on sale servicing in profitable areas. arging few paisas more than their competitor. Shell is facing very stiff to PSO and Caltex. ew companies in the refinery sector.

ETING STRATEGY OF SHELL PAKISTAN LTD.

gy of shell is concentrate on its business and selected market areas. By company expands its business by upgrading petrol pumps in the country. e concentrating in the following three areas: ervice e quantity VICES: is working for customer satisfaction because customers play a very vital ity ort failure of a particular company. That is the reason that shell is basic aim to satisfy its customers and provide better and better service to rief it can be said that shell gives a strong emphasis on customer services.

OR BETTER CUSTOMER SERVICES: ion site follows the seven-point formula for providing customer service to its below: r drive in, guide him to a vacant filing unit by a neatly uniformed attendant l pump. tendant well comes to that customer from the driver side. takes the keys form the customer. After that the attendant asks to the bout the quantities of fuel. nt shows meter reading before filing the fuel to the customer.

the tank the attendant tells the customer to see the meter reading and iters, hands over the keys and takes the amount of money. sk to the customer that he would like to purchase an international high imula x. tendant cleans windscreen of the vehicle and says good-bye with smile. a customer feels that he is being given proper attention and he will again station to fill the tank of his vehicle. et Wash and preserver oil change facilities are also available at filling

the filling stations are working for 24 hours for customers. the stations, shops offer a wide range of convenience goods through the s and stores.

gy of Shell is creating a strong Brand Image of the company in the n visual terms, the installation of Shells Retail Visual Identity (RVI) makes a diate difference between shells gasoline stations and those of its tan State Oil (PSO) and Caltex. The RVI programme is massive, for the hich shell inherited through the take over, around two thirds are scheduled s RVI sites, many of them being completely redesigned from the ge tanks up. In addition, new sites are being acquired in strategic locations. being designed according to the international standards keeping in view the espects and an Excellent/Terrific out look. The purpose of this is to attract develop a strong brand image in his mind. UANTITY of the company is to set standards for reliability and honest dealing mental to the companys reputation. For the improvement of quality and points are important: ing units quantity control units

G UNITS: its visit sites, keeping staff up to date on a whole range of topics including, issues of health, safety and environment. MTU train the workers on different UANTITY CONTROL UNITS: ovation cover fuels quality assurance, an area where cynical disregard of sted by dilution of premium grades with low-cost gasoline has become so omers have given up complaining about it. Recognizing the importance to utation for delivering the right quality of fuel, shell has introduced random recast. Technicians operate what are, effectively, mobile field laboratories, y using an octane meter. This produces a result in just a few minutes, ing normal centralized laboratory facilities. l, Fuel Quality is fundamental to our reputation for honest dealing. Quantity that whether the retailers are giving the right quantity or less quantity of ers. The quantity is checked through various instruments. The quantity heck the digital pump.

SHELL OPERATIONAL STRATEGY ite with a very efficient management to improve the quality and quantity of the better customer satisfaction services. For this purpose shell follows its s, plans, and strategy and policies. nt aspect of Shells site control by the management with efficiently and

ver eipt procedure nts nd Payment procedures

ting ccount operation e operation

anagement policy

is procedure is to ensure that when a site is taken over as a company P) the working capital taken over at the site is correctly valued. The step, ken on the hand over day i.e., the first day of site operations as a COS

plies to existing dealer sites which are to be taken over as COS.

ger is responsible to ensure compliance with the procedure. D STANDARDS

taken-over company follows the following procedure for stock taking: to a target date for handing over the site which is called that hand over g-over the site, two options are available. G CAPITAL quirement at a site is determined keeping in view the sales of the site. ice of the initial fill to be sent to RSO/2 for recording and the original is to be in a separate file. ILLS ls for utilities etc. incurred by the site before the hand over date have to pay outstanding amount should be mentioned in the site take-over note and

e out-going dealer. IPT PROCEDURE

quantity and specifications of the received product match with that ordered.

