Strategic Management Project - PARCO

Presented To: Prof. Ghulam Ahmad Rana

Presented by:Shahnawaz Khanzada0182Maryam Shahid1249M. Ibrahim1194Ayesha Ansari1235Ahmad Raza1222Zeerak Batool1223Malik Zain Nawaz1185

Presented To: Prof. Ghulam Ahmad Rana

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

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

PAK ARAB REFINERY LIMITED

Whats PARCO all about?

MID COUNTRY REFINERY

STRATEGIC STORAGE FACILITIES

PRODUCTS AND SERVICES

Organizational Structure

Contact Offices in Pakistan CORPORATE HEADQUARTERS Pak-Arab Refinery LimitedCorporate HeadquartersKorangi Creek RoadP.O. Box 12243Karachi-75190PakistanMID COUNTRY REFINERY (MCR) PARCO Mid-Country RefineryQasba GujratDistrict MuzaffargarhPakistanISLAMABAD OFFICE House No. 2-B, Nazimuddin Road,Sector F-8/1,Islamabad.

Operational Offices in Pakistan4 terminal Station8 Pumping Station6 Marketing Regional Offices2 Land Acquisition Collectorates

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

Type of ownershipIts a Joint Venture between Govt. of Pakistan and Govt. of Abu Dhabi

60 % Govt. of 40 % Govt. of Pakistan Abu Dhabi

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

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

Present Factorsproducts or servicesmarketsconcern for public imageself-conceptconcern for survival,growth and profitability

Missing Factorscustomerstechnologyconcern for employeesphilosophy

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

GOALS & OBJECTIVES

Parco is an Energy life line of the countryParco is location due to Defense point of view it is catering to 21 days fuel reserve of the countryParco has develop a white oil pipeline from Mehmood Kot to Karachi and Mehmood Kot to Machike and its catering to secure transportation of fuel

PProgressive Corporate OutlookAAggressive Pursuit of Technical ExcellenceRReliability of ServiceCConsistency in PerformanceOOrganized & Systematic DevelopmentCORE VALUES

Key Success Factors

Professional attitude towards workSuccessful strategy implementationProfessional team Right decision making

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

Culture reflected by practicesDevolution of AuthorityA lot of Red Tapeism Very effective Human resources department working very actively for HR developementVery well defined SOPs

Main Strategies Under Taken

Corporate levelTo cater to the defense and energy lifeline of the country.To remain self sustainable/viable financially.The main products produce by PARCO are deficit in the country. The strategy applied is blend of push and pull

Business unit level:

On the business unit level PARCO is applying diversification strategyPARCO at business unit level has started marketing lubricants, LPG and Bitumen on octopus strategy

Functional levelTwo way relationship with distributorsSlow moving products are marketed on product linking basics Lubricant being the slowest and highest margin products, PARCO has evolved LFR (Lube Fuel Ratio) system Ensure maximum efficiency in the operation of the distribution channel.

External And Internal Assessment

Pestle AnalysisPolitical situationThe political situation ofPakistanis not satisfactory and unstable. Rapid change in the Govt. and the change of the policies of the previous govt. by the new govt. abruptly effect thePakistans political situation. Due to these entire factors the foreign investors hesitate to invest inPakistan.Govt. should device such policies that are beneficial for the local exporter as well as for the investors.

ECONOMIC SITUATIONThe economic condition ofPakistanis not suitable for investment. Market growth rate is very low and new investors hesitate to invest. Increasing inflation rate due to heavy loan make the business environment strict. Actually increase in inflation rate leads to high cost of production so our country products sell out at a high price but with low margin.

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

TECHONOLGICAL FACTORTechnological advancement in all the sectors of the country has changed the entire socio-economic environment. Especially in the Oil sector there is a lot of technological development.

ENVIRONMENTAL FACTORSParco has the following refineries in pak.National refinery ltd (36000) BPDsPak refinery ltd (30000) BPDsAttock refinery ltd (22000) BPDsBosicor refinery ltd Byco (16000) BPDs

LEGAL FACTORSThe products produce by Parco are mainly state regulated.The import policy of white oil is governed by the government.The government varies from different political parties

Working structureParco is governed by board of directors which is lead by a chairman.The operational activities are governed by the managing directors.There are three deputy managing directorsDMD (OPS)DMD (Finance)DMD (Refinery)

COMPETITIVE ANALYSISPak Arab Refinery Limited (PARCO) has the following competitors working inPakistan.National Refinery Limited (NRL)Pakistan Refinery Limited (PRL)AttockRefinery Limited (ARL)BosicorRefinery Limited (BYCO)

NRL (NATIONAL REFINERY LIMITED)

National Refinery Limited (NRL) was incorporated as a public limited company atKarachiin 1963. Government ofPakistantook over the management of NRL under the Economic Reforms Order, 1972. NRL is a petroleum refining and petrochemical complex producing a wide range of fuels, Lube Base Oils, BTX (petrochemicals), Asphalts and specialty products for domestic consumption and export. It is located on a plot comprising 263 acres in theKorangiIndustrial Area of Karachi. The companys plants have a fuel refining capacity of 2,710,500tonnesper annum (tpa) of crude oil, two lube refineries with a combined designed capacity of 176,200tpaof lube base oils (LBO) and a BTX unit with a designed capacity of 25,000tpa

