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“A Study Of Important Issues In Allied Petro Retailing In India At Selected Bpcl Petrol Pumps”


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Marketing Project Report Mumbai University

Marketing Project Report Mumbai University

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  • 2. DECLARATIONI hereby declare that the project report entitled “A Study Of Important Issues In Allied Petro Retailing InIndia At Selected BPCL Petrol Pumps”carried out at “Bharat Petrolium” is my work submitted in partialfulfillment of the requirement for Degree of MASTER OF MANAGEMENT STUDIES (MMS),UNIVERSITY OF MUMBAI from KOHINOOR BUSINESS SCHOOL, KURLA, MUMBAI and notsubmitted for the award of any degree, diploma, fellowship or any similar titles or prizes.Date: Signature: _______________Place: Mumbai Student Name: ___________ CERTIFICATE Page | 2
  • 3. This is to certify that the project entitled A Study Of Important Issues In Allied Petro Retailing In IndiaAt Selected BPCL Petrol Pumps” is successfully completed by “Abhijit P Jaitapkar” during the secondyear of her course, in partial fulfillment of the Masters Degree in Management Studies, under the Universityof Mumbai, through KOHINOOR BUSINESS SCHOOL, Kurla, Mumbai-400070.Date:Place: Mumbai “Dr. Sandeep Sawant” ACKNOWLEDGEMENT Page | 3
  • 4. It is my privilege to express my gratitude and respect to those who guided and inspired me in thecompletion of this project. I am deeply indebted to my project guide of the Kohinoor Business School Dr. Sandeep Sawant forgiving me this opportunity to undergo my project in his esteemed organization and for his timelysuggestions and valuable guidance. On the occasion of complete and submission of project,I would like to express my deepSense of gratitude to college HOD .Dr. Ms.Bharati Deshpande for providing me thePlatform of management studies I also want to give thanks to Mr. Subhash Gawade .He constantly encouraged me and showed methe right path from day one till the completion of my project. I am also thankful to Mr. Dhananjay M. for helping me to proceed in conducting the survey andcomplete it on time. I am grateful to the Director, Faculties, administrative staff and the librarian of Kohinoor BusinessSchool for providing me all the support required for successful completion of my project. Shahbaz Khan Page | 4
  • 6. EXECUTIVE SUMMARYThe project title was “A Study Of Important Issues In Allied Petro Retailing In India At Selected Bpcl PetrolPumps”The research work was divided into two phases for reporting & analyzing the factors respectively.Each phase is being described as follows was the starting point of research work & its duration was about 2weeks. Before going out for primary research work, I studied the CNG lube oil industry with the help ofinternet & collected some useful insight about the industry. In the primary research work, I first of alldecided on the different category of persons (stakeholders) who are linked with the engine oil. Thesepersons/stakeholders were as follows:-1) Auto Drivers2) Taxi Owners3) Shopkeepers selling engine oil4) Mechanic PersonnelThen I had carried an exploratory survey for each stakeholder without drawing any questionnaire. Thisrandom sample helps me to understand the various factors affecting the buying decision of engine oil. Butthe information which I get was quite raw & hence I moved on to the second phase for a systematic reviewof the enlisted factors gathered from the exploratory survey. After understanding the enlisted factors, Iformed the questionnaire, covering each & every aspect about buying behavior of engine oil. I form differentquestionnaire for all stake holders from the point of view of that segment of people. The sample datacollection from all the stakeholders had taken duration of around 5 weeks. In the first week I covered theauto rickshaws drivers. I had taken a sample of 150 auto drivers from all the major part of Delhi. In thesecond week I covered the survey of Taxi owners which constitutes a sample of 119 people. The third weekwas devoted to cover the shopkeepers. In the fourth weak I covered the mechanic personnel. I also covered a Page | 6
  • 7. survey on the social & economic demographics of the life style of drivers. From this survey I try to figure outthe relationship between the buying behavior of drivers & their educational & economic background. Thissurvey was covered in the fifth week. The remaining days of my research work were used to draft out thestudied factors on the word file & give it the shape of a project report. The overall expenditure from thestarting day of research & upto the end day of submission of report was in between Rs 4000-4500. RESEARCH OBJECTIVES To understand the various challenges faced by OMC in the application of the concept of Allied Petro Retailing. To identify the various segments of the consumers. To identify various strategies of Allied Petro Retailing. To list the different practices carried out by OMCs in order to promote co-marketing. To understand the basic idea behind the practice of creation of a different brand identity by different OMCs in respect to application of the Allied Petro Retailing concept. Page | 7
  • 8. RESEARCH DESIGN AND METHODOLOGYThe formidable problem that follows the task of defining the research problem is the preparation of thedesign of the research project, popularly known as "research design".Different research designs can be conveniently described if we categorize them as:• Research design in case of exploratory research studies.• Research design in case of descriptive and diagnostic research studies.• Research design in case of hypothesis testing research studies.Exploratory research studies are also termed as formulate research studies. The major emphasis in suchstudies is on the discovery of ideas and insights. Descriptive research studies are those studies that are usedto describe the characteristics of a particular individual or group, whereas diagnostic research studiesdetermine the frequency with which something occurs.Hypothesis testing research studies (generally known as experimental studies) are those where the researchertests the hypothesis of causal relationships between variables.In our case the research has been designed keeping in mind the exploratory or formulate research studies.Data SourcePrimary source:-• Primary data is not used for this study. Page | 8
