c


PETROBRAS, a history of success and a future of glories.





 

1. TITLE ................................................................................................................................................. 1
j. TABLE OF CONTENTS ..................................................................................................................... 1
3. EXECUTIVE SUMMARY .................................................................................................................. 2
4. INTRODUCTION ............................................................................................................................... 2
4.1 The history of petroleum ................................................................................................................ 3
5. COMPANY ANALYSIS .................................................................................................................... 3
5.1 SWOT Analysis ............................................................................................................................. 4
5.j PESTEL Analysis .......................................................................................................................... 5
5.j.1 Political Factors....................................................................................................................... 5
5.j.j Economic Factors .................................................................................................................... 5
5.j.3 Social Factors .......................................................................................................................... 6
5.j.4 Technological Factors ............................................................................................................. 6
5.j.5 Environmental Factors............................................................................................................. 6
5.j.6 Legal Factors........................................................................................................................... 7
5.3 Porter Five Forces .......................................................................................................................... 7
5.3.1 Bargaining Power of Suppliers ................................................................................................ 8
5.3.j Threat of New Entrants............................................................................................................ 8
5.3.3 Bargaining Power of the Buyers .............................................................................................. 9
5.3.4 Threat of Substitute Products or Service .................................................................................. 9
5.3.5 Rivalry among Existing Competitors ....................................................................................... 9
5.4 Red and Blue Ocean Strategy ......................................................................................................... 9
6. RECOMENDATIONS....................................................................................................................... 10
7. CONCLUSION ................................................................................................................................. 11
8. REFERENCES ...................................................................................................................................... 11
›



This paper treat itself with the analysis tools of the environment factors for Petróleo
Brasileiro S/A ± PETROBRAS, a Brazilian oil company. The researcher utilized four kinds of
tools to analyse the company¶s environment, SWOT, PESTEL, Porter Fiver Forces Framework
and the Blue Ocean Method.

It was found that the company is doing very well in managing the environmental threats
but the natural risk of ending the oil reserves haunts the company, forcing the company to find
new sources of fuel and new sites of oil.


  

This paper was made with the intention to describe and evaluate the changing business
environment of Petróleo Brasileiro S/A ± PETROBRAS over the last five years, using theories
shown at class with models and relevant examples.

PETROBRAS is a Brazilian company focused on oil exploration and production

operation, it also deals with other connected activities as natural gas and derivates. The company
was founded in October 3rd of 1953, by then president Getúlio Vargas with the intent of
executing oil activities in the country. The initiative to create the company started in 1946 with a
people¶s campaign to protect Brazil¶s oil with the slogan ³The oil is ours´. PETROBRAS held
the market¶s monopoly from over 40 years (1954-1997), been awarded in 199j by the Offshore
Technology Conference (OTC), the most important award in the oil sector, been awarded again
in j001.

The company has been helping Brazil to do an effective manage of its natural resources,
in 1997 the country was able to enter in the select group of 16 countries that produced more than
a million barrels of oil per day. The monopoly was broken on August of the same year (1997)
increasing the eager of the company to extend its market, several new oil locations was found in
Brazil¶s basins. Having this growth in oil production in j003, PETROBRAS was able to double
its daily oil & natural gas production, surpassing the two million barrels per day.

With public and private associations, in April of j006 the P-50 platform lead Brazil to its
oil self-sufficiency. Nowadays, the company is present in j7 countries, been in j007 rated as
world¶s 7th biggest oil company with shares traded at stock exchanges, data by Petroleum
Intelligence Weekly (PIW), also in this year the company was insert at DJSI (Down Jones Global
Sustainability Index), this index been considerate the most important global sustainability index.
 PETROBRAS has dedicated time and efforts to be a sustainable oil company, in early
j008 the company was acknowledged by a Management & Excellence survey (M&E) as the
world¶s most sustainable oil company, becoming then, world¶s reference.

 c



 !"

The use of petroleum is dated from behind the beginning of the extract industry, there are
records that the Egyptians after coated their mummies, used to sealed them in their pyramids
with pitch; a use in the street was also found by the Babylonians, Assyrians and Persians. Even
the Bible claim that Noah used petroleum to make his Ark seaworthy.

