Summer Internship Report 2015

Pakistan State Oil (PSO)

Internee name # Muhammad Arsalan Khan

Reg. No # 04151213035

Class # BSBA-6 (Finance)

Supervisor (QASMS) # Mr. Sufyan Anjum

Supervisor (PSO) # Mr. Akhtar Rahman (Territory Manager)

1

Acknowledgement

I take this opportunity to express my gratitude and deep regards to my supervisor Sir

Sufyan Anjum for his exemplary guidance, monitoring and constant encouragement

throughout the internship. The blessing, help and guidance given by him, time to time

shall carry me a long way in the journey of corporate life.

I also take this opportunity to express my gratitude to my supervisor at Pakistan State Oil

(PSO) and thankful to all my company’s staff for their valuable guidance in preparing

this report in a presentable fashion.

Lastly, I would like to say thanks to my parents for their constant encouragement

throughout the internship and during the preparation of this report without which this

assignment would not be possible.

2

Executive Summary

This report is a thorough essence of my study which I conducted as an internee in

a period of six weeks in Pakistan State Oil (PSO), Islamabad Divisional Office. It is also

the head office for the north region. I have exclusively studied and observed the

organizational structure, customer service, accounts & management and personnel

administration of the company. The purpose of this report is to evaluate the performance

of PSO and give concrete recommendation for further improvement. Although the

company is functioning satisfactory, even then some drawbacks have been pointed out in

the operation of the PSO.

Six weeks period is too less to understand the operation of PSO, but still it was a

great experience for me to have a feel of the practical world and keeping in view the

limitations of the study, this seems reasonable attempt.

3

List of Abbreviations

PSO..............................Pakistan State Oil

SOCL………………...State Oil Company Limited

PNO………………….Pakistan National Oil

POCL………………..Premier Oil Company Limited

PSDC………………..Petroleum Development Corporation

COCO……………….Company Owned Company Operated

HSD………………….High Speed Diesel

KSE………………….Karachi Stock Exchange

SECP…………………Securities and Exchange Commissions of Pakistan

FBR…………………..Federal Board of Revenue

CFT…………………..Cross Functional Teams

BU……………………Business Unit

MQTU……………….Mobile Quality Testing Unit

4

Table of Contents

Organizational introduction………………………………….5

Steps towards Formation of PSO……………………6

Organizational Structure……………………………..8

Vision Statement………………………………………10

Mission Statement…………………………………….10

Departments of PSO………………………………….13

Personal working……………………………………………..14

Accounts & Finance Department……………………15

Human Resource Management Department……….18

Facilities Department…………………………………20

Marketing Department………………………………20

Lubricant Sales Department…………………………21

SWOT analysis………………………………………………..24

Conclusion & Recommendations…………………………….34

References……………………………………………………..37

5

Chapter # 1

Organizational introduction and Departmental description

1.1 History of Pakistan State Oil (PSO):

After the separation of East Pakistan and transfer of government from military

rulers to elected government, the vision of government entirely changes. Government of

Pakistan now focuses on nationalization and development of assets. For this purpose,

government start its efforts to establish the first national oil Marketing Company of

Pakistan in 1974. To convert the vision of the government into reality, two oil companies,

Pakistan National Oil (PNO) and Dawood Petroleum Limited (DPL) were merged to

form a single company named as Premier Oil Company Limited (POCL).

After the establishment of POCL, government established Petroleum Storage

Development Corporation (PSDC) on 3rd June, 1974 and after some time, renamed it as

State Oil Company Limited (SOCL). Following the event, the ESSO undertakings were

purchased by government in September 1976, and control was given to SOCL. But

before the end of the year, the government again decided to merge Premier Oil Company

Limited (POCL) and State Oil Company Limited (SOCL), thus forming the company

named as Pakistan State Oil Company Limited (PSO).

6

After the formation of PSO, comprehensive renewal corporate cultural program

was designed and implemented in 2004. The basic aim of this program is to revamping

the organizational architecture, empowerment of employees, rationalization of staff and

transparency in decision making through cross functional teams (CFTs). This corporate

renewal program transform the company’s major operations into independent activities,

which were supported by legal, financial, informative and other services. Monitoring and

control systems were established to reinforce and check this structural change. With the

aim to be a No # 1, and to work with the best workforce of the nation, Human Resource

Development (HRD) become one of the main priority of the company under this

corporate cultural renewal program.

Pakistan State Oil possess 62 percent of market share in oil industry which depicts

the successful implementation of corporate reforms and enable business to maintain its

position as a market leader in a highly competitive business environment.

Steps towards formation of PSO

1. January 1, 1974:

Government takeover PNO and DPL and merged them to form POCL under

Marketing of petroleum products (Federal Control Act, 1974)

2. June 6, 1974:

Government establishes “Petroleum Storage Development Corporation” PSDC.

