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Determining the Viability of Putting Up a Petron Bulilit Service Station in
Maraouy, Lipa City, Batangas
A Feasibility Study
Presented to the Faculty of the College of Business and Accountancy
First Asia Institute of Technology and Humanities
In Partial Fulfillment of the Requirements for the Degree of
Bachelor of Science in Accountancy
By:
Christopher S. Aguilar
Janine P. Mendoza
Pamela Kris A. Padilla
Lester Fiel T. Panopio
December, 2011
CHAPTER I
INTRODUCTION
Petroleum has a colorful history filled with colorful people. It has been a
cyclical history full of booms and busts; all of them magnified by the huge scale
of the fortunes won and lost.
The origins of the petroleum industry in the world commerce can be
traced back when Edwin Drake drilled the first commercial oil well in Oil Creek,
Pennsylvania in 1859. Years after October 1972, the principal exporting
countries in the Middle East had been gaining wealth, power, and expertise from
the enormous royalties they had been collecting since the first half of the 1900s.
They formed the Organization of Petroleum Exporting Countries (OPEC) and
began formally consulting each other on oil prices and policies. The national oil
companies of the major exporting countries have been growing more vertically
integrated, investing their profits from the upstream segment of exploration and
production in expanding into the downstream segment of refining, transportation,
and marketing. (http://www.irs.gov/businesses/article/)
In the Philippines, the growth and development of the petroleum industry
started in the 1930s when large companies ventured into the industry’s
downstream segment. Due to favourable market trends and with the passage of
Retail Trade Liberalization Act of 2000 that enabled the intensive penetration of
incumbents’ market share by 70 new players in the market, many small and
medium-sized entrepreneurs are becoming interested to be part of the said
industry and Petron Corporation used this opportunity as its advantage.
(http://www.mib.com.ph/Others/Petron.pdf)
Petron Corporation, having the largest number of retail outlets in the
country with over 1,300 stations and being the biggest local refiner with a
capacity to process 180,000 barrels of crude per day, has opened its low-cost
micro refilling stations to interested investors called Petron "Bulilit" Service
Stations under the Petron Bulilit Dealership Program that capitalizes on the
opportunity of providing fuel in areas with untapped volumes. Petron's new
concept station offers investors a low cost alternative to develop service station
outlets under a major brand. The proposed new stations will have only two to
three pumps and are smaller than heretofore Petron stations. The new stations
would be put up in areas deemed by the company as "pioneer growth" locations
that may have relatively small demand at present but have a great potential for
growth. (http://www.petron.com/newsroom)
Since the Filipino government recognize the petroleum industry as vital to
the country's economic stability, the researchers opt to establish the feasibility of
a gasoline station under the aforementioned Petron Bulilit Dealership Program,
the Petron Corporation’s latest innovation in the industry’s downstream segment
that assists the interested investors in the site selection and preparation, dealer
training and project implementation.(http://www.fundinguniverse.com/company-
histories/Petron-Corporation-Company-History.html)
A. Statement of the Problem
This study will determine the feasibility of establishing Petron Bulilit
Service Station along J. P. Laurel Highway, Barangay Maraouy, Lipa City.
Likewise, this study will answer the following questions:
Management Aspect
1. What form of business organization will be adopted?
2. What are the initial manpower requirements?
3. What is the initial number of people required for operation?
Technical Aspect
1. What are the franchising procedures?
2. What is the capacity of the gasoline tanks?
3. Where is the nearest refilling station?
4. Where will be the undertaking situated?
5. What would be the lot plan and construction layout?
Marketing Aspect
1. Who is the target market of the undertaking?
2. What are the strategies to be employed to penetrate the target
market?
3. Will there be a market gap for the undertaking?
Financial Aspect
1. How much is the initial capital needed?
2. What would be the sources of the capital?
3. Are there any cash bond and working capital requirement?
4. Will the undertaking be profitable?
Socio – Economic Aspect
1. In what ways can the undertaking benefit the community?
2. In what ways can the undertaking help the government?
B. Objectives of the Study
This study aims:
Management Aspect
1. To identify the people involved in the operation
2. To know the initial number of people required for operation
Technical Aspect
1. To determine the necessary franchising procedures
2. To determine the capacity of the gasoline tanks
3. To ascertain the nearest refilling station
4. To know the location of the undertaking
5. To determine the lot plan and construction layout
Marketing Aspect
1. To identify the target market of the undertaking
2. To know the strategies to be used in penetrating the target market
3. To assess if there is any market gap for the undertaking
Financial Aspect
1. To determine the initial capital needed
2. To ascertain the sources of the capital
3. To verify if there are any cash bond and working capital requirement
4. To determine the profitability of the undertaking
Socio-Economic Aspect
1. To know the benefits of the product to the members of the community
2. To identify the ways in which the undertaking can help the
government.
