PSO project

TABLE OF CONTENTS

COMPANY PROFILE.....................................................................................................................................1

INDUSTRY PROFILE.....................................................................................................................................2

MARKET SEGMENTATION.............................................................................................................................. 2PORTER INDUSTRY ANALYSIS....................................................................................................................... 3

PSO MARKETING OPERATIONS.................................................................................................................4

SALES IN BILLIONS (PAK. RS.).......................................................................................................................4PSO VS SHELL........................................................................................................................................... 4PROFITABILITY OF PSO IN MILLION (PAK. RS.)...............................................................................................5RELATIONSHIP BETWEEN SALES AND PROFITABILITY GROWTH/ DECLINE TRENDS (%)....................................5PRODUCT MIX MANAGEMENT........................................................................................................................6BCG MATRIX APPROACH FOR PSO..............................................................................................................7

BRAND MANAGEMENT & COMMUNICATION............................................................................................7

PSO CARDS................................................................................................................................................ 8ADVERTISEMENT AND PROMOTIONAL EXPENDITURES PSO VS SHELL............................................................9

DISTRIBUTION & FLEET MANAGEMENT...................................................................................................9

RETAIL MANAGEMENT..............................................................................................................................10

RETAIL FUEL OUTLETS............................................................................................................................... 10NON-FUEL RETAIL OUTLETS....................................................................................................................... 11

THE INDUSTRIAL CONSUMERS............................................................................................................... 12

VALUE CHAIN – PSO..................................................................................................................................13

SWOT ANALYSIS........................................................................................................................................13

STRENGTHS............................................................................................................................................... 13WEAKNESSES............................................................................................................................................ 14OPPORTUNITIES......................................................................................................................................... 15THREATS................................................................................................................................................... 15

Financial Profile............................................................................................................................................ 16

Company Profile

Pakistan State Oil Company (PSO), is the largest Oil Marketing Company (OMC)

operating in Pakistan and engaged in the storage, distribution and marketing of POL

products and is among the country’s largest corporate entities with highest earnings and

capitalization. Supported by well-established infrastructure built at par with international

standards, comprising around 877,000 million tons storage facilities representing almost

81% of the total storage capacity in the country. PSO has an edge over its competitors

in terms of economies of scale and cost effective operations.

PSO has always been considered as a blue chip company with market capitalization of

around Rs. 50 billion (USD 860 million). The company is the winner of “Karachi Stock

Exchange Top Companies Award” and a member of World Economic Forum.

The PSO’s retail coverage of over 3,800 outlets which representing 80% participation in

total industry network. The rapidly expended international standard New Vision outlets

are more than 800. These new outlets accommodate the end user’s needs but also add

beauty to the landscape. These outlets are equipped with convenience stores, business

centers, Internet facility and CNG facility, etc. To ensure the quality of the products

being sold to customers, 16 mobile quality-testing units have been deployed in all major

cities to carry on-the-spot checks for quality and quantity.

Alongside its retail business, PSO also caters to the fuel demand of the industrial

consumers that includes power generation, railways, sugar, textile and steel mills, etc.

The company has also been meeting the fuel needs of defense of the nation and

maintains on time supplies to armed forces.

PSO operates at 8 airports and serves 4 domestic and 18 international airlines under its

technical/ commercial license agreement with Air Total International. PSO enjoys over

70% market participation in aviation fuel. PSO participation in Allama Iqbal Airport,

Lahore is 100%.

PAKISTAN STATE OIL COMPANY LIMITED

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PSO’s LPG business unit, supported by 4 plants with combined capacity of 750 MT/day,

is delivering cheap fuel to low-income households and rural areas where natural gas is

not available. The trade unit is fully alive of its responsibilities of delivering Kerosene,

Light Diesel Oil and Lubricants to end-user via 580 distributors appointed all over

Pakistan.

Industry Profile

There are four main OMCs in Pakistan that includes PSO, Shell, Caltex and Total. PSO

is the market leader by holding overall 67% of market share and with 22% share Shell

Pakistan hold second position.