3. August 3, 1976:

7

PSDC renamed as State Oil Company Limited (SOCL)

4. September 15, 1976:

Government of Pakistan purchases undertakings of ESSO, and give their control

to SOCL.

5. December 30, 1976:

Merger of PNO and POCL into SOCL and rename it as Pakistan State Oil

Company (PSO).

6. 1999:

New vision program with new logo of PSO is launched.

8

PNO &DPL Merged into POCL (Jan 1,

1974)

Formation of PSDC (June 6,

1974)

PSDC renamed as SOCL (August

3, 1976)

Purchase undertaking of ESSO

(Sept. 15, 1976)

Formation of PSO (December

30, 1976)

New Vision Program (1999)

1.2 Introduction:

Since its inception, PSO is a market leader in the industry and company maintain

its position till the preparation of this report. PSO is a government owned company

with 51% shares in government hand while 49% are available to general public

through Karachi Stock Exchange (KSE). PSO have biggest network of retail outlets

with more than 3500 retail outlets country wide. PSO also has a biggest fuel storage

capacity of more than 1 Million liter.

1.3 Organizational Structure and Company Information:

Organizational structure of Pakistan State Oil (PSO) is as follows:

1.3.1 Board of Management:

1.3.1 Mr. Mujahid Eshai…………………………. Chairmen

1.3.2 Mr. Amjad Pervez Janjua…………………... Managing Director & CEO

1.3.3 Mr. Muhammad Naeem Malik…………….. Member

1.3.4 Mr. Umar Azim Daudpota…………………. Member

1.3.5 Mr. Bilal Ijaz………………………………. Member

1.3.6 Mr. Adeel Rauf……………………………. Member

1.3.7 Mr. Shahzad Saleem………………………. Member

1.3.8 Mr. Salman Ansari………………………... Member

1.3.9 Mr. Shahid Islam………………………… Member

1.3.10 Mr. Hussain Islam……………………….. Member

1.3.2 Company Secretary:

Ms. Ayesha Afzal

9

1.3.3 Auditors:

M/s. KPMG Taseer Hadi & Co.

M/s. M. Yousuf Adil Saleem & Co.

1.3.5 Registrar Office:

THK Associates (Pvt.) Limited, Ground Floor, State

Life Building No. 3, Dr. Ziauddin Ahmed Road, Karachi.

Phone: 021-35689021

Fax: 021-35655595

1.3.6 Registered Office:

Pakistan State Oil Company Limited, PSO House,

Khayaban-e-Iqbal, Clifton, Karachi – 75600, Pakistan.

UAN: (92-21) 111-111-PSO (776)

Fax: (92-21) 9920-3721

Website: www.psopk.com

10

Vision Statement:

“To excel in delivering value to customers as an innovative and dynamic

energy company that gets to the future first”

Analysis of Vision Statement:

Vision Statement consist of four components. Customers, customer needs,

your business values and your product and services. The above vision statement shows

customer concern as it depicts delivering value to customers. PSO is operating in oil and

gas industry, produce homogeneous product which is petrol and other, and these products

are the basic needs for customers. So everyone buy these products whether to exploit

customer needs or not. Hence, in my view, this is a proper vision statement and it do not

need any change.

Mission Statement:

We are committed to lead in energy market through competitive advantage

in providing the highest quality petroleum products and services to our customers. We

have:

Professionally trained, high quality, motivated workforce, working as a team in

an environment, which recognizes and rewards performance, innovation and

creativity, and provides for personal growth and development.

Sustained growth in earnings in real terms.

Lowest cost operations and assured access to long-term and cost-effective supply

sources.

11

Highly ethical, safe environment, friendly and socially responsible business

practices.

Analysis of Mission Statement:

Mission Statement consist of nine components. These are customers,

products/services, markets, Technology, concern for survival, growth and profitability,

philosophy, self-concept, concern for public image and concern for employees. In the

mission statement stated above, company is not focuses on customers because their

product belongs to a category of basic needs. Instead, they focus on their employees,

rewards and their professional growth. As an oil marketing company, they do not require

advanced technology and innovation, so their mission statement isn’t focuses on that

aspect. Instead they shows concern for employees, have a self-concept and concern for

public image.

Our Values

Excellence:

We believe that excellence in our core activities emerges from a passion for

satisfying our customer’s need in terms of total quality management. Our foremost goal is

to retain our corporate leadership.

Cohesiveness:

We endeavor to achieve higher collective and individual goals through

team. This is inculcated in the organization through effective communication.

12

Integrity:

We uphold our values and business ethics principles in every action and

decision. Professional and personal honesty, dedication and commitment are the

landmarks of our success. Open and transparent business practices are based on ethical

values and respect for employees, communities and environment.