C. Significance of the Study
Apart from contributing to the petroleum industry, the study is expected to
benefit the following:
Proprietors
The establishment of the gasoline station will open opportunities
for other proprietors' future and potentially feasible endeavors (e.g.
convenience stores) in the area.
Consumers
These include drivers of public utility vehicles such as jeepneys,
multicabs and tricycles as well as owners of private vehicles in Barangay
Maraouy, Lipa City. Putting up a 'bulilit' station in the area would provide
them convenience and attend to their everyday gasoline needs.
Community
The establishment of the gasoline station will provide job
opportunities especially to the residents in the vicinity.
Local Government
The local government of Barangay Maraouy, Lipa City will be able
to generate additional revenue through taxes.
Academe and other researchers
The study will provide the academe and other researchers
information about franchising, especially fuel stations, which may be
useful in their undertakings as this may serve as a reference and a
source of related literature.
D. Scope and Limitations
The study focuses on the establishment of Petron Bulilit Service Station
along J. P. Laurel Highway, Barangay Maraouy, Lipa City, Batangas. The
researchers shall represent the sole proprietor Violy Olan who wants to expand
her real state and farm business into the other field, the retail industry.
The study will be conducted to determine the feasibility of the
undertaking. The researchers will only give attention to the establishment of the
gasoline station, which will operate only as a distributor of Blaze, XCS Plus,
XTRA Unleaded, Regular Unleaded and Diesel Max. Expansion, although Petron
Bulilit Stations are designed as pre-fabricated models that can start with one to
three product pumps to easily expandable stations, is not within the scope of the
study. Also, the study will not cover the use of Petron Fleet Card and offering of
Petron by-products such as Ultron, Rev-X, and Gasul since these will be
dependent upon the discretion of the franchisee as stated in the franchise
agreement.
The study is limited to registered jeepney, tricycles and multicabs with
franchise in Lipa City and privately – owned vehicles (e.g. SUV, Sedan,etc). Bus
service operators and trucks will not be within the scope of the study.
CHAPTER II
REVIEW OF RELATED LITERATURE
The related literature contains the related readings and studies regarding
the petroleum industry and provides the researchers additional information and
knowledge in the subject under study. The conceptual literature deals with the
published articles while the research literature pertains to the unpublished
materials.
A. Industry Terms:
Petroleum (crude oil) is a thick, dark oil composed of a complex mixture
of organic chemicals, most of which are made up solely of hydrogen and
carbon (hydrocarbon). (Mayer, Richard J. Connections in Environmental
Science, 1st edition. Singapore: McGraw-Hill Book Co., 2001.)
Franchising is a form of marketing and distribution in which the
franchisor grants to an individual or company (the franchisee) the right to
run a business selling a product or providing a service under the
franchisor's business format and identified by the franchisor's trade mark
or brand. A modern franchise includes a format for the conduct of the
business, a management system for operating the business and a shared
trade identity.
Franchising can also be described as a pooling of resources and
capabilities; the franchisor contributes the initial capital investment, know-
how and experience; the franchisee contributes the supplementary capital
investment, motivated effort and operating experience in a variety of
markets. Franchising is a comprehensive business relationship, not just a
buyer-seller relationship. There is considerable interdependence between
the franchisor and the franchisee.
Petron Blaze is an ultra-high-performance unleaded gasoline with an
extremely high octane rating. With its high octane rating, it prevents
knocking and maximizes engine performance at all times. Petron Blaze
also contains a special blend of octane booster and multi-functional
additive that brings about superior combustion and performance. Petron
Blaze is a pure, highly-refined fuel that does not only promise excellent
performance during engine start-up but also provides sustained engine
power every time.
Petron XCS Plus with ValvemasterTM is a premium alternative to leaded
gasoline that has the unique combination of two superior additive
systems, XCS and Valvemaster TM. Only Petron XCS Plus offers
Valvemaster TM, the superior lead substitute that is adopted in many
international markets including the U.S.A., the U.K., New Zealand and
Australia.
Petron XTRA Unleaded is an environment-friendly, premium motor
gasoline that contains a high performance detergent additive which
provides excellent cleaning effect for optimum vehicle power. It also
contains a unique gas-saving additive that promotes more efficient
combustion and lower fuel consumption.
Petron Regular Unleaded is a motor fuel with controlled volatility for
maximum economy, easy starting and good acceleration. It is suitable for
low compression gasoline engines.
