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Strategy formulation for

IOCL for 2012


BY:
ABHIMANYU SINGH
DEEPTODIP SEN
MD. EJAAZ
SHUDHANSU KUMAR
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INTRODUCTION
 Started in 1959
 49% petroleum products share,40% refining share
 116 th position in Fortune – 500 list
 Group refining capacity is 60.2 million metric tonnes
per annum (MMTPA)
 Indian Oil controls 10 of India’s 20 refineries
 Accounts for 33.8% share of national refining capacity
 Investing over Rs. 30,000 crore (US$ 6.8 Billion) by
2012 to raise group refining capacity to over 80 MMTPA

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Steps followed in Strategic Formulation

Scanning &
access of Analysis of ext
external factors
environment -opportunities
–social
-Threats
-task

Examination Selection Review &


& evaluation Review of strategic revision as Generation Selection &
Evaluation corporate & evaluation
the current – factors(SWOT) necessary: recommenda
:Current Governance: strategic
Mission,visio in the line of tion of best
performance -Mission
n,objective,s BOD,Top current Alternative alternative
results -Objective
trategies,pol management situation
icies

Scanning &
Assessing Analyze
Environment internal
factors:
-structure
-strengths
-culture
-weakness
-resources

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Mission and vision

Vision
A major diversified, trans-national, integrated energy company,
with national leadership and a strong environment conscience,
playing a national role in oil security & public distribution.
Mission
 To achieve international standards of excellence in all aspects of
energy
 creation of wealth, value and satisfaction for the stakeholders
 business ethics and Total Quality Management
 preserve ecological balance
 To achieve higher growth through mergers, acquisitions,
integration and diversification
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Evaluation of current performance results

 Earnings per share


 comparatively higher than the other two close competitors
 could be attributed to its large volume of shares as well as its huge revenue
 does not imply that it has used its funds efficiently

 Price to Earnings ratio


 lower P/E ratio
 is a safe bet for risk averse investors as compared to BPCL and HPCL

 Asset turnover ratio


 3 times larger and a revenue that is 2 times larger than BPCL
 So compared to BPCL, it’s a less efficient company.

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Performance……….contd…

• Net profit margin ratio


– Lies between BPCL and HPCL
– In 2004 the company had a highest profit margin
– low profit margin can be attribute to the fact that its costs are higher

• Operating profit margin


– are high, reason could be attributed to higher sales than the costs

• Debt-to-Equity ratio
– is in increasing order till 2006, after that it is almost stagnant
– Invested less in the new projects compared to competitors

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PEST ANALYSIS
Economic environment
 Projected GDP growth rate of 7%
 Recent high inflation attributed to spike in crude oil price
 2.63 mb/day oil consumption
 First reason for the Indian trade deficit

Socio cultural environment


 70% of India lives in villages
 Customer psychology is also different for different regions

Natural environment
 Increased emphasis on environmental policies by Govt.
 Mission of the company- “to develop environmental friendly products”
 Won SCOPE meritorious award for environmental excellence
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Cont…
Technological environment
 Increased R&D expenditures by the company
 First experimental H-CNG at R&D center Faridabad
 Latest technology development for bio diesel production

Political and legal environment


 Prices governed by MoPNG
 Regulator is PNGRB
 Geo political tensions

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Five force analysis
 Growing presence of
foreign players
 High entry and exit
barriers

Customers

Intense segment  Value proposition


cartels such as OPEC rivalry

 growing usage of CNG


 Increased awareness of bio
fuels
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SWOT ANALYSIS

Strength Weakness
PSU Unit PSU unit
Vast refining & distribution network Upstream R&D
Diversified out look Petrochemical development
technology
Old refineries leading to poor refinery
margins

Opportunity Threat
To expand in south east Asia Volatility of crude oil price
Can become a independent E&P player Increased competition from private
Expansion easily possible due to huge and foreign players
distribution n/w IOCL
and SWO T Ana lysis
Current strategies as a leader
Defending its market share
 Market leader in branded fuels with 60% market share
 Branded fuel growth rate is 75% YOY for IOCL

Porter’s generic strategies


 Overall cost leadership
 Differentiation
 Focus

Strategic alliance
 product or service alliance
 Promotional alliance
 Logistic alliance
 Pricing collaboration
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Suggested Strategy for 2012
• Blended fuel – brand repositioning has to be done, as they are not able
to capture the intended turnover response from the market
• Company needs to improve upon upstream R & D so as to be an
integrated energy company and be self-sufficient.
• Company should go for independent Oil block acquisition in future after
attaining sufficient experience in that area.
• India 70% unexplored sedimentary blocks provide a potential
opportunity for the company for diversification

• Global competitiveness-With Governments relaxation in FDI norms,(up


to 49% allowed in refining sector),Indian Government might reduce its
share in IOCL inorder to streamline fund raising and compete globally.

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 Trans-national : IOCL must go bullish on future acquisitions of oil
blocks either in India or abroad

 Diversified : IOCL must push for the 5% ethanol(jatropha) blended


diesel to promote bio-fuels

 Integrated energy company :.IOCL should market itself as a


integrated energy company by venturing into diversified energy sources
like ,Solar power expansion will increase in a large scale and bio-fuel
plantation will be on increased scaled.

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