plies to all company operated sites for the receipt of all products and tock as well as packed lubricants.

is responsible to ensure compliance with the procedure. D STANDARDS

hould be present at the site during the decantation of the product. n the site manager should tally the product specification with the grade should be checked for integrity and numbers matched with those on the

ipt of lubes, the site manager should check the quantity ands specification invoice with that of the indent placed. sure that the product received is not damaged or leaking. S ed bank signatories. The name of the Site manager may be included in account. However, site mangers are not authorized signatory to operate

AYMENT PROCEDURES

all products will be financed by the cash proceeds from the initial fill. ade under following Process: r fuels is the indent price and invoices must be prepared on this basis. are to be made as per arrangement with the depot/installation (COD/DOD DD). /DDs must be made out for exactly the same amount as the invoice and vour of shell Pakistan Ltd. es/DD must be handed over to the truck driver after noting the particulars of s/DD. All the copies of invoice site copy of the invoice to be retained on the ile maintained.

all products will be financed by the cash proceeds from the initial fill. ade under following Process: ld be placed on telephone at the nearest supply point. D for the exact value of the invoice should be drawn in favour of shell of d. heque/DD number and date should be noted on the invoice when precut is t the site. company has a copy of the invoice, the site manger red band copy returned driver on which all cheques details will have to be recorded.

LES

to the customers in a manner that the exposure of the company is

pany operational sites.

ility of the territory manager to ensure that all credit accounts are approved nger. edit terms and operation lies with the regional manager of the f the territory manager. the necessary credit customers and sales records in the responsibility of der the supervision of the territory manager. D STANDARDS unts can only be opened with the approval of RRMs. The customer should RRM for opening a credit account with the site. The application should ng basic details: me dress type of vehicles etc.

e default of payment by the customer the site will stop extending credit to first try to recover the credit amount form the customer. In case the t pay the balance with in the month, the balance amount will be deducted eposit and the account will be closed. send a security deposit deduction note to specify the deduction of the r a particular customer and send the amount to the site to balance off the

PRODUCT TESTING

authorized and is accounted for in daily stock. Product testing is a process uct from the nozzles for the purpose of testing that dispensers are ht quantity of the product. Since this product is not considered as the sold ccounting process needs to be in place.

ility of the site manger to ensure that all the product testing is conducted in that all the testing is properly authorized by the territory manager and in e to QCU and maintenance staff. The signatures of the concerned staff are y also be conducted by the weights and measures officials. D STANDARDS ay testing of the product it is mandatory that the measuring cylinders kept hould be vetted by the quality control unit. nt of the product withdrawn from each nozzle is noted and after the of testing the product if decanted in the tank. ssary testing should be conducted in the presence of the site manger. nsured by the site manger that the entire tested product is decanted back pective tanks. also supposed to enter the product testing amount in the SMS along with o the date, amount of product from respective nozzles and testing authority. IMPREST ACCOUNT OPERATION

Territory Managers and aware of the imprest account operating procedures. ure that the company exposure is reduced by using correct banking

rest Account procedures have been designed to ensure implementation of st operation outlined in Management Policies and Procedure Guide.

pplicable to imprest account operation and the reimbursements.

to be followed whenever, the imprest account is operated and claims for re made.

ility of the Regional Manager and the Territory Manager to ensure that the operated and claims for reimbursements are made in accordance with the n in the procedures. ND STANDARDS ccount should only be used to meet all the expenses of business nature ousekeeping, bank charges, etc. for sites are set by RSO on the recommendation of the concerned RRM. All nses of the site are detailed in the imprest approval form and the total of all es up the imprest limit of the sale. PRICE CHANGE PROCEDURE

is procedure is to ensure that the changes in the working capital status as a change of the product are recorded and reported accurately.

