American International University-Bangladesh (AIUB)

A RESEARCH REPORT ON
PETRONAS
Submitted To:
Prof. Dr. Md. Mahmodul Hasan
Faculty of Business Administration
American International University Bangladesh (AIUB)

Submitted By:

GOLAPER KATA

Date of Submission:
7th December, 2014

American International University-Bangladesh (AIUB)

A RESEARCH REPORT ON
PETRONAS

Submitted To:
Prof. Dr. Md. Mahmodul Hasan
Faculty of Business Administration
American International University Bangladesh (AIUB)

Submitted By:
GOLAPER KATA
Serial

Name

ID

1.

Hasan, Md. Galib

14-97566-1

2.

Prentice, Dora

14-97612-1

3.

Morshed, KH. Rahat

14-97558-1

4.

Sadat, Aminus

13-97336-3

A RESEARCH REPORT ON
PETRONAS

Letter of Transmittal
4th December, 2014
Prof. Dr. Md. Mahmodul Hasan
Faculty of Business Administration
American International University Bangladesh (AIUB)
Banani, Dhaka 1213.
Subject: Submission of Term Paper on PETRONAS
Dear Sir,
First and foremost, we would like to thank our honorable faculty Prof. Dr. Md.
Mahmodul Hasan to encourage and influence us to prepare such a wonderful report
on one of the best multinational company in the globe PETRONAS. However After
a long period of hard work we combined both our theoretical and practical
knowledge we tried to make the report as best as possible with the best guidance of
our faculty.
We are thankful to you to giving us such a challenging opportunity which actually
help us a lot to enhance International Standardized Academic knowledge and prove
our practical and theoretical capabilities. This opportunity has also helped us to
achieve knowledge about the modern corporate boniness environment and their
applied strategies. Therefore, we firmly believe that, this report will be able to meet
your approval. We would genuinely appreciate to make further corrections where it
seems necessary by you.
Finally we are fervently requesting and hope that you would be kind enough to accept
our Term Paper and oblige thereby.
Yours sincerely,
Serial

Name

ID

1.

Hasan, Md. Galib

14-97566-1

2.

Prentice, Dora

14-97612-1

3.

Morshed, KH. Rahat

14-97558-1

4.

Sadat, Aminus

13-97336-3

Signature

Acknowledgement
First of all we would like to thanks Almighty Allah for helping us to complete this
term paper properly and on time.
We are also especially grateful to our honorable faculty Prof. Dr. Md. Mahmodul
Hasan for his kind and sincere guidance throughout these endeavors and to make
our report better and much more knowledgeable.
We would like to express our sincere gratitude and cordial thanks to our parents,
friends and other classmate for their crucial support and providing needed
information about our term paper despite of their enormous workload. It would have
been quite impossible to carry on the term paper and give it a final shape without
their help.
Although, we had to face some difficulties due to the lack of time while preparing this
term paper, and at one moment of time, we thought we would not be able to
complete this, but thanks go to the Almighty once again for making us prepare this
paper and submit in time.
Finally we would like to say that this report is a subject to error or mistakes that are
inherent in human endeavor. We therefore request every reader of this paper to
forgive us for any kind of mistake.

Table of Content:
Sl. No.

Topics

Page No.

Letter of Transmittal
Acknowledgement
Executive Summary

i-ii

1.

Chapter 1
Introduction of the Term Paper

(1-12)

1.1.

Definition of Strategic Management

2-3

1.2.

Most Strategic Management Model

(4-12)

1.2.1.

PESTEL Analysis of PETRONAS

4-5

1.2.2.

Porters Five Forces Model of PETRONAS

5-7

1.2.3.

Strategic Group Map of PETRONAS

7-9

1.2.4.

Blue Ocean Strategy of PETRONAS

1.2.5.

Open Innovation of PETRONAS

9-10

1.2.6.

SWOT Analysis of PETRONAS

10

1.2.7.

McKinsey Seven - S model of PETRONAS

10-12

2.

Chapter 2
Strategic Model Analysis

(13-20)

2.1.

SWAN Analysis of PETRONAS

14

2.2.

Value Chain Analysis of PETRONAS

15-16

2.3.

ViSA Model of PETRONAS

16-17

2.4.

SMARTER Model of PETRONAS

17-18

2.5.

BCG Matrix of PETRONAS

18

2.6.

PURE Objective Model of PETRONAS

19

2.7.

GREAT Model of PETRONAS

20

3.

Chapter 3
Current Situation Analysis and Discussions

(21-33)

3.1.

Market Analysis including Market Segmentation

22

3.2.

23

3.3.

EFE Matrix of PETRONAS

CPM Analysis of PETRONAS

24

3.4.

TOWS Analysis of PETRONAS

25

3.5.

QSPM Analysis of PETRONAS

26

3.6.

Financial Analysis of PETRONAS

27

3.7.

Break Even Analysis of PETRONAS

27

3.8.

Competitors Analysis of PETRONAS

28-29

3.9.

KSFs Analysis of PETRONAS

29-30

3.10.

Strategy Evaluation and Contingency Plan of PETRONAS

31-32

4.

Chapter 4
Concluding Statement

(33-36)

4.1.

Recommendation

34

4.2.

Conclusion

34-35

5.

Chapter 5

(36-39)

5.1.