Market Segmentation

Petroleum industry is categorized into two main markets according to the nature of the

products and their usage. The Whit Oil segment includes MOGAS, Kerosene, Diesel

and Jet Oil that are purified fuel. The Black Oil segment represents the products, which

are less purified and used in mostly industrial sectors.

The White Oil Markets has registered the 2.6% growth while the Black Oil Market faced

15% decline due to low demand in power sector especially by HUBCO.


2

PSO holds market leadership in White Oil Market with 59 % and Black Oil Market with

79% participation.

White Oil Market Black Oil Market

Porter Industry Analysis

PSO Marketing Operations


3

The following are five main competitive edges for PSO over its key competitor Shell Pakistan.

1. PSO’s vast storage capacity means ensured supplies.

2. PSO’s vast logistics support meeting huge demands in shorter time.

3. PSO’s widespread depots and divisions to serve the customer better.

4. Quality and Quantity assured through PSO Fleet of Quality Vans.

5. Prepaid, Loyalty, Fleet and Corporate cards add value to customers.

Sales in billions (Pak. Rs.)

PSO VS Shell


4

Profitability of PSO in million (Pak. Rs.)

Relationship Between Sales and Profitability Growth/ Decline Trends (%)


5

Product Mix Management

The total width of PSO product mix consists of 7-product line, which includes the Castrol

series that is the market alliance of PSO in Pakistan. As for concern the length of

product mix is contains 87 products by making difference due to size or other verities.

Product Mix for Pakistan State OilPSO

AutomotiveOils

PSOIndustrial

Oils

CastrolAutomotive

Oils

CastrolIndustrial

Oils

IndustrialChemicals

Fuel Oils

Passenger Car Motor Oils

Diesel Engine Oils

Motor Cycles Oils

Gear Fluids

Break Fluids

Automotive Greases

Gas Engine Oils

Hydraulic Oils

Turbine Oils

Gear Oils

Refrigeration Oils

Cylinder Oils

Asphaltic Oils

Heat Transfer Oils

Metal Working Fluid

Slide Way Oils

Process Oils

Transformer Oils

Industrial Greases

Passenger Car Motor Oils

Diesel Engine Oils

Motor Cycles Oils

Gear Fluids

Break Fluids

Automotive

Greases

Marine Engine Oil

Circulating Oils

Hydraulic Oils

Turbine Oils

Gears Oils

Refrigeration Oils

Cylinder Oils

Asphaltic Oils

Heat Transfer Oils

Metal Working Fluids

Slide Way Oils

Industrial Grease

Solvent Oil

Mineral Turpentine

Hexane

Toluene Xylene

Isopropyl Alcohol

MEK

VAM

NBA

HOBC

Premium

High Speed Diesel

Kerosene

Light Diesel

Furnace Oil

6 Product 13 Products 6 Products 12 Products 8 Products 6 Products

Product Line Depth


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BCG Matrix Approach for PSO

Brand Management & Communication

Brand Management & Communication at PSO stands at the connection of the company

and its customers to integrate the totally different dynamics of the two worlds. It is

essentially a balancing act between the external market and the internal capabilities of

the company. The department processes, develops and ensures the strength of PSO’s

corporate image as well as of products and services. The company has been

advertising in the most creative and unique manner.

Promotional Campaigns

This includes presenting interesting fuel and lubricants promotion campaigns to indulge

customers.

Mega hoardings

Mega hoardings constructed at retail outlets are another classic example, which is not

only an extremely cost-effective initiative but also provides the company with an ideal

location to advertise and also enhances the outlook of the outlet.


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Zoom Signs

Another image-building tool and a one-of-its-kind mode of advertising is Zoom Sign.

These are 110 feet tall towers, with PSO logo on the top, built at the stations in major

cities of Pakistan. These signs that can be seem from a distance are providing PSO

with tremendous mileage.

Encouraging sports

PSO is also keen on encouraging sports in the country and is a major sponsor of SAF

Games, various cricket series, golf tournaments and squash championships.

PSO Light & Visual Park

PSO has also adopted a park now called “PSO Light & Visual Park” in Islamabad where

new plantation and lights have been put up along with other beautification activities.

