Strategic Management Project - Parco

Presented To: Prof. Ghulam Ahmad Rana Presented by: Shahnawaz Khanzada 0182 Maryam Shahid 1249 M. Ibrahim 1194 Ayesha Ansari 1235 Ahmad Raza 1222 Zeerak Batool 1223 Malik Zain Nawaz 1185

Introduction of PARCO  PARCO is a fully integrated company with an asset

   

base exceeding 141 billion Rs. It a joint venture between govt. of Pakistan and the emirates of Abu Dhabi. 60% of the share holding is by govt. of Pakistan and 40% by the emirates of Abu Dhabi. It has the refining capacity of 100,000 BPD. Combined storage capacity of over 1 million tons.

History and Evolution of PARCO • • • • • • • • • • • •

In Corporation (1974) KMK Pipeline (1981) MFM Pipeline (1997) A Refinery unit being installed (1999) Mid-Country Refinery Under Construction (1999) Tanks under construction (2000) Mid-Country Refinery (2000) Construction Phase of Port Qasim Station (2003) White Oil Pipeline being laid (2003) White Oil Pipeline (WOP) construction phase (2004) Construction at Ghazi Ghat (2004) Khalifa Coastal Refinery (Future Project)

PAK ARAB REFINERY LIMITED

What’s PARCO all about?

MID COUNTRY REFINERY

STRATEGIC STORAGE FACILITIES

PRODUCTS AND SERVICES

Organizational Structure MANAGING DIRECTOR

MD Secretariat

DMD Finance

Finance

Internal Audit

DMD Ops

Refinery

Pipeline

Admin & Marketing

HR, Admin and Transport

Marketing & Commercial

Contact Offices in Pakistan  CORPORATE HEADQUARTERS

Pak-Arab Refinery Limited Corporate Headquarters Korangi Creek Road P.O. Box 12243 Karachi-75190 Pakistan  MID COUNTRY REFINERY (MCR) PARCO Mid-Country Refinery Qasba Gujrat District Muzaffargarh Pakistan  ISLAMABAD OFFICE House No. 2-B, Nazimuddin Road, Sector F-8/1, Islamabad.

Operational Offices in Pakistan  4 terminal Station  8 Pumping Station  6 Marketing Regional Offices

 2 Land Acquisition Collectorates

Number of Total Employees There are more than 5600 Workers who are currently working in PARCO all over Pakistan.

Type of ownership  It’s a Joint Venture between Govt. of Pakistan

and Govt. of Abu Dhabi

60 % Govt. of Govt. of

40 % Pakistan Abu Dhabi

vision To be a leading national energy company of choice for all stakeholders by employing a strategy of diversification and integration with the right technology and adopting best industry practices for sustained competitive advantage.

Mission To transport, refine and market petroleum and related products in Pakistan in a safe, efficient, reliable and environment-friendly manner maintaining professional excellence and ensuring favorable returns on all employed resources

Present Factors  products or services  markets  concern for public image  self-concept  concern for survival, growth and profitability

Missing Factors  customers  technology  concern for employees  philosophy

Recommendation on mission statement We believe on giving the designation to employees according to their qualification. We will make all efforts to exceed our customer’s expectation and will lead our industry industries to appropriate technologies. Our firm will operate at highest level of ethics.

GOALS & OBJECTIVES

 Parco is an Energy life line of the country  Parco is location due to Defense point of view it is

catering to 21 days fuel reserve of the country  Parco has develop a white oil pipeline from Mehmood Kot to Karachi and Mehmood Kot to Machike and its catering to secure transportation of fuel

CORE VALUES P

Progressive Corporate Outlook

A

Aggressive Pursuit of Technical Excellence

R

Reliability of Service

C

Consistency in Performance

O

Organized & Systematic Development

Key Success Factors  Professional attitude towards work  Successful strategy implementation  Professional team  Right decision making

Culture Analysis Parco has a tall organogramic structure and a lot different divisions. The total no. of employees in these divisions are 5600.  The control and working system is 9001 ISO based.  The culture is red-tapism and bureaucratic.  The SOPs are defined on a times even if violating them is beneficial.

