Documente Academic
Documente Profesional
Documente Cultură
Submitted by:
DERLA, JENNIFER JANE L.
Submitted by:
4-CLM JANE L.
DERLA, JENNIFER
4-CLM to:
Submitted
Professor Jenny De Guia
Submitted to:
Professor Jenny
APRIL 2019
Table of Contents
EXECUTIVE SUMMARY........................................................................................... 1
STRATEGIC OBJECTIVE...................................................................................... 95
STRATEGIC ISSUES ........................................................................................ 96
STRATEGIC OBJECTIVES ............................................................................ 97
FINANCIAL OBJECTIVE ............................................................................... 98
RECOMMENDED BUSINESS STRATEGY ......................................................... 98
RECOMMENDED ORGANIZATIONAL STRATEGY .................................... 100
STRATEGY MAP ................................................................................................... 101
FINANCIAL PROJECTION ................................................................................. 102
DEPARTMENTAL PROGRAMS ......................................................................... 107
In this paper, the top key strengths, weaknesses, opportunities, and threats were identified
and evaluated to come up with the appropriate alternative strategies for Pilipinas Shell. The
researcher also used different matrices, analysis, evaluations, and conclusions to further determine
the appropriate alternative strategy. In formulating the strategy, the top strategy and the umbrella
strategies that appear were Product Development, Market Development, and Market Penetration,
with these alternative strategies it can help sustain the Pilipinas Shell to their top strategic issue
which is their environmental reputation. With regard to their top strategic issue, and the top
alternative strategy of Product Development, the researcher recommends Pilipinas Shell to develop
a so-called "carbon-neutral fuel", this product still uses fuel and other oil components however it
is more environment friendly since it reduces the emission of greenhouse gases which is a
contributor to the continuous destruction of environment.
1
CHAPTER 1
INTRODUCTION
COMPANY PROFILE
integrated downstream refining and marketing company, it is a combined retailer and manufacturer
of oil products. They focus on turning crude oil into a range of refined products, which are moved
and marketed for domestic, industrial and transport use. Shell is one of the leading fuel retailers in
the country. Shell aims to continue providing high-quality products and trusted service to Filipino
motorists across the country. Filipinos can find their premium performance fuels, Shell V-Power
Nitro Plus Racing, Shell V-Power Nitro Plus Diesel, and Shell V-Power Nitro Plus Gasoline, along
with their main grade offers of Shell FuelSave Gasoline and Shell FuelSave Diesel in our stations
In this paper, the top key strengths, weaknesses, opportunities, and threats were identified
and evaluated to come up with the appropriate alternative strategies for Pilipinas Shell. The
2
researcher also used different matrices, analysis, evaluations, and conclusions to further determine
the appropriate alternative strategy. In formulating the strategy, the top strategy and the umbrella
strategies that appear were Product Development, Market Development, and Market Penetration,
with these alternative strategies it can help sustain the Pilipinas Shell to their top strategic issue
which is their environmental reputation. With regard to their top strategic issue, and the top
alternative strategy of Product Development, the researcher recommends Pilipinas Shell to develop
a so-called "carbon-neutral fuel", this product still uses fuel and other oil components however it
is more environment friendly since it reduces the emission of greenhouse gases which is a
The head office of Pilipinas Shell Petroleum Corporation is located in Shell House Building
156 Valero Street, Salcedo Village 1227, Makati City, Metro Manila, Philippines.
ORGANIZATIONAL STRUCTURE
enable a strong track record of delivery. The current president of the Pilipinas Shell Petroleum is
Cesar G. Romero. He is responsible for the management and capital investment associated with
the Global Retail business’ physical assets worldwide. This includes network planning, real estate,
petrol station construction, facilities maintenance, soil and groundwater services, Health, Safety,
Security and Environment (HSSE), and Continuous Improvement. He was the Vice President of
3
Retail Sales and Operations East which is accountable for the Operating Profit and Loss of the
Shell Retail Petrol stations in SE Asia, South Asia, and China. He was the Vice President of Retail
Sales and Operations East which is accountable for the Operating Profit and Loss of the Shell
Retail Petrol stations in South East Asia, South Asia, and China. During his four-year tenure, the
Shell Retail East’s operating profit grew by an average of 10% per annum with improved HSSE
marketed for domestic, industrial and transport use. Pilipinas Shell Retail prides itself
4
in supplying Filipino motorists with quality products and excellent customer service
o Pilipinas Shell has a lot of gasoline stations found in different cities and provinces
in the Philippines wherein the consumers can buy their products conveniently. The
target market of Pilipinas Shell are the regular people who buys oil and gas, mostly cars
or engine owners. Other consumers include smaller companies which are oil
distributors.
As one of the leading fuel retail players in the country, its customer-focused
network offers a range of quality Shell Fuels and Lubricants, car service centers and
provides quality fuels that cater to you and your cars’ evolving needs. Developed by
some of the best scientists from around the world, you can enjoy every drive when you
trade areas. They target to increase their market share by capitalizing on their leading
5
brand preference position, growing their base of customers and dealers through
and expanding their commercial offering through various additional services Pilipinas
Shell also seek to maintain and improve their integrated, reliable and cost efficient
structure by maximizing cost savings in their integrated supply chain network. They
also intend to capture the market growth by maximizing the benefits and strategic
6
CHAPTER 2
In this chapter, the researcher will further discuss the sources of information and the
methods used to gather the different information. The major assumption and the different
RESEARCH DESIGN
In this strategic management paper, the researcher used various frameworks in order to
successfully accomplish the paper. For Chapter 1 and 2 the researcher used the Fred David's nine
components and Mckinsey 7S as a framework for this chapter. For Chapter 3 or the External
Analysis of Pilipinas Shell, the researcher used the PESTEL Analysis and Porter's Five Forces
Analysis or the Industry Analysis, the researcher used the External Factor Evaluation to know the
PESTEL’s opportunities and threat and the Competitive Profile Matrix. For Chapter 4 or the
Internal Analysis of Pilipinas Shell, Internal Factor Evaluation Matrix used to evaluate all the
internal strength and weaknesses of the company. For the Strategy Formulation of Pilipinas Shell
which can be found on Chapter 5 of this paper, the researcher used different matrices in developing
Strategic Position and Action Evaluation (SPACE) Matrix, Boston Consulting Group (BCG)
Matrix, Internal-External (IE) Matrix, Grand Strategy (GS) Matrix, and Quantitative Strategic
7
Eleven Alternative Strategies
Alternative Strategies can help the company achieve their long their objectives or sustain the
continuous growth of their company. There are eleven alternative strategies in which
companies can implement depending on what is fitting to them. The eleven strategies are
Pilipinas Shell can tie-up with its franchisees and give cash incentives or awards to a
suppliers.
competitor. Since the oil industry is oligopoly, it is easier for Pilipinas Shell to collaborate
with other competitors such as Petron and Caltex, for example these major oil players can
establish an association and from there they can conduct meetings with regard to industry
updates, especially right now the oil industry is unstable when it comes to pricing. Moreover,
they can conduct projects with regard to their corporate social responsibilities.
Market Penetration is a strategy which seeks to increase market share for present products
or services in present markets through greater marketing efforts. Shell is known for their
8
raffle contests and toy car collections, however their marketing efforts should not only be
limited to these. With the changing demands of the consumer, particularly the Filipinos who
are very much attracted to promos and discounts, giving freebies to loyal patrons and by
improving their services will help Pilipinas Shell to further increase their market share.
geographic areas. There are some rural areas in the Philippines that is still out of reach of
Pilipinas Shell, most of the time, these big oil companies can only be seen in the downtown
areas of a certain provinces. Also, Shell advertisements have this elitist impact to some,
choosing brand ambassadors who can represent the masses can help Shell to attract more
comply with the environmental standards without compromising the quality of its fuels.