Petron Diesel Max is a lowsulfur, premium product that contains a
unique and robust multifunctional additive that contains smoke reducing
agent and lubricity additive to protect fuel injection system. It also has the
ability to maintain and improve fuel injection system cleanliness through
unsurpassed detergency characteristics. (http://www.petron.com)
B. Conceptual Literature
Discovering Uses of Petroleum
According to Connections in Environmental Science (A Case
Study Approach, 2001 edition) by J. Richard Mayer, petroleum is a
relatively new addition to our energy stores. It was not until 1859 that the
world’s first successful oil was drilled at Titusville, Pennsylvania. At that
time, coal was the world’s most important energy resource, fueling the
steam engines that powered the Industrial Revolution. However,
petroleum quickly surpassed coal as the most highly valued energy
resource because one of its components, kerosene, could be burned in
street lamps and home lanterns instead of whale oil. At first, other
petroleum components, such as gasoline, diesel oil, and heating oil, were
discarded. However, their importance is soon discovered. Oil was
cheaper than coal, burned cleaner and was easier to transport. In the
early 1900s, Henry Ford’s automobile created a demand for gasoline,
further encouraging the emergence of petroleum exploration, drilling and
refining as new industries.
By 1929, oil supplied one-third of the total U.S. energy demand.
Ten years later, almost half of the nation’s energy needs were being met
by burning fuels derived from petroleum (petrofuels). By the end of the
World War II, coal was no longer a number one fuel; petroleum and
natural gas accounted for two-thirds of all U.S. energy requirements.
During World Wars I and II, the United States, Britain, and their
allies depended heavily on petroleum to fuel motorized transport vehicles,
merchant chips, naval vessels, aircraft, and military armaments. In 1940,
the United States and Russia were the world’s largest petroleum
producers and consumers, while the rest of the industrial world still
depended mainly on coal. But by the end of the second world war, the
productivity and economic prosperity of many nations, including the
United States, was linked to petroleum. In 1999, U.S. demand for
petroleum averaged close to 19 million barrels a day.
Republic Act No. 8762
Republic Act No. 8762, otherwise known as the Retail Trade
Liberalization Act of 2000 is the policy of the State to promote consumer
welfare in attracting, promoting and welcoming productive investment that will
bring down price for the Filipino consumer, create more jobs, promote
tourism, assist small manufacturers, stimulate economic growth and enable
Philippine goods and services to become globally competitive through the
liberalization of the retail trade sector.
Pursuant to this policy, the Philippine retail industry is hereby
liberalized to encourage Filipino and competitive retail trade sector in the
interest of empower the Filipino consumer through lower prices, higher
quality goods, better services and wider choices.
Republic Act No. 8479
Embodied in the Republic Act No. 8479, otherwise known as the
“Downstream Oil Industry Deregulation Act of 1998,” is the policy of the state
that deregulates the oil industry to “foster a truly competitive market which
can better achieve the social policy objectives of fair prices and adequate,
continuous supply of environmentally-clean and high quality petroleum
products” (Congress 1998).
With deregulation, government allows market competition. That means
government does not interfere with the pricing, exportation, and importation
of oil products, even the establishment of retail outlets, storage depots,
ocean-receiving facilities, and refineries.
It has been a decade ago since lawmakers made a proposition that
deregulation would secure the Philippines from the vulnerability of oil price
shocks due to its heavily dependent on imported oil. But it is now
increasingly apparent that many are calling to scrap the law as six out of ten
Filipinos favor the repeal of RA 8479. (Somosierra 2008).
2009-2030 Philippine Energy Plan
As the country faces the realities of growing energy demand, tight
energy supply, limited foreign investments and critical power development
issues, the Department of Energy is set to release the Philippine Energy Plan
highlighting the plans and programs of the energy sector to fuel support for
the economic growth of the country for the period 2009-2030. Specifically, the
Plan will deal with the future of energy development which is very vital to the
country’s prosperity. The over-arching theme of PEP 2009-2030 is ensuring
the best energy choices for a better quality of life.
The plans and programs of PEP 2009-2030 are crafted to respond to the
challenges that are confronting the energy sector at present and usher the
change in the landscape of the country’s energy future. In simple terms, the
Plan will see to it that public policies on energy are at par with the changing
needs of the energy sector which will ensure energy security, pursue
effective implementation of energy sector reforms and implement social
mobilization and cross-sector monitoring.
(http://www.doe.gov.ph/PEP/default.htm)
a. Research Literature
The study entitled “Feasibility on the Establishment of a Fuel Station
in Asaba, Delta State” made by Nkemdirim, Jennifer may form the basis of an
important investment decision and covers various aspects of the business
concept development, start-up, production, marketing, finance, and business
management. The study also provides sector information, brief government
policies and procedures and international scenarios. The study also
highlights the key factors in making the project profitable. The key factors are
the location of the project where the daily turnover of motor vehicles is a
dependent variable and the other one is the selection of the proper
equipment for carrying out the successful operations of the project.