Respect:

We are an equal opportunity employer attracting and recruiting the finest

people around the country. We value contribution of individuals and teams. Individual

contributions are recognized through our reward and recognition program.

Innovation:

We are committed to continuous improvement, both in new product and

processes as well as those existing already. We encourage creative ideas from all

stakeholders.

Corporate Responsibility:

We promote health and safety environment culture both internal and

external. We emphasize on community development and aspire to make society a better

place to live in.

PSO as a market leader:

PSO is the only government based and government supported oil marketing

company. This advantage make the company as a market leader in oil industry within the

domain of the country. The company has a largest branch network of retail outlets which

13

is able enough to serve a large portion of automotive sector. Besides that, company is a

major fuel supplier to aviation, armed forces, railways, power projects and agricultural

sector. PSO also provide jet fuel at 9 airports and ship fuel at 3 ports. Currently PSO have

more 62% market share in the oil industry, which is one of the proof of company’s

success.

Retail fuel is one of the core business of company. Company have more

than 3500 retail outlets to fulfill the needs of the automotive sector, and their team is

working day and night to provide the finest quality fuel and lubricants to their respected

customers without any hassle and delay. Company provide premier XL (petrol), green

XL plus (diesel) and HOBC to its approximately 2.8 million retail customers daily. PSO

retail department is spread across the nation with 14 divisional offices. Each retail outlet

and division is linked with a SAP software.

Departments at PSO:

Pakistan State Oil (PSO) have many department and with such a huge base

of fixed assets and large operational expenditure, it is not a surprising thing. The function

of each department is explained in the next chapter along with personal working and

learning experience. Here is a list of departments operated by the company.

1. Finance Department

2. Marketing

3. Human resource Management

4. Facilities

5. Lube sales & LPG

14

6. Taxation

7. Cards

8. Mobile Quality Testing Unit

15

Chapter # 2

Personal working & learning experience

Pakistan State Oil (PSO) is a professional organization and play a key role in

national economy. PSO have many functional departments, which help in running the day

to day business of company and also to achieve long-term goals. These departments

includes Finance department, Human Resource Management, Marketing, Facilities,

Cards, Lube Sales & LPG and Mobile Quality Testing Unit (MQTU) departments. I work

personally in many of these department and the remaining one like marketing

department, I get insight through introductory sessions given by the respective heads of

these departments. My personal working and learning experience, while doing my

internship is explained in following lines.

2.1 Accounts & Finance Department:

Accounts & Finance Department is headed by Mr. Hakeem Muhammad Tayyab.

Being a student of Finance, it appears to be of special interest for me. He teaches me a

number of different things and mechanisms. The finance department of PSO usually have

to monitor and control 4 different general accounts. The first one is Fixed Asset account.

This account didn’t need much monitoring. The fixed assets were only revalued once at

the end of the company’s fiscal year. Moreover, if some new fixed asset is purchased or

acquired by the company, it will be treated by using the Matching Principle.

The second account comprises of stores accounting. It contain all the information

of inventory and other general items which do not classify separately in the balance sheet.

16

Special Project is a third general account, which involve in dealing the finances of any

special project being carried out by the company. Necessary funds were allocated for this

purpose at the start of the year and continuously monitored by the department to prevent

any misuse of funds. The last account is named as payroll and provident fund. Salaries of

employees were paid from this department. Employee insurance programs, pension plans

and retirement funds were also present here. It is the responsibility of finance manager to

correctly forecast the minimum amount needed for pensions, salaries, insurance and

retirement of employees for the whole year. But the funds were not allocated once,

successive payments were made so that capital couldn’t stuck in one account.

Working of finance department is further subdivided into 4 different categories.

These were written as follows:

2.1.1 Accounts Payables:

As PSO is an oil marketing firm with lots of purchases, so it is quite

obvious that company would have large accounts payables too. To deal only with

accounts payables, a separate person is appointed and here I learn to process bills timely

and then made payments within the given time in order to meet the company’s

commitment. We clear all our bills within the stipulated time period, so that our suppliers

always remain happy from us and our goodwill and reputation in the market continues to

prevail. Besides that, I also learn to make payments of all capex & revex items, which

constitute more that Rs. 4 billion/year. Ensuring of expenses in correct accounts and

reporting of monthly expenditure status are also some functions of accounts payables

sub-department, which I learn during my internship.

17

2.1.2 Treasury:

Treasury sub-department in present in PSO Karachi Head Office. Through

introductory sessions, I’m able to understand the purpose and working of this department.

It perform some very key functions, like all the transactions and dealings with associated

banks were handled and performed by this department. Receive payments from

international clients, they called it as “import foreign exchange”. At the beginning of

every month, bank reconciliation statements were prepared. The purpose for preparing

the statement is to check whether there is any outstanding cheque or not. Each of our

bank send the statements of our accounts to treasury. Here, they have their own records

too. So, by comparing both of the statements, any outstanding cheque if present can be

figured easily. If there is any outstanding cheque, then an adjustment for this cheque is

made in company’s record.