  • 9. Secondary source:-• Magazine, Newspaper and Internet websites.Sampling Plan:-• Sampling is not required for this study.Collection of InformationSince this study is a qualitative study and based on secondary source of information, data has been collectedfrom secondary source such as magazine, Newspaper, Internet websites and books.Analyzing the DataAfter the completion of data collection, the data was then assimilated into a word documents. Inferenceswere drawn thereafter.Presenting the FindingsThe inferences were then summarized along with the insights during data collection Recommendations havebeen given on the basis of the above steps.Decision MakingThe recommendations drawn after the findings could be best worked out by way of analysis.Strategy PlanSteps involved:• Data collection• Sampling• Analyzing the data Page | 9
  • 10. • Presenting the findings• Conclusion• References INDUSTRY INTRODUCTIONIndian Petroleum SectorTo understand the Indian Petroleum Retail Sector we should have a look on Keynote Management of theretail end is a key determining factor in the success of otherwise of any business. To gain a sustainableadvantage, a retailer needs to understand and satisfy both the apparent and the latent needs of the customer.This principle holds true in petroleum retailing too. All our efforts in exploration and production, refining,distribution and marketing and finally culminate at retail point after moving through a long complicatedsupply chain. The downstream business is extremely intricate and of sustainable strategic importance to thenational economy. Oil products, especially transportation fuels, would continue to play a key role in thenational economic growth. This is what makes the retail business exciting and challenging. It demandscontinuous efforts at improvement of product and services, higher customer satisfaction, and offers endlessopportunities to innovate.The business environment in India has undergone a significant change in the past few years, and nowhere isit as pronounced as in the petroleum sector. Increase in refining capacity has transformed India from a netimporter to a net exporter of petroleum products. Petroleum marketing has been decontrolled leading to entryof new domestic and international players into the market. Government have provided operational freedomto the government oil companies in a host of areas including determining their own market share, freedom toprepare and implement their market plans , selection of dealers etc. We are also moving towards a marketdetermined pricing regime in letter and spirit. This liberalized scenario is making the sector intenselycompetitive, and the oil companies, especially those in the public sector would need to adopt a morecustomer focused approach to the retail end of their business. Page | 10
  • 11. Besides providing the policy framework for a liberal, decontrolled petroleum sector, the Government isconscious of the need to encourage a disciplined and responsible market. The Petroleum and Natural GasRegulatory Board Bill is a step in this direction. This Bill seeks to set up a regulatory board to regulaterefining, distribution and marketing of products with a view to protect the interests of the consumers andpromote fair competition among the entities, ministry of Petroleum & Natural Gas has also issued variouscontrol orders and directions to check adulteration.Some of the major challenges that need to be immediately and purposefully addressed can be summarized asunder:a) Qualityb) Quantityc) Priced) Value added servicese) Building brand identityf) Generating higher volumesg) Reaching the subserviced areasAbove all, the oil companies can build a sustainable competitive advantage only if they are driven by acustomer centric approach and seek to continuously improve. While we see modernized, well illuminatedpetrol pumps coming along the highways and major urban centers, these innovations by themselves may beonly cosmetic. The boom in consumerism has given rise to a mature and demanding customer. Ourcompanies too need to mature fast. Let us now take the challenges mentioned above, individually.The customer, for whatever reasons, has little faith in the quality of product dispensed through our petrolpumps. While his demands are high, his expectations remain low. Bereft of choice, he is satisfied as long ashe gets an unadulterated product. Our oil companies interpret quality to mean “no adulteration”. But as themarket evolves and competition grows, quality will be interpreted as the impact of the fuel on the efficiencyand performance of the automobile’s engine. Similarly, we are satisfied with an assurance of dispensing theright quantity to the customer and publicize it as a unique selling proposition. The recent initiatives such as“Pure for Sure”, “Q&Q check” and “Pure Bhi Poora Bhi” need to graduate beyond the promise ofunadulterated fuel dispensed in right amount. Such narrow and limited perception of a quality product andservice may not hold good in future when real competition sets in. Quantity and Quality would be the bareminimum a customer would demand. The Government also proposes to hold the oil companies accountable Page | 11
  • 12. for the high quality of product dispensed through their network. Retail sales of diesel account for 80 % oftotal sales and in petrol this percentage is 98 %. The image of a company is mainly reflected through retailoutlets.Price of petrol and diesel has so far not been a differentiating factor in the retail business. Even after thedismantling of the Administered Mechanism, the price of products remains the same throughout the lengthand breadth of the country. We all know that the cost of the product is a very important factor in consumerchoice.With the entry of couple of private players, though still in a small way, a sort of price war has already startedin a few locations. If anything, this price war is going to become a reality in times to come when the newentrants go in for a rapid expansion in an aggressive manner of their retail network.They have already speeded up their efforts at commissioning new retail outlets in the past few months. Forthe Government oil companies, it is imperative to undertake a concerted exercise at cutting down their costsand improving efficiency to effectively counter this challenge. Leveraging information technology for supplychain management, and monitoring the quality and quantity of product can go a long way to improveefficiency and cut down the costs.One of the more visible transformations in the retail business of auto fuels is the recognition by the oilcompanies that non fuel activities could be an important source of revenue at their retail outlets. So we haveconvenience stores, fast food centers and other such amenities finding a place at petrol stations. This is a verywelcome change. However, the