References

37

5.2.

www.golaperkata4.com

38

5.3.

www.academia.edu

39

Executive summary:
PETRONAS, short for Petroliam Nasional Berhad, is a Malaysian oil and gas
company that was founded on 17 August 1974. Wholly owned by the Government of
Malaysia, the corporation is vested with the entire oil and gas resources in Malaysia
and is entrusted with the responsibility of developing and adding value to these
resources. PETRONAS is ranked among Fortune Global 500's largest corporations in
the world. Fortune ranks PETRONAS as the 75th largest company in the world in
2013. It also ranks PETRONAS as the 12th most profitable company in the world and
the most profitable in Asia. The company is headquartered at the PETRONAS
Towers which was officially opened on Malaysias 42nd National Day, 31 August 1998
in the corporations 24th Anniversary year. PETRONAS has grown to be an
integrated international oil and gas company with business interests in 50 countries.
The group is engaged in a wide spectrum of petroleum activities, including upstream
exploration and production of oil and gas to downstream oil refining; marketing and
distribution of petroleum products; trading; gas processing and liquefaction; gas
transmission pipeline network operations; marketing of liquefied natural gas;
petrochemical manufacturing and marketing; shipping; automotive engineering and
property investment. PETRONAS provides a substantial source of income for the
Malaysian government, with 45% of the governments budget dependent on
PETRONAS' dividend, moreover in 2011 government actual balance has 5 percent
deficit of Gross Domestic Product. PETRONAS' goals would be to safeguard national
sovereignty over oil and gas reserves, to plan for both present and future national
need for oil and gas, to take part in distributing and marketing petroleum and
petrochemical products at reasonable prices, to encourage provision of plant,
equipment, and services by Malaysian companies, to produce nitrogenous fertilizers,
and to spread the benefits of the petroleum industry throughout the nation.
PETRONAS, with its policies of promoting self-reliance, helping to develop
associated industries, and varying the sources and uses of oil and gas, played an
important role in the Malaysian economy. The PETRONAS unit that is responsible
for handling education matters is called the Sponsorship & Talent Sourcing Unit
(STS). PETRONAS has its own university, University Teknologi PETRONAS (UTP).
In 1995, a subsidiary was created to import, store, and distribute Liquefied
Petroleum Gas (LPG). In addition, the companys polyethylene plant in Kerteh began
operations. We have made some analysis on PETRONAS. From our analysis we

found that now-a-days PETRONAS in CASH COW, it has high market share but have
low market growth. It competed with Chevron from many days, their score from
CPM is 3.35 and for PETRONAS it is 3.30. After analysis over EFE we got 3.25 so we
can say that it is the most influential state owned national oil and gas company in
Malaysia. With two alternatives we made QSPM for PETRONAS and the score for
expanding in exporting gas is 5.15 and for expanding in exporting oil is 5.45. Prime
Minister Mahathir Mohamad commented on the achievement in Bernama News
Agency article, claiming that the PETRONAS LNG complex now serves as another
shining example of a vision realized of a national aspiration, transformed into reality
by the same belief among Malaysians that we can do it. Indeed, PETRONAS had
transformed itself into a global oil company over the previous decade, becoming a
national symbol for success. The company realized, however, that it would have to
continue its aggressive growth strategy to insure its survival in the years to come.

Chapter - 1
Introduction of the Term Paper

PETRONAS
1.1. Definition of Strategic Management
Strategic Management Theory (Theory: 2000-2010)

Strategic Management can be defined as (1) the art and science of formulating, (2)
implementing, and (3) evaluating cross-functional decisions that enable an
organization to achieve its objectives.

Strategic

Management

focuses

on

integrating

management,

marketing,

finance/accounting, production/operation, research and development (R&D) and

computer information systems to achieve organizational success.

Strategic Management (Theory: 2011 2015 )

Strategic management involves strategy development, which is comprised of five
stages:
1. Discovery,
2. Strategic thinking,
3. Strategic planning,
4. Strategy roll-out,
5. Strategy tune-up/Adjustments.
PETRONAS follows Strategic Management (Theory: 2011 2015 ) because:

1. Discovery:
PETRONAS is a Malaysian Oil and Gas company that was founded on 17th august
1974 and now has grown to be an integrated international oil and gas company with
business interests in 50 countries.

2. Strategic thinking:
PETRONAS is ranked among fortune global 500s largest corporations in the world.
Fortune ranks PETRONAS as the 75th largest company in the world in 2013. It also
ranks PETRONAS as the 12th most profitable company in the world and most
profitable in Asia.

Vision Statement
To be a Leading Oil and Gas Multinational of Choice.
Mission Statement

We are a business entity

Petroleum is our core business

Our primary responsibility is to develop and add value to this national

resource

Our objective is to contribute to the well-being of the people and the nation.

3. Strategic planning:
PETRONAS has pursued an effective strategy of to become a leading lubricants and
functional fluids company with a global market share amongst the top competitors.

4. Strategy roll-out:
They have a very good strategic planning as a result of which just within a period of
10 years they were able to expand their business globally.

5. Strategy tune-up/Adjustments:
They also maintain strategy tune up by publishing annual report every year and
organized yearly meeting.

1.2. Most Strategic Management Model:

1.2.1. PESTEL Analysis of PETRONAS
Political

Wholly owned by the Govt. of

Economical

Malaysia.

It is an international oil and gas

It is the most profitable company

in the world.

45% of the Govt. budget

exploration company with

dependent on PETRONAS

business interests in 50 countries.

dividend.

Its played an important role in the

PETRONAS policy is self-reliance

Malaysian economy as a whole.

and helps to develop associated

It is the 75th largest company in

industries.

the world.