Insurance of raw material carriers mainly ships is also one of the key duty of

treasury. Other than that, petty cash is also held by the treasury. Petty cash is an amount

in cash use to meet small day-to-day expenditures like purchase of ball points, papers etc.

2.1.3 Financial Reporting:

Financial reporting comprises of preparation of company’s monthly performance

and then presentation of it to the top management both at Head Quarter and Divisional

offices. Moreover quarterly and semiannually financial reports were also prepared under

financial reporting. An internal auditor audit these reports but the annual report is being

audited by some external auditor. Besides that, representatives from financial reporting

are responsible to deal with any issue arises with Securities and Exchange Commission of

18

Pakistan (SECP) or any other monitory institution. Annual Expense budgets are also

compiled by them and they have to forecast the expected financial position of the

company for the next year. So that management may able to decide their future goals and

to redefine them, if necessary. Individuals from financial reporting have many powers

and have direct link with company owned and company operated (COCO) outlets and

they are responsible of monitoring financial activities of these outlets.

2.1.4 Shares:

PSO is a public limited company with 49% of its shares operated in Karachi Stock

Exchange (KSE). Due to this reason, they have to maintain their books as it is a

compulsory condition form SECP to all the listed companies in stock exchanges. Other

than that, for dividend payments, book keeping is mandatory. This sub-department

actually deals with shareholders, stock exchanges and related monitory and regulatory

authorities. They have to maintain record of withholding tax, organize Annual General

Meeting (AGM) and to remain in touch with Central Depository Company (CDC) for the

transfer of shares and to prevent any fraud from the end of brokerage firms.

2.2 Human Resource Management Department:

Human Resource Management is divided into two sub-departments. The first one

deals with people especially hiring process while the other one is related with

organizational development. During my internship, no hiring take place in Islamabad

divisional office because there is a ban on hiring from federal government. So there is a

little work to do. They have given us manuals to read and from these manuals, I extract

19

that they value people as their greatest resource and want to achieve their goals through

people. Their basic aim is to build an ideal working environment which appeal

individuals and motivate them. To achieve specific goal or to accomplish certain task,

cross functional teams were formed. Mostly these teams consist of senior management

officer, one individual from finance department, one from engineering and one from the

human resource department. This is not hard n fast rule. Cross Functional Teams (CFT)

can be mold according to the tasks. Other than that, they introduced a concept of

Business Unit (BU) in which each BU is responsible for sales volumes, profitability and

investment. Moreover, un-necessary layers were removed from the hierarchy for effective

and fast movement of information. Besides that, interactive sessions are regularly held by

managing director at all levels.

The second sub-department is organizational development. Here, I learned the

culture of PSO and how a planned change can be made possible. It seeks to change

beliefs, attitude, values, structure and practices so that the organization can better adapt to

technology and live with fast pace of charge.

They follow the following model for Organizational Development:

Decision by management to use OD……………….diagnosis of need by

management and consultant………………….collection of appropriate

data……….data feedback and confrontation……………..action planning and

problem solving……………….team building……………intergroup

development………Evaluation and follow

20

2.3Facilities Department:

This department deals with retail outlets and provide maintenance function at

minimum cost. Through introductory sessions, I come to know that PSO is converting its

old vision outlets with new vision outlets. New vision outlets includes Main building,

steel canopy, spreaders, dispensing Pump Island, steel storage tanks, slogan wall,

Driveway, underground piping, C-store, Masjid, tyre shop, lubricant display racks,

monolith, graphics and signage. According to them, there are three type of outlets.

Company based (COCO), Dealer Financed category A (DFA) and Dealer Financed

Category B (DFB). This classification is based on equipment (building etc.), signage

(company logo etc.) and civil work (human resource, tiles etc.). In company financed

outlets, company bear all expenses. The owner only provide land and the minimum limit

of land is 2 Kanal. The total expense on such an outlet is almost Rs. 25 million. PSO F-8

outlet is company financed outlet. The owner receive 70% and company get 30% from

net income while everything is controlled by company.

In dealer financed outlet (DFA), company provide equipment and signage while

civil work is done by the dealer. In case of DFB outlets, company only provide signage

while equipment and civil work is done by the dealer. To deal all these outlets and to

ensure minimum monthly sale, facilities department and territory managers work in joint

functional team to get the desired result.

2.4Marketing Department:

This department do not have sufficient resources and skilled workforce to market

PSO products worldwide. PSO only face competition in sale of lubricants. When I ask the

21

marketing manager about their marketing techniques, he replied to me that with limited

resources and with strict check and balance from finance department, we were unable to

work at full potential. We devise marketing campaigns but these campaigns start from

our outlet and ends at our outlet. We were unable to go for media advertisement or buzz

marketing. Sometime, we print brochures and banners and hanged them on some public

place for a very limited time because of heavy rental expense.