possibilities are immense and efforts in this direction too slow and limited.Why don’t we view the retail outlet not merely as a point for selling petrol and diesel, but also as a primecommercial real estate in our control? Further, this is a location that is easily accessible to both the motoristand pedestrian. The retail outlets have potential to become a one stop shop for meeting innumerable needs ofthe customers on one hand, and increasing the revenues of the outlet on the other. A statutory framework hasalso been provided in respect of petrol pumps to be located on national highways. The guidelines issued bythe Ministry of Road Transport and Highways stipulate that the petrol stations should be a composite restarea for the highway users and provide all the products and services that a highway user may require underone roof. But a statutory framework can only be lay down the minimum requirements; it is for the businessentities to explore the other possibilities that are on offer. These could range from convenient stores,restaurants, cyber cafés etc. for the car users to dhabas, dormitories, laundry services etc for the truckers.These are mere illustrations. Page | 12
  • 13. The product that goes in the fuel tank of the automobile is the same, irrespective of the company that ownsthe petrol stations. So how does one build a unique brand identity, which goes beyond a single petrol stationgiving value added non fuel services? A small step in his direction has been taken with the introduction ofpremium fuels. The integrity of these fuels needs to be established and preserved, and their share in the totalsale needs to be increased. The sale of premium fuels in our country is 1 to 3% only, whereas in countrieslike USA it is as high as 35 to 50 %. Maybe, we could also experiment with an intermediate grade of fuelbetween the regular and premium brands. This would provide greater choice to the customers, and could bean effective strategy to command customer loyalty.These initiatives have to be blended with a strong concern for the environment as also energy security.Greater investment in the available alternative fuels such as CNG, Ethanol blended petrol and auto LPG is adesirable course of action to pursue, both for addressing social concerns and expanding the reach of the oilcompanies.We also need to keep pace with the advanced world in our efforts to discover other alternative sources suchas Bio- diesel, hydrogen etc. We expect a more proactive approach from our companies in this direction.A good petrol pump that aims to provide comfortable and convenient service to the customers requires ashigh an investment as Rs. 50 to 75 lakhs. Depending upon the location and the number and quality ofservices, the investment levels could go up to Rs. 1.5 crores. However, the per pump throughput has beendeclining and hovers around 160 – 180 KL/month. The profitability, may even the sustainability, of the retailbusiness at such high investment and low volumes needs to be addressed. Paradoxically, even in such ascenario, the oil companies have launched a very ambitious, and at times reckless, programme of networkexpansion. Obviously the assessment of the market growth made by the oil companies indicates highpotential in future. However, my view is that companies should target to generate higher volumes per retailoutlet rather than concentrating only on increasing the numbers.This would give them better returns on their investments. And simultaneously, a different business andinvestment model is required to be developed for low volume petrol stations located in rural areas. Myunderstanding is that the rural agricultural market has a large untapped potential for diesel sales, and the oilcompanies should make efforts to develop these markets. It is not a correct position that social obligations ofthe PSUs adversely affect their commercial interests. If non essential consumer goods like soft drinks andcosmetics can penetrate the far flung rural markets, why can’t the essential mass consumption petroleumproducts? Page | 13
  • 14. This brings me to another neglected area of LPG and kerosene marketing. Since both are subsidizedproducts, there is a visible reluctance to expand in these areas. The reach of LPG is restricted to urban orurbanized rural segments. As LPG has emerged as a major environment friendly cooking fuel, it is expectedthat our oil companies, as responsible corporate entities would try to expand its reach. Similarly, the poorman’s fuel, kerosene demands serious attention. While petrol pump dealerships are mushrooming, nearly25000, we have only 6000 kerosene dealers in the entire country. Half the department blocks in the countrystill do not have a kerosene storage facility or a dealership. And further, the oil companies have transferredthe responsibility of distribution to the State Government. This aberration needs to be addressed fore with.The hydrocarbon sector is also witnessing the emergence of the Natural Gas market in India. It has nowmoved from a more or less localized controlled business to a market determined activity. Natural Gas isbecoming the preferred fuel in several industries.The Government has initiated many steps to increase its availability and subject the Gas market tocompetitive forces.Some of these important initiatives are increasing domestic gas production, import of LNG, transnational gaspipelines, a Gas pipeline policy and Regulatory framework for Gas marketing and transportation. With theonset of competition, this sector would also throw up the challenge of providing efficient and quality serviceto the consumers. It is she who will define quality, be it product or a service. And oil companies can afford toneglect the customer at only their own peril.MarketingOn the marketing side, initiatives have been taken by the Government of India to improve the marketingmargins of the Oil Marketing Companies (OMCs) which earlier operated under a cost plus assured returnbasis. All products have been decontrolled w.e.f. 1st April 2002 with subsidies on LPG and SKO continuingon a specified flat rate basis and are to be borne by the Consolidated Fund of India. These will be phased outin the next 3-5 years. Post APM, oil companies nearly doubled their combined net profit to Rs 232.54 billionin 2002-03, the first year the petroleum sector was deregulated. The dismantling of APM had led to a rise inthe margins of the marketing companies, while upstream companies, like ONGC, are now being paidinternational prices for their crude production. However, LPG & SKO are contributing negatively to theearning is the market companies since the retail prices are fixed and the subsidies are far lower than theactual outgo of the oil companies. Page | 14