PETRONAS is one of the main

sponsors of the BMW Sauber
Formula One team.

Social/Socio-Culture

They concern about health and

Technological

safety issues.

PETRONAS brings

gas exploration.

underprivileged children to watch

the race.

They find first onshore oil

discovery in Malaysia.

They use their own tank for export

oil.

PETRONAS awards education

sponsorships.

Use latest technology for oil and

They have their own refinery plan.

PETRONAS have their own

universities.

Ecological/Environmental

Malaysian geographical condition

Legal/Regulatory

PETRONAS have joint ventures

with Aromatics Malaysia Sdn Bhd,
China National Offshore Oil
Corporation and Chevron
Overseas Petroleum ltd.

It is a state owned company.

It has more than 100 subsidiaries

and around 40 joint ventures

making oil and gas exploration

relatively easier.

PETRONAS also concern about

environmental control.

It goals would be to safeguard

national sovereignty over oil and
gas reserves.

companies.

Malaysia is in a good geographic

position for oil and gas.

Students can work for two years

for every one year they are
sponsored.

1.2.2. Five Forces Analysis of PETRONAS

Bargaining Power
of Supplier

Threats of New
Entrants

Rivalry

Threats of
Substitute

Bargaining
Power of Buyer

Bargaining Power of Suppliers:

High competition among suppliers: High levels of competition among
suppliers acts to reduce prices to producers. This is a positive for PETRONAS
Corporation. High competition among suppliers PETRONAS" will have a long-term
negative impact on this entity, which subtracts from the entity's value.

Diverse distribution channel: The more diverse distribution channels become

the less bargaining power a single distributor will have. This positively affects
PETRONAS. "Diverse distribution channel (PETRONAS)" will have a long term
positive impact on this entity, which adds to its value.
Volume is critical to suppliers: When suppliers are reliant on high volumes,
they have less bargaining power, because a producer can threaten to cut volumes and
hurt the suppliers profits. This can positively affect PETRONAS.

Bargaining Power of Buyers:

Low buyer price sensitivity: When buyers are less sensitive to prices, prices can
increase and buyers will still buy the product. Inelastic demand positively affects on
PETRONAS.
Product is important to customer: When customers cherish particular products
they end up paying more for that one product. This positively affects on PETRONAS.
Large number of customers: When there are large numbers of customers, no one
customer tends to have bargaining leverage. Limited bargaining leverage helps
PETRONAS.

Rivalry:
Government limits competition: Government policies and regulations can order
the level of competition within the industry. When they limit competition, this is a
positive for PETRONAS.
Large industry size: Large industries allow multiple firms and produces to
prosper without having to steal market share from each other. Large industry size is a
positive for PETRONAS.
Exit barriers are low: When exit barriers are low, weak firms are more likely to
leave the market, which will increase the profits for the remaining firms. Low exit
barriers are a positive for PETRONAS.

Threat of Substitutes:
Substitute is lower quality: A lower quality product means a customer is less
likely to switch from PETRONAS to another product or service.

Substitute has lower performance: A lower performance product means a

customer is less likely to switch from PETRONAS to another product or service.
Substitute product is inferior: An inferior product means a customer is less
likely to switch from PETRONAS to another product or service.
High cost of switching to substitute: Limited number of substitutes means that
customers cannot easily switch to other products or services of similar price and still
receive the same benefits. High switching costs positively affect PETRONAS.

Threat of New Entrants:

Strong distribution network required: Weak distribution networks mean
goods are more expensive to move around and some goods dont get to the end
customer. The expense of building a strong distribution network positively affects
PETRONAS.
Strong brand names: If strong brands are critical to compete, then new
competitors will have to improve their brand value in order to effectively compete.
Strong brands positively affect PETRONAS.
High learning curve: When the learning curve is high, new competitors must
spend time and money studying the market before they can effectively compete. High
learning curves positively affect profits for PETRONAS.
Entry barriers are high: When barriers are high, it is more difficult for new
competitors to enter the market. High entry barriers positively affect profits for
PETRONAS.

1.2.3. Strategic Group Map

Extent of product (or service) diversity:
The group is engaged in a wide spectrum of petroleum activities, including upstream
exploration and production of oil and gas to downstream oil refining, marketing and
distribution of petroleum products, trading, gas processing and liquefaction, gas
transmission pipeline network operations, marketing of liquefied natural gas,
petrochemical manufacturing and marketing, shipping, automotive engineering, and
property investment.

 Extent of geographic coverage:

Number of market segments served:

Exploration and production of oil and gas to downstream oil refining, marketing and
distribution of petroleum products, trading, gas processing and liquefaction, gas
transmission pipeline network operations, marketing of liquefied natural gas,
petrochemical manufacturing and marketing, shipping, automotive engineering, and
property investment.

Distribution channel used:

They distribute their product by ship and lorry.
Extent of branding:
PETRONAS uses various means for branding such as TV, media and web-site media
to cover the global era. PETRONAS marketing department adopted innovative digital
marketing strategies, by developing a pioneering and integrated websites. They
sponsor and sports and cultural events globally such as BMW Sauber Formula One
Team, TOYOTA Team, Fiat Yamaha Moto GP team, Mercedes Grand Prix team.

 Marketing effort:
PETRONAS uses the 7p model for its marketing which includes Product, Price, Place,
Promotion, People, Process and Physical evidence.

Product (or service) quality:

They have world class product.