In the beginning of its modern use, the oil was used to produce kerosene, in order to light
lamps. Seen the oil as a new market and expecting it to grows more, in 1854, George Bissell, an
American lawyer, opened the first oil company in the history, but they weren¶t successful, trying
again in 1858 with some other business man, founding the Seneca Oil Company, been able to
found oil at 69 ½ feet deep.

The commerce of oil starts to grow, the United States of America leading it, but just
extracting it wasn¶t enough, they found necessary to refine the oil to find more market. So the
process began, by 1860 in the USA there were around 15 refineries producing 1 to 100 barrels a
day.

Seen the oil as a viable option to earn money, a young bookkeeper named John D.
Rockefeller financed his first oil refinery. He was able to control all steps of his refinery and
capable of use the disorder and instability of other refineries on his favour, and in 1870 he
controlled more than 10% of US refining capacity, making deals with rail companies and
lowering his prices, buying competitors, in 1890 his companies controlled 90% of US refining
capacity, making him the richest person in the world.

#

 $
 

In this part of the work, the researcher is going to use some analysis tools to allocate the
company in the actual market, to indentify its weakness and strengths, and find points for the
company to grow and become more competitive.

# c
% 
&' 

The SWOT Analysis is a strategic planning method used to evaluate the trengths,
%eaknesses, pportunities, and hreats involved in a project. The intention here is to find
where the company is strong and find his weakness as well, internal and externally, this way
becoming more competitive. The Framework 1 Shows the SWOT analysis of PETROBRAS

'"()
c
*
% 

Helpful Harmful
SWOT (to achieve the
(to achieve the objective) objective)
*Dominant position in
(attributes of the organization)

extraction, refine and

*Nationalism
transport of refined and
brute oil;
*Logistic
Internal Origin

*Know-How in techniques *The new project is

and technologies for always expansive
perforation, development then the previous
and production at deep one
water and ultra-deep water
*Reserve base and
comparatively long life
reserves, which will
*The oil is found
provide
more and more at
sustain and enhance
(attributes of the organization)

difficult areas of
growth of production and
reaching
control costs in a large
saving
of scale
*Strong position in natural
External Origin

gas market in Brazil, with

*The natural oil
great potential
reserves are
growth.
finishing
*Attracting international
partners in all activities
Source: Author.

When looking at the SWOT analysis of PETROBRAS, is possible to see that the
company build in the last five years a huge Know-How of techniques and systems to perform its
business in Brazil, and also are capable of collect fast amount of money for new projects, with a
cost although. The logistic is one if its great strong attributes when working in Brazil, the actual
conditions of roads and the missing alternative ways of transport the oil make difficult for new
entrant and competitors to achieve the same price. High cost of raising resources for new projects
is a preoccupation for the company.

It is possible to see the that natural resources are finishing, almost leading the company to
an dead end, in terms of oil extraction, so foreseeing it, the company started 4 years ago, projects
with the Brazil¶s government to find new sources of fuel.

# 
$ 
&' 

The PESTEL analysis is a manager tool to analyse the macro-environment of the

company. The macro-environment is what surrounds the company, the external forces such as
governments, financial market, laws, social factors, economic factors, environment factors, etc.
The point in doing this analysis is that this forces are not controlled by the company itself, the
company are passive in receive this forces and have to adapt itself to them. That¶s why the
PESTEL analysis is a great tool to measure the impact of macro forces of the company. It
consists in analysing six ways of macro impacts (Political Factors; Economic Factors; Social
Factors; Technological Factors; Environmental Factors; Legal Factors)

#  c
$ +'

'+

There are the factors that refer to the government policy, and the way that this policy
affects the company and the economy. Does the government provide any kind of goods and
services; does him subsidies? Etc.

With the findings in the pre-salt, PETROBRAS oil production in the next few years is
going to increase its productions to top-ranking global levels, and nowadays a big discussion
about royalties for this exploration in happening. The government says that PETROBRAS will
have the exclusivity for this kind of oil extractions, but this future is uncertain.

#  
+&"+

'+

An economic factor affects the company on its interest rates, taxation changes, economic
growth and exchange rates.

The company will only be affected in this factor if:

-Occur some change in the actual tax system;

-The government seeking more profit change the way of taxing foreign trade;

-Seeking take the control of the inflation, change taxes.

