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BY:ABHIMANYU SINGH

DEEPTODIP SENMD. EJAAZ

SHUDHANSU KUMAR

Strategy formulation for

IOCL for 2012

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INTRODUCTION

Started in 195949% petroleum products share,40% refining share116 th position in Fortune – 500 listGroup refining capacity is 60.2 million metric

tonnes per annum (MMTPA) Indian Oil controls 10 of India’s 20 refineriesAccounts 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

Steps followed in Strategic Formulation

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Analysis of ext factors

-opportunitie

s-Threats

Evaluation :Current

performance results

Examination &

evaluation the current

–Mission,vision,objective,strategies

,policies

Review of corporate Governanc

e:BOD,Top

management

Scanning & Assessing Environme

nt-structure-culture

-resources

Selection strategic

factors(SWOT) in the line

of current situation

Scanning & access of external

environment –social

-task

Generation &

evaluation strategic

Alternative

Review & revision as necessary:

-Mission-Objective

Analyze internal factors:

-strengths-weakness

Selection & recommendation of

best alternative

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 7

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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Growing presence of foreign players

High entry and exit barriers

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Five force analysis

Value propositioncartels such as OPEC

growing usage of CNG Increased awareness of

bio fuels

Intense segment rivalry

Customers

IOCLand SWOT Analysis

Strength WeaknessPSU UnitVast refining & distribution networkDiversified out look

PSU unitUpstream R&DPetrochemical development technologyOld refineries leading to poor refinery margins

Opportunity ThreatTo expand in south east AsiaCan become a independent E&P playerExpansion easily possible due to huge distribution n/w

Volatility of crude oil priceIncreased competition from private and foreign players

SWOT ANALYSIS

Current strategies as a leaderDefending 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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