Pricing policy:
PETROANS uses penetration pricing strategy by offering lower prices compared to
competitors in order to gain more market share and at the same time providing
similar services or even better than competitors.

1.2.4. Blue Ocean Strategy

PETRONAS has head to head with Chevron in this industry.

1.2.5. Open Innovation:

Billions of dollars go into creating innovative products from the energy that
PETRONAS harness in their exploration activities. PETRONAS is constantly staying
ahead of the evolving energy needs by seeking opportunities to work with global
innovators to drive industrial growth and to improve their capabilities. One of the
ways they are asserting their value to stakeholders is their involvement in

motorsports, most notably Formula 1 (F1). More than a sponsorship programme,

they have expanded their fuel and lubricant products through the intensive research
and development (R&D) that goes into every race. In the latest F1 developments, they
have partnered with AMG to bring technical excellence and innovation to the world
of oil and gas, which serves to strengthen our fluid technology with PETRONAS
Lubricants International.

1.2.6. SWOT Analysis of PETRONAS

Strength
1. One of the world's strongest brand
names.

Weakness
1. Cost of environmental hazards.
2. Legal issues.

2. Diverse and huge operations.

3. Employment scam.

3. PETRONAS has grown to be an

4. Rising investment requirement.

integrated international oil and

gas company with business
interests in 50 countries.
4. Sponsored education to Malaysian
students.

Opportunity

Threats

1. Increasing fuel/oil prices.

1. Government regulations.

2. Increasing natural gas market.

2. High Competition.

3. More oil well discoveries.

3. Long-term falls in domestic oil

4. Expand export market.

production.
4. Competition in regional LNG
supply.

1.2.7. McKinsey Seven S Model of PETRONAS

Business Environment/Strategy:
PETRONAS promotes a healthy workforce and mitigates significant workplace health
risks. PETRONAS Operate with industry-leading asset integrity and reliability

efficiently use natural resources and assets. The legal department oversees all the
legal issues related to the companys operation in Malaysia. This department consists
of top performing lawyers, paralegals, land persons and staff.

Shared Values:
PETRONAS conducts business in a socially responsible and ethical manner.
PETRONAS respects the law, support universal human rights, protect the
environment, and benefit the communities where they work.

Structure:
There are 9 functional departments in PETRONAS. Those are External Affairs,
Human Resource, Finance, Planning and Commercial, Asset Development,
Information, Communication and Technology (IC&T), OE/HES (OE stands for
Operational Excellence and HES stands for Health Environment and Safety), Legal
and Operation.

Organogram:

 Staff:
PETRONAS ensure enhance stakeholder communications and involvement to ensure
strategic alignment all aspects of day to day operations also enhance organizational
capability to provide the right people with the right skills in the right place with the
right responsibilities at the right time in the right numbers.

System/Infrastructure:
Service awards are given to PETRONAS employees for accomplishing time related
milestones in their career with the corporation. Service awards are given to an
employee after their first year, 5th year and every succeeding year. When an employee
is eligible for a service award, s/he selects a preference from an available range on
the PETRONAS website for that particular award.

Skill:
PETRONAS Execute with excellence through rigorous application of our operational
excellence and capital stewardship systems and disciplined cost management
through rigorous application of our operational excellence and capital stewardship
systems and disciplined cost management.

Style:
PETRONAS is committed to superior product performance and quality. Over more
than 40 years, they have grown into one of the leading marketers of refined products,
including gasoline, diesel and aviation fuels and lubricants.

Chapter 2
Strategic Model Analysis

2.1. SWAN Analysis

Strengths
1. One of the world's strongest brand names.
2. Diverse and huge operations.
3. PETRONAS has grown to be an integrated international oil and gas company
with business interests in 50 countries.
4. Sponsored education to Malaysian students.
Weaknesses
1. Cost of environmental hazards.
2. Legal issues.
3. Employment scam.
4. Rising investment requirement.
Achievements
1. Wholly owned by the Govt. of Malaysia.
2. Fortune ranks PETRONAS as the 75th largest company in the world in 2013.
3. It also ranks PETRONAS as the 12th most profitable company in the world.
4. The most profitable company in Asia.
Next Step
1. Want to be a largest in Southeast Asia oil producing nations and its state-run
energy.
2. Focusing on the quality on their assets and high grading their international
portfolio.
3. Enforcing market discipline.
4. Focusing on North America.

2.2. Value Chain Analysis of PETRONAS

1. Primary Activities:

Supply Chain
Management &
Operations
Distribution

Sales and Marketing &

Service

Fuel, raw materials, inventory management &

Production, assembly
Shipping, delivery, network

Advertising, market research and planning,

dealer &
Consumer service, support and
complaint and dispute resolution

Supply Chain Management: PETRONAS extract fuel, oil, gas as raw materials
and keeps that as inventory as delivers those goods with maintaining strong
supply chain management.
Operations: After production of oil and gas it is required to assemble those
with maintaining proper packaging for further operation.
Distribution: PETRONAS maintain a strong distribution channel by using
shipping, proper delivery of goods and keeping good relationship network
with its local supplies and distributors always.
Sales and Marketing: PETRONAS uses a vast advertising policy by giving
advertisement through TV, Newspaper, and Journals etc. It also emphasis on
market research and planning activities.
Service: PETRONAS is very much concerned about installation, providing
spare parts delivery, repair of any defect of goods and machinery, complaints
with due care, maintenance of all the installed parts.

