straman report final2

Aitor BarandiaranAitor BarandiaranCole FranciaCole FranciaGabb ParungaoGabb ParungaoGenesis RaymundoGenesis Raymundo

Company HistoryCompany HistoryPetron began on 1933 when Socony

and Standard Oil merged into Stanvac

In the 1960’s, the venture ended and was divided to Esso and Mobil.

Esso became a GOCC in 1973, then was transformed to PNOC. PNOC soon absorbed Mobil.

Soon, Petrophil a.k.a. Petron was formed

Vision and MissionVision and Mission To be the leading provider of total customer solutions

in the energy sector and its derivative businesses. We will achieve this by:◦ Being an integral part of our customers' lives,

delivering consistent customer experience through innovative products and services;

◦  Developing strategic partnership in pursuit of growth and opportunity;

◦  Fostering an entrepreneurial culture that encourages teamwork, innovation and excellence;

Vision and MissionVision and MissionLeveraging our refining assets to

achieve competitive advantage;Caring for community and the

environment;Conducting ourselves with

professionalism, integrity and fairness; 

Promoting the best interest of all our stakeholders.  

ObjectivesObjectivesTo maintain the majority of

market shareTo maximize the companies

profitability and sustainabilityTo ensure customer satisfaction

StrategiesStrategiesDiversificationWidening ReachStrengthening the Supply Chain

Products, services and Products, services and consumersconsumersFuel oil and diesel to industrial

customers in power generation, construction, marine transports and manufacturing sectors

Jet fuel to airlines such as PALRetail gasoline, diesel and

kerosene to motorists and public transport operators

CompetitorsCompetitorsChevronRoyal Dutch ShellTotalOther small independent firms

(Flying V, Phoenix, Unioil, Seaoil etc.)

Industry AnalysisIndustry AnalysisIndustry Background

◦At the end of 2008, the prices of Dubai crude fell to $40 per barrel

◦Prices have doubled due to government stimulus plans and the ever increasing global demand of oil

The IntervieweeThe IntervieweeEmmanuel E. Erana

◦He started in 1984 and handled various finance positions in the San Miguel group

◦He was the CFO for SMC’s Australian operation called National Foods Ltd.

◦After the sale of National Foods Ltd., he was assigned as the Chief Information Officer-in-charge of information and technology

◦At the same time, he also worked on the project concerning the acquisition of Petron

His ChallengesHis ChallengesPetron was coming out of a huge

loss from 2008.

Refinery margins were almost non-existent

Some functions of the company required major investments

Financial PositionFinancial PositionIn 2009, Petron reported a net

income of PhP4.3 billionNet operating income increased,

to PhP9.2 billion from PhP1.9 billion

However, sales volume dropped from 49.7 million barrels to 44.2 million barrels

ANALYSISANALYSISProblem Statement

To increase economies of scale and as a result be able to increase the thin profit margins which Petron is currently experiencing due to heavy competition

Vision and MissionVision and Mission To be the leading provider of total customer solutions

in the energy sector and its derivative businesses. We will achieve this by:◦ Being an integral part of our customers' lives,

delivering consistent customer experience through innovative products and services;

◦  Developing strategic partnership in pursuit of growth and opportunity;

◦  Fostering an entrepreneurial culture that encourages teamwork, innovation and excellence;

Vision and MissionVision and MissionLeveraging our refining assets to

achieve competitive advantage;Caring for community and the

environment;Conducting ourselves with

professionalism, integrity and fairness; 

Promoting the best interest of all our stakeholders.  

*Vision and Mission*Vision and MissionADDITIONS TO THE VISION:

◦Continually find innovative ways to increase effectiveness and most especially efficiency

◦ To be able to consistently increase market share over time  

EFE MatrixEFE MatrixKey external factorsOpportunities                                                                     

Weight Rating W. Score

The strong performance of the Philippine Economy

0.10 3 0.30

New administration which promises to eradicate corruption

0.10 3 0.30

Only gasoline provider not experiencing shortages

0.07 2 0.14

Problems regarding taxing issues faced by a major competitor

0.07 2 0.14

Increasing sales of cars and motorcycles

0.15 3 0.45

EFE MatrixEFE MatrixThreats 

Weight Rating W. Score

Multinational firms in direct competition with Petron.  