2.5Lubricant Sales Department:

During my internship at lubricant sales department, I come to know that PSO

lubricants were very good as compared to their competitors. But the low sale of lubes is

due lack of awareness in people. To increase the sale of lubes, company gave target to

each territory manager to sell 16,000 liters of lubes per month. This department monitor

the sale of lubes and issue notices to respective managers, if they were lacking behind

from the target.

PSO have many other department but due to lack of time, I’m unable to work in

those departments. These includes cards department and taxation department. Taxation

department is not present in Islamabad Divisional Office, so only the Cards department

left, where I didn’t work but I gather sufficient knowledge regarding this department with

the help of other internees. According to them, PSO offer four type of cards, corporate

cards, Fleets Cards, Loyalty Cards and Prepaid Cards. This department monitor sales

through cards and issue reminder to clients, if their accounts got empty.

22

Mobile Quality Testing Unit (MQTU) is another separate department. I saw their

working at F-8 outlet. They planned surprise visit at different outlets in their special

laboratory cum vans. At outlets, they collect samples and check whether these samples

are meet the standard requirements. Initially they took sample in their bottles and check

the accuracy of dispensing unit. Then, they perform some test to check the quality of fuel.

If there is some adulteration, then severe actions were taken by the company and

sometime, it may result in cancellation of license.

Working at Retail Outlet

During my internship, I worked at two different retail outlets. Both outlets are

company financed or in common term, COCO outlets. The first one is PSO F-8 outlet and

the other one is PSO Foreign Office outlet. My working and learning experience at these

two outlets is written below.

F-8 Outlet:

My supervisor at F-8 outlets are Mr. Ibrar (outlet manager), Mr. Faisal

(Accountant) and Mr. Umar (Forecourt Manager). When I started 2nd part of my

internship at PSO outlet (Petrol Pump), on the very first day I was briefed by team of

internees who are at the company owned, company operated COCO outlet, sector F-8.

Company operated outlets have assigned amount for day to day running of

business commonly called as working capital. Working capital of this outlet is 6.5

million. Management at outlet use this amount of money for purchasing of fuel and lube,

and day to day running of business. After the sale of this product, that amount would be

added in the original balance. If any difference appear, management would be

23

answerable. The earned money is deposited in the bank on the daily basis. At the end on

month, bank provide bank reconciliation statement, which is used to match up with our

registers operated manually as well as electronically.

Pump managers maintain the cash register, which includes the credit, sale and

balance, the sum of these amount is known as cash in hand. Moreover he maintain the

cash book, which includes opening balance, purchase cash, fresh balance and deposit

cash. Pump manager also maintains the stock register. This register stores the information

about the inventory at the pump. Two petrol tanks of capacity 23,500 liters each, one

diesel tank of capacity 15000 liters and HOBC tank contain 15000 liters product. This is

all managed by the pump manager and he is responsible to maintain the supply.

DIP rod method is used on the pump to check the quantity of fuel which is being

brought by the tanker and is available in the underground storage tanks. The dip road is

inserted very slowly into the tanker so as not to produce any friction, because a little

amount of friction can produce spark. A ring of fuel is formed which tells about the last

contact of fuel on the dip rod. This scale reading of the dip is taken and then compared

with the dip chart, issued by the company after proper experiments. The values of the

physical measurement may vary from the stock register, this difference in values of the

fuel stock is arise due to human error, and it can be reduced by taking precautions while

taking reading.

The monthly profit of the F-8 pump is approximately PKR 2.2 million. The pump

is totally financed by the PSO, but the total monthly profit is divided between the land

holder (70%) and PSO (30%). The pump sells retail fuel, and non-retail fuel. The non-

retail has car wash and ATM facility. The car wash pays the company 50,000 per month

24

and the ATM pays 30,000. The maximum cash is on Monday due to the bank holiday on

weekend.

Foreign Office Outlet:

This outlet is under Mr. Baaz gul. He is also in charge of all the COCO outlets in

Islamabad/ Rawalpindi region and one of the most senior person in this field.

Unfortunately, I didn’t work under his supervision because he has some serious health

issues. In his absence, I work under supervision of Mr. Muneer (Successor of Mr. Baaz

gul, now outlet manager) and Mr. Kamran (Forecourt area manager). As this outlet is also

a COCO outlet, so there is no difference in working. This outlet is a bigger one with 5

fuel storage tanks. Two for Petrol with capacity 23,500 liters each, two for diesel with

same capacity and one for HOBC with capacity of 15,000 liters. At outlet, I have to

maintain several registers on daily basis. These registers include gain & loss register,

stock register and cash book. Besides that a daily activity sheet is also prepared on a daily

basis. Its working capital is Rs. 15.5 Million. This outlet gave fuel on a subsidized rate to

Aiwan-e-Saddar. The reason is that they won’t pay full amount. According to them, the

owned company and being an owner of company as well as Pakistan, they won’t pay

sales tax. Hence, company is force to provide fuel to their cars at Rs. 57/Liter.