2. Support Activities:

Product R&D,
Technology and
Systems development

Equipment design, software, telecommunication

Human Resource
Management

Recruiting, hiring, training

General management, finance, legal
and regulatory affairs, safety &
security, overhead functions.

General
Administration

Product R&D, Technology and Systems development: PETRONAS always

provides emphasis on equipment design, maintaining software for right
extraction and telecommunication facilities for the wellbeing of the supplier.
Human Resource Management: PETRONAS recruiting policy is an important
factor. They hire the best graduate from the different corners with due care
and provide training for becoming the skilled and proficient employee.
General Administration: PETRONAS has a strong general management
system. The finance department works with care, legal and regulatory affairs
follow the rules and regulations of the authority, safety & security measures of
the people are taken as a serious matter and looks after the overhead functions
carefully.

2.3.ViSA Model Analysis

Vision:
To Be A Leading Oil and Gas Multinational of Choice.

Strategy:
PETRONAS,

through

wholly

owned

subsidiary

PETRONAS

International

Corporation Ltd, has entered into an agreement with GMR Infrastructure

(Singapore) Pte Ltd and GMR Infrastructure Ltd both subsidiaries of GMR Group,

India to acquire a 30% stake in GMR Energy Singapore Pte Ltd (GMRE). The
proposed acquisition marks PETRONAS maiden venture into the international
power market, and is a major step in its effort to extend its existing integrated
presence further along the energy value chain as part of its future growth strategy.

Action Plan:
Want to be a largest in Southeast Asia oil producing nations and its state-run energy.
Focusing on the quality on their assets and high grading their international portfolio.
Enforcing the market discipline. Focusing on North America.

2.4. SMARTER Model Analysis

Specific:
They are offering their product direct to the customer by their refuelling station.

Measurable:
We would suggest that PETRONAS should open their operation in North America.

Achievable:
This will be achievable as they are making profit each year. So, they have enough
financial support to buy resources and expand their business.

Realistic:
As PETRONAS has a good branding image which will help them to gain popularity in
petrochemical business.

Time:
They set a plan for 2 years in their onshore project.

Encompassing:
PETRONAS should continually evaluate the performance of their budgeted cost and
actual cost to maintain low cost they can.

 Reviewed:
PETRONAS should monitor their performance regularly so that it can be completed
within the time frame of 3 years.

2.5. The BCG Matrix of PETRONAS

Market Growth Rate

HIGH

PETRONAS
LOW
LOW

HIGH

Relative Market share

Here PETRONAS is in Cash Cow position on BCG Matrix. Reasons are given below:
PETRONAS is one of Asia's most profitable companies. PETRONAS have huge
market potential with high market share. PETRONAS has grown to be an integrated
international oil and gas company with business interests in only 50 countries. But
they have low market growth.

2.6. PURE Objectives of PATRONAS

Positive:
PETRONAS takes its responsibility to measure, manage and minimize its impact on
the environment seriously and will continue to look at innovative ways in which it
can do that.

Understood:
a. Performance:
PETRONAS is ranked among Fortune Global 500's largest corporations in the world.
Fortune ranks PETRONAS as the 75th largest company in the world in 2013. It also
ranks PETRONAS as the 12th most profitable company in the world and the most
profitable in Asia.

Recorded:
According to the annual report, the following three years Revenue, Profit and EBIT
was recorded as:
Year

Revenue(Billion)

Profit(Billion)

EBIT(Billion)

2013

317.30

65.6

94.30

2012

391.20

59.5

89.70

2011

241.20

63

90.50

Ethical:
PETRONAS expects all suppliers to comply with its Supplier Ethics and Code of
Conduct, regardless of local and international business practices. PETRONAS desires
to operate in an environment that is free from influence due to unethical business
practices. Therefore, suppliers are requested to conduct business with PETRONAS in
a manner that would not in any way compromise the PETRONAS Supplier Ethics
Code of Conduct.

2.7. GREAT Model of PETRONAS

Goals:
PETRONAS' goals would be to safeguard national sovereignty over oil and gas
reserves, to plan for both present and future national need for oil and gas, to take
part in distributing and marketing petroleum and petrochemical products at
reasonable prices, to encourage provision of plant, equipment, and services by
Malaysian companies, to produce nitrogenous fertilizers, and to spread the benefits
of the petroleum industry throughout the nation.
Roles:
A high- quality portfolio of existing assets, promising major projects under
development worldwide, and investment in numerous new emerging businesses,
combined with employees who make a difference, ensures an opportunity- rich
future for PETRONAS.
Expectations:
Want to be a largest in Southeast Asia oil producing nations and its state-run energy.
Focusing on the quality on their assets and high grading their international portfolio.
Enforcing the market discipline. Focusing on North America.
Accountabilities:
PETRONAS believes it is their responsibility to seek to understand and be
understood by their stakeholders a diverse group of individuals and organizations
who can impact or be impacted by their business.
Timing:
They set a plan for 5 years in their onshore project. PETRONAS is one of the
successful companies. It always maintains good time management system. By taking
personal responsibility and pride in their work to deliver timely, quality results that
benefit PETRONAS and help achieve their vision and strategy.