#  ›
+'

'+

Any change in the social trends can impact on the demand of the company¶s product and
the availability and willingness of individuals to work at the company.

Nowadays PETROBAS is one the most targeted company for recent graduate and
specialized workers in Brazil, the company leads more than 5 social programs to help families
and its workers. The company is seen by its investors and workers as an excellent place t work
and invest. This Factor is not a threat to the company.

#  
+& ,+'

'+

New technologies can create new products or change the way of making old products.
These new technologies can benefit consumers and the company as well.

This is a critical factor for the company, with the advance of technology; the company is
always seeking new way to realize its processes, and researches. With better resources the
company is able to increase its chances to find new oil sites in deep waters and ultra-deep waters;
this discovery implies high-complex projects, great investments as well and qualified workers
and researchers.

In the past five years, huge changes in the available technologies have changed the way
that the company deals with its corporate secrets and do investments in new methods to discover
oil sites.

To be able to do a fast response to changes in the market the company needs to always
been investing in new technologies and find a way to retain crucial workers that have this
knowledge, and also find ways to disseminate this knowledge.

#  #
&-&"&'

'+

These factors are related to climate and weather changes, how the changes on the
temperature will affect the company, can a storm prejudice the company¶s production? These are
the kind of answers that is looked for when analysing this factor.

PETROBRAS has several of its oil platforms on sea, and basins. The company has a
team of researchers that observe the weather of the site where the oil is been explored, because
any great storm or strong winds can affect the safety and the quality of the oil extracted, doing a
damage to the company¶s image.

In the past, happened to occur some accidents with PETROBRAS¶s ship caring oil on
Guanabara¶s basil, and it has compromised the company¶s image and provoked a huge loss of
money due to indenisation to the people whose life was affected by the incident.
 There are also the preoccupations related to the environment, since the company are
dealing with a product with high degree of pollution, they have to strict in following the law and
preventing accidents; any kind of accident with this product is prejudicial not only for the
company¶s image but for the environment itself.

#  .
,'

'+

These factors are related to the legal environment in which firms operate, for example the
laws that are applied in the company, and the market that the company operate.

There are some factors that may interfere in PETROBRAS¶s business, for example, this
year (j010) Brazil is going to have presidential elections, and the history shown that some times
when there is a change of president, some laws that impacts directly on the company¶s
production are changed, affecting all of their plans and strategies.

New environmental laws can affect the way of extraction and transport of the oil,
meaning that the company will have to spend money to change the way that these things are been
done.

# ›
$

-

+

 The Porter Five Forces framework is used to analyse the forces that act upon the
company, with this analysis is possible for us to find new opportunities of market, and prevent
been caught on surprise by new entrants.

'"()

*
$

-

+
','"

# › c
','&&,
$(

! 

PETROBRAS is one of the biggest oil companies in the world; so the power exercised by
the suppliers over the company is limited. The company¶s ³worries´ with them is the fact that the
level of complexity in the projects is so high that the company needs suppliers able to fast
respond to the needs of each project and each new situation.

# › 
'

(
&'&

The company holds the expertise in deep waters and ultra-deep waters in the oil extract
market, making almost impossible to a new entrant threat the company, but some vertical
integration may be a threat but the cost to high.

PETROBRAS experienced a threat from REPSOL, when in the end of j009 the company
announced to invest US$1j bi in the Brazilian oil sector, up to j01j. This threat was minimized
by the pre-salt discovery and the new legislation that came with it.
# › ›
','&&,
$(


!

The biggest buyer from the company is PETROBRAS itself. The other branch of the
company that produce gas, and other forms of fuel. This is useful in terms of logistic and the
injection of capital in new investments. Around the world, the price of the oil is negotiated in the
electronic market and only the big cartels in the Middle East can change its price drastically.

# › 
'

!/!
$0!+

-+

The oil is said to be extinguished from the earth¶s surface in more or less fifty years. This
is a big problem for the company, as well the alternative forms of fuel like the biofuels and in the
future, Hydrogen is pointed as a viable substitute.

The global warming is a plus to the biofuels issue, and to deal with this, PETROBRAS is
doing partnership with the government to find alternatives to its own product, with the intention
in not losing market share.