Directional and safety signs

Activities like putting up of directional and safety signs and overhead gantries in

Karachi, Lahore, Islamabad, Saiwal, Peshawar and Faisalabad is the classic example of

PSO as a socially ethical organization.

PSO Cards

PSO is also offering plastic cards for the retail and industrial consumers according to

their requirements.

1. Loyalty Card

2. Prepaid Cards (available in Rs. 500, 1500, 2500 & 5000)

3. Fleet Card for Corporate Vehicles

4. Corporate Card for Corporate employees


8

Advertisement and Promotional Expenditures PSO VS Shell(Rs. 100,00,000- crore)

Distribution & Fleet Management

PSO Logistics Department, the most vital link in the company’s supply chain, supported

by;

8,500 Strong Tank Lorry Fleet along with 7000 trained drivers

3,800 Railway Wagons

480 Lubricant Distributors

Pipe Lines

With the introduction of satellite tracking system Logistics Department now constantly

monitors the road movement of its fleet. Continuous review of the logistics mechanism

has enabled the company to further fine-tune and bring in more efficiency in the modes

of production transportation at its disposal.

In line with the management’s belief of “Business Partner Concept”, the logistics

department has upgraded priority areas at installations and depots, so as to provide

basic facilities and amenities to cartage contractors and their crew.


9

Imports

PSO imports 4 million tones of Fuel Oil & Gas Oil to meet the deficiency due to

production constraints in Pakistan.

StoragePSO have 877,000 MT Storage capacities, which is representing the 81% of total

storage in the Pakistan

Inventory Turnover Rate (PSO VS Shell)

Retail Management

The retail management activities at PSO are divided into two sub areas. The

department who is engaged in fuel retail activities represents the Fuel Retail Outlets and

department engaged in non-fuel activities like car wash represents the Non Fuel Retail

Outlets.

Retail Fuel Outlets

Retail Fuel is the core and most vital business segment in PSO, which is responsible for

generating 90% of the company’s revenue through sale of PSO products at more than

3,800 Retail Outlets.


10

New Vision Retail Outlets

PSO began it New Vision Retail Outlets (NVRO) in the year 1999 and has 833 NVROs

at the end 2003. The NVROs has become the backbone of the company operations and

the highest level of significance is given to all matters related to them. PSO has

developed its NVRO development policy. This policy is to bringing old retail outlets

within the parameters of NVRO.

CNG Facilities

Today there are more than 400 CNG stations throughout the country. Shell Pakistan is

providing the CNG facility at only 68 outlets.

Non-Fuel Retail Outlets

The Non-Fuel Retail Department is responsible for all the non-fuel facilities at the retail

outlets. PSO, being an organization committed to providing value added services to its

customers, has facilities at its stations. These includes,

Convenience Stores (C-Stores)PSO currently has about 64 operational C-Stores all over Pakistan. These are stocked

with a wide range of products such as food items and basic consumer goods. There is

special distribution system is developed for C-Stores and finally a number of promotions

are also run at regular intervals in conjunction with reputable consumer goods

companies.

Business CentersBusiness Centers have been developed at 16 different outlets within various divisions in

efforts to provide round-the-clock services to customers. The centers are equipped with

all basics such as a fax machine, photocopier, and e-mail facility.

Internet facilitiesPSO has developed Internet facilities at 600 retail outlets. A comprehensive web based

e-mail system has also been put into place to allow dealers and divisions offices to

communicate with Head Office.


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Auto Car WashesRecently, as part of the ongoing value addition activities, automatic car washes were

introduced at the outlets. Currently, there is one car wash each in the three major cities

in Pakistan.

Karachi Lahore Islamabad

ATM MachinesPSO has further installed MCB ATM machines at two of its outlets in an effort to make

these outlets a one-stop complete service provider.

Easy Payment MachinesEasy Payment centers are established with Citibank at 17 outlets. These allow the

people to easily pay their bills without the hassle of having to stand in long queues. The

facility is currently being offered for KESC, SSGC, PTCL, Citibank Credit Cards, Paktel

and Instaphone.