Chapter 3
Current Situation Analysis and Discussions

3.1. Market Analysis with Market Segmentation:

Market Analysis:
Since Malaysias national oil company was incorporated in 1974, its initial upstream
activities of exploration and production have moved steadily downstream.
PETRONAS now ranks as one of the Fortune Global 500 largest corporations in the
world, operating as an integrated oil and gas business that encompasses refining,
marketing, trading and retail operations within a global marketplace. PETRONAS
has long integrated value-adding business initiatives to maximise synergies and
returns. Five years ago, a multi-million dollar investment resulted in a new base oil
refinery being added to complement and enhance the existing Melaka Refinery
complex. As a fully integrated company, PETRONAS has all the pieces in place to
market its base oils successfullyfrom the reliability of supply from its upstream
operations to its world-class refining complex, to a global marketing and distribution
network supported by logistics and technology capability. As global demand for
better, cleaner lubricants grows, engine and equipment manufacturers are
increasingly convinced of the technical, economical and logistical advantages that
PETRONAS base oils can provide for their businesses. PETRONAS is well on its way
to becoming the preferred high quality base oil.

Market Segmentation:
PETRONAS Dagangan Berhad (PDB) is a provider of petroleum products in
Malaysia. The Company operates in three segments: Retail segment, commercial
segment and other segment. If offers a range of products and services in all its four
core businesses of retail, commercial, liquefied petroleum gas (LPG) and lubricants.
The Company offers a range of petroleum products, including motor gasoline,
aviation fuel, kerosene, diesel, fuel oil, LPG cylinders and asphalt. The retail Business
Division (Retail) is responsible for the marketing and distribution of petroleum
products to the consumer market through its network of over 973 PETRONAS
Service Stations. On May 30, 2012, the Company incorporated PDB (Netherlands)
B.V. On September 5, 2012, it acquired PETRONAS Aviation Sdn Bhd. On November
8, 2012, the Company acquired PETRONAS International Marketing (Thailand) Co.
Ltd. On December 31, 2012, the Company acquired PETRONAS (Vietnam) Co. Ltd.
and Thang Long LPG Co. Limited.

3.2. EFE Matrix of PETRONAS

Key External Factors

Weight

Rating

Weighted
Score

Opportunities
1. Increasing fuel/oil prices.

0.20

0.80

2. Increasing natural gas market.

0.15

0.45

3. More oil well discoveries.

0.05

0.10

4. Expand export market.

0.10

0.20

1. Government regulations.

0.10

0.30

2. High Competition.

0.05

0.20

3. Long-term falls in domestic oil production.

0.15

0.60

4. Competition in regional LNG supply.

0.20

0.60

Threats

4= The response is superior

Rating

3= The response is above average

2= The response is average
1= The response is poor
TOTAL

1.00
0

3.25

3.3. CPM Analysis of International Petroleum Industry

Critical Success
Factors

PETRONAS

CHEVRON

NEXEN

Weight
0.10

Rating

Score

Rating

Score

Rating

Score

0.30

0.30

0.30

Quality of Services

0.20

0.80

0.80

0.80

Price Competitiveness

0.10

0.30

0.30

0.30

Management

0.10

0.40

0.30

0.40

Financial Expansion

0.15

0.45

0.45

0.45

Global Expansion

0.20

0.60

0.60

0.60

Customer Loyalty

0.05

0.15

0.20

0.10

Market Share

0.10

0.30

0.40

0.30

Advertising

1.00
TOTAL
4=Major Strength
3=Minor Strength
2=Minor Weakness
1=Major Weakness

3.30

3.35

3.25

3.4. TWOS Matrix

It is a combination assessment technique of EFE and CPM Matrix Analysis-

INTERNAL FACTORS (CPM Matrix)

Strengths:

SCORE

Weaknesses:

1. One of the world's strongest

brand names.

1. Cost of environmental
hazards.

2. Diverse and huge operations.

2. Legal issues.

3. PETRONAS has grown to be an

3. Employment scam.

integrated international oil and

gas company with business

3.30
(CPM)

4. Rising investment
requirement.

interests in 50 countries.
4. Sponsored education to
Malaysian students.

Opportunities:

Threats:

1. Increasing fuel/oil prices.

1. Government regulations.

2. Increasing natural gas market.

2. High Competition.

3. More oil well discoveries.

3. Long-term falls in domestic

4. Expand export market.

oil production.
4. Competition in regional LNG
supply.

EXTERNAL FACTORS (EFE Matrix)

3.25
(EFE)

3.5. QSPM (Quantitative Strategic Planning Matrix) For PETRONAS

Alternative 1

Alternative 2

Exploring natural gas in Asia

Exploring oil in North America

Weight

Weight

Attractive

Total

ness

Attractiven

Score

ess Score

0.15

0.30

0.10

0.20

0.10

0.30

0.15

0.30

0.20

0.80

0.20

0.60

0.05

0.05

0.05

0.05

0.20

0.60

0.15

0.45

2. Legal issues.

0.15

0.30

0.10

0.20

3. Employment scam.

0.05

0.10

0.05

0.05

4. Rising investment requirement.

0.10

0.20

0.20

0.60

Sum Weights

1.00

Key Factors

Attractiven

Total

ess Score

Attractiven
ess Score

Strengths
1.

One of the world's strongest brand

names.

2. Diverse and huge operations.

3. PETRONAS has grown to be an
integrated international oil and gas
company with business interests in 35
countries.
4. Sponsored education to Malaysian
students.

Weaknesses
1.

Cost of environmental hazards.

1.00

Opportunities
Increasing fuel/oil prices

0.20

0.60

0.15

0.45

2. Increasing natural gas market

0.15

0.45

0.20

0.60

3. More oil well discoveries

0.05

0.10

0.10

0.40

4. Expand export market

0.10

0.30

0.05

0.15

0.10

0.20

0.05

0.05

2. High Competition

0.05

0.15

0.20

0.60

3. Long-term falls in domestic oil

0.15

0.30

0.15

0.45

4. Competition in regional LNG supply.

0.20

0.40

0.10

0.30

Sum Weights

1.00

1.