plies to the change of prices for all grades of fuels and lubricants sold at the

ility of the RRM to ensure that price change takes place at a COS in the esentative of shell Pakistan limited. It is the responsibility of the site manger hange in working capital value is reported correctly and accurately. The responsible for the verification of the accuracy of the above. D STANDARDS changed, the following procedure is t be applied at the COS: are notified by RSO to FNC/12 supply points and regional offices to update ingly. ned territory manger is authorized to change thee prices on COS. At the hange, the sale is temporarily stopped. er and the territory manager representative must take a dip of the storage meter readings of all dispensing units jointly. GEMENT POLICY ture of petroleum, losses being one of their inherent characteristics play an e efficiency of petroleum business. The potential of cost saving by trols and reducing the losses is considerable. ibility in the site operation is to ensure that the physical losses are kept at aximum, quantity of the product received is delivered to the customer. LOSSES ce standards are normally assessed on historical basis by comparing ffective monitoring of losses can be achieved by following way: rement and accounting for all the deliveries. on of the tank lorries, dispensers and storage tanks at retail site. afety with low risk of undetected theft. al measurement of the actual product stacks and comparison with the k stock to access the losses for a given period. the loss control performance against the targets. The targets will vary pe of the product and equipment used.

hecks to ensure compliance to procedures and performance of the

STRATEGIC OPTIONS arate aspects, which are needed consideration for development alternative e direction in which the organization may choose to develop. e methods by which the direction of development might be achieved. ion and methods are not independent of each other. Now we shall discuss ich the shell limited may choose to develop.

on etration velopment

elopment ion

company feels any danger about the survival of company; the company se of its assets. Shell is the biggest company of the world. It has a strong That is why shell does not choose such type of direction.

the company will change the way of operation but concentrate on present Shell is waving on this direction. The shell is waving by following factors! a share in a growing market in a declining market uality market activity roductivity through capital investment RATION n exist for gaining market shares as a deliberate strategy et penetration. The shell is also working on this direction by providing better pany operation sites. The above discussion in consolidation also relevant

New

rs

New

urrent

OPMENT

ment, the company locates any new areas where it could start its business k. Market development can include new market segment. Shell has no at is why Shell is working on the direction of market development. The proof l has expanded its business more than hundred countries. Now Shell is ness in all small and big cities of Pakistan. LOPMENT the consolidation in their present market does not adequate opportunities r coping with changing environment. Shell developed the product of CNG. ell is also working on this direction. N ans new product and new market. The two broader concept of diversification

ersification diversification

SIFICATION tion means development beyond the present product and market, but still onfines of the industry in which the company operates. Shell has introduced st example of related diversification. ification ent beyond the present industry into product/mkt, which have not clear resent product/mkt. Shell is interested in other business e.g., al and metals.

Evaluation of strategic options

o strategic options for improvement of shell performance as maintain the leader of mer services. For this purpose we evaluated them, which is better to achieve the tives. ment. ment tions we use the tool of SWOT analysis. There are three steps involved in egy option.

ty

gest multinational company dealing in Pakistan. As such there is no facing by shell. By market development shell can cope with aggressive oduct development (CNG) Shell can decrease its dependence on particular akistan Ltd.).

ment the company can capture the market of CNG. Use of CNG reduce the environmental pollution and save the consumption of fuel. et (establish new outlets and upgrade existing outlets) increase growth rate and market share simultaneously. Feasibility we will assess how our strategy might work in practice. In product l has not sufficient resources to cope with existing requirement. ment shell has sufficient resources to meet the current needs of the lso capable to performing the services in the field of new market. chieve market position by developing the new outlets and improving the existing outlets. ope with reaction of competitors by market and product development. ufficient technology to fulfill the current requirement of market development. Acceptability ility we will try to assess weather the consequences of proceeding with a table. crease it profit market share, and growth rate by established and upgrading

great financial risk to develop a new product but there is no as such risk in elopment. ng a product there is high rate of risk in this way the company may losses its

is thing badly affect on the capital structure of the company. trong culture so this is no affect on our new strategy for developing new