25

Chapter # 3

SWOT Analysis

In 1960’s Albert Humphrey is said to have developed this strategic planning tool

using data from the top companies of USA. The SWOT analysis looks at the strengths,

weaknesses, opportunities and threats that are relevant to an organization in a new

venture. A SWOT analysis is a tool which allow users to look at the direction, an

organization or company may wish to move forward in the future. A SWOT analysis is a

useful tool, which help in summarizing the current state of a company and helps to devise

an informed plan for the future. That plan must circled around the existing strengths, re

dresses existing weaknesses, exploits opportunities and defends against threats. One

important thing to mention is that in SWOT analysis, strengths and weaknesses are comes

from the company’s internal environment while threats and opportunities are due to

external factors.

3.1 Strengths:

3.1.1 Identify your skills and capabilities.

3.1.2 What can you do particularly well, as compared to your rivals?

3.1.3 What is your strength in the eyes of analysts?

3.1.4 What resources do you have?

3.1.5 What is your reputation in the market?

26

3.2 Weaknesses:

3.2.1 What your rivals do better than you?

3.2.2 What do you do poorly?

3.2.3 Which thing generates the most customer dissatisfaction and complaints?

3.2.4 Which thing generates the most employee dissatisfaction and complaints?

3.2.5 What processes and activities can you improve?

3.3 Opportunities:

3.3.1 Where can you apply your strengths?

3.3.2 How is technology changing your business?

3.3.3 Are there new markets for your strengths?

3.3.4 Are your rival’s customer is dissatisfied?

3.3.5 How are your customer and their needs changing?

3.4 Threats:

3.4.1 What are your competitors developing?

27

3.4.2 Are there is someone in the market, who is able to meet the demands of your

competitors?

3.4.3 Are your rivals improving their services?

3.4.4 is your cash flow and debt position is healthy?

3.4.5 is new competition is coming?

3.4.6 Are your revenues are growing slower than the industry average?

The above points are the some basic things, which we have to keep in mind during the

SWOT analysis.

3.5 SWOT analysis of PSO

Pakistan State Oil (PSO) is an oil marketing company. They have many

competitors, and it may include both local as well as international competitors. While the

biggest threat for them are international competitors like Shell, Total and Caltex. As all

these companies are dealing in the same products with same quality and same profit

margin, it is difficult for them to show fast growth in short span of time. In that particular

industry, the real competition is in between customer care, lubricant sales and to attain

large tenders. The company which is fast and strong enough to get tenders, provide best

customer care and produce a quality lubricant will be able to shoe somewhat fast growth

then the competitors. The following proceedings consist of SWOT analysis of PSO,

which enable us to figure out the areas where the company is good, where it need

28

improvement, what are the possible problems and what are the possible advantages that

could be availed by the company.

3.5.1 STRENGTHS

3.5.1.1 Talented & Experienced Staff:

PSO Islamabad division is equipped with an experienced staff. Few of

them are working from last 20 years but they didn’t switch the company even when

attractive packages were offered to them by their competitors. I think they build an

emotional attachment with the company. Due to this, in hard times when company faces

some crises like the issue of circular debt and other managerial problems, they work day

and night to retain their customers and try to resolve their queries. In return company

rewarded them with bonuses when the financial position is good.

3.5.1.2 No. of clients:

PSO is the oldest oil marketing in the country and also 51% of its shares

were owned by the government. They have more than 62% market share which is a proof

of its large customer base. As it is a semi government firm with good reputation,

customers put their trust in the company. Whenever there is a shortage of fuel, COCO

(company owned company operated) outlets never got dry. They always provide fuel and

this will help company to increase their customers and goodwill too because a satisfied

customer is also a marketer in itself. Moreover, with government support, company is

able to get contracts with the government institutions like PIA, ARMY, WAPDA,

29

Railways etc. These contracts are of great worth and constitute a large portion of revenue

of company.

3.5.1.3 Low tender margin:

Company offer lowest rates to achieve big tenders from independent

power producers (IPPs), manufacturing industries and multinational corporations. This

will enable company to get those contracts and make potential clients but on the other

hand, profits will not grow accordingly. One of the official said on this issue, “No doubt,

we decrease our profit margin but we get giants. We achieve our expected profit because

these giants are not buying a 1,000 or 10,000 liter fuel, they were buying hundreds of

thousands liters of fuel, so our expected profits also increases with it. One more thing is

that these giants not make a contract for 1 shipment, when we enter in the contract, it will

be long lasting and benefitted company in the longer run”. So the company’s ability to

give low bids, in facts enable it to get long term gains.