Threats
1.

Government regulations

production.

Sum Total Attractiveness Score

1.00

5.15

<

5.45

3.6. Financial Analysis

Financial Year
Earnings Per Share
Return on Revenue
Return on Assets
Return on Equity
Return on
Investment

2010-11

2011-12

2012-13

0.66%
37.5%
17.80%
13.60%
11.22%

0.84%
30.80%
18.30%
17.33%
14.95%

0.82%
29.70%
20.70%
16.93%
15.28%

3.7. Breakeven Analysis of PETRONAS

To calculate the breakeven point unit, fixed expenses are to be by the contribution
margin. Contribution margin is sales per units minus all variable expenses. And to
calculate breakeven point dollar per unit price should be multiplied by the breakeven
units.
Break Even Point for PETRONAS in three years:
Year
Fixed Cost
Total Revenue
Variable cost

2011
44.050
=175.497 billion
241.20
=949.70 billion
55.199
=230.687 billion

Fixed Cost/ (Revenue-Variable cost)

2012
63.588

2013
68.859

391.20

317.30

73.049

102.439

= {175.497/ (949.70-230.687)}
= 0.2441 billion

0.2441
Billion

3.8. Competitor Analysis

PETRONAS is the monopoly energy production company of Malaysia. This means
they have no direct competitors in the DOMESTIC (Malaysian) market. On the other
hand, energy is a global commodity. As such, they have numerous competitors on a
global scale. Competitors include everyone who produces and distributes oil and gas.
This means every "oil major" company in the world is their competitor, from ExxonMobil, Chevron, BP, Lukoil, Shell, Total Fina, Pertamina, Saudi Aramco, Gazprom, et
cetera, et cetera is their competitor.

Chevron:
Chevron is an American multinational energy corporation. Headquartered in San
Ramon, California and active in more than 180 countries, it is engaged in every
aspect of the oil, gas, and geothermal energy industries, including exploration and
production, refining, marketing and transport, chemicals manufacturing and sales,
and power generation. Chevron is one of the world's largest oil companies as of 2013.
It ranked third in the Fortune Global 500-2014 list of the world's largest companies
Chevron's downstream operations manufacture and sell products such as fuels,
lubricants, additives and petrochemicals. The company's most significant areas of
operations are the west coast of North America, the U.S. Gulf Coast, Southeast Asia,
South Korea, Australia and South Africa. In 2010, Chevron sold an average 3.1
million barrels per day (490103 m3/d) of refined products like gasoline, diesel and
jet fuel.
Chevron's alternative energy operations include geothermal, solar, wind, bio-fuel,
fuel cells, and hydrogen. In 20112013, the company plans to spend at least
$2 billion on research and acquisition of renewable power ventures. Chevron has
claimed to be the world's largest producer of geothermal energy. In October 2011,
Chevron launched a 29-MW thermal solar-to-steam facility in the Coalinga Field to
produce the steam for enhanced oil recovery. The project is the largest of its kind in
the world.

NEXEN:
Nexen is a Canadian oil and gas company based in Calgary, Alberta. On February 25,
2013, Nexen became a wholly owned subsidiary of Beijing-based CNOOC Limited. It

has three growth strategies: oil sands and shale gas in western Canada as well as
conventional

exploration

and

development

primarily

in

the North

Sea, offshore in West Africa, and deepwater exploration in the Gulf of Mexico. Nexen
started in 1969 as Canadian Occidental Petroleum Ltd. (CanOxy), and was 80%
owned by Occidental Petroleum, an oil company based in Los Angeles. In the first
decade of its existence, CanOxy was fairly Canadian-oriented. During the 1980s and
1990s they increased their international holdings, first in the Gulf of Mexico, then
into places like Yemen and the North Sea. Further Canadian assets were also
acquired. Nexen has interests in Canada (including the Athabasca oil sands through a
7.23% ownership of Sync rude and the Long Lake project), the UK North Sea, the
United States, and offshore West Africa. Beginning in February 2013, Nexen took
accountability for managing approximately $8 billion in CNOOC Limited assets
located throughout North and Central America. The Long Lake project in the
Athabasca Oil Sands was initiated in 2001. It was started in order to develop the
Long Lake site using steam-assisted gravity drainage and the Or Crude process for
on-site upgrading. Production capacity at Long Lake is 72,000 barrels of bitumen per
day which, when upgraded, is capable of generating approximately 58,500 barrels
per day. The proved reserves at the Long Lake site are 310,000,000 bbls.

3.9. KSF Analysis of PETRONAS

Climate change and the protection of the environment continue to be among key
sustainable development issues in the oil and gas industry. The industry is focused
on efficient use of natural resources, the reduction of carbon emissions, and
mitigating the impact on the environment while meeting the worlds growing energy
needs. PETRONAS endeavours to use resources such as energy and water
responsibly in all our operations and we aim to reduce our carbon footprint through
new and ongoing initiatives.

a.

Technology-related KSFs

Expertise in a Particular technology

Ability to improve production processes

b.

Manufacturing-related KSFs

Quality Control Know-How

Low-cost product design and engineering

Access to attractive supplies of skilled labor

c.

Distribution-related KSFs

A strong network of wholesale/dealers

Direct Sales via internet retail products

d.