Pilipinas Shell with its continuous effort to explore more fuels, they should develop a
cheaper fuel for the masses that is still environment friendly and can compete with the other
Related Diversification is a strategy which a company adds new but related products and
services. Pilipinas Shell, other than selling fuels and lubricants have this small stand on their
9
Unrelated Diversification is a strategy in which a company adds new but unrelated products
and services. Pilipinas Shell diversified with small convenient stores in every Shell gasoline
Retrenchment occurs when an organization regroups cost and asset reduction to reverse
declining sales and profits. If Pilipinas Shell was not able to keep up with the intense
competition in the oil industry and the continuous inflation oil prices and their market share
is starting to decline, the company should start laying-off employees and minimize the
retrenchment strategy, the market share of Pilipinas Shell still continued to decline, Pilipinas
Shell can sell their Select convenient store to other interested buyers and make it as a stand
Liquidation is selling all of a company's assets, in parts, for their tangible worth. If Pilipinas
Shell despite of implementing retrenchment and divestiture strategy their market share
continuously declined to a point where they can no longer sustain the operation of their
company, it is about time to liquidate their assets and settle their liabilities.
10
Figures and Illustration table 2.1
SOURCES OF INFORMATION
The data gathered in this strategic management paper came from various resources.
Information obtained by the researcher came from news articles, researches, data gathered from
interviews, and from documents provided by the company itself. Specifically, the researcher used
the different news website of Philippine Daily Inquirer, Philippine Star, Rappler, ABS-CBN News,
and GMA News in obtaining information with regard to the latest trends and other relevant
information in the oil industry. Also articles from Business Mirror was used by the researcher. The
official website of Pilipinas Shell Petroleum Corporation is the big contributor in providing
11
\
2.3 METHODOLOGY
Process
industry in general.
12
4. Collecting the data The researcher gathered most of the
Inquirer.
5. Analyzing the data The data gathered from different sources were
13
6. Formulating the conclusions and In formulating the most feasible alternative
preparing the report strategy for Pilipinas Shell, the researcher used
carbon footprints.
14
SCOPE AND LIMITATIONS
The study and analysis of this strategic management paper will be limited to the information
given by the interviewee in the Pilipinas Shell Petroleum Corporation. Particularly the company's
operation, and to know the company's performance within the Philippine market as compared to
its competitors Petron Corporation and Caltex Philippines. In line with this, the operation and
analysis of the oil industry in the Philippines will also be covered by this strategic management
paper.
15
CHAPTER 3
refining and marketing company. They focus on turning crude oil into a range of refined products,
which are moved and marketed for domestic, industrial and transport use. Shell is one of the
leading fuel retailers in the country. Shell aims to continue providing high-quality products and
trusted service to Filipino motorists across the country. Filipinos can find their premium
performance fuels, Shell V-Power Nitro Plus Racing, Shell V-Power Nitro Plus Diesel, and Shell
V-Power Nitro Plus Gasoline, along with their main grade offers of Shell FuelSave Gasoline and
The oil industry is impressed with public interest and national security, therefore a
petroleum company upholds plenty of responsibilities which is vital to the State, the government,
Dubai crude has increased week-on-week by almost US$1.30 per barrel. MOPS gasoline
and diesel have also increased by around US$1.50 per barrel and close to US$2.00 per barrel
16
respectively. The reasons for the adjustment are oil prices rose more than 2 percent to their highest
this year on February after an outage at Saudi Arabia's offshore oilfield boosted expectations for
tightening supply, while progressing U.S.-Sino trade talks strengthened demand sentiment, supply
has also been curbed by U.S. sanctions on Venezuelan and Iranian crude and reduced Libyan
output because of civil unrest. Security threats could threaten Nigerian production after general
elections this weekend, growing confidence that the United States and China will resolve their
ongoing trade dispute also supported prices. Those talks will restart next week in Washington,
with both sides saying this week's negotiations in Beijing showed progress, oil futures ended higher
Thursday as traders weighed potential outcomes for U.S.- China trade talks, which are likely to
have a direct impact on demand for energy, and crude prices found support from expectations that
the U.S. will extend its deadline for implementing additional tariffs on Chinese goods by 60 days,
according to Bloomberg News, but prices had also spent part of the session time trading lower.
The Department of Energy has formally launched the Philippine Conventional Energy
Contracting Program (PCECP). DOE Secretary Alfonso G. Cusi said that the "keen interest which
many investors expressed in exploring oil and gas in the Philippines" augurs well for the country’s
development and energy security. The PCECP is a program that offers 14 pre-determined areas.
The option for investors to propose their own exploration area, making oil and gas exploration a
dynamic investment prospect for players in the energy sector. The PCECP provides a more
17
investor-friendly environment which is consistent with the directions set by President Rodrigo
Duterte. In October 2018, President Rodrigo Duterte signed the Service Contract No. 76, covering
Area 4 of Eastern Palawan. This was awarded to Israeli firm Ratio Petroleum Ltd. signaling the
A new gas and oil source will soon be tapped after the Department of Energy (DOE)
declared the Alegria Oil Field in Southern Cebu to have commercial quantities of natural gas and
oil resources. In a statement, the DOE said Energy Secretary Alfonso Cusi has signed the Joint
Petroleum Co. Ltd. CIMP Co. Ltd. holds Petroleum Service Contract (SC) 49, which covers the
Alegria Oil Field. DOE said exploration and drilling activities on the oil field by the service
The Philippines has signed an oil exploration deal with Israeli firm Ratio Petroleum Ltd,
allowing the company to explore for oil and gas resources in an area east of Palawan. The
Petroleum Service Contract (PSC) was signed by President Rodrigo Duterte, Energy Secretary
Alfonso Cusi, and Ratio Petroleum President and CEO Itay Raphael Tabibzada. The signing took
place on October 17, 2018 in Malacañang. The first PSC signed under the Duterte administration,
it allows Ratio Petroleum to conduct oil and gas exploration in a 416,000-hectare area called Area
18
Relevance:
• The conflict over the Panatag Shoal which has oil and gas reserves
• The continuous conflict over the disputed island which is rich in different natural
• The entry of more potential oil companies because of the Downstream Oil Industry
Deregulation Act. Such Act encourages a healthy competition among existing oil
companies.
3.1.2 Economic
The oil industry plays a big part in the Philippine economy. In this part, the Level of
Economic Growth, the Effects of Inflation, the newly passed Tax Reform, and will be discussed.
Philippine economy likely to grow by slower 6.3% this 2019. The figure was ahead of
economists’ consensus forecasts and made it one of Asia’s best-performing economies for the
period. In the Philippines, GDP growth in 2018 was affected by a slowdown in household spending
19
due to a rapid increase in inflation. Exports rose faster than imports during the quarter. And
manufacturing and other industries grew faster than services. An expanding economy will be
welcomed by Philippine businesses and foreign investors accustomed to vertiginous swings in the
country’s politics that can hit investor sentiment and cause companies to put on hold their business
plans for one of Southeast Asia’s most populous countries. In 2019 and 2020, the UN projected
the Philippines’ GDP growth at 6.5 percent and 6.4 percent, respectively.
The new round of fuel tax hike that took effect last January 1 should not put too much
pressure on Filipino consumers’ budgets, the Department of Energy said Thursday, citing steep
declines in world oil prices that translate to lower local pump prices. The government has decided
to proceed with the second tranche of its fuel excise tax adjustment in 2019, after the country’s
economic managers called off their previous plan to suspend the implementation of additional
P2.00 levy on both gasoline and diesel. DOE spokesperson Wimpy Fuentebella said the recent
drop in oil prices in the world market would cushion the impact of petroleum tax hike on
households. Fuentebella also assured the public that the government is closely monitoring factors
that can stoke a sudden spike in oil prices like a currency slump and weather disturbances.
Oil prices have shed since October last year due to fears of oversupply and weak global
demand. Domestic pump prices have tracked the freefall in Dubai oil prices — Asia’s benchmark
— with gasoline prices now below levels seen before the first tranche of petroleum tax increases
20
was implemented in January 2018, according to ING Bank in Manila. But some analysts said the
oil excise tax increases this year could lead to broad-based price increases similar to the first
tranche introduced in January 2018. Higher domestic petrol prices, particularly unleaded gasoline,
diesel, kerosene, and liquefied petroleum gas, mainly caused higher inflation in the transport
sector, the continuing surge in domestic petrol prices, coupled with depreciation in the peso-dollar
rate, may exert upward pressures on inflation, leading to increases in the cost of electricity, gas,
President Rodrigo Duterte has signed into law the Tax Reform for Acceleration and
Inclusion (Train) bill which is expected to generate P130 billion in revenues. Duterte signed
21
Republic Act 10963 or the Train law – a priority measure of the Duterte administration. The first
of 5 tax reform packages, the Train law "corrects a longstanding inequity of the tax system" by
reducing the income taxes of 99% of income taxpayers. To make up for the loss of revenue due to
reduced income tax, the law imposes higher taxes on cars, fuel, tobacco, cosmetic surgery, tobacco,
and some sweetened beverages. Diesel, which is not taxed at present, will be imposed P2.50-per-
liter tax in 2018, P4.50 in 2019, and P6 in 2020. LPG would have be taxed P1 per liter in 2018, P2
in 2019, and P3 in 2020. For gasoline, from the current tax of P4.35 per liter, it would be imposed
a levy of P7 per liter in 2018, P9 in 2019, and P10 in 2020. The tax on diesel and higher taxes on
other oil products that was approved by President Rodrigo Duterte will take effect on 2018.