Culture reflected by practices  Devolution of Authority

 A lot of Red Tapeism  Very effective Human resources department

working very actively for HR developement  Very well defined SOP’s

Main Strategies Under Taken

Corporate level  To cater to the defense and energy lifeline of the

country.  To remain self sustainable/viable financially.  The main products produce by PARCO are deficit in the country. The strategy applied is blend of push and pull

Business unit level:

 On the business unit level PARCO is applying

‘diversification strategy’  PARCO at business unit level has started marketing lubricants, LPG and Bitumen on octopus strategy

Functional level  Two way relationship with distributors  Slow moving products are marketed on product

linking basics  Lubricant being the slowest and highest margin products, PARCO has evolved LFR (Lube Fuel Ratio) system  Ensure maximum efficiency in the operation of the distribution channel.

External And Internal Assessment

Pestle Analysis

Political situation •

The political situation of Pakistan is not satisfactory and unstable. Rapid change in the Govt. and the change of the policies of the previous govt. by the new govt. abruptly effect the Pakistan’s political situation. Due to these entire factors the foreign investors hesitate to invest in Pakistan. • Govt. should device such policies that are beneficial for the local exporter as well as for the investors.

ECONOMIC SITUATION • The economic condition of Pakistan is not

suitable for investment. • Market growth rate is very low and new investors hesitate to invest. • Increasing inflation rate due to heavy loan make the business environment strict. • Actually increase in inflation rate leads to high cost of production so our country products sell out at a high price but with low margin.

SOCIAL SITUATION • The change in the lifestyle of the people affects

the growing demand of the PARCO products. • The change in the lifestyle and needs in different demographics also affect the demand of the customers. • Due to all these changes PARCO is performing excellent for the excellence of organization as well as for the customer.

TECHONOLGICAL FACTOR  Technological advancement in all the sectors of

the country has changed the entire socioeconomic environment.  Especially in the Oil sector there is a lot of technological development.

ENVIRONMENTAL FACTORS  Parco has the following refineries in pak.  National refinery ltd (36000) BPDs

 Pak refinery ltd (30000) BPDs  Attock refinery ltd (22000) BPDs  Bosicor refinery ltd Byco (16000) BPDs

LEGAL FACTORS  The products produce by Parco are mainly state

regulated.  The import policy of white oil is governed by the government.  The government varies from different political parties

Working structure  Parco is governed by board of directors which is

lead by a chairman.  The operational activities are governed by the managing directors.  There are three deputy managing directors  DMD (OPS)

 DMD (Finance)  DMD (Refinery)

COMPETITIVE ANALYSIS Pak Arab Refinery Limited (PARCO) has the following competitors working in Pakistan.  National Refinery Limited (NRL)  Pakistan Refinery Limited (PRL)  Attock Refinery Limited (ARL)  Bosicor Refinery Limited (BYCO)

NRL (NATIONAL REFINERY LIMITED) • National Refinery Limited (NRL) was incorporated as a • •

• •

public limited company at Karachi in 1963. Government of Pakistan took over the management of NRL under the Economic Reforms Order, 1972. NRL is a petroleum refining and petrochemical complex producing a wide range of fuels, Lube Base Oils, BTX (petrochemicals), Asphalts and specialty products for domestic consumption and export. It is located on a plot comprising 263 acres in the Korangi Industrial Area of Karachi. The company’s plants have a fuel refining capacity of 2,710,500 tonnes per annum (tpa) of crude oil, two lube refineries with a combined designed capacity of 176,200 tpa of lube base oils (LBO) and a BTX unit with a

(ARL) ATTOCK REFINERY LIMITED • Since its commissioning in 1922, ATRL passed through various •

• • • •

•

stages of transformation. From batch distillation stills of 2,500 barrels per day (BPD), today it has grown into a modern state-of-the-art Refinery with a capacity of 40,000 BPD. VALUE ADDITION ARL is in continuous search for value added products and has produced and supplied Polymer Modified Bitumen (PMB). ARL has successfully added JP-8 to its range of Jet fuel production, which already included JP-1 and JP-4. ARL is supplying Unleaded Gasoline, Low Sulfur Diesel and Low Sulfur Furnace Oil to the market in line with its policy of producing more environment friendly fuels. ARL is now targeting low benzene and low aromatics gasoline production and further lowering sulphur level in diesel to less than 500 ppm.