3.5.1.4 Resources:

PSO have more than 3000 employees all over the Pakistan and more

than 3500 retail outlets spreading around the country. Moreover, they were dealing in

those products which now become as a basic necessity of daily life. This will enable the

company to raise their net profit after taxes above 21.8 billion rupees annually, keeping in

mind the all-time prevailing issues of circular debt. Share price of PSO is more than Rs.

350/share, which assures that company is strong because its share is strong. Hence, we

30

can say that company is financially strong and sound enough to overcome any alarming

situation and in a position to start mega projects.

3.5.2 Weaknesses

3.5.2.1 Less Marketing:

PSO and its competitor obtain fuel from Attock oil refinery through

Sihala Depot at same price. As the price is same and the quality is also same, it will not

give an advantage. But the quality and prices of lubricants is different. In that field, PSO

can get an advantage, if management focus on marketing of its lubricants as its

competitors like Shell, Caltex and Total do. The competitors were using latest marketing

techniques like television and radio ads, banners and bill boards, and through mobile

SMS service. PSO on the other hand, didn’t market its lubricants. Due to this, company is

very much behind from other companies in the sale of lubricants. If company market its

lubes, then there are very high chances of increase in sale of lubes due to its strong

customer base and goodwill in the market.

3.5.2.2 Less COCO outlets:

PSO have very few COCO (Company owned company operated)

outlets. Only seven in north region. All other outlets were controlled by different dealers.

These dealers include Politicians, Retired Generals, Industrialists, Bureaucracy and other

31

powerful persons. These dealers run their outlets in their own way like they didn’t follow

company dress code, do not maintain registers, do not sell the least amount of lubes,

purchase fuel from other companies and many more things which company cannot allow.

As they were powerful, sometime company won’t be able to do any corrective measure

and this will eventually hurt company reputation and goodwill. On the other hand, COCO

sights were fully controlled by company and working properly under the instructions

provided by the management. So, it is advisable to increase the COCO sights gradually.

So that the effect would be nullified.

3.5.3 Opportunities

3.5.3.1 New Markets;

With successful implementation of war against terror, there are strong chances of

improvement of peace in northern areas. If peace is provided to those areas, then

economic activity will surely be generated and this won’t happen without fuel. This is an

opportunity for company and management must took comprehensive decisions to avail

that particular opportunity. Furthermore, with increase hope in betterment of economy

and possible arrival of large groups and multinational companies, a handful pool of

industrial consumer would be established. If company is able enough to forecast and avail

fully that opportunity, it will surely multiply their revenues and help to overrun the

impact of circular debt on performance of company and its income.

3.5.3.2 New Technology:

32

Now a days in developed countries, companies’ measure fuel in tanks through

automatic devices, which increases accuracy and decreases the chances of error. PSO on

the other hand, uses the old Dip Rod method, which contain heavy chances of human

error. Currently, no company in Pakistan uses automatic device method. If PSO do this, it

will decrease its losses and chances of theft, thus increases its revenue. Furthermore, in

foreign countries at far furlong areas, companies installed automated dispensing units.

Any person can scratch its card and put fuel in his/her car on its own. No need of specific

person. If PSO try this, it would surely give them good results, decreases their fixed costs

(Salaries of pump attendant), increase the sale of their cards, and no doubt, the first

mover advantage too.

3.5.4 THREATS

3.5.4.1 Competition:

Few years back, there was no serious competitor of PSO in any field. But now

Caltex, Shell, Total are its biggest competitor in lubes and if the current management also

follow the footprints of previous one and do nothing, they will surely create competitors

in fuels too. Despite of foreign competitors, local competitors are also there to challenge

the company. For example, Mehr’s have more than 40 outlets and they grow rapidly, and

may be in near future, they will be in a bargain position with PSO. So to survive and

prosper in this highly competitive market, PSO must have to take same bold steps.

Management must decide whether to safeguard their own interest or the interest of the

company.

33

3.5.4.2 Political Involvement:

One of the disease and biggest threat for sound and peaceful growth of PSO is

political involvement. The Islamabad divisional office, where I do my internship is a best

example of political involvement and references. During the course of my internship and

discussion with different office bearers, I came to know that each and every employee in

Islamabad division attain job due to political references or some army personnel

reference, even the peon gets job due to reference of some ex. Chairman FBR (Federal

Board of Revenue). From this, I figure out that how big reference is needed to get a job in

PSO. I’m worried that if the same course of action continues and management at head

office didn’t decide to move against the political will, PSO might face the same future as

faced by steel mills and Pakistan International Airlines (PIA). So in my opinion,

management must have to take series of steps to prevent the sinking ship of PSO and save

it from the politicians and competitors.