  • 15. Some of the other initiatives taken up by the GoI include : Oil companies allowed selecting their own distributors/ dealers. Deregulation of Import / Export of all petroleum products. Awarding of marketing rights for transportation fuels to investors in exploration and refining. Introduction of petrol blended with 5% ethanol in the country.Current Profile of Marketing & Distribution• Transportation fuels comprise 47% of the total demand of petroleum products.• At present marketed by Indian Oil, Bharat Petroleum, Hindustan Petroleum, IBP, Reliance Petroleum, Essar oil limited, Shell, ONGC.• Parallel marketing of SKO & LPG allowed.• Despite low prices of SKO/LPG due to heavy subsidy, reasonable market penetration by parallel marketers, 7% in LPG and 10% in SKO• Free import and marketing of all other products allowed• Level playing field for all players available• Marketing of lubricants deregulated• Regulatory body to monitor marketing of petroleum products to be in place• Estimated investments in marketing sector up to 2025 : US$ 27.55 billionThe use of LPG as a transportation fuel has been in principle accorded and CNG is being currently used as anauto fuel in some Indian cities.Recent Trends in Petro Product Consumption Page | 15
  • 16. The domestic market for petroleum products was depressed during July – September 2003. The overallconsumption growth was a negative 2.2% against 1.6% during the corresponding period of the previous year.Diesel (which accounts for the largest share of refined product consumption at about 40%) consumptionwitnessed a decline of 4.1%. Diesel consumption growth was under pressure despite a positive growth in theGDP. The possible reasons for this unexpected trend were: rise in CNG consumption in the transportationsector, substitution of diesel with natural gas in industries and, the possibility of kerosene adulteration indiesel. A study by the petroleum Ministry Government showed that the slide was “locational” and not“sector-specific”. Accordingly, the Government on November 28, 2003 decided to ban import of kerosene byprivate companies in a move to curb adulteration of diesel. Under the new dispensation, kerosene can beimported only through state trading companies – IOC, BPCL, HPC and IBP Ltd. Naphtha and Keroseneconsumption growth have also shown decline at -10.5% and 3.3% respectively. Products witnessing positivedemand growth include LPG (10.2%), ATF (6.0%) and MS (2.6%).Key Success Factors and OutlookWhile the Indian Downstream Refining & Marketing sector has been theoretically decontrolled, there are stillsome areas where actual decontrol has not yet happened. For example, retail prices of automotive fuel arc stillfixed by the oil companies in consultation with the government and price competition has not happened.Similarly, for LPG and SKO, the retail prices have been kept unchanged for quite some time and the subsidies havenow been slashed by l/3rd. Accordingly, during 2003-2004, the oil companies have accounted for subsidy receipton LPG and SKO @ 2/3rd of the amount claimed during 2002-2003, as per the government directives. Thishas curtailed profitability growth. However in 2003-04, the other two major Oil PSUs (i.e. ONGC and GAIL)were asked to share the subsidy burden of LPG and SKO. ONGC is reported to have been hit by a subsidyburden of Rs 260 crore due to this.While it has been so for the PSU players, the Government has decided to provide private companies subsidy onLPG equivalent to that given to state retailing firms. Also, the Government is planning to allow sale of surplusdomestic LPG by private sector parallel marketing companies.The downstream refining and marketing sector otherwise offers immense growth opportunities for thedifferent players. In the refining segment, while the surplus situation in most products may not initiate interest ingreenfield projects, the current duty structure protects the Indian refining margins. Accordingly, new entrantsmay show positive interest in taking the existing refining assets of the oil companies - whenever they are Page | 16
  • 17. offered for privatisation. These refining assets may in turn mitigate the product sourcing risk &r the marketoperations - where the bulk of the profit margins in the downstream segment lie. Accordingly the marketingsegment is expected to see ongoing initiatives by the oil companies. These initiatives are expected to be centeredaround the interests of the consumers and may involve steps such as improving product range, refurbishing theretail outlets, selling non-fuel items, providing value added services, etc. Page | 17
  • 18. PricingBy a gazette notification in November 1997, Government set a timetable for a phased transitionfrom an administered price regime to a market-determined system with continued subsidizationof PDS kerosene and LPG, but on a gradually reducing scale. Subsidies on kerosene and LPG forhousehold use were to be phased down over time to smaller price subsidies of 33.3 per cent and 15per cent, respectively, by end-March 2002. As part of the energy sector reforms, the prices of manypetroleum products, for example, naphtha, furnace oil, low-sulphur heavy stock (LSHS), lightdiesel oil (LDO) and bitumen, have been liberalized since April, 1998. One importantachievement was the linking of high speed diesel prices to international prices and an eliminationof subsidy since September 1997 for some time. However, LPG and kerosene, consumed mainlyby the domestic sector, continue to be heavily subsidized. The phased reduction in subsidies hasfallen behind schedule. In March 2002, Government decided that the subsidy on domestic LPGand PDS kerosene would be provided on a specified flat-rate basis from the Consolidated Fundfrom April 1, 2002. In this situation, Government reimburses the firms for the cost of thesubsidy, which is carried as a line item in the budget and called the petroleum subsidy.Rising petroleum prices and subsidy burdenThe unprecedented and steep rise in the international prices of crude and petroleum products has ledto an increase in the explicit subsidy bill in the Central Governments budget from Rs.5, 225 croresin 2002-03 to Rs. 6,573 crores m 2003-04. Moreover, there were reports of under recoveries bypublic sector oil marketing companies leading to demand for greater subsidies. Retail sellingprices of motor spirit and high speed diesel for the consumers are calculated by taking intoaccount:(i) Basic price at refinery level on import parity basis,(ii) Freight up to depots,(iii) Marketing cost and margin,(iv) State-specific irrecoverable levies,(v) Excise duty Page | 18