(BPL) BOSICOR PAKISTAN LIMITED • The Company was incorporated on 9th January,

1995 as a Public Limited Company with the objective of acquiring, setting up and operating an oil refinery of 30,000 barrels per day capacity. • The refinery is situated at District Hub, Lasbela, Balochistan, ½ kilometers from HUBCO. • The plant consists of a Crude Distillation Unit, the Reformer Unit, the Kerosene Merox Unit, the Light Straight Run Merox Unit, Utilities, off sites and associated Ancillaries.

(PRL) PAKISTAN REFINERY LIMITED  In 1959 Pakistani Investors and major oil

companies joined hands to set up the biggest oil refinery in Pakistan.  In 1962, this idea was materialized in the form of Pakistan Refinery Limited, which had a capacity to process 50,000 barrels of Iranian Light crude oil per day.

Total Quality Management Total quality management (TQM) stresses following three principles.  Customers satisfaction  Employee involvement  Continuous improvement

• It is also includes benchmarking, process design, • • • •

•

purchasing and problem solving tools. Customers Satisfaction PARCO offers best quality products with fast delivery time to the customers. These quality products are being offered at international prices. Name of PARCO is a symbol of a quality, which provides satisfaction in terms of quantity, and quality to its customers. Employee Involvement

•  For employee involvement, PARCO provides

• •

•

•

developments programs (training), awards (Long service award etc), incentives, bonus, environment. The employee also participates in the decision by giving suggestion for improvement.  For continuous improvement, there is quantity lab, available to check the quality of raw material as well as of finished goods. In case of any problem in process different problems solving tools are used to monitor the progress of project. Checklist, histogram, pareto charts etc, are used for improving quality and performance.

Porter’s 5 Forces Model  Threat of New Entrant  Threats of Substitutes  Bargaining Power of Consumers  Bargaining Power of Supplier  Rivalry among Competing Firms

High High Moderate Moderate Moderate

overall industry= mature and competitive

S.W.O.T MATRIX FOR PARCO INDUSTRIES

External and internal assessment

Strengths:

Weaknesses:

1.Country wide war houses 2.Big agents at major cities 3.Sales staff in potential market hubs 4.Fake oils yet not available in case of pearl lubricants S.O strategies

1.Unattractive packaging 2.Short product line 3.No price control 4.No trade promos 5.Ground level market shares 6.Weak market pull W.O strategies

•State of art refinery having production capacity of 7000 M. tons of biturox •Pakistan monthly depend 4000 M.tons Local 7000+6000 M.tons Production 13000 M. tons

•Over the years 4000M.tons captured by smuggled products •Smuggled products direct use in products like motorway M3 FSD- Jhang M4 Jhang- Multan M5 Multan- Khaniwal

Threats:

S.T strategies

W.T strategies

1.MNCs increased focus over lube business 2.High quality imported lube oils at affordable prices 3.Counterfeit 4.Price hike

•Political threat New generation tax •Parco has developed a market team and trying to capture smaller projects of PWT (public works deptt.)

•Our policy is governed by ministry of petroleum directly So the new govt. policy can directly related by govt. and our work plant of $ 160M can be put on hold

Opportunities 1.

Top tier market

2.

Industrial grades

3.

Pearl trucks plus in small packs of 4 and 10 ltrs

4.

