Ways to enter the markets, options with pros and cons. It is a case on how a petroleum lubricant industry wants to enter, the channels. and what problem it can face in India

1. AGRI Petroli Entering
The Indian Market

2. Company Overview
 AGIP (Azienda Generale Italinana dei petroli) was founded by the Italian
Government in 1926.
 AGIP Petroli was established in 1977 and became sector-head of the ENI group
in 1981.
 It is a leading supplier, refiner and distributor of petroleum products in Italy.
 The company is not only a major competitor in the Italian market; it also
plays a substantial role in the international oil market through
subsidiaries, branches. joint ventures, and representative offices throughout
the world.
 It is one of the few companies involved in all segments of the lubricant
cycle, including production and marketing of base oils and finishes lubricants
plus recovery and re-refining of used oils.

3. Industry History
Until 1990s
 Highly regulated market
 Clear Dominance of PSUs
 IOC, HP, BPCL market share greater than 90%
Early 1990s
 Decanalization of base oil imports which were earlier canalized through IOC
 Import duties down to average of less than 30%
 Deregulation of Base oil pricing
 Import Licensing abolished

4. Types of market entry
 Exports
 Wholly owned subsidiary
 Joint Venture
 Strategic Alliance

5. Exports
 Higher Logistic costs and 30% import duties but lesser infrastructural expenses.
 Difficulty in handling a large number of distributers spread across 25 states and 7 UTs.
 Cost ineffectiveness as compared to rivals. The PSUs would still have price advantage.
 Difficult to tap the market which has inefficient distribution networks.
 Lack of knowledge of Indian market, consumer behaviour
 Stiff competition from well established PSUs,20 MNCs and several local brands and
‘black’ oil market.
 All distribution channels were already taken by existing competitors and it was
expensive to set-up a new distribution channel

6. Wholly Owned Subsidiary
 Higher Infrastructure establishment costs.
 Establish and maintain own distribution networks with building strong
relationship with existing networks and consumers.
 Inability to tap entire country’s market.
 Backward Integration and cost effectiveness are one of the plus points.
 Scope for future growth due to existence inside the country.
 Higher exit cost.
 The new MNCs have little knowledge about consumer behaviour, geographic
areas market opportunities and lack of local language skills

7. Joint Ventures(JVs)
 Combination of cost effectiveness and established distribution network.
 Cheaper production by using third party blenders but after reaching critical
production own blending plants are required to be constructed, which are risk
prone.
 Lower political risks due to involvement of an Indian company which
protected by Indian laws and regulation.
 Sharing of equity and profits.
 Lesser Capital as compared to wholly owned subsidiaries

8. Joint Venture with Escort Ltd.
 Escort’s sales organisation is of higher standard compared to other Indian
firms.
 Strong Link with dealers, Assurance of long term relationships which will help
them to tap the whole country.
 Already has structured joint ventures with OEMs whose approvals are required
for new brands.
 Availability of local expertise.
 Taking advantage of an established brand name through a strong customer
and professional brand name.
 But Escort lacks existing technical know how's and no current involvement in
production of cars.
 Cultural clashes between joint ventures.

9. Strategic Alliance
 Contractual Entry mode for example it can enter technology and licensing
agreement with other companies that own blenders and have established
distribution channels in India.
 Collaboration of tie-ups with Original Equipment Manufacturers (OEMs) as
their approval is required to qualify the product. It is also needed to
strengthen value proposition of a particular brand.
 Many companies such as Castrol have made strong partnership with major
Indian and global OEMs including Tata Motors, Mahindra and
Mahindra, Volvo, Audi, Ford for participating in their workshops for high
quality lubricants

10. How best can AGIP Petroli take advantage of
existing recourses and capabilities in India?

11. Demands Aspects in Petroleum products

12.  As shown in the table AGIP can take advantage of rapid growth of various
types of oils like synthetics and high performance multi oils.
 In northern and south western India there was an increasing vehicle parc by
atleast 40%.It will be advantageous for AGIP to tap into market with
innovative products.
 Total volume of consumption of lubricants will decrease by 6% in 3 years, AGIP
is in an advantageous position because the consumption of high quality
lubricants will increase.
 Within such scenario retail outlets were expected to maintain sales and if
AGIP can explore this by entering markets with OEMs
 By providing discounts and incentives it can increase it market share.

13. Current Competitions
 There was a gap between demand and supply of petroleum products in India.
 Due to liberalization AGIP can enter the market and capture a part of market
share with its high quality lubricant product
 The volume of lubricant used at once was decreasing as the quality of product
was increasing
 High competition has led to lack of product differentiation
 AGIP should focus on marketing and advertising to establish a brand name

14. Future Competitions
 In the coming period because of market saturation the smaller players will be
driven out due to Industry Shake-out.
 Advancement in engine oil technology and use of high performance oils or
possible substitutes. This is advantageous to AGIP because it already is in the
high quality product production while the PSUs are new at it.
 PSUs will be in a competitive position since they had integrated operations
which makes them more self sustainable. PSUs will also try to gain advantage
in Bazaar market.
 They might be constantly backed by the government
 OEM relationships will be a crucial factor

15. Strengths of AGIP
 Multinational Corporation.
 Technical know-how and Research and Development
 Availability of Capital
 International reputation and experience
 Could lessen its profit margins to establish relations with distributors and
consumers.
 There is a constant revamping of its industrial systems, handles by Euron, due
to which it can easily adapt to a country condtion.

16. Risks of AGIP
 Lack of Entry channels and a fragmented market
 Culturally different host country
 Economic Liberalisation was recent and could not be considered a permanent
situation then
 Can be minimized with a JV with Escorts

17. THANK YOU