Strategies based upon SWOT Analysis:

S4W1 Market Development:

PSO have more revenues than any other company operating in the particular

sector. Their revenues were in billions and we can say that the company is somewhat

financially sound and capable. PSO is facing difficulty in sale of lubricants. Although

company ordered every territory manager to sell 16,000 liters of lubricants per month, but

this target is same time unachievable in some areas. To increase sale of particular

product, company have to focus on Market Development. For this purpose, they have to

market their lubricants in every possible manner. They can run media campaigns, buzz

34

marketing and more importantly advertise their products in front of visiting customers at

their outlets. To do all that stuff, obviously funds will be needed and currently company

is in a position to bear advertisement expenses.

S4W2 Expansion:

Company have resources but little presence in northern areas. As the war against

terror is going towards its end and the outcome will obviously be peace. And it is quite

certain that peace will create economic activity. To fuel up that economic uplift, someone

have to do something. It is a good opportunity and with resources in hand, PSO must go

for expansion and explore new markets. The mode of expansion will totally be dependent

upon the management’s will. Whether they go for COCO outlets or go for dealer based

outlets. In my opinion, they have to focus on dealer based outlets in northern areas and

COCO outlets in developed areas of country.

35

Chapter # 4

Conclusion & Recommendations

Pakistan State Oil (PSO) is one of the largest company of Pakistan and it’s been

an honor for me to be a part of this prestigious organization as an internee. Before joining

the company, I believe that it is easy to sell oil related products as it almost become a

basic necessity of life. But during my internship, I faced different realities. There are

competitors in the market which put obstacles and make it difficult for you to do

business. To overcome competition, a great level of effort and skills were required. PSO

is doing quite well in competition. Its position as a market leader is a proof of its

greatness and efficiency. Overall company is performing well but management must have

to focus on some areas particularly take steps to increase the sale of lubes either through

market development or product development or any other suitable way, because in that

particular area, competitors were posing a serious threat and company is way behind.

Early and timely collection from industrial client is also a major job. If receipts

were delaying and delaying by the clients, amounts will get stucked, this will lead to late

payments and fines, eventually decreasing the goodwill of the company and creation of

circular debt. Political involvement is one of the major threat in steady growth of

organization. Management must have to fire unskilled and incompetent employees and

hire eligible candidates on merit and do not accept any pressure.

During the course of my internship, I figure out that company isn’t charge

General Sales Tax (GST) from “Aiwan-e-Sadder”. This is a total discrimination and it

must be eliminated. Every client must be treated at Par. If management didn’t decide

36

today and didn’t take back this discount facility, then maybe in near future, some other

institution like PM House or Supreme Court of Pakistan stands up and demand for the

same discount. So, this activity must be stopped otherwise it will seriously hurt company

at some point of time in future.

Staff members at PSO outlet should be strictly instructed to wear the specified

dress and follow the dress code during work hours. Moreover, if company can change the

uniform and made it somewhat attractive, it make will make a good impact. Other than

that, I knew one dealer based outlet on G.T road, the owner gave certain gifts to its

customers upon refueling from the same outlet. If PSO follow the same model, allot

points on each time, when person get fuel and when certain limit is crossed, gave them

reward in form of free fuel or some other gifts, it surely increase their sales and

eventually profits also increases.

Old vision outlets are now lacking behind from new vision outlets. This will

seriously disturb the war against competition. To compete effectively, old vision outlets

must be replaces with NVROs (New Vision Retail Outlets). Obviously a huge amount is

needed but a gradual process of up gradation can make a difference.

PSO is a large and prestigious organization and lot of people dream to be a part of

it, either as an employee or as an internee. But when internees like me join the company,

they were very disappointed because of its current prevailing culture under which

employees sometime do nothing and only talk with their co-workers all day. Instead if

they teach internees about their skills and work and give them sessions, it will be very

helpful for students.

37

In short, I would like to say that PSO has potential to be a part of fortune’s 500

companies but what create hurdle in its way is political involvement, lack of correct and

timely decision and somewhat in its vision. Company must have to redefine its mission

and vision. Allocate tasks and goals to each team and made possible that every employee

work on its full potential. If company succeeded in doing so, I will be very hopeful that

PSO can make a difference in coming decade.

38

References

http://www.psopk.com/

http://www.psopk.com/investors/financial_reports.php

http://www.psopk.com/about_us/

http://www.psopk.com/products_services/

http://www.psopk.com/suppliers/

http://www.psopk.com/ogra/index.php

http://kse.com.pk/

http://dps.kse.com.pk/

https://en.wikipedia.org/wiki/Pakistan_State_Oil

https://en.wikipedia.org/wiki/Pakistan_State_Oil#History

39