Company runs retail outlet chain

BCG MATRIX FOR PARCO

External and internal assessment

Furnace Oil

MS 90RON

Betumen

JP 4

C.P.M- COMPETITOR PROFILE MATRIX

External and internal assessment

PARCO

BOSICOR

Critical success Factors

Weight

Ratio

Weighted Score

Rating

Weighted score

Market share

0.15

4

0.60

2

0.40

Product quality

0.05

3

0.15

4

0.20

Customer service

0.05

3

0.15

4

0.20

Customer loyalty

0.05

2

0.10

3

0.15

E-commerce

0.05

2

0.10

3

0.03

Storage Capacity

0.10

3

0.30

2

0.20

Social Responsibility

0.04

3

0.12

3

0.12

Environmental Issues

0.05

3

0.15

3

0.15

Advertisment

0.10

4

0.40

3

0.30

Profit Margin

0.15

3

0.45

3

0.45

Total Outlets

0.20

3

0.6

2

0.40

Total

1.00

3.12

2.60

THE SPACE MATRIX

External and internal assessment

.

Axis X

Internal Strength Position

External Strength Position

Competitive Advantage

Industry strength (Worst -6, Best -1)

(Worst +6, Best +1)

Product Quality

-2

Growth potential

+2

Market Share

-2

Entry of new firms

+3

Brand Image

-3

Access to Financing

+2

Research and development

-1

Competition pressure

+5

Average Score = -2

Average Score = +3

Total X-Axis Score = +1.5

Financial Strength

Environment Strength (Worst +6, Best +1)

Axis y

(Worst -6, Best -1)

ROI

+2

Inflation

-4

Leverage

+3

Technology

-1

Liquidity

+3

Demand Elasticity

-3

Cash Flow

+2

Taxation

-3

Average Score = +2.5 Total Y-Axis Score = -2.25

Average Score = -2.75

+6.00

FS

Aggressive

Conservative

-6.00

CA

IS +6.00

Competitive Defensive

ES -6.00

EFE - EXTERNAL FACTOR EVALUATION MATRIX

External and internal assessment

Factors

Weight

Rating Weighted Score

Opportunities: Top tier mrkt

0.15

4

0.6

Industrial grades

0.10

4

0.4

Pearl trucks plus in small packs of 4 and 10 ltrs Company runs retail outlet chain

0.10

2

0.2

0.10

3

0.3

MNCs increased focus over lube business

0.15

3

0.45

High quality imported lube oils at affordable prices

0.10

3

Counterfiet

0.10

Price hike

0.10

2

0.2

0.10

3

0.30

Threats:

1

0.3 0.1

Reduced margin profit

Total Weighted Score

1

2.85

THE GRAND STRATEGY MATRIX

External And Internal Assessment

Rapid market growth

Quadrant 2

Quadrant 1

Strong competitive position

Weak competitive position Quadrant 3

Quadrant 4

Slow market growth

External And Internal Matrix

External And Internal Assessment

Internal Factor Evaluation Matrix Sr. no

Strength

Weigh Ratin W. t g Score

1

Country wide war houses

0.20

3

0.6

2

Big agents at major cities

0.25

4

1

3

Sales staff in potential mrkt hubs

0.15

4

0.6

4

Fake oils yet not available in case of pearl lubricants

0.10

3

0.3

Weaknesses 5

Unattractive packaging

0.08

2

0.16

6

Short product line

0.05

2

0.05

7

No price control

0.04

3

0.12

8

No trade promos

0.04

2

0.08

9

Ground level mrkt shares

0.04

2

0.08

10

Weak mrkt pull

0.05

3

0.15

Total

1

3.14

IFE Total weighted scores Average

1-1.9

2-2.9

3-4

2-2.9

Weak

1-1.9

Medium

High

3-4

Low

EFE Total weighted scores

Strong

IFE 3.14, EFE 2.85 so its lies in quadrant 4

Marketing Mix Of PARCO Product

Price

Place

promotion

Quality

List Price

Channel

Advertising

Features

Discount

Location

Personal Selling

Brand Name Allowance Transportation

Sales Promotion

Human Resource Management  Diverse cultural backgrounds and multi-ethnic origins add up to

create a strong resource base at PARCO.  Each

member makes a valuable contribution while overall

functioning as a team. Committed to doing more for their country.  PARCO people remain dedicated and passionate about their work.