(ARL) ATTOCK REFINERY LIMITEDSince its commissioning in 1922, ATRL passed through various stages of transformation. From batch distillation stills of 2,500 barrels per day (BPD), today it has grown into a modern state-of-the-art Refinery with a capacity of 40,000 BPD.VALUE ADDITIONARL is in continuous search for value added products and has produced and supplied Polymer Modified Bitumen (PMB).ARL has successfully added JP-8 to its range of Jet fuel production, which already included JP-1 and JP-4.ARL is supplying Unleaded Gasoline, Low Sulfur Diesel and Low Sulfur Furnace Oil to the market in line with its policy of producing more environment friendly fuels. ARL is now targeting low benzene and low aromatics gasoline production and further loweringsulphurlevel in diesel to less than 500ppm.

(BPL) BOSICOR PAKISTAN LIMITEDThe Company was incorporated on 9th January, 1995 as a Public Limited Company with the objective of acquiring, setting up and operating an oil refinery of 30,000 barrels per day capacity. The refinery is situated at District Hub,Lasbela,Balochistan, kilometers from HUBCO. The plant consists of a Crude Distillation Unit, the Reformer Unit, the KeroseneMeroxUnit, the Light Straight RunMeroxUnit, Utilities, off sites and associated Ancillaries.

(PRL) PAKISTAN REFINERY LIMITEDIn 1959 Pakistani Investors and major oil companies joined hands to set up the biggest oil refinery inPakistan. In 1962, this idea was materialized in the form of Pakistan Refinery Limited, which had a capacity to process 50,000 barrels of Iranian Light crude oil per day.

Total Quality ManagementTotal quality management (TQM) stresses following three principles.Customers satisfactionEmployee involvementContinuous improvement

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

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

Porters 5 Forces Model

Threat of New EntrantHighThreats of Substitutes HighBargaining Power of Consumers Moderate Bargaining Power of SupplierModerateRivalry among Competing Firms Moderate

overall industry= mature and competitive

S.W.O.T MATRIX FOR PARCO INDUSTRIESExternal and internal assessment

Strengths:Country wide war housesBig agents at major citiesSales staff in potential market hubsFake oils yet not available in case of pearl lubricantsWeaknesses:Unattractive packagingShort product lineNo price controlNo trade promosGround level market sharesWeak market pullOpportunitiesTop tier marketIndustrial gradesPearl trucks plus in small packs of 4 and 10 ltrsCompany runs retail outlet chainS.O strategiesState of art refinery having production capacity of 7000 M. tons of bituroxPakistan monthly depend 4000 M.tons Local 7000+6000 M.tonsProduction 13000 M. tonsW.O strategiesOver the years 4000M.tons captured by smuggled productsSmuggled products direct use in products like motorwayM3 FSD- JhangM4 Jhang- MultanM5 Multan- KhaniwalThreats:MNCs increased focus over lube businessHigh quality imported lube oils at affordable pricesCounterfeitPrice hike Reduced margin profitS.T strategiesPolitical threatNew generation taxParco has developed a market team and trying to capture smaller projects of PWT (public works deptt.)

W.T strategiesOur policy is governed by ministry of petroleum directlySo the new govt. policy can directly related by govt. and our work plant of $ 160M can be put on holdBCG MATRIX FOR PARCOExternal and internal assessment

BetumenFurnace OilMS 90RONJP 4C.P.M- COMPETITOR PROFILE MATRIX

External and internal assessment

PARCOBOSICORCritical success Factors Weight RatioWeighted Score Rating Weighted score Market share0.1540.6020.40 Product quality 0.0530.1540.20Customer service 0.0530.1540.20Customer loyalty 0.0520.1030.15E-commerce0.0520.1030.03Storage Capacity 0.1030.3020.20Social Responsibility 0.0430.1230.12Environmental Issues 0.0530.1530.15Advertisment0.1040.4030.30Profit Margin0.1530.4530.45Total Outlets 0.2030.620.40Total 1.003.122.60THE SPACE MATRIX

External and internal assessment

.Axis XInternal Strength PositionExternal Strength PositionCompetitive AdvantageIndustry strengthProduct QualityMarket ShareBrand ImageResearch and development(Worst -6, Best -1) -2-2-3-1

Growth potentialEntry of new firms Access to FinancingCompetition pressure(Worst +6, Best +1)+2+3+2+5

Average Score = -2Average Score = +3Total X-Axis Score = +1.5Axis yFinancial StrengthEnvironment StrengthROILeverageLiquidityCash Flow(Worst +6, Best +1)+2+3+3+2InflationTechnologyDemand ElasticityTaxation(Worst -6, Best -1)-4-1-3-3

Average Score = +2.5Average Score = -2.75Total Y-Axis Score = -2.2556 Conservative