  • 19. (vi) Delivery charges from depot to retail pump outlet(vii) Sales tax and other local levies, and(viii) Dealers commission.The basic selling prices of motor spirit and high speed diesel are uniform at all refinery locationsthroughout the country. As per the existing arrangement between the oil marketing companiesand refineries, the element at (i) is revised on a fortnightly basis in line with movements ininternational prices. The marketing costs and margins, dealers commission and delivery chargeswithin free delivery zones are also uniform. The prices at various locations vary depending upon thedistance from the refinery, rate of sales tax and other local levies. Although the oil marketingcompanies were granted freedom to fix retail selling prices of motor spirit and high speed dieselon a fortnightly basis, in practice, this arrangement has not appeared to have worked in quite atransparent manner. For example, there was no revision of motor spirit and high speed dieselprices between January 1, 2004 and June 16, 2004, while the prices of crude and petroleumproducts in international markets increased rapidly. In order to mitigate the hardship of oilcompanies, Government worked out a new methodology with effect from August 1 2004 allowingthe oil marketing companys limited freedom to revise the prices of motor spirit and high speeddiesel within a price band. Oil companies are permitted to adjust prices on their own within aband of ± 10 per cent of the mean of rolling average import-parity price including cost of freightof the previous 12 months and last quarter. When prices move beyond this band, the oilmarketing companies have to approach the government to modulate the excise duty rates.Dismantling of APM, De-regulation of Petrol and Diesel in 2002 and Experience thereafter:Scheme of Presentation• Examine the post de-regulated business environment with respect to Petrol and Diesel with particular reference to pricing.• Current Pricing Mechanism for Petrol and Diesel Page | 19
  • 20. The Experience on de-regulation of Petrol and Diesel• APM was dismantled in April, 2002.• Pricing of Petrol and Diesel de-regulated.• Industry proposed Import Parity Pricing.• Inland prices would have included freight from ports.• Pricing implemented based on freight-equalization.• Prices in coastal markets higher than DPP.• Inland prices lower.• Refineries compensation synchronized with international prices, every fortnight• Consumer prices lagged behind in Fiscal 2002• EXIM amendment in 2003.• Private refineries and new entrants allowed marketing rights of automobile fuels.• Offer lower prices in coastal markets.• Flexibility was only in consumer pricing• Proposal for implementation of IPP.Current Pricing Mechanism for Petrol and Diesel• Vulnerabilities in international prices of crude and finished petroleum products.• Need to modulate impact on domestic consumer.• Autonomous adjustment of Retail Selling Prices by Oil Marketing Companies within a reasonable price band.• Average C&F Price computed considering: 1) Rolling Average of C&F prices during previous quarter 2) Rolling Average of C&F prices during previous year• Price Brand applying +/- 10% based on Average C&F as above Page | 20
  • 21. Composition of Retail Selling Prices beyond C&F prices1) Landed cost a) C&F b) Insurance c) Customs Duty applicable for product d) Bank Charges, Ocean Loss, Wharf ages2) Ex Storage Point Price a) Landed cost b) Weighted average freight equalization factor c) Stock loss and return on working capital d) Marketing cost e) Marketing margins3) Retail selling prices a) Freight from refinery to inland storage points b) Excise Duty c) Sales TaxIssues related to Pricing Mechanism based on Price Brand• Prices based on previous fortnight could be higher than upper ceiling on sustained basis.• Results in Under Realization for OMCs• Options are :  Modulation in Excise Duty Rates.  Flexibility within Price Brand.  Review of gross margins. Page | 21
  • 22. PROFILE OF THE ORGANISATIONVision We are a leading energy company with global presence through sustained aggressive growth and high profitability We are the first choice of customers, always We exploit profitability growth opportunity outside energy We are the most environment friendly company We are a great organization to work for We are a learning organization We are a model corporate entity with social responsibilityThe JourneyGlorious HeritageEarly History - Dawn of a New EraDo take some time off for a brief interlude with the past, as wetake you back in time to the evolution of Bharat Petroleum Corporation Limited. A new chapterin the history of Indian industry.Petroleum (derived from Latin Petra - rock and oleum - oil) first came up in wells drilled for salt.People found it useful as illuminating oil and the demand for it steadily increased.Samuel Kier, a Pittsburgh druggist, bottled and marketed Petroleum as medicinal cure. Tomarket a deodorised variant, he designed the first primitive refinery in 1852, which was a hugeimprovised kettle, connected to a metal tank.Colonel Edwin Drake and Uncle Billy Smith drilled a well with the specific objective offinding oil, and on 27th August 1859, they struck oil at Titusvale, in North WesternPennsylvania, USA, at a depth of 69.5 ft. Page | 22
  • 23. From Nothing to GoldThe 1860s saw vast industrial development. A lot of petroleum refineries also came up.An important player in the South Asian market then was the Burmah Oil Company. Thoughincorporated in Scotland in 1886, the company grew out of the enterprises of the Rangoon OilCompany, which had been formed in 1871 to refine crude oil produced from primitive hand dugwells in Upper Burma.The search for oil in India began in 1886, when Mr. Goodenough of McKillop Stewart Companydrilled a well near Jaypore in upper Assam and struck oil. In 1889, the Assam Railway andTrading Company (ARTC) struck oil at Digboi marking the beginning of oil production in India.While discoveries were made and industries expanded, John D Rockefeller together with hisbusiness associates acquired control over numerous refineries and pipelines to later form thegiant Standard Oil Trust. The largest rivals of Standard Oil - Royal Dutch, Shell, Rothschilds -came together to form a single organisation: Asiatic Petroleum to market petroleum products inSouth Asia.In 1928, Asiatic Petroleum (India) joined hands with Burmah Oil Company - an active producer,refiner and distributor of petroleum products, particularly in Indian and Burmese markets. Thisalliance led to the formation of Burmah-Shell Oil Storage and Distributing Company of IndiaLimited.The Pioneering Spirit - Burmah Shell MarketingA pioneer in more ways than one, Burmah Shell began its operations with import and marketingof Kerosene. This was imported in bulk and transported in 4 gallon and 1 gallon tins through rail,road and country craft all over India.The company took up the challenge of reaching out to the people even in the remote villages toensure every home had its supply of kerosene. The development and promotion of efficient Page | 23