22
Relevance:
Expansion of the Philippine economy. Manufacturing and other industries grew faster
than services.
Continuous growth of the Philippine economy that could result into decreasing the
inflation
Due to the additional tax in petroleum products there will be a domino effect to other
commodities
3.1.3 Social
Total crude oil import for the period reached 41,747 MB, an increase of 15.9 percent from
36,016 MB of 1H 2017. About ninety percent of the total crude mix (37,497 MB) was sourced
from the Middle East, of which 37.7 percent (15,754 MB) came from Saudi Arabia, the top supplier
of crude oil into the country. Next is Kuwait with a 24.6 percent share of the total crude mix,
followed by UAE, Qatar and Oman with 18.6, 6.2 and 2.6 percent share, respectively. On the other
hand, a total of 401 MB was imported from the ASEAN Region (350 MB) and from local
production (51 MB). Also, 3,849 MB of crude oil was sourced from Russia which is equivalent to
8.4 percent share of the total crude mix. The remaining 0.9 percent was from Taiwan (319 MB)
23
3.1.3.2 Other Petroleum Distributor and Suppliers
fuel oil (RFO or bunker fuel), diesel fuel, kerosene and special fuel oils (SFO).
Philippines' Deregulated Downstream Oil Industry. It was established in 1998 during the
enactment of Republic Act 8479 and currently distributes all kinds of fuel oil, wide ranges
Ensuring high quality products and services could be the most effective way to encourage
Filipino consumers to switch brands, according to a new report from Nielsen. Filipino consumers
placed the highest premium on quality while the rest of the consumers in Southeast Asia also gave
importance to quality—higher than the global average, this emphasizes the shifting focus of
consumers as incomes increase and their purchase drivers move away from price alone.
Furthermore, because Filipinos are price sensitive, Filipinos are inherently attracted to discounts
and promos, hence this is another way for business owners to encourage more consumers into
24
Relevance:
• Consumers are price sensitive but are willing to pay more for a high quality products and
services
• As the population of the Philippine grows, demand for petroleum products will increase
3.1.4 Technology
The Tabangao Refinery has been producing a broad range of high quality petroleum
products such as gasoline, jet fuel, kerosene, diesel, fuel oils, LPG, naphtha, and sulfur, for over
50 years. Recently, Pilipinas Shell completed the upgrade of the Tabangao Refinery. With the
upgrade, Pilipinas Shell now sells, in bulk or retail, gasoline and diesel fuels that meet the
requirements of Philippine Clean Air Act. The Tabangao Refinery is able to distill various types
of crude oil from various origins, and this flexibility enables processing of high value crudes.
Furthermore, the refinery jetty can accommodate Very Large Crude Carriers, resulting in cost
savings from favorable freight economics. The refinery continually develops and implements
projects and activities that improve its margin generation, energy efficiency, and cost profile.
25
3.1.4.2 Malampaya Phases 2 and 3
natural gas, the cleanest-burning hydrocarbon, and reduces the need for imported oil. Phases 2 and
3 are expected to sustain levels of gas production in the coming years, helping to maintain national
energy security. The Malampaya deep-water gas-to-power project off the coast of Palawan began
operating in 2001. A second platform started up in 2015 to help maintain vital supplies of energy
for years to come. The new offshore platform – a Depletion Compression Platform (DCP) - is
adjacent to the existing Malampaya Shallow Water Platform, located some 50km offshore from
Palawan in western Philippines. Combined with the successful drilling of two new production
wells, which were completed in 2013, the new offshore platform will maintain the level of gas
production to fulfill commitments under existing gas sales agreements, thus ensuring the steady
Pilipinas Shell Petroleum Corporation’s North Mindanao Import Facility (NMIF), the
company’s latest landmark project in Mindanao. The state-of-the-art import facility with 90-
26
million-liter capacity is the first of its kind in the Philippines equipped to receive medium-range
(MR) vessels. NMIF, now the biggest facility in the Philippines for Shell outside its Tabangao
Refinery in Batangas, serves as a game changer for the Visayas and Mindanao region, as the
company’s previous major energy investments have been concentrated in Luzon. NMIF is very
important for Shell because number one, it provides energy security for Visayas and Mindanao.
Number two, it enables a more efficient and economical supply chain for the country. Most
importantly, it will reduce the overall maritime risks because of the shorter lead times for vessels
to transport petroleum products. The facility supports the government’s thrust to promote
development and to upgrade the downstream infrastructure, improving the country’s energy
resilience through an increase in oil stockpile. It contributes to increased security of energy supply
3.1.4.4 Locally Funded Project – Alternative Fuels for Transportation and Other Purposes
Key initiatives under the said programs include the implementation of the Locally Funded
Project – “Alternative Fuels for Transportation and Other Purposes” which aims to introduce
alternative fuel vehicles and promote emerging and advance energy technologies. These initiatives
aim to reduce the country’s dependence on imported oil by providing energy consumers with
alternative and advance energy technologies and more environment-friendly fuel options aside
27
Relevance:
• The Malampaya signalled the birth of the natural gas industry in the Philippines.
3.1.5 Environmental
The oil industry is hazardous since it involves different chemicals which can be harmful to
our surroundings. That is why the government produced different regulations that the oil
companies must comply. In this part, the Response to Global Warming, the Health and Safety, and
the different laws concerning the environment which regulate the oil companies will be discussed.
Shell is helping to meet growing global energy demand and limit CO2 emissions with
cleaner-burning natural gas. Global demand for natural gas, could rise by more than half by 2040,
according to the International Energy Agency. Natural gas is the cleanest-burning hydrocarbon.
Shell explore for it, and produce it, on and offshore. It makes up more than half of Shell’s
production today. One of the biggest things that has happened in Shell over the last 15 to 20 years
is that they now a slightly more of a natural gas company than an oil company. People get less
than half the emissions from natural gas compared to coal. Oil is midway, between coal and natural
gas in terms of emissions. Biofuels, if done well, can make a good contribution and so they have
been part of setting up various international for a about sustainable biofuels. By mandate from
28
various governments, Shell have to have biofuel components in a lot of their fuels. They have
developed a joint venture in Brazil for producing sustainable biofuels from irrigated sugarcane
The oil and gas business can be adversely affected by natural disasters such as earthquakes,
tornados, wildfires, and hurricanes. Even the occurrence of such disasters in other countries, such
as the United States, the Philippines can feel the huge impact when the oil commodities have been
imported, oil prices briefly spiked resulting to increase of oil prices in the market. Natural
calamities also cause damages to refineries resulting to temporary reductions of production, there
are times production activities are being halted, causing a decline in gas supplies.
Oil has become a very important part of commerce; however, oil reserves are non-
renewable resources. As a result of its importance, the topic of oil itself is incredibly contentious
and political. A recent article by The Guardian, warned that oil is currently in the “post-peak stage”
when it comes to global supply. This means that oil is on the last legs of abundant production and
that oil production will soon decline. When the world runs out of oil, gas prices will soar higher.