Selection es which needs consideration, first a way in which an organizations l dictate which methods of evaluation are most useful at the time of selecting ess by which selection of strategies occurs since how the information from in strategic decision making. n of the strategic options we are concluded that the market development is , our selections is market development. Because it provide a chance to earn mpetitive advantage and has a low risk as compare to other options. RIOS TO 2020 OF SHELL

NNECTIONS builds a set of global scenarios every three years to explore the nges arising from changes in the business environment that need to be sses. These scenarios provide a useful context for testing our strategies p us to anticipate significant changes in the world around us. CONTACTING LATIONS Office deals with all media enquiries relating to the Group's corporate ternational businesses. The Press Office also handles all media enquiries ses of Shell in the UK. For urgent media queries out of office hours, please ress officer on pager no 07659 129 454 and leave a message and contact A TRULY GLOBAL TRADE ade is growing - and rapidly becoming truly global. Currently olumes are likely to reach 120 million tons per annum by 2005 al growth rate of over 5% since 1995. arkets is also increasing. By the end of this decade, new LNG y be added in China, India and the Americas. ll require increased shipping capacity. If all current orders are orld's LNG fleet will expand from 127 active carriers today, to next five years. lumes between now and 2005 will largely come from expansions ts. But several new projects around the world are likely to be

n by that time - and will fuel additional growth in the LNG cond half of the decade. e, we have interests in five existing LNG projects all of which under construction or under consideration. Additionally, we are evelopment of several new projects - four of which are shown on lin, Timor Sea, Namibia and Venezuela. LNG industry is driven by overall growth in global natural gas o by the decreasing cost of delivering LNG competitively to l service provider to the LNG projects in which we participate, role in capital cost reductions. Subsequent LNG developments years have demonstrated a 50% reduction in development costs. an be improved upon even more. Our goal is for our next LNG e delivered at a significant improvement over Oman - which is roject to date. GOOD EXAMPLE le of the opportunities in LNG is in Nigeria. The first production of as from the first of a two-train project that came on stream in e two trains together now deliver some 6 million tons a year, Rim and Mediterranean markets. d train was granted in 1999. Construction is well underway with t for early 2003. a further two-train expansion is already under serious discussion ners, government and customers driven by gas availability, cost mand. Once built, Nigeria could be producing almost 15 mtpa by making it one of the world's largest LNG producers. l and financial challenges of the original LNG project in Nigeria e. But the project is now well placed to help meet growing e and North America. ow to a completely different climate - to the Sakhalin project in a - where we are partners with Mitsui and Mitsubishi. volved here are much different. The project involves field onshore pipeline to deliver the gas to an ice-free port, and e liquefaction facilities - for a total estimated cost of $8.9 bln. l be the first from Russia. It will add a new source of energy markets and will play a significant role in guaranteeing energy rth east Asian region for years to come.

HE KEY TO OPPORTUNITY f technology is the key to other possible opportunities related to ves that remain stranded due to the prohibitive cost of