  • 24. kerosene-burning appliances for lighting and cooking was an important part of kerosene sellingactivity.With motor cars, came canned Petrol, followed by service stations. In the 1930s, retail salespoints were built with driveways set back from the road; service stations began to appear andbecame accepted as a part of road development. After the war Burmah Shell established efficientand up-to-date service and filling stations to give the customers the highest possible standard ofservice facilities.On 15th October 1932, when civil aviation arrived in India, the company had the honour offuelling J.R.D. Tatas historic solo flight in a single engined de Havillian Puss Moth fromKarachi to Bombay (Juhu) via Ahmedabad. Thirty years later, i.e. in 1962, Burmah Shell againhad the privilege to fuel JRD Tatas re-enactment of the original flight. Burmah Shell also fuelledflying boats, which carried airmail at slightly higher rates than sea transport, at several locations.As a true pioneer would, the company introduced LPG as a cooking fuel to the Indian home inthe mid-1950s. And all along, it went beyond selling petroleum, to educate the customer. Besidesselling Bitumen, the company pioneered desert road construction, training road engineers. Itprovided free technical services to industrial customers - big and small - and it became a part ofthe companys culture.On Stream - The Burmah Shell RefineryAn agreement to build a modern refinery at Trombay, Bombay was signed between the BurmahShell group of companies and the Government of India on 15th December 1951.Burmah Shell Refineries Limited was incorporated as a private limited company under theIndian Companies Act on 3rd November 1952, and work began on the marshland of Trombay atBombay. Man and machine worked relentlessly, and soon the swamps gave way to towers andtanks of steel, and miles of pipeline.The refinery on 454 acres of land at village Mahul went on-stream on 30th January 1955, oneyear ahead of schedule. Dr. S. Radakrishnan, Vice President of India, declared the 2.2 MMTPA Page | 24
  • 25. (Million Metric Tonnes Per Annum) Refinery open on 17th March 1955. It was then the largestrefinery in India then.With this infrastructure, free India moved one step closer to self-reliance.From Burmah Shell to Bharat PetroleumOn 24th January 1976, the Burmah Shell Group of Companies was taken over by theGovernment of India to form Bharat Refineries Limited. On 1st August 1977, it was renamedBharat Petroleum Corporation Limited. It was also the first refinery to process newly foundindigenous crude (Bombay High), in the country.Shaping the FutureThe core strength of Bharat Petroleum Corporation Limited has always been the ardent pursuit ofqualitative excellence for maximisation of customer satisfaction. Thus Bharat Petroleum, theerstwhile Burmah Shell, has today become one of the most formidable names in the petroleumindustry.Bharat Petroleum produces a diverse range of products, from petrochemicals and solvents toaircraft fuel and speciality lubricants and markets them through its wide network of PetrolStations, Kerosene Dealers, LPG Distributors, Lube Shoppes, besides supplying fuel directly tohundreds of industries, and several international and domestic airlines.Dynamic Growth Post NationalisationFollowing Nationalisation in 1976, Bharat Petroleum changed gears and embarked upon a rapidgrowth path. Turnover, profitability and financial reserves grew by leaps and bounds. Massiveexpansion and modernisation provided a tremendous boost to the companys performance.Large-scale recruitment and training became critically important to meet the demands ofexpansion. Page | 25
  • 26. The Winds of Change - A Transformed Organisation EmergesOpening up of the Indian economy in the nineties brought with it more competition andchallenges, kindled by the phased dismantling of the Administered Pricing Mechanism (APM)and emergence of additional capacities in the region in refining and marketing.In 1996, Bharat Petroleum went through a process of visioning, involving people at all levels,which evolved a shared vision and a set of shared values. Based on this, the companyrestructured itself, in a proactive move to adapt to the emerging competitive scenario. Thefunction-based structure was carefully dismantled and replaced with a process-based one. Thismade the company more responsive to its customer needs.Bharat Petroleum realises that, in the long run, success can only come with a total reorientationand change in approach with the customer as the focal point. Today, Bharat Petroleum isrestructured into a Corporate Centre, Strategic Business Units (SBUs) and Shared Services andEntities. The organisational design comprising of five customers facing SBUs, viz. Aviation,Industrial and Commercial, LPG, Lubricants and Retail and one asset based SBU, viz. Refinery,is based on the philosophy of greater customer focus.The Planned ApproachIncreasing globalisation, new products and services, and innovative marketing have resulted in avery market savvy consumer. The production-based success philosophy of marketers has nowbeen replaced by a customer-oriented philosophy. Bharat Petroleum has taken cognisance of thissituation well in time and has been taking radical steps to keep itself attuned to the changingtimes, realising that the future belongs to those who listen and adapt to their customers.Strategy DevelopmentBharat Petroleum recognises that all strategic initiatives must conform to the overall vision oftheCorporation and improvethe economic value. The Strategy Development effort at the corporatelevel achieves better focus in the new organisational structure, besides facilitating the SBUs indeveloping their respective strategies that lead to an integrated Corporate Strategy. A Business Page | 26