AggressiveDefensiveCompetitive+6.00-6.00-6.00+6.00FSISESCAEFE - EXTERNAL FACTOR EVALUATION MATRIXExternal and internal assessment

FactorsWeightRatingWeighted ScoreOpportunities:Top tier mrkt

0.1540.6Industrial grades0.1040.4Pearl trucks plus in small packs of 4 and 10 ltrs0.1020.2Company runs retail outlet chain

0.1030.3Threats:MNCs increased focus over lube business

0.1530.45High quality imported lube oils at affordable prices0.1030.3Counterfiet0.1010.1Price hike 0.1020.2Reduced margin profit0.1030.30Total Weighted Score12.85THE GRAND STRATEGY MATRIXExternal And Internal Assessment

Quadrant 2Quadrant 1

Quadrant 3Quadrant 4Weak competitive positionStrong competitive positionSlow market growthRapid market growthExternal And Internal Assessment

External And Internal Matrix

Sr. noStrength Weight RatingW. Score 1Country wide war houses0.2030.62Big agents at major cities0.25413Sales staff in potential mrkt hubs0.1540.64Fake oils yet not available in case of pearl lubricants0.1030.3Weaknesses 5Unattractive packaging0.0820.166Short product line0.0520.057No price control0.0430.128No trade promos0.0420.089Ground level mrkt shares0.0420.0810Weak mrkt pull0.0530.15Total13.14Internal Factor Evaluation Matrix

StrongAverage Weak Low Medium High IFE Total weighted scores EFE Total weighted scores 3-42-2.91-1.92-2.93-41-1.9PARCOIIIIIIVVIVIIVIIIIXIFE 3.14, EFE 2.85 so its lies in quadrant 4

Marketing Mix Of PARCO

ProductPrice PlacepromotionQualityList PriceChannelAdvertisingFeaturesDiscountLocationPersonal SellingBrand NameAllowanceTransportationSales PromotionHuman Resource ManagementDiverse cultural backgrounds and multi-ethnic origins add up to create a strong resource base at PARCO. Each member makes a valuable contribution while overall functioning as a team. Committed to doing more for their country.PARCO people remain dedicated and passionate about their work. PARCO people are focused on broadening horizons and meeting new challenges. Creative and multi-talented, these fine individuals take pride in shaping the future of Pakistan.

OTHER STRATEGIESR & D:

Procurement

Production

Research & DevelopmentImproving quality is continuous process at PARCO, for the purpose a very active R & D department is functional.It was R & D departments suggestion that HSFO was value added to Bitumen.The main role of R & D department is to compile a workable report to BD section of marketing and commercial division.

ProcurementProcurement at PARCO is divided into two departments Marketing and CommercialThe main procurement at PARCO is of crude import from ADNOC and ARAMCO2) MaterialsAll local procurements are done through materials department

ProductionPARCO has a refining capacity of 100000 Barrels per Day at MCR Mehmood Kot District Muzaffar GharAnother refinery project is under process at Khalifah Point Hub KarachiThe production capacity of this refinery would be 250000 Barrels per Day

CONTROL PROCEDURESManagement control

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

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

Quality controlPARCO is producing the most sensitive fuels and is maintaining EURO 2 standards still 2002 for this quality control system the following certifications was doneISO-9001: 2002, Quality Management SystemISO-14001: 2004, Environmental Management System.Every batch produced samples are tested at in house LAB and every batch report consists of sample test result

Human resource controlIn PARCO final hiring/firing authority relies with the managing director but is solely based on the recommendations of HR department.Annual appraisal/award system of all employees was implemented by HR department by 2004.HR department monitors the training and development of employees and accordingly conducts in-house as well as out sourced training courses.

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

Group analysisOwn assessment on PARCO

Everything PARCO achieves is the product of team effort. All PARCO employees share the achievements of the company and have every reason to feel proud of what has been achieve so far. However with the diversification in business activity , Parco meets the new challenges , since success lies in better service and consumer satisfaction.PARCOs future aim is therefore to consolidate a significant account presence, as a major contender in the petroleum sector of Pakistan, with future that heralds bright prospects.

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

STRATEGIC ALTERNATIVES

FUTURE PROSPECTIVESKCR (Khalifah Point Coastal Refinnery) Extension of Pipeline form Machike to TarujabaPearl LPG marketing company

Recommendations Keeping in view the high threats level from competition, PARCO should enhance marketing budgets and work on brand establishing.Before commencement of KCR PARCO should start working on establishment its name in international market as 250000 barrels per day production cannot be consume in Pakistan markets.HR should also emphasis on developing and training of a team for export of fuels.

PARCO should focus on these issues:

Implement and improve training practicesImprove employee satisfactionImprove pay/benefitsStart PromotionCampaignsImprove the launch of the productBe competitive in pricingImplement a multi-source feedback system

Thank you

Admin & MarketingDMD OpsDMD FinanceMarketing & CommercialHR, Admin and TransportPipelineRefineryInternal AuditFinanceMD SecretariatMANAGING DIRECTOR