Marketing-related KSFs

Brand Name

Fast, accurate technical assistance

Clever Advertising

e.

Skills & Capability-related KSFs

A talented and young workforce

Short-delivery-time capability

Supply Chain Management Capabilities

Strong e-commerce

f.

Other types of KSFs

Overall low costs

A strong balance sheet and access to financial capital

Patent Protection

3.10. Strategy Evaluation

External Factor
Evaluation Matrix

Cumulative Profile
Matrix

Quantitative Strategic
Planning Matrix

In the case of PETRONAS the Out of the 3 companies, the

total weighted score is 3.25 CPM
which

are

above

which

indicates

analysis

reveals

that

average, PETRONAS is the stronger

that

their player in the industry with the

strategies are effective and the score of 3.30. The sore also
company is taking advantage indicates that they are meeting
of existing opportunities along the

average

with minimizing the potential industry

adverse
threats.

effects

of

standard

for

performance.

external PETRONAS can use the score

as their competitive advantages
and use this information in
their strategic planning, while

Out of the two alternatives the

2nd alternative i.e. expanding in
exporting oil has higher scores
that

indicate

attractive

it

has

more

strategies,

considering all the relevant

external and internal factors
that could affect the strategic
decisions. The score of the 2nd
alternative indicates that it is
more feasible than

the 1st

alternative.

also identifying their weakness

to

target

for

process

improvement.

Contingency plan
There are Prime key areas: PETRONAS Progressive development of oil resources.
PETRONAS proposes to develop its gas and oil reserves PETRONAS have numerous
development and exploration opportunities that PETRONAS believe can sustain
their growth. PETRONAS announced a goal to sell enlarged in assets by 2014 and
have made significant progress. PETRONAS expects to grow production on a
continuing operations basis. This will come mostly in the form of higher-value

liquids and from areas with lower effective tax rates. This mix shift, combined with
the divestiture of several lower-margin properties, should improve overall company
margins within a few years at a flat price.

Chapter 4
Concluding Statement

4.1. Recommendation
PETRONAS is the monopoly energy production company of Malaysia. This means
they have no direct competitors in the DOMESTIC (Malaysian) market. On the other
hand, energy is a global commodity. As such, they have numerous competitors on a
global scale. Competitors include everyone who produces and distributes oil and gas.
This means every "oil major" company in the world is their competitor, from ExxonMobil, Chevron, BP, Lukoil, Shell, Total Fina, Pertamina, Saudi Aramco, Gazprom, et
cetera, et cetera is their competitors.

4.2. Conclusion
In long lasting business a company should develop a strong strategy to survive in the
market competing with other competitors and achieved it goodwill from customers
as well as shareholders, stakeholders. PETRONAS should manage those things in its
long lasting business. Bangladesh is a pace for good business facilities because there
are lots of area and place to where they can get wells for digging and exploring
natural gas for their long lasting sustainable business growth. They should look after
continuously about the matter of political situation which can affect their business
growth. There are few environment conscious groups who are activated in
environmental problem and they should take care about this matter and not work
such a way so sea creature fall in danger. As their selling become higher they should
increase their supply of oil and gas continuously. They should search new wells for
increase of production and brand employee for attracting perfect employee in their
company for better output. Then they can develop themselves and make them top
supplier of oil and gas in Asia and North America. PETRONAS has completed a
biodiversity risk assessment at all areas of operation, and they have taken the
necessary measures to mitigate the impact of their activities on surrounding areas.
As they operate in mega-bio diverse countries, they take a risk-based approach and
have completed a desktop assessment to identify high risk areas. They endeavor to
minimize the effect of our activities on biodiversity at all our operational sites. We
are a fully integrated energy company with a leading portfolio and wide network of
operations around the world. With growing demand for energy, we challenge

ourselves to redefine the future of energy with innovative approaches to technology

and engineering in order to maximize and deliver sustainable energy for tomorrow.

Chapter 5
References

5.1. References:
Fred. R David, Strategic Management: Concepts and Cases (12/e)
Pearson Prentice Hall
http://www.petronas.com.my/Pages/default.aspx
http://en.wikipedia.org/wiki/Petronas
http://financials.morningstar.com
http://financials.morningstar.com/ratios/r.html?t=PNADF
Global 500 2008:Petronas. Fortune. Retrieved 16 July 2008.
Global 500 2008: Top Performers Most Profitable. Fortune Magazine.
Retrieved 16 July 2008.
Global 500 2009: Full List. Fortune. Retrieved 21 July 2009.
PETRONAS signs $418-million deal for Mauritania assets. Offshore
Magazine. 27 August 2007. Retrieved 15 July 2008.
PETRONAS and partners strike oil and gas in Mauritania. The Star. 8 May
2008. Retrieved 15 July 2008.
Joseph Chin (15 July 2008). PETRONAS posts record profit, declares RM6b
dividend to govt. The Star. Retrieved 15 July 2008.
Petronas agrees to renew bid for Canadas Progress: sources. Reuters. 29
October 2012.
Rich oil deposits discovered in Sarawak. Investvine. com. 19 January 2013.
Retrieved 19 January 2013.
Brands of The World.
"Petronas unveils refreshed version of logo". Business Times. 11 June 2013.
joe remaks
Petronas to mull possibility of listing units. Business Times. 10 August 2009.
Petronas Dagangan capex at RM500mil
Petronas teams up with Maybank, CIMB
Petronas Chemicals shares open up 13pc on debut. The Malaysian Insider.
26 December 2010.