  • 27. Planning process has been put in place that not only provides opportunities for the SBUs topursue their visionary goals in consonance with the Corporate Vision, but also continuouslymonitors trends and identifies strategic opportunities for the Corporation.Brand ManagementIn the highly competitive scenario, it has become imperative to own dominant brands. The BrandManagement team at Bharat Petroleum endeavours to build and manage a strong brand imagereflecting Bharat Petroleums core values of being INCARE, viz. INnovative, CAring andREliable. Emphasis is laid on continuously understanding customer behaviour, tracking theirchanging needs and expectations, and meeting these needs in the most cost-effective manner.Research and DevelopmentResearch and development CentreAlways on the forefront to innovate, Bharat Petroleum ismaking distinct efforts towards Research and Development (R and D). Besides the R and Dfacilities at the Refinery and the Product Application Development Centre in Sewree in Mumbai,a new state-of-the-art RandD Centre is being set up near Delhi. The R and D Centre is beingorganised around three core groups - Process and Technology Development, Product ApplicationDevelopment and Environmental Engineering. A total outlay ofRs.3,000 million has been planned to be spent in three phasesup to the year 2003-04 on this project.Technological EdgeBharat Petroleum has always been on the forefront ofharnessing technology initiatives for BPCL has been on forefront in harnessing technology.maximising efficiency and achieving greater customer satisfaction.Bharat Petroleum is the first Public Sector Oil Company to implement Enterprisewide ResourcePlanning (ERP) solutions - SAP. The implementation project known as ENTRANS(Enterprisewide Transformation) has been awarded the SAP Star Implementation Award, withBharat Petroleum having the distinction of executing the largest and the most ambitious SAP Page | 27
  • 28. project in India. The challenge of SAP implementation was to ensure that all the integratedelements (of the complex multi-modular integrated solutions that impact the entire workflow ofthe organisation) work seamlessly across the length and breadth of the country, including theremote locations. Providing online connectivity in these remote locations, given the full-fledgedIT network infrastructure, was in itself a daunting task.Bharat Petroleum is reaping the benefits of the integrated system in many areas of its operations.The early gains of implementation are in the areas of tracking customer-receivables, monitoringcredit-management, inventory management, besides easing the operations in a large number ofareas.Furthermore, Bharat Petroleum has also set up one of the biggest Centres of Excellence in Asiato provide online support to the end users and also work towards continuous improvement inbusiness processes and handle product upgrades and new generation products.With SAP as the IT backbone, Bharat Petroleum plans to take advantage of the Internet basedcapabilities along the entire value chain with a Customer Relationship Management solution. Alarge data warehouse project has also been implemented, which facilitates access to real-timeaccurate information on key performance indicators at all Bharat Petroleum locations. Thisenables the management to take strategic and business decisions, thus ensuring value-addedservices, better customer satisfaction and enhanced shareholder value.People Above OilOver the years, Bharat Petroleum continues to meet the challenges of the rapidly changingenvironment, leading to changes in the marketing of products and services. In all these changes,only one factor has remained constant and has been the source of Bharat Petroleums strengthand inspiration for any future innovations - Bharat Petroleums People. The feeling of ownershiphas facilitated all employees to understand the complexity of the market and needs of thecustomers, and respond to these needs with innovative initiatives and offerings. Page | 28
  • 29. For Bharat Petroleum, commitment of its employees is a critical resource. Fully realising thatonly a happy employee will put his best foot forward with the customers, Bharat Petroleum hastaken many steps to make the organisation a great place to work. In a survey conducted byHewitt Associates for the January 2001 issue of Business Today magazine to identify the bestemployers, Bharat Petroleum was ranked among the top ten employers in India. The objective ofthe study was to find out which companies had really charged the emotional and intellectualenergy of their employees. The other companies who were selected were Infosys, Hewlett-Packard, P and G, ICICI, Hughes, LG, HLL, Compaq and Asian Paints.Bharat Petroleum fosters effective value-based HR processes for development of people andtheir organisational capabilities with a view to provide them with a competitive edge and also torealise their personal vision in tandem with the corporate vision. The thrust areas include: Performance Management which links business goals with individual performance goals Recognising competencies and capabilities of the staff through Competency Modelling to help identify and place the right person in the right job Identifying competency gaps and bridging such gaps through appropriate training and developmental programmes Multi-skilling to encourage employees to take up new initiatives in the areas of Enhanced Fuel Proposition, Add-on Stores, One Stop Truck Shops, Grocery and Fast Food Stores.Bharat Petroleum has been conferred the National HRD Award - 2000 by National HRDNetwork for making Outstanding Contribution to HRD.At the National Petroleum Management Programme (NPMP) on Excellence in Creativity andInnovation (1999-2000), Bharat Petroleum employees bagged all the three awards in theindividual category, along with four certificates of recognition in the team category. Page | 29
  • 30. ANALYSIS OF DATAQ1. How Frequently Do U Refill Your Vehicle? a) Twice In A Week b) Weekly c) Fortnight d) Monthly 35 30 25 20 15 10 5 0 Twice In A Week Weekly Fortnight MonthlyIllustration:According To Survey Mostly Customer Said, I Have Refueling The Vehicle forenight ThenCustomer Said That They refill vehicle Weekly Page | 30
  • 31. Q2. How Frequent Do You Visit BPCL Retail Outlet in a month? a) 1-2 b) 2-5 c) 5-10 d) More than 10 30 25 20 15 10 5 0 1-2 2-5 5-10 More than 10Illustration:According To Survey Mostly Customer Said Yeah, he visit 1-2 months. Then Customer SaidThat They visit 2-5 month. Page | 31
  • 32. Q3. Are YOU Aware of Bpcl(In & Out)? a) Definately, Yes and I often visit the store. b) Yes, but I hardly visit it. c) Yeah,I have seen it from outside while refueling my vehicle. d) Just heard of it from someone e) No 35 30 25 20 15 10 5 0 Definately, Yes Yes, but I hardly Yeah,I have Just heard of it No and I often visit the visit it. seen it from from someone store. outside while refueling my vehicle.Illustration:According To Survey Mostly Customer Said Yeah, I Have Seen It From Outside WhileRefueling The Vehicle Then Customer Said That They Aware Of BPCL(IN & OUT) But HardlyVisit It. Page | 32