Nothing can be moved, manufactured, transported, built, planted, mined or harvested without the
29
Relevance:
• Shell promotes a healthy and safe environment to all by trying to meet the global energy
• A healthier environment through the continuous search of alternatives that limit the
emissions of CO2
The oil industry is impressed with public interest, hence there are laws passed regulating
the operation of oil companies. In this part, the different legislations concerning the oil industry in
Under the Oil Deregulation Law (Republic Act No. 8479) the government does not
interfere with the pricing, export and importation of oil products, nor the establishment of retail
outlets (gasoline stations); storage depots; ocean-receiving facilities; and refineries. People can put
up these installations practically wherever and whenever they want. In the case of retail outlets,
they can even be set up beside or across the street each other. Provided of course the
owners/operators of these installations & facilities notify and give prior notice to the Department
of Energy (DOE). The location of these installations & facilities must of course conform to the
zoning laws of the local government unit concerned, as well as secure the requisite permits from
the Department of Environment and Natural Resources. Large business establishments and
government corporations can also import their fuel requirements without securing any permit from
30
the government; they just have to inform the DOE. They can also choose any local or foreign
the utilization of government and/or private resources, local and foreign, under the arrangements
embodied in this act which are calculates to yield the maximum benefit of the Filipino people and
the revenues to the Philippine Government for use in furtherance of national economic
development, and to assure just returns to participating private enterprises, particularly those that
will provide the necessary services, financing and technology and fully assume all exploration
risks.
The circular sets the interim rules and regulations governing the transmission, distribution
and supply of natural gas. The circular promotes Natural Gas as an environment-friendly and
economically efficient source of energy for the country by creating conditions for the establishment
of a Natural Gas industry that will enable the country to achieve greater energy self-sufficiency
and at the same time serve the interests of the broad variety of industry participants. This circular
also facilitates the participation of the private sector in the Natural Gas industry. It also promotes
competition by liberalizing entry into the industry and by adopting pro-competition and fair trade
measures with due regard to the financial viability of industry participants. And it ensure
31
compliance with international safety standards and with Philippine environmental and other laws
and regulations.
Relevance:
• More competitors might enter the oil industry since the Oil Deregulation law promote such
Products
As to Capital Requirement, the capital requirements for a refinery will rule out most
domestic firms being able to participate in the local oil industry. In this sense the high capital
requirement does pose a greater barrier to entry than say, the capital requirements of starting out
32
in many other businesses. However, to some big oil players this big capital requirement does not
As to Government Policy, The Oil Deregulation Law encourages competition in the oil
industry. There are many competitors now compared to when the industry was regulated.
Deregulation has helped promote healthy competition. As a result, the entry of new oil companies
and the expansion of existing industry players in the past five years have eroded the market share
of the country’s top three major oil firms, including Pilipinas Shell.
As to time management, handling a business demands a lot of time, especially for those
who are just starting-up. From the surveillance, to paper works, to taking care the different needs
of the business. Not all potential business owners can handle such since you have dedicated all of
As to number suppliers and their quality performance, Middle Eastern countries accounted
for the highest dollar value worth of Filipino imported crude oil supplies in 2016. Kuwait increased
its exported crude oil sales to the Philippines. Three Mideast countries were responsible for the
Philippine total crude imports for 2016 namely Saudi Arabia, Kuwait and the United Arab
Emirates.
As to Presence of substitute, The potential for the expansion and growth of renewable
energy sources such as solar, hydro power, wind, biomass, hydrogen, and geothermal is enormous.
33
Innovations in this area are emerging to promote markets in renewable energy development and
resources. It is expected that these innovations will enhance diversity in energy supply, secure long
term sustainable energy supplies, reduce global atmospheric emissions, and provide more
As to price of Product Substitute, Public transport operators are realizing that using electric
vehicles for their vehicle fleets is not only environmentally-friendly, good for the air around us,
much more quiet and convenient to use, requires less maintenance, but most importantly, cheaper
to operate. The cost of electricity to operate is only 40% of the money you spend on fuel for the
As to Number of Substitute, the electric vehicle is steadily gaining attention here and
abroad. The electric vehicle uses electricity stored in a battery pack to power an electric motor and
turn the wheels. When depleted, the batteries are recharged using grid electricity, either from a
wall socket or a dedicated charging unit.The amount of pollution produced depends on how the
electricity is made.
energy from the grid to power the wheels, compared to conventional gas vehicles, which typically
convert 17%-21% of the energy stored in gasoline to power at the wheels. Electrics undergo similar
34
testing as gas-powered cars. In an accident, airbags will deploy and electricity is cut from the
battery. Plus, the fluid batteries actually take impact better than a gas car.
As to price sensitivity of consumers, Filipino people here are very sensitive to price.
Filipino motorists cheer whenever oil companies’ rollback prices of petroleum products. It is
common for an industrial customer to submit a request for bids for a certain volume of a certain
product, with the lowest cost supplier winning the contract. The consumers think that if the
government doesn't do anything about the persistent increase of oil price, the burden will
continuously fall upon the consumers since the effect of such increase can be also seen in the prices
of other commodities. Price is a key consumer concern and the oil marketers need to strike a
As to product differentiation, Oil companies selling gas will try to differentiate their
products by highlighting performance characteristics and additives. They may highlight a more
positive experience that a customer may receive by using their service stations instead of the
competition's.
As to competitors, there are three major oil players in the country namely Petron Corp.,
Pilipinas Shell Petroleum Corp. and Chevron Phils. Petron maintained its lead with a 30.4 percent
35
market share, followed by Shell with 23 percent and Chevron with 6.9 percent. Today, there are
more oil dealers that have networks of gasoline stations around the country, where before they
were absent. Smaller retail networks are owned by Total, Phoenix, SeaOil, Flying V. If one
travelled to many outlying provinces, one finds many smaller, provincial networks of retailers.
Some of them resemble stand-alone gas stations, owned by independents, with interesting names
even. While the three major players have been continuing their respective retail expansion, smaller
oil players have also been aggressively widening their reach across the country.
As to price competition, the prices of domestic fuels differ by regions and provinces. But
they are not much far off from each other after taking into account transport costs from Manila.
Before, there were only Petron, Shell, and Caltex. Today, there are more oil dealers that have
networks of gasoline stations around the country, where before they were absent.
As to promotion, In a bid to keep up with peers in the highly competitive downstream oil
industry in the country, service stations nowadays are offering discounts, freebies and even a
lifetime supply of fuel. The recent promo offered by Shell was called the “Summer Promo” in
which motorists can avail themselves of free drinks every time they gas up. On their fifth visit,
they earn a chance to win a free vacation. Shell said these are meant to increase awareness on Shell
fuels. Some dealers of Petron Corp., the country’s largest oil refiner, also offer cheaper gas prices
in selected gasoline stations. The most popular is the P1-P2/ liter discount on some of its petroleum
products. A Petron dealer in Sucat, Parañaque City, said the signage of its price offering is large
36
Relevance through Porters Analysis:
• Consumers are price sensitive, however despite of the continuous oil price hike and recent
passage of the tax reform law consumers will still purchase petroleum products since consumers
will still prefer the use of fueled-vehicles since substitutes such as electric powered cars due to
limited range and shortage of recharging stations unlike gasoline stations which can be seen
anywhere.
Score
Opportunities
Political: Petroleum Service Contract will help boost the 0.05 2 0.10
37
Social: It signals opportunities for crude oil-supplying 0.05 3 0.15
Legal: Under the Oil Deregulation Law, people can put up 0.10 3 0.30
want.
substitutes
Threats
companies.
38
Fuel smugglers sell oil products in a lower price 0.10 3 0.30
Analysis:
The weighted score is 2.47 which passed the average midpoint. Hence, it can be said that
the Pilipinas Shell Petroleum Corporation has a strong reputation externally which is not easily
threatened by any external factors. Given the fact that Pilipinas Shell Petroleum Corporation has
established a name in the oil industry, the entrance of new competitors does not easily threaten the
company, the brand name itself is the most important strength of the company.