# › #
-' 
'"&,
1&,
"

Petroleum is a derivative needed in all countries around the world, and PETROBRAS
helped Brazil to achieve its oil self-sufficiency, so most of the barrels produced by the company
are bought by Brazil and the rest is sold around the world at market price. The rivalry will be
tougher when the pre-salt extractions starts, because it will increase the number of barrels
produced and the company will need to sell more quantity overseas. Long-Term contracts will be
an option to avoid has unsold barrels in stock.

# 
0
'&0
 !
+'&
',

This theory of analysis is based on the Bloody ocean strategy; whether a company finds
itself confined in an existing market fighting against each other¶s trying to steal costumers. The
Red and blue ocean strategy were created by Chan Kim and Renée Mauborgne suggesting that
the company don¶t always have to fight among the others to find its space and costumers, the
company can develop an uncontested market space that make the competition irrelevant, by
creating an competitive advantage and sustaining it. To create the blue ocean there are j ways:
* Create a completely new market, as eBay did; or

J
 
  
when a company expands the boundaries of an existing
industry.
 V
  
     

Compete in an existing market Create an uncontested market
space. space.

You have to beat the competition. Make competition irrelevant.

Share the existing demand. Create and caputre new demand.

Been profitable as the same time

Break the value/cost trade-off
as competitive.
Create a system to pursuit
Create a differentiation.
differentiation and low cost.

Source: http://www.valuebasedmanagement.net/methods_kim_blue_ocean_strategy.html

By looking at the strategy shown above, we can see that PETROBRAS finds itself in a
red ocean right now. Facing huge competitors and watching the main product (crude oil) to fade
away. In order to achieve a blue ocean the company needs to find a new strategy or as said in
theory above, company expands the boundaries of the existing industry.

.
  

It was possible to see that PETROBRAS have already consolidated its position in
Brazilian¶s market, and now needs to get more space overseas. With the SWOT analysis it is
perceptive that the difficulty to find new oil sites it¶s getting harder and harder. More often the
company is been able to find oil sites in the bottom of the ocean but it is getting more and more
expensive to put this projects to work, and the amount of oil to be found in the oil site not always
correspond to the expectations of the company and its investors. To solve this problem the
company should keep looking for new sources of oil and new kinds of fuel as well, to maintain
its top position at the domestic market.

For been a Brazilian company created with the intention to protect the country¶s oil the
PESTEL analysis shown that the company have a good past and future perspectives in the social
factor, but what is a source of preoccupation is the technologic factor, because the company
retains the top researches and technologies in deep and ultra-deep water¶s oil extraction, so it is a
concern to retain this technology and always keep growing. To deal with this possible threat it is
advisable for the company to keep always improving its techniques to retain talents and find
news; and also insert confidentiality policy at higher levels.

With Porter five forces framework it is possible to realize that the threat of substitute
products or service is the principal for the company in its actual stage. The awareness of global
warming are madding people to more and more find non pollution sources of fuel, and oil is not
one of these. To fight this the company needs to keep doing what is already doing and if possible
begin to participate in new projects overseas, to shown that the company is preoccupied with this
issue, for the investors and the buyers, and are working as hard as possible to make its product
not a threat for the environment, but a good thing for all living things.

Ý
   

Petróleo Brasileiro S/A ± PETROBRAS, is one of the biggest oil companies in the world
and is making a good job to improve its international position, they had some environmental
issues over the last five years, but with a good public relations work the managed to overcome
the negative issue and keep consolidating its position year after year. PETROBRAS have
partnerships with the Brazilian government to avoid unexpected legal changes and the company
keep always improving its social relation with workers and investors.




PETROBRAS S/A, [Online], Available fro URL http://www.petrobras.co .br [Accessed 15 April 2010]

Pafko. [Online], Available fro http://www.pafko.co /history/h_petro.ht l [Accessed 22 April 2010]

PORTER, Michael. Competitive strategy). New York: Free Press, 1980

Blue Ocean Strategy [Online], Available fro

http://www.valuebased
anage
ent.net/
ethods_ki
_blue_ocean_strategy.ht
l [Accessed 23 April
2010]
ercer, D 2000, arketing Strategy: The Challenge of the External Environ
ent, Sage Publications Ltd.