outlined plans to apply our Floating LNG technology to ifficulties and monetise the Kudu field offshore Namibia, and the e East Timor Sea. ating LNG will enable lower construction costs, a minimal , and a higher degree of flexibility. Depending on the location, osts can be reduced by up to 40% - which is often the difference e need to make them realities. ion of leading technology opens up many opportunities. Another o Liquids. trated that GTL technology can be commercial and that the petitive on the world market. ced by the Shell Middle Distillate Synthesis process at a plant producing 12,000 bpd at Bintulu here in Malaysia, are so ading to the creation of new markets. he next generation plant - capable of producing 75,000 bpd - will nt in excess of a billion dollars each. But economies of scale and will result in significant advantages. tisation of gas reserves that would otherwise be uneconomic. ra revenues for resource owners from new markets for natural e liquids produced can also substitute for expensive oil imports. advantages, by the end of this decade, we believe Gas to Liquids nt industry. markets are opening up and creating new opportunities in Asia. Underlying economic growth - and the related surge in ricity - is the driver in China and India. G ON KEY INFRASTRUCTURE and, Shell and other companies are heavily involved in the elopment of key infrastructure projects. This infrastructure pelines, LNG import terminals, distribution systems, and power billions of dollars. he total amount to be spent on projects open to foreign investors domestic natural gas infrastructure - upstream, midstream and uld be as high as $25 bln over the next ten years. ETS DIFFERENT of the market maturity spectrum are the US and Europe. As and liberalise, marketing and trading opportunities emerge. But es require different capabilities for success. s of dollars for investment in capital-intensive infrastructure arkets require highly skilled human resources and balance

f supporting the commercial risks and financial exposures. ificant involvement in these areas is through Coral in the US, and urope. In these markets, new technologies and business models develop innovative ways of meeting our customers' needs. xpansive as the opportunities I've outlined may seem, they are ide variety of opportunities I see in the world's natural gas e they add up to a significant new path forward for the global s is an industry of the future, not of the past. E ALSO CHALLENGES opportunities and growth will not happen without overcoming a nges. We will mention just four: do business based on principles; contribute to sustainable development; get deregulation right; attract the necessary human resources. ck, when companies first started producing statements of s, there was considerable cynicism. People thought they were public relations material. We believe that, in the 21st century, than that. We believe the Shell business principles, and the onstrate, will be critical business assets. DIFFERENT WORLD is different. It is more global, transparent and fast moving. In by a clearly articulated set of business principles is an advantage s, our customers, our suppliers, our partners and the h which we interact. The principles set the boundary conditions do business.

nt is important but, to me, of overriding importance is our ustainable development. This commitment encompasses our do must take into account not only the economic impact, but d environmental impact.

't do this alone. That's why our commitment relies heavily on with partners, governments and local communities to ensure we riate balance in all three areas of Sustainable Development. g challenge will be to get deregulation right. The California rated for us many of the potential pitfalls. It is now incumbent ernment and industry - to work together to design systems that

hortages or that discourage long term investment. keep in mind the ultimate aim of producing products and services nd reliably - and ensuring long-term security. e is attracting the human capital required to deliver the growth number of natural gas markets increase, and as more and more , the demand for experienced people in our industry rises. is not limited to those in traditional natural gas fields such as s and technologists - although these will remain important. We reasing numbers of experienced international business latory experts, traders, IT systems specialists, and financiers. portantly, we need strategists, asset operators, managers and cal experience. Success calls for a diverse work force - one well iverse markets that will be key to the future. industry is facing a broad range of opportunities. The Shell longarios indicate that demand for clean, efficient energy is going to al gas, because of its environmental qualities, efficiency, and ances, is going to play an increasingly important role.

o be challenges - such as the attraction of the necessary human ital. Anti globalization and supply security add to these emand for more and cleaner energy goes on. And I believe our ositioned to meet the challenges along the way.

Recommendations ld be proper shades and proper sitting arrangements at the filling stations eople who come for oil changing and car washing face difficulties in this

should be disposed in a proper way to protect the environment form being

d provide small incentive to its customers. ke Buy 50 liters of super and get a come free or a cola drink free, should oducing time to time by shell. d make company operation site in every city for capture the new market. nly one thing that is constant that is change; shell should investment on velopment to cope with dynamic environment. hould established new regional office to control the activities of company site. should provide the facility 0f free oil change on all its out lets. ld develop modern retail outlet. These outlets should have all possible customers because one of the reasons behind decrease market share is ion of competitors. d develop effective marketing programs that will help the company increase will lead to increase market share. In these market programs emphasis iven to advertising, which is most effective and efficient tool of promotion for f business.