39
3.4 COMPETITIVE ANALYSIS
The competitive analysis determines the strengths and weaknesses of the company and as
Product/Service
STRENGTHS WEAKNESSES
Offering
40
3.4.2 Caltex Philippines
Product/Service
STRENGTHS WEAKNESSES
Offering
offers different
Wide range of oil and • High investment in research and
fuels, gasolines,
fuel products Pricing development
lubricants and
power • Tax structure
diesel such as C a l
High quality equipment
texwith
Techron,
Concentrate Plus,
Havoline and
41
COMPETITIVE PROFILE MATRIX (CPM)
Critical
Weight Rating Score Rating Score Rating Score
Success Factor
Brand
0.30 3 0.90 4 1.2 2 0.60
Reputation
Product
0.20 4 0.80 3 0.60 2 0.40
Quality
Innovation in
products and 0.10 4 0.40 3 0.30 2 0.20
services
Employee
0.15 4 0.60 3 0.45 2 0.30
satisfaction
Price
competitive 0.15 2 0.30 3 0.30 2 0.60
ness
Effective
planning and 0.10 4 0.40 3 0.30 2 0.20
budgeting
TOTAL 1 3.40 3.30 2.30
Figures and Illustration Table 3.7
42
ANALYSIS:
The Competitive Profile Matrix reveals that Pilipinas Shell Petroleum Corporation has the
highest weighted score being ranked as first with a total of 3.40. While Petron Corporation has
landed on the second spot with a total of 3.30, with only a .10 difference it can be said that Petron
and Pilipinas Shell has a tight competition in the Philippine oil industry. Caltex Philippines landed
on the third spot with a total of 2.30. Pilipinas Shell Petroleum Corporation, Petron Corporation,
and Caltex Philippines are all reputable and trusted brands in the Philippines when it comes to
fuels and lubricants, however, although Caltex Philippines is also well-known in the country their
advertisements were lessened rendering the latter company not as popular as Pilipinas Shell and
Petron who innovates their marketing strategy to cope up with the demands of the consumer.
43
CHAPTER 4
VISION
To be the most admired and trusted company that powers progress for the Filipino through
MISSION STATEMENTS
We delight our Customers with high quality fuels, lubricants & specialties, and best-in-
We attract and retain the best Employees through very competitive remuneration and
growth opportunities.
relationships.
We deliver consistent, attractive and increasing returns for our Shareholders through
44
VALUES
Social Responsibility.
45
Is it concise Yes It provides practical advice on
to customers, communities
embodied in it.
to them to adopt.
Does it give No
clear
indication as
to when it
should be
attained?
46
Mission
Customers Yes "We delight our Customers with high quality fuels, lubricants &
Markets No
Technology Yes “We delight our Customers with high quality fuels, lubricants &
Concern Yes “We partner with Government and Communities in promoting social
profitability
corporate governance."
Self- No
concept
Concern Yes “The Shell General Business Principles, Code of Conduct and Code of
for public Ethics help everyone at Shell to act in line with these values and
47
"We partner with Government and Communities in promotic social
Concern Yes “We attract and retain the best Employees through very competitive
employees
Concern Yes “Our core values are honesty, integrity and respect for people. “
for nation
Revised Vision
To be the most admired and trusted company that powers progress for the Filipino for the next
48
Revised Mission
We, Pilipinas Shell Petroleum Corporation, aim to be the top oil provider in the Philippines
• We delight our Customers with high quality fuels, lubricants & specialties made in our
refineries through our world-class technology, and best-in-class technical & convenience
• We attract and retain the best Employees through very competitive remuneration and
growth opportunities.
• We engage the most professional Business Partners in long-term and mutually beneficial
relationships.
• We deliver consistent, attractive and increasing returns for our Shareholders through
Core Values
Our core values are honesty, integrity and respect for people. The Shell General Business
Principles, Code of Conduct and Code of Ethics help everyone at Shell to act in line with these
49
Pilipinas Shell Petroleum Corporation
HISTORY
Pilipinas Shell traces its roots to Asiatic Petroleum Company (Philippine Islands), Ltd.
which opened for business in the Philippines and began to import and sell motor gasoline and
kerosene in 1914. Asiatic Petroleum Company (Philippine Islands) Ltd. was renamed The Shell
Company of the Philippine Islands, Ltd. in the 1940s. In 1959, Pilipinas Shell was incorporated
under the name The Shell Refining Company (Philippines), Inc. in compliance with the then
required percentage of Filipino ownership (25%) in large industrial ventures. In 1970, Pilipinas
Shell was renamed Shell Philippines, Inc. and was later renamed Pilipinas Shell Petroleum
Corporation in 1973. In 1976, Meralco Securities Corporation acquired 25% stake in the Company
resulting in the Company being 50% owned. In February 1987, the Filipino ownership in the
Company decreased to 33.33% after a share buyback by the Company of Meralco Securities
50
Corporation’s stake in the Company. In August 2015, the Filipino ownership in the Company
decreased to 31.82% following the issuance of additional shares pursuant to a stock rights offering.
As one of the leading fuel retail players in the country, its customer-focused network offers
a range of quality Shell Fuels and Lubricants, car service centers and convenience stores. With
over a century of experience in fuels development, Shell provides quality fuels that cater to you
and your cars’ evolving needs. Developed by some of the best scientists from around the world,
you can enjoy every drive when you fill up with Shell quality fuels.
5.2.1 MANAGEMENT
PILIPINAS SHELL PETROLEUM CORPORATION
ORGANIZATIONAL CHART
51
BOARD OF DIRECTORS
Luis C. la Ó(Filipino)
52
MANAGEMENT TEAM
delivery.
FINANCE (Filipino)
FUELS (Filipino)
RELATIONS (Filipino)
53
5.3. Human Resource
Shell has Diversity and Inclusion clause, they care for gender count in role (male to female
ratio); respectful treatment regardless of race, sex, and or religion; there is a hotline in the company
wherein one may report any cases that violates the Diversity and Inclusion clause.
In developing their employees, Shell has a training program. Trainings occur once a week;
if not training, engagement or skill building sessions in various business aspects – allows for room
for growth beyond current role and department. Opportunities to engage or participate in
departments outside of present ones are also available to explore further avenues for company
growth. Mentorship programs are also highly encouraged. Different engagement subgroups are
Shell also encourages their employees through salary bonus depending on individaual
performance and contribution (project implementation) and business performance on the world
customer service and other business needs to Shell companies around the world. SBO-Manila has
grown from less than 50 staff in 2004 to more than 2,000 employees in 2009, making it the biggest
of six Shell Business Operations across the globe. Its expansion is testimony to the Filipino
54
professionals’ world-class service and a significant contribution to the Shell Group’s
operational excellence.
As of 31 December 2015, Pilipinas Shell employs 754 people and almost all of them are
Filipinos. In its effort to recruit from local areas where it has business presence, Pilipinas Shell has
developed the following programmes jointly with the Pilipinas Shell Foundation, Inc. (PSFI) such
Kakayahang Industriyal (SKIL) to encourage hiring and training to upskill local communities.
PSFI is the social development arm of Shell in the Philippines which pioneers in pursuing best
practice projects that respond to the needs of Shell worksites and host communities.
Pilipinas Shell’s nationwide scholarship programme delivered via PSFI, Gas Mo, Bukas
Ko (GMBK, “You fuel my future”), is borne out of the belief that education is one of the best tools
towards a better life. Since 2007, GMBK continues to develop technically-capable gas attendants
who can seize more opportunities and potentially pursue alternative livelihood activities that could
With over 1,600 scholars, GMBK continues to provide learning opportunities towards
improving the lives of the scholars. In fact, 85% of these scholars continued to take on bigger
responsibilities as gas attendants, while some of them were promoted to higher positions.
55
5.4 OPERATIONS AND PRODUCTION
In Productions or Operations, the process on how the product is done, the materials being
used, the suppliers, the technological aspects, the labor and the quality control of the products
being produced by the company will be discussed. In the business of oil and gas exploration and
production, Shell Philippines Exploration B.V. (SPEX) operates the Malampaya Deep Water Gas-
56
to-Power Project together with its joint venture partners. Malampaya represents the largest and
most significant industrial investment in the history of the Philippines. It heralded the birth of the
country’s natural gas industry, enabling the supply of clean, environment-friendly fuel and
providing 2,700 megawatts of power to Luzon for a period of 20 years. This represents roughly
40-45% of Luzon’s power generation requirements, providing the country a considerably long-
term revenue stream to the government, in addition to considerable foreign exchange savings.
57
Safety is Pilipinas Shell's first priority and the core of its operations. The aim is to have
zero fatalities and no incidents that harm people, or put our neighbors or facilities at risk. Pilipinas
Shell leverages on the worldwide supply and distribution chain and manufacturing assets of the
Shell global organization to ensure its business operations in the Philippines are well-supported.