0.10 4 0.40

 Increasing use of alternative energy resources  

0.15 1 0.15

Increasing competition from small independent firms  

0.08 3 0.24

Unstable prices of oil in the world market

0.05 3 0.15

Oil being a non- renewable resource

0.13 1 0.13

Total 1 2.4

IFE MatrixIFE MatrixStrengths

Weight Rating W. Score

Good management

0.10 2 0.20

Effective advertising strategies

0.08 1 0.08

400 new gas stations in 2009

0.15 3 0.45

Improving profitability for 2009, coming from loss

0.10 3 0.30

Good network of distribution and logistics

0.09 2 0.18

IFE MatrixIFE MatrixWeakness

Weight Rating W. Score

Weak product differentiation

0.05 1 0.05

Not able to maximize output of the Bataan refinery

0.12 3 0.36

Not so much emphasis on expansion

0.15 4 0.60

Declining inventory turnover due to smuggling

0.10 3 0.30

Declining working capital turnover

0.06 1 0.06

Total 1 2.58

CPM MatrixCPM MatrixShell Chevron TOTAL

Critical Success Factor

WEIGHT Rating

Score

Rating

Score

Rating

Score

Advertising .3 3 .9 3 .9 2 .6

Product Quality

.1 4 .4 3 .3 2 .2

Customer Loyalty

.2 3 .6 3 .6 2 .4

Market Share

.2 3 .6 2 .4 2 .4

Management Capabilities

.1 3 .3 3 .3 3 .3

Pricing .1 4 .4 4 .4 4 .4

Total 1 3.2 2.9 2.3

SWOT MatrixSWOT MatrixStrengths Weaknesses

1. Good company management2. Effective advertising strategies implemented by the company3. 400 new gas stations opened in the past two years4. Improving profitability for 2009, coming from losses in 20085. Good network of distribution and logistics

1. Weak product differentiation2. Not able to maximize output from the Bataan Refinery owned by Petron3. Company not implementing much emphasis on expansion4.Declining inventory turnover due to smuggling5. Declining working capital turnover

Opportunities SO STRATEGIES WO STRATEGIES1. The strong performance of the Philippine Economy2. New administration which promises to eradicate corruption3. Only gasoline provider not experiencing shortages4. Problems regarding taxing issues faced by a major competitor5. Increasing sales of cars and motorcycles

1. Rapid expansion of gas stations to take advantage of limited resource of petroleum currently burdening competitors (S3, O3)2. To fill in for the shortage in supply due to the gas pipe leakage (S3, O4)

1. Maximize output of Bataan Refinery to maximize profit to match with increasing sales of vehicles (W2, O5)2. To be able to take advantage of the strong Philippine economy and increase demand for its products through differentiation (W1, O1)

Threats ST STRAGIES WT STRATEGIES1. Multinational firms in direct competition with Petron2. Increasing use of alternative energy resources3. Increasing competition from small independent firms4. Unstable prices of oil in the world market5. Oil being a non-renewable energy resource

1. Open more gas stations to increase market share versus international competitors (S3, T1)2. Purchase a small independent firm for expansion. (S3, S4, T3)

1. Increase research and development in order to find ways to be at par with current trend (T5,W1)2. Increase product differentiation in order to compete with multinational firms (T1, W1)

SPACE MatrixSPACE Matrix

INTERNAL STRATEGIC POSITION EXTERNAL STRATEGIC POSITIONFINANCIAL STRENGTHS ENVIRONMENTAL STABILITYLiquidity +5 Competitive pressure -1Cash flows +5 Demand variability -2Working capital +4 Price elasticity -1Earnings per share +3 Technological changes -2COMPETITIVE ADVANTAGE INDUSTRY STRENGTHSMarket share -1 Resource utilization +5Product quality -3 Productivity +4Customer loyalty -3 Profit potential +5Control over suppliers and distributors -2 Financial stability +6

SPACE MatrixSPACE Matrix

AlternativesAlternativesMore aggressive expansion of the

number of gas stationsMergers and acquisitions (buy

out independent oil companies)Invest in other alternative energy

resources

RecommendationRecommendationCurrently Petron is not able to

maximize the capabilities of its refineries, specifically its Bataan plant.

Our group recommends Petron to further expand its operations in order to meet the capabilities of its refinery. We believe that if Petron is able to perform proper due diligence on a possible target firm it will be able to take advantage of possible synergies which will arise for a successful merger or acquisition. Also, if done properly this will be a faster way for the company to grow.

RecommendationsRecommendationsHow the strategy will be implemented 

The company should be able to conduct proper due diligence in order to make sure that the merger or acquisition will be beneficial to them and so that the combined firms will be able to maximize and generate all the synergies the merger or acquisition will be able to create

1 Billion pesos available funds in order to implement strategy

In order to raise the funds needed we suggest the company to under-go a stock rights offering 1:3 ratio

ResultsResultsExpected/forecasted results of strategy

implementationWe expect the implementation of the strategy to be able to increase the economies of scale of Petron. Through this, Petron will increase its market share which will consequently increase income through increasing its sales. Also, Petron will be able to maximize its resources specifically its Bataan refinery, currently this refinery’s output is not being maximized by Petron.