  • 33. Q4. Do You Feel That Because Of In And Out You Visit BPCL? a) Highy Agree b) Agree c) Neither Agree Nor Disagree d) Disagree e) Higly Disagree 35 30 25 20 15 10 5 0 Highy Agree Agree Neither Disagree Higly Agree Nor Disagree DisagreeIllustration:According To Survey Mostly Customer Said Yeah, I highly agree. Then Customer Said ThatThey neither agree nor disagree . Page | 33
  • 34. Q5. Paying A Visit To BPCL Stands Convienient For You Or Not? a) Highy Agree b) Agree c) Neither Agree Nor Disagree d) Disagree e) Higly Disagree 35 30 25 20 15 10 5 0 Highy Agree Agree Neither Agree Disagree Higly Disagree Nor DisagreeIllustration:According To Survey Mostly Customer Said Yeah, I highly agree. Then Customer Said ThatThey neither agree nor disagree . Page | 34
  • 35. Q6. What Are The Things You Generally Transact With At A BPCL(In And Out)Store? a) Grocery b) A.T.M c) Bookstore d) Air check 13 25 Grocery A.T.M 12 Bookstore Aircheck 25Illustration:According To Survey Most Of The People Said That They Transact Mainly A.T.M And Aircheck At BPCL(IN & OUT) Petrol Pumps. Page | 35
  • 36. Q7. Paying A Visit To BPCL(In And Out)Store Stands Convienient For You Because Of: a) Grocery b) A.T.M c) Toilets d) Bookstore e) Aircheck f) General Store 30 25 20 15 10 5 0 Grocery A.T.M Toilets Bookstore Aircheck General StoreIllustration:According To Survey Mostly People Said That A.T.M’s ,Air check And Toilets Stand ForConvenient At BPCL(IN & OUT)(In & Out) Stores Page | 36
  • 37. Q8. Prices Of BPCL Stores Are Competitive Or Less Than That Of Other Stores? a) Highly Agree b) Agree c) Neither Agree Nor Disagree d) Disagree e) Highly Disagree 45 40 35 30 25 20 15 10 5 0 Highy Agree Agree Neither Agree Disagree Higly Disagree Nor DisagreeIllustration:According To Survey Mostly Customer Said Yeah, I highly agree. Then Customer Said ThatThey highly disagree. Page | 37
  • 38. Q9.Are You Satisfied With BPCL(In And Out) Stores? a) Highy Agree b) Agree c) Neither Agree Nor Disagree d) Disagree e) Higly Disagree Highy Agree 13% 25% Agree 12% Neither Agree Nor Disagree Disagree 20% 30% Higly DisagreeIllustration:According To Survey Mostly Customer Said Yeah, neither agree nor disagree .. Then Customer Said That They Highly Agree. Page | 38
  • 39. Q10 .what services you expect from in & out store? a) Grocery b) A.T.M c) Toilets d) Bookstore e) Air check f) General Store 35 30 25 20 15 10 5 0 Grocery A.T.M Toilets Bookstore Aircheck General StoreIllustration:According To Survey Most Of The People Said That A.T.M’s , General Stores , Toilets & Aircheck Are The Services What They Expect From In & Out Stores. Page | 39
  • 40. CONCLUSIONWith the deregulation of the petroleum sector and the change in the retail scenario of the petrobusiness. This liberalised scenario has madding the sector intensely competitive and the oilcompanies, especially those in the public sector would need to adopt a more customer-focusedapproach to the retail end of their business. Number of retail outlets is increasing rapidly because ofthat throughput per retail outlets came down up to 160 KL from 180 KL Margin of companies areshrinking and on the other hand pricing of petroleum product is still in governments hand.Oil companies are competing with each other to reinvent themselves and capture the biggestmarket share. To achieve this, efforts would be required to gain a competitive edge and toincrease volume off lake, by enhancing scale of operations, upgrading retail outlets and findingnew business opportunitiesAllied Petro retailing has been adopted by all oil companies as a tool to generate more revenue aswell as allure the customer to avail the bunch of facilities under one roof.Importance of Allied Petro-Retailing increasing going up in present scenario because offollowing;-Benefits to the Customer:• More than one requirement at one place.• Time saving.• Money saving because of less transportation. Page | 40
  • 41. Benefits to the company:• Better utilization of fixed assets.• New source of revenue generation.• New tool for differentiation.• Benefiting from positive rub off.• Attracting more customers.• Giving opportunity making long term relationship.Area of OperationPresent:• National highway, State highway, State Capital and some good town.• In rural India, still in nascent stage.Future:• Rural India as well as small town are better prospect for expansion of Allied Petro-Retailing Facilities at retail outlets. Page | 41
  • 42. QUESTIONNAIRE ON BPCL (IN & OUT)Q1. How Frequently Do U Refill Your Vehicle? e) Twice In A Week f) Weekly g) Fortnight h) MonthlyQ2. How Frequent Do You Visit BPCL Retail Outlet in a month? e) 1-2 f) 2-5 g) 5-10 h) More than 10Q3. Are YOU Aware of Bpcl(In & Out)? f) Definitely, Yes and I often visit the store. g) Yes, but I hardly visit it. h) Yeah,I have seen it from outside while refueling my vehicle. i) Just heard of it from someone j) NoQ4. Do You Feel That Because Of In And Out You Visit BPCL? f) Highly Agree g) Agree h) Neither Agree Nor Disagree i) Disagree j) Highly Disagree Page | 42
  • 43. Q5. Paying A Visit To BPCL Stands Convenient For You Or Not? f) Highly Agree g) Agree h) Neither Agree Nor Disagree i) Disagree j) Highly DisagreeQ6. What Are The Things You Generally Transact With At A BPCL(In And Out)Store? e) Grocery f) A.T.M g) Bookstore h) Air checkQ7. Paying A Visit To BPCL(In And Out)Store Stands Convenient For You Because Of: g) Grocery h) A.T.M i) Toilets j) Bookstore k) Air check l) General StoreQ8. Prices Of BPCL Stores Are Competitive Or Less Than That Of Other Stores? f) Highly Agree g) Agree h) Neither Agree Nor Disagree i) Disagree j) Highly DisagreeQ9.Are You Satisfied With BPCL(In And Out) Stores? Page | 43
  • 44. f) Highly Agree g) Agree h) Neither Agree Nor Disagree i) Disagree j) Highly DisagreeQ10 .what services you expect from in & out store? g) Grocery h) A.T.M i) Toilets j) Bookstore k) Air check l) General Store Page | 44
  • 45. BIBLIOGRAPHYReference Books:Marketing Management - Philip KotlerBasic of Marketing - Dr. P. C. PardeshiSelling - Cynthia L. GreeneReference Links:   ,  Business World – issue dated February 15th, 2005. Petroleum Retail Stuck in Pipeline.  The Hindu Business Line Reliance , Essar changing the rules of fuel retailing, Tuesday, July 20, 2004, Archana Chaudhary.  The Hindu Business Line Strategy Report – Indian Oil & Gas Industry 2004, Chemtech, December 31, 2003.  TERI, Background paper issues in the deregulation of the Oil & Gas sector, New Delhi, R.K.Narang, Ardhendu Sen and Leena Srivastava. Page | 45