Shell is one of the two manufacturers of oil and gas along with its competitor, Petron, with
a refinery set up in Tabangao, Batangas and an active exploration team based in Alabang that
participates in the Philippines' MALAMPAYA project. The location of the refinery is ideal due to
ease of import of raw materials from various suppliers for the production of oil and gas. Since
Shell is an international company, the products and services are identical worldwide as well as the
production and manufacturing process. As such, the materials needed for production also comes
from various sectors of the world. For instance, for the case of the Philippines, one their major
import and export target is Singapore. This is especially in regards to the source of the raw
materials. In terms of distribution, given that Shell and Petron are the only local manufacturers
they sell not only in their respective gas stations but to smaller gas companies as well.
To find oil and gas resources Shell uses a range of geophysical imaging technologies.
Seismic reflection imaging remains the most widely-used geophysical technique in hydrocarbon
exploration. First, they capture echoes using advanced sensors as the waves pass through, or
bounce off, the rock and sediment deep underground. Shell places many sensors over a wide area
to record waves from different angles to provide the best picture from beneath the surface in the
58
site we are surveying. Second, they process the vast amounts of seismic data they have gathered
map of the site we are investigating. And third, Shell makes use of a certain visualisation software
to turn the data into images that can be analysed and interpreted by Shell scientists quickly and
efficiently. This ability to visualise and interpret billions of signals lies behind their biggest
5.5 MARKETING
In Marketing, the products, consumer behaviour, the way how the company advertise
59
Shell FuelSave
fulfill the multiple roles you take on in life. With the changing needs
of customers, our scientists developed fuels that can help you manage your motoring costs and get
more out of your drive. The results are Shell FuelSave Gasoline and Shell FuelSave Diesel which
Clean Engine
Previous fuel economy formulations have been solely based on keeping probl engine parts clean,
such as intake valves. We continue to add special detergents to our Shell FuelSave Gasoline
60
Smoother Running
Shell FuelSave Gasoline is designed to reduce energy losses in the engine, which can help improve
Improved Combustion
Shell FuelSave Diesel is our efficient fuel scientifically designed to ignite and burn more
effectively than standard diesel, thereby helping to increase the efficiency of the engine and
improve fuel economy. When diesel is injected into the engine, there is a time delay between the
fuel droplets meeting the hot, compressed air and the start of combustion. Shell FuelSave Diesel
is designed to reduce this time delay and thereby help the engine achieve more optimum
combustion, which can help to increase fuel efficiency and to improve fuel economy.
61
Clean Engine
Shell FuelSave Diesel is also designed to prevent the build-up of deposits on fuel injectors. In
*heavy duty trucks these deposits can reduce engine efficiency and lead to poorer fuel economy
in the longer term. It also includes special detergents formulated to help keep fuel injectors clean
Shell V-Power
Shell V-Power has breakthrough DYNAFLEX Technology that can help protect your engine. The
only fuel co-engineered with recommended by Ferrari, Shell V-Power is designed to deliver the
has the power to help restore up to 100% of the engine’s performance. New
Shell V-Power Diesel has DYNAFLEX Technology for the best cleaning
performance. New Shell V-Power Diesel provides the best performance and efficiency.
62
Shell V-Power Gasoline Product Benefits
decrease energy wasted from heat. Less energy wasted helps improve engine efficiency and
system deposits and a new friction-busting molecule helping engine efficiency. Shell V-Power
63
Lubricant Products Shell Helix Oil Change +
Shell Helix Oil Change+ gives an experience that makes basic vehicle
maintenance a walk in the park. With a range of Shell Helix motor oils
suitable for varying needs of car engines old and new, paired with
Shell Helix
Shell Helix Ultra is the first synthetic motor oil designed from natural gas that gives you
converts natural gas into crystal-clear base oil with virtually none of the impurities found in
crude oil. Base oil makes up approximately 75-90% of motor oil and so this is a significant step-
change in the composition. Shell PurePlus Technology produces base oil that provides enhanced
viscosity, friction and volatility performance compared to more prominently used traditional base
64
oils. This means it helps extend engine life, reduce maintenance costs, reduce oil consumption,
Shell Rimula
Shell Rimula is one of the solutions presented by Shell that gained the
company its foothold as a global leader in power and energy that pioneers
Shell Advance
Advance Ultra is formulated with Pureplus Technology, a revolutionary process that converts
natural gas into crystal-clear base oil with virtually none of the impurities found in crude oil. This
results to enhanced viscosity, friction, and volatility performance. All products are formulated with
65
Active Cleansing Technology that prevents dirt particles sticking together to form deposit. The
Shell Advance oils ranges from synthetic to mineral oils, to fit your motorcycle engine’s need and
preference.
Non-Fuel Offering
Shell believes that a gasoline station should be more than a pit stop but an
oasis for their customers. Shell Select offers a wide range of snacks,
Deli-to-Go
We aim to transform retail stations into a one-stop shop for motorists, with
amplify the Shell customer experience, these hearty meals and snacks at Deli2Go are tasty, fresh,
66
5.6. RESEARCH AND DEVELOPMENT
In Research and Development, the potential of developing new products and improving
As of now, no specific news on any development of the products has been announced but
as mentioned, there are improvements and expansions currently in the work for the refinery set up
in Tabangao that may result in an improved distribution process of material and the manufacturing
process itself. To make the future more sustainable, Shell’s research and development teams create
innovative fuel and lubricant formulations that are suited to modern vehicle engine technology,
safe and reliable for motorists, and backed by extensive science-based tests. “Customer needs are
changing; engines are changing. The intention is to be able to cope with more modern engines,
which are becoming smaller but more powerful,” explained Mae Ascan, Shell Senior Fuel Scientist
and Regional Technical Lead for Asia. Challenges that fuel scientists have to contend with include
higher operating temperatures and pressure, higher engine load, and exposure to harsher
conditions. Some of these challenges are market-specific, such as climate, and the average age of
the vehicle fleet or machinery in use. Add the human factor, and the focus is not just on enhancing
67
5.6.2 Improving Existing Product and Its Quality
PSPC have taken steps in the refining process to reduce the levels of sulphur, benzene and
the addition of lead in fuels. Sulphur is reduced via hydro-treating of the gasoline and diesel
components. Benzene is reduced by adjusting unit operating conditions to limit feeding the
products released out of the refinery meet the requirements of the national regulation. Shell has
always been at the forefront in terms of fuel innovations by staying at through the times to cater to
our customer’s changing needs.Two of their main products are the Shell V-Power and the Shell
Fuel Save Over the years. Understanding the needs of every Filipino motorist and the goal to
continuously develop better fuel formulations, Pilipinas Shell recently introduced their new and
improved V-Power fuels for both gasoline and diesel-fed motors. It took more than five years of
diligent study from the company’s research and development team of experts to finally come up
with the most advanced formula—the DYNAFLEX Technology. Shell's fuel scientist also work
hand in hand with Scuderia Ferrari, Shell's technical partner to test their fuel and ensure that they
are up on a par with even the most powerful engines in the world. In terms of achieving the desired
motor performance and efficiency, Shell’s new technology actively removes and prevents harmful
buildups and deposits inside the fuel system. They have also developed small convenience stores
significantly placed in each Shell gas station called Select and within those smaller business
68
opportunities opened such as a small food stall called as Deli2Go and maintenance shops were
also opened.
The company greatly values research and progress for sustainable energy, even beyond oil
and gas. According to Shell's outlook, by mid-century, there could be 9 billion people on the planet,
and around three-quarters of us will live in cities. Energy demand could be double year 2000 levels.
The world will need much more energy to power homes and fuel transport for a growing population
with rising living standards. But to counter climate change, energy must increasingly come from
lower-carbon sources. Meeting these challenges will require a radical change in the global energy
system and a range of new energy sources. Because the energy system is so large, and demand for
energy is rising so quickly, to achieve these changes will take a huge collective effort. Shell has
been preparing for the challenges of a lower-carbon future for some time through their scenarios
planning.