PARCO people are focused on broadening horizons and meeting new

challenges.  Creative and multi-talented, these fine individuals take pride in

shaping the future of Pakistan.

OTHER STRATEGIES  R & D:

 Procurement  Production

Research & Development  Improving quality is continuous process at

PARCO, for the purpose a very active R & D department is functional.  It was R & D department’s suggestion that HSFO was value added to Bitumen.  The main role of R & D department is to compile a workable report to BD section of marketing and commercial division.

Procurement  Procurement at PARCO is divided into two

departments 1) Marketing and Commercial The main procurement at PARCO is of crude import from ADNOC and ARAMCO 2) Materials All local procurements are done through materials department

Production  PARCO has a refining capacity of 100000 Barrels

per Day at MCR Mehmood Kot District Muzaffar Ghar  Another refinery project is under process at Khalifah Point Hub Karachi  The production capacity of this refinery would be 250000 Barrels per Day

CONTROL PROCEDURES

Management control

Marketing control  Except lubricants all other products produced by

PARCO are deficit in the country.  PARCO has a limited marketing budget of Rs. 20 million per annum, which is mainly consumed inform of pamphlets, give a ways and small hoardings.  The appraisers of marketing team is based on sales.

Production control  PARCO has a fully computerized production

system which is controlled by commercial department at import stage by pipeline department while transportation of crude from Kemari to Mehmood Kot and by operations division at refining level.  At refinery the refining process is further control by nine different departments thus having a tall structure of control.

Quality control  PARCO is producing the most sensitive fuels and is

maintaining EURO 2 standards still 2002 for this quality control system the following certifications was done  ISO-9001: 2002, Quality Management System  ISO-14001: 2004, Environmental Management

System.  Every batch produced samples are tested at in

house LAB and every batch report consists of sample test result

Human resource control  In PARCO final hiring/firing authority relies with

the managing director but is solely based on the recommendations of HR department.  Annual appraisal/award system of all employees was implemented by HR department by 2004.  HR department monitors the training and development of employees and accordingly conducts in-house as well as out sourced training courses.

Finance control  PARCO

financial involvement in control by finance department and monitored by internal audit department.  The seriousness of this department can be evaluated by the designation Deputy Managing Director Finance.

Group analysis Own assessment on PARCO  Everything PARCO achieves is the product of team effort. All

PARCO employees share the achievements of the company and have every reason to feel proud of what has been achieve so far.

However with the diversification in business activity , Parco meets the new challenges , since success lies in better service and consumer satisfaction.  PARCO’s future aim is therefore to consolidate a significant

account presence, as a major contender in the petroleum sector of Pakistan, with future that heralds bright prospects.

 There is need for proof any concept of

refresher courses for the employees. If directors would make arrangement to provide training to the employees then they would work efficiently. But this productivity will also increase.  We would like to recommend that the management should develop some policies for the promotions of efficient workers. If no policy for the promotion of workers so it will create unrest among the workers  . The management should make sound policies for the promotions of efficient workers. This will not only increase the productivity of workers but the management

STRATEGIC ALTERNATIVES

FUTURE PROSPECTIVES  KCR (Khalifah Point Coastal Refinnery)

 Extension of Pipeline form Machike to Tarujaba  Pearl LPG marketing company

Recommendations  Keeping in view the high threats level from

competition, PARCO should enhance marketing budgets and work on brand establishing.  Before commencement of KCR PARCO should start working on establishment its name in international market as 250000 barrels per day production cannot be consume in Pakistan markets.  HR should also emphasis on developing and

PARCO should focus on these issues: • Implement and improve training practices • Improve employee satisfaction • Improve pay/benefits • Start Promotion Campaigns • Improve the launch of the product • Be competitive in pricing • Implement a multi-source feedback system

Thank you