Another study conducted by Vignesh, Vinayakaperumal G. (2002)
entitled “Feasibility Study to Set Up Company-Owned/Company-Operated
(COCO) Gas Stations in Metro Manila for Caltex Philippines, Inc.” deals in
depth the union related issues, the political sensitiveness associated in
operating a COCO, loss of existing dealer motivation due to COCO, risk
profile, and implementation plans. The study is primarily concerned with the
effect of the retail trade liberalization act that gives way to many aspiring
Filipino investors to establish their company-owned or company-operated
operations. The feasibility of establishing COCO's highlights the competitive
positioning strategy based on service differentiation. The strategy revolves
around Excellent Service Execution by the service attendants at the point of
sale.
Taking into account the importance of a gas refilling station in the
province of Batangas, the conclusion of the study conducted by Delos Reyes,
Leonor B.et. al., (1991) entitled “Profile of Caltex Refinery in San Pascual,
Batangas” (an exploratory study), is that the Caltex refinery plays a vital role
in the economic development of Batangas since the oil is the lifeblood of the
community. The researchers recommended that the Caltex refinery should
maintain the exemplary performance and the Batangas refinery should
expand in order to meet the increasing demand of the province.
Moreover, according to the researchers of the study entitled
“Business Profile and Status of Selected Gasoline Stations in Batangas
Province” made by Catibog, Lovely M., et. al., (2006), majority of the gasoline
stations in Batangas are owned by sole proprietors, operating a service type
of business for five years with an initial investment that ranges from P1, 000,
000 to P 3, 000, 000. The researchers recommended that in order to have
efficient and effective operations, the owners and managers need to maintain
their flexibility and management skills and to keep track of their
responsibilities.
CHAPTER III
MARKETING STUDY
Research Methodology
This part constitutes the blueprint for the collection, measurement and
analysis of data that will aid the researcher in accumulating information relevant
to the study. The researchers will use the Descriptive Method which involves the
description, recording, analysis and interpretation of the subject matter. This
method is primarily concerned with what, where, when, how much, or how a
research will be conducted.
The descriptive method involves the following:
1. Research Design
It refers to the arrangement of conditions and analysis of data in
manner that aims to combine relevance to the research purpose with
economy in procedures.
The subject of the study was limited only to the registered drivers,
with franchise of the route or Toda of public utility vehicles and those
which have privately-owned vehicles, who, usually go past Gen. Luna St.,
Brgy. 10, Lipa City.
With respect to the jeepney drivers and tricycle operators,
stratified sampling technique is employed in selecting the sample. This
method of sampling involves the division of a population into smaller
groups known as strata. The strata are formed based on members'
shared attributes or characteristics. A random sample from each stratum
is taken in a number proportional to the stratum's size when compared to
the population. These subsets of the strata are then pooled to form a
random sample.The sample calculated will be the researcher’s target
respondents to whom the questionnaires will likewise be distributed.
For the drivers of privately-owned vehicles the questionnaires will
be distributed randomly to the households residing within the vicinity. The
respondent will be selected on a per driver basis notwithstanding the
number of vehicles owned from the nearby barangays of Sabang and
Latag, Lipa City, Batangas.
2. Data Gathering
This is a term used to describe a process of preparing and
collecting data. The purpose is to obtain information to make market and
financial projections and quantitative and qualitative data analysis.
The researchers used the following primary technique in order to
obtain information through direct interactions from persons who can
provide the information:
Survey Stratified?
It refers to sampling or partial collection, of facts, figures or
opinions taken and used to approximate or indicate what a complete
collection and analysis might reveal. The researchers made a
questionnaire that embodies questions asked in a standardized manner
to each respondent. The questions raised vary according to the
classification of the respondents, namely, the tricycle drivers, jeepney
drivers and privately – owned vehicles.
The total number of respondents in each of the three category
(tricycle drivers, jeepney operators and privately – owned vehicles) will be
calculated using Slovin’s formula. This formula is used to take into
account confidence levels and margins of error. This technique is
employed by the researcher to have the desired degree of accuracy.
Moreover, it gives the researchers an idea of how large the sample size
in order to ensure a reasonable accuracy of results.
Interview
This refers to formal or informal meeting between two people or
among a group of people for the purpose of obtaining information about
something in particular. The questionnaire is structured in a way that
facilitates the gathering of specific information about the technical and
financial aspects of the study that will be deemed essential in the course
of the study.
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