69
5.8 FINANCIAL
Financial ratios
Ratios 2018
2019
(Audited)
Liquidity
Current Ratio
1.47 1.45
Quick Ratio
0.69 0.76
Leverage
Efficiency
Inventory Turnover
8.17 12.47
Fixed Asset Turnover
13.60 22.22%
Total Asset Turnover
2.59 2.22
Profitability
70
Gross Profit Margin
13.75% +14.97
Net Income Margin
5.26% +6.12
Return on Total Assets
12.66% 13.60
Return on Total Equity
24.88% 13.60
Figures and Illustration Table 5.5
Weighted
Key Internal Factors Weight Rating
Score
Strengths
0.10 4 0.40
Shell's brand name itself
0.10 3 0.15
Strategic advertising
0.05 3 0.15
High quality equipment
71
Weaknesses
High cost of operating equipment 0.05 2 0.10
Total 1 2.63
Analysis:
The total weighted score is 2.63, the Pilipinas Shell Petroleum Corporation passed the
average midpoint, hence the company has an effective and efficient internal management. The
the oil industry. Overall, there are strategies by the company that are being used or utilized properly
72
CHAPTER 5
marketing company. They focus on turning crude oil into a range of refined products, which are
moved and marketed for domestic, industrial and transport use. Shell is one of the leading fuel
retailers in the country. Shell aims to continue providing high-quality products and trusted service
to Filipino motorists across the country. Filipinos can find their premium performance fuels, Shell
V-Power Nitro Plus Racing, Shell V-Power Nitro Plus Diesel, and Shell V-Power Nitro Plus
Gasoline, along with their main grade offers of Shell FuelSave Gasoline and Shell FuelSave Diesel
73
6.1 A SWOT Matrix for Pilipinas Shell Petroleum Corporation
Strengths Weaknesses
equipment
2. Strategic advertising
property
8. Coaching and mentorship
7. The innovation must
strategies
conform with Philippine
product standards
74
Opportunities SO Strategies WO Strategies
75
Threats ST Strategies WT Strategies
2. Fuel smugglers sell oil 2. Generate more CSR 2. Establish more local
products in a lower price activities that are aligned innovation for processes
3. Additional excise tax in with greener environment and products [W7, T6]
organizations advocating
a healthier environment
[S7, T8]
6.2 Strategic Position and Action Evaluation
77
Competitive Position (CP) Industry Position (IP)
Environmental issues
78
6.3 SPACE Matrix for Pilipinas Shell Corporation
Total 4
Under the Oil Deregulation Law, petroleum companies have freedom over 3
pricing, export and importation of oil products etc.
Government regulations 4
Total 37
Oil depletion -2
Total -21
80
Continuous innovation of produc -3
Strategic advertising -2
Environmental issues -2
Total -39
Conclusion
81
Figures and Illustration Table 6.1
Analysis:
From gathering all the Finance Position, Industry Position, Stability Position and Competitive
position from the top key strengths and weaknesses of Pilipinas Shell Petroleum Corporation, and
computing their corresponding rates, with a total of +1.32 for the X axis upon adding up the IP
Average and CP Average, and -1.0 for the Y axis upon adding up the FS Average and SP Average,
it goes to show that Pilipinas Shell Petroleum falls on the Competitive Position quadrant. Hence,
it can be said that Pilipinas Shell Petroleum is at a competitive advantage among all other oil
players in the country. Therefore, the fitting effective strategies that Pilipinas Shell could
implement in their business are Forward Integration, Backward Integration, Horizontal Integration,
82
6.4 The BCG Matrix
I
II
Medium 0
Product Development
Retrenchment
Diversification
Divestiture
Retrenchment
Liquidation
Divestiture
DOGS
CASH FLOWS
IV
Low -20 III
83
Relevance:
The Boston Consulting Group (BCG) Matrix shows the differences among divisions in
terms of relative market share position and industry growth rate. The product of Pilipinas Shell
which is Shell Select falls under the first quadrant which is Question Mark, in this quadrant the
Divestiture are being considered feasible in the company. The fuel products falls under quadrant
two which is Stars, in this quadrant the alternative strategies Backward, Forward or Horizontal
Integration, Market Penetration, Market Development, and Product Development are the
feasible alternative strategies for the company. The product Shell lubricants falls under third
quadrant which is Cash Cows, in this quadrant the alternative strategies Product Development,
Diversification, Retrenchment, and Divestiture are the feasible alternative strategies in the
company.
84
6.5 The Internal-External (IE) Matrix
4.0
THE EFE TOTAL WEIGHTED SCORES
High II III
I
3.0 to 4.0
3.0
IFE = 2.63
Medium
EFE=2.47
2.0 to 2.99 IV V VI
2.0
Low
1.0 to 1.99 VII VIII IX
1.0
Figures and Illustration Table 6.3
85
Analysis of IE Matrix
From the Internal Factor Evaluation garnering a weighted score of 2.63, and from the
External Factor Evaluation garnering a weighted score of 2.47 in which both scores passed the
average midpoint and clearly indicates that Pilipinas Shell has an effective internal management
and is competitive or responsive with external the external threats. In the Internal-External
Matrix, Pilipinas Shell Petroleum falls on Quadrant V which is the Hold and Maintain region,
hence, the effective alternative strategies that is fitting to Pilipinas Shell Petroleum is Market
Quadrant I
Quadrant II 1. Product Development
1. Product Development
2. Horizontal Integration
2. Market Development Forward
3. Market Penetration integration
3. Backward Integration
4. Market Development
Quadrant III
Quadrant IV
Product Development
Market Development Related Diversification
Retrenchment Unrelated Diversification
Retrenchment
Divestiture
86
Analysis of GS Matrix
Pilipinas Shell Petroleum Corporation is classified under Quadrant 1, it shows that the
company is continuously growing and has a strong competitive advantage among other oil players
in the country. The alternative strategies that Pilipinas Shell must implement in order to sustain
their growth are Product Development, Market Penetration, Horizontal Integration, Forward
Pilipinas Shell has established and continuously making a name in the oil industry, it's about time
to engage in different corporations to offer a new and better services to their loyal customers.
87
SUMMARY OF STRATEGIES
Market
X X X X 4
Development
Market Penetration X X X X X 5
Product
X X X X X 5
Development
Horizontal
X X X 3
Integration
Forward Integration X X X 3
Backward
X X X 3
Integration
Divestiture 0
Liquidation 0
Related Divesture X 1
Unrelated Divesture X 1
Retrenchment 0
Joint Ventures 0
Relevance:
The Tally Table shows the what are the top three feasible strategies based on the
frequencies derived from the different matrices. The top three alternative strategies as shown from
the Tally Table are Market Penetration which garnered a total of 5, Product Development which
garnered a total of 5, and lastly, Market Development which garnered a total of 4. While Forward
Integration, Backward Integration, and Horizontal Integration follows which garnered a total of 4.
88
6.7 A QSPM for Pilipinas Shell Petroleum Corporation
STRATEGIC ALTERNATIVE
S 1
Opportunities
capabilities.
economy
discounts
89
4. Under the Oil Deregulation 0.10 2 0.20 4 0.40 3 0.30
want.
products
products etc.
development of substitutes
suppliers
90
S 1
Threats
1. Downstream Oil Industry 0.03 2 0.06 4 0.12 3 0.09
Deregulation encourage
competition among existing
oil companies.
Total 1.00
91
S 1
Strategy 1 Strategy Strategy
Market 2 3
Penetratio Market Product
n Develop Develop
ment ment
Strengths
92
S
Strategy 1 Strategy Strategy 1
Market 2 3
Penetratio Market Product
n Develop Develop
ment ment
93
Analysis of QSPM
Based from the Quantitative Strategic Planning Matrix (QSPM) the most attractive
alternative strategy for Pilipinas Shell Petroleum Corporation is Product Development with a score
of 6.12, hence, in the QSPM Matrix the company is being encouraged to improve their existing
products. With the demands of Filipino consumers and with our environment today, it is a
challenge to Pilipinas Shell to innovate their products based on the price preference of the
consumers and as well as complying with the environmental standards. The second alternative
strategy is the Market Development with a score of 4.41, this strategy can Pilipinas Shell to
establish their brand further, extending their services to rural areas can help the company to be
known further. And lastly, Market Penetration with a score of 4.13 which encourages Pilipinas
Shell to intensify their marketing strategies since the Filipino consumers are inherently attracted
94
CHAPTER 6
refining and marketing company. They focus on turning crude oil into a range of refined products,
which are moved and marketed for domestic, industrial and transport use. Shell is one of the
leading fuel retailers in the country. Shell aims to continue providing high-quality products and
trusted service to Filipino motorists across the country. Filipinos can find their premium
performance fuels, Shell V-Power Nitro Plus Racing, Shell V-Power Nitro Plus Diesel, and Shell
V-Power Nitro Plus Gasoline, along with their main grade offers of Shell FuelSave Gasoline and
An objective is a specific end results that a company seeks to achieve in pursuing its basic
mission. From the revised vision and mission statement Pilipinas Shell seeks to: Human Resource
related Objectives
95
Operations or Internal related Objectives
• To ensure compliance with the Philippine laws and government regulations Other Finance
related Objectives
Strategic Issues are the big problems or challenge that a company is facing.