The Industrial Consumers

The following are major industrial consumers segments for PSO,

General Trade

For the General Trade segment includes the major customers like, NLC, POF Wah,

Police, KMC, KWSB, Gairon, Ruplai Group, Engro Chemicals and Pakistan Steel Mill

(Ex-Shell Customer)

Defence

PSO enjoys a long-standing and deep-rooted relationship with Pakistan Army especially

in the Fleet Management Training for senior arm force officers.


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Power Industry

In 1994, PSO was the only OMC that made huge investment of around 2.2 billion and

aggressively entered the power sector and captured a market share of approximately

88% by supplying products to all power plants.

Value Chain – PSO

SWOT Analysis

Strengths

1. Market Share of 70% is one the main strength of PSO.

2. Company reputation in the industrial sectors adds the strengths for PSO.

3. Product quality is also strength especially in industrial sector.

4. Service quality like plastic cards and non-fuel activities adds the value.


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5. Distribution & Fleet network, which covers 81% country retail network, is the key

edge on PSO its competitors.

6. Promotional activities add value in brand awareness and attraction of new

customers.

7. Innovation like Auto Car Wash helps PSO to differentiate with its main

competitors.

8. Storage capacity, which holds 80% of total storage capacity of the country, is

also key advantage over its competitors.

9. Technical skills in Fleet management are another strength for PSO.

10.Visionary, capable leadership adds value to PSO strength like their NVRO

operations.

11.Financial Stability with strong reserves, paid-up capital adds the trust of

stakeholders.

12.Product line width adds long range of products for more revenue opportunities.

13.Castrol brand affiliation with PSO adds strength in terms of brand awareness.

14. Relations with Government one of the key strength of PSO in order to get legal

protections.WeaknessesLost & Dissatisfied customers are major weakness of

PSO as they are causing the perception of inefficient PSO.

1. Old retail outlets are major weakness for PSO as they are not enough capable to

compete the Shell, Caltex or Total outlets.

2. Untrained staff at outlets is causing inefficient services.

3. Quality assurance is not so effective to build the image of “Quality & Quantity”.


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OpportunitiesAfghanistan's Market is the biggest opportunity for

OMCs in Pakistan.

1. De-regularities of Oil industry in Pakistan add the opportunity to fill the deficiency

in few sectors of petrochemicals markets.

2. Export Opportunities of Black Oil Products is also adding the opportunities by

exporting Black Oil products, which is facing downfall due to the introduction Gas

Oil.

3. Industrial & Trade growth in Pakistan is also the opportunity for PSO as they are

adding revenues in Power sector that is the major customer of PSO.

Threats1. Risk of forward integration of Supplier is the key threat for PSO and other OMCs

in Pakistan. As the example, the PARCO who is one of the main POL product

suppliers to OMCs adopt the forward integration strategy by introducing its own

OMC with its new business alliance TOTAL and named its OMC as TOTAL-

PARCO.

2. Risk of Diversification in technology is also a key threat for PSO as due to new

technology used in industrial sector are causing decline in particular POL

products.

3. Availability of Substitutes in Black Oil Market are causing a solid reason for the

declining trend in Black Oil Products, which is major threat for PSO.


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Financial Profile

(In Millions of Pak. Rs.)

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Sales 64333 66012 80563 109508 121345 115636 135040 195039 182323 206376

Marketing & Administrative Expenses

616 565 1000 1143 1155 1153 1452 1640 1411 1982

Profit 696 1041 1498 2046 1846 2671 2231 2251 3188 4030

Capital Expenditures 322 462 921 821 408 397 967 1254 1430 1643

Shareholder's Equity 2255 3052 4149 5533 6586 8184 8986 9808 11253 13063

(Pak Rupee ‘000’)

2003 2002

PSO Shell PSO Shell

Sales Related

Net Sales 172445775 77822817 153110993 69042054

Cost of Products Sold 163490577 72049466 146333600 64164232

Transportation Charges 138955 1108712 180251 1150285

Storage 62968 41615 68734 53609

Financial Stability

Cash & cash equivalents at the end of the year 1228220 1075698 1831693 478764

Reserves 11348212 2233026 9823176 2233026

Marketing

Sales Promotion & Advertisement 200760 223284 159094 161897

Communication 46935 99618 30510 98674

Thank you


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Documents

PSO project