Being one of the biggest oil players in the country, there is a connotation that the
96
In order to effectively execute the different strategies or plans of the company, the welfare
Strategic Issue #3: Impact of TRAIN Law to the operational cost of Pilipinas Shell
The passage of TRAIN Law also added some operational cost to Pilipinas Shell, although
they can pass the burden of paying the taxes to consumers, the increase of their commodities fails
97
6.1.3 Financial Objective
Analysis
Pilipinas Shell Petroleum Corp.'s (PSPC) strategy to pursue sustainable growth that pays
equal attention to economic, environment and social performance is literally paying dividends,
with the country's most efficient petroleum distributor recording strong numbers in 2019 and the
near future.
Business Strategies
Fuel products is one of the contributors of the continuous destruction of the environment,
hence, in order to further lead the oil industry Pilipinas Shell should develop new fuel products.
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For the past few years, Pilipinas Shell was able to introduce new products with less carbon
emissions, with their continuous advancement, they can come up with a fuel that produces no
carbon footprints, such product development will not only benefit the environment but it will help
Pilipinas Shell to further boost their market since such product development will be the most
environment friendly fuel product in the country, and a first in the oil industry. With all the high-
end tools, advanced technology, and skilled laborers Pilipinas Shell can make such product
possible.
present products or services. Pilipinas Shell should introduce new fuel product/s produces no
Market Development involves introducing present products or services into new geographic
areas. Pilipinas Shell should further increase their gasoline stations in rural areas. Although it can
be said that Pilipinas Shell gasoline stations are widespread all throughout the Philippines, still
there are some areas in the Philippines that are not within the reach of Pilipinas Shell. There are
local gasoline stations in some rural areas that buys fuels from Pilipinas Shell, however, it is still
better if Pilipinas Shell itself would build their own stations in such areas to further disseminate
their brand.
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6.2.3 Strategy Ranked Number 3: Market Penetration
Market Penetration seeks to increase market share for present products or services in present
markets through greater marketing effort. Although Pilipinas Shell is fond of raffle games but
winning such is only by chance and not for all. Pilipinas Shell should come up with more freebies
to their loyal customers, such as when you gas-up for a particular price you will be rewarded with
a free Shell Select item or the loyal customers will have a discount the next time they gas-up with
any Shell outlet. Also, they should come up with their own discount cards wherein their customers
can use in order to earn points which can later on be used as a mode of payment.
Organizational Strategies
In Product Development, Pilipinas Shell should expand their workforce in their operations
that can help develop the product. Within the Operations Department, Pilipinas Shell should create
teams within such department, the first team will involve mostly of scientists and engineers that
will further study the needed chemicals or components for the development of the fuel product.
The second team will involve workers that will try on the effectivity of the developed product/s,
whether it complies to their objective of creating a 'no carbon footprint fuel'. The third team
together with the Legal Department, will be responsible for the quality control of the product and
whether it complies with all the needed requirements of the Philippine law.
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6.4 Strategy Map
Consumer Customer
Satisfaction Loyalty
CUSTOMER
INTERNAL BUSINESS
Produce high Maximize
PROCESS
quality products operational
effectiveness
Increase employee
LEARNING AND satisfaction
GROWTH
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6.5 Financial Projection
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Total 12,475,749 12,773,457 13,412,130 14,753,343 16,228,678 17,851,545
Expenses .81 .70 .77 .15 .96
Net 7,443,775 7,815,963. 9,046,891. 9,951,580. 10,946,738 12,041,412
Income 75 37 51 .57 .41
Dividend 9,668 9,668 9,668 9,668 9,668 9,668
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Projected Financial Position
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TOTAL 31,752, 34,090,132 644,362,1 537,413,02 779,678,1 668,355,96
NONCUR 903 11 4 54 1
RENT
ASSETS
TOTAL 70,609, 80,099,543. 988,850,1 1,253,532,6 1,376,029,0 1,513,631,9
ASSETS 251 59 51 99 30.6 34
.65 .08 .02
Current
Liabilities
Accounts 17,021, 17,872,222. 18,765,83 20,642,416. 91,222,82. 10,034,510.
payable 164 2 3.31 64 13 34
and
accrued
expenses
Dividends 9,668 9,668 10,151.4 11,166.54 - -
payable
Short-term 5,370,0 5,907,000 6,202,350 6,822,585 18,244,564 20,069,020.
borrowings 00 .26 69
TOTAL 22,400, 23,788,890 24,978,33 27,476,168 27,366,84 30,103,531
CURRENT 832 5 6
LIABILITI
ES
Non-
current
Liabilities
Loans 11,000, 12650110 16406413 180470552. 519851760 1
payable, 000 8.315 146 7.361 218369368.0
net of 972
current
portion
Provisions 4,280,1 4708160.6 15572509 171297600. 518842736 4207270096.
and other 46 1.445 589 0.648 7132
liabilities
TOTAL 15,280, 17,358,271 319,789,2 351,768,15 386,944,9 425,639,46
NONCUR 146 30 3 68 5
RENT
LIABILITI
ES
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TOTAL 37,680, 41,147,161 344,767,5 379,244,32 414,311,8 455,742,99
LIABILITI 978 64 1 14 6
ES
Equity
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6.6 Departmental Programs
Departments usually are usually distinct to each other and is a specialized division of a
large organization. Each department have their own roles to portray in an organization, hence, it is
important to assign each department their own departmental programs. Departmental programs
can help the organization to move systematically and orderly since specific jobs are delegated to
each department in line with their expertise.
Legal Department
Legal Program: Law and Regulation Updates
Seminar
passed
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Legal Program: Law Compliance Checking
Seminar
108
Operations/Productions Department
Operations Management Program: Planning for product development
Seminar
intellectual property
Finance and HR
Department
Operations, HR, and Finance
May 2019
Department
Discussion of the steps to be
HR
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Operations Management Program: Carbon-Neutral Fuel
Activities Timeline Team, Responsible
Determination of needed
components to produce the
product
Development per se of the 2019-2020 Operations group
product of Carbon-Neutral
Fuel
Testing of product 2020 Operations group
effectiveness
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Marketing Department
Marketing Program: Development of posters for new fuel product
poster
poster
111
Marketing Program: Enhancement of Shell Select store and gasoline station design
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HR Program: Hiring of experienced chemical engineers
Activities Timeline Team Responsible
Advertisement of job
posting
April 2019 Marketing group
Submission of resume of
interested applicants
Interview
applicants
the applicants
Hiring
report to work
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HR Program: Hiring of experienced scientists
Activities Timeline Team Responsible
Advertisement of job
posting
Submission of resume of
interested applicants
Interview
applicants
Selection
the applicants
Hiring
report to work
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HR Program: Training of new employees
Finance Department
Finance Management Program: Budget allocation for research and development
Meeting with research and June 2019 Budget group and Operations
development group group
Agreement to needed
budget for the research and
development
Purchasing of needed July 2019 Operations group
technology for research and
development
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Finance Management Program: Budget allocation for product modification
Activities Timeline Team Responsible
Finance Management Program: Budget allocation for store and station renovation
Activities Timeline Team Responsible
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CHAPTER 7
In this chapter, the researcher will evaluate, monitor, and control the implementation of the
top strategy through the use of a Balance Score Card. The Balance Scorecard is being used to look
an organization's strategy from the four different points of view. The four different perspectives
are: Financial Perspective, Customer Perspective, Innovation and Learning Perspective, and
Financial Perspective
revenue
117
Customer Perspective
concerns
and recognition
program
118
Learning and Growth Perspective
expectations organization
119
CHAPTER 8
APPENDICES
120
121
122
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