TotalFinaElf

POINT OF VIEW:
I choose the point of view of the CEO of the TotalFinaElf Philippines, Inc.
OBJECTIVES:
-

To increase its market share in the oil industry.

To be one of the well-entrenched players in the oil industry in the

Philippines.

To be able to generate profits, and start recovering from losses, by

2002.

PROBLEM:
How will TPI ensure its survival in the Philippine market, given the different
environmental forces in the country such as a seemingly saturated market with
well-entrenched players and a deregulated oil industry?
AREAS OF CONSIDERATION:
A Company Background
TotalFinaElf Company is originally called Total S.A. Total S.A. is a French
multinational oil company and one of the six "Supermajor" oil companies in the
world. Its businesses cover the entire oil and gas chain, from crude oil and
natural gas exploration and production to power generation, transportation,

refining, petroleum product marketing, and international crude oil and product
trading. Total is also a large-scale chemicals manufacturer. The company has its
head office in the Tour Total in the La Dfense district in Courbevoie, near Paris.
The company was founded after World War I after the French Prime Minister
Raymond Poincar rejected the idea of forming a partnership with Royal Dutch
Shell in favour of creating an entirely French oil company. At Poincar's behest,
Col. Ernest Mercier enlisted the support of ninety banks and companies to found
Total on 28 March 1924, as the Compagnie franaise des ptroles (CFP), literally
the "French Petroleum Company". Petroleum was seen as vital in the case of a
new war with Germany. However, the company was from the start a private
sector company (it was listed on the Paris Stock Exchange for the first time in
1929). CFP took up the 23.75% share of Deutsche Bank in the Turkish
Petroleum Company (renamed the Iraq Petroleum Company), awarded to France
as compensation for war damages caused by Germany during World War I by
the San Remo conference. In 1991 the company name became simply Total.
After Total's takeover of Petrofina in 1999, it became known as Total Fina.
Afterwards it also acquired Elf Aquitaine. First named TotalFinaElf after the
merger in 2000, it was later renamed back to Total in May 2003. TotalFinalElf is
the fourth largest oil and gas company in the world and the largest in Europe. It
has 4 refineries and 2,000 service stations worldwide. It operates in 17 Asian
countries and the biggest investment is in the Philippines. TPI or TotalFinaElf
Philippines Inc. came to the Philippines in1997. At present, the company
captured 2 % of the oil market and about 17% of the LPG market. TPI has

opened service stations in Metro Manila, far south as Lucena and further north in
Tarlac. All stations have standard equipment and amenities. TPIs service
stations underline the expensive facilities. TPI focuses on high quality products
and services excellence. Gasoline and diesel are the top products in terms of
sales. They also sold LPG, lubricants, greases and special fluids. TotalFinalElf is
a strong player worldwide in the aviation fuel market. The retail and industrial
business accounts for 85% of its entire earning and the 15% comes from
lubricants and LPG. LPG market is one of the fastest growing businesses for TPI
has 200 outlets in Metro Manila. Its LPG branded as Totalgaz. TPI is one of the
biggest new players entered in the Philippines.

B Persons involved in the Case

CEO of TotalFinaElf
The Big 3 Competitor in the Philippines: Shell, Caltex, Petron
The Government
Consumers
C TOWS (Threats/Opportunities/Weaknesses/Strength)
STRENGTH

All stations have standard equipment and amenities

High quality products and excellent services

Offers wide variety of products

Established more than 200 outlets in Metro Manila

A strong player world-wide in the aviation fuel market

Fourth largest oil and gas company in the world and the largest in
Europe

WEAKNESS
Their products are based on imported diesel and gasoline prices in
Singapore which are normally priced higher and subject to greater price
fluctuations than locally refined products

Doesnt have their own oil refinery in the Philippines

A new player in the oil industry in the Philippines

OPPORTUNITIES


LPG market is one of the fastest growing businesses for TPI
Investments are projected to reach P36 billion for new import terminals,
storage facilities and service stations
Aviation fuel market in the Philippines is still open for new entrants like
TPI

THREATS

Well-entrenched competitors
There are 181 new players that entered in the market as of December
2001

The oil refineries of the Big 3 control up to 95 percent of the local

oil supply
Constant changes in the laws and regulatory policies of the country
make investing inefficient
As for fuel demand, there are estimates indicating a drop by about 1.5
to 2 percent with the entry of natural as in the market

ALTERNATIVE COURSES OF ACTION:

Construct its own local base oil refinery in the Philippines. Constructing its
own local base refinery will enable TotalFinaElf to sell its oil at lower prices which can
compete to the pricing of its biggest competitor. It can also lessen transportation
expense. Aside from the profit it will make, Filipinos can also benefit because more jobs
can be available if this plan will pursue. Lastly, having its refinery here in the country can
increase its output of production rather than be dependent to its refinery abroad. The
disadvantage of this plan is of course it will need a high capital investment, it is
somewhat risky due to conflict in government that will arise due to environmental

damages it will incur. Being new in the country will also be a disadvantage to the
company for they may have difficulty in finding a location where they can put up their
refinery.
Design strategic actions to communicate the companys products to potential
customers. As a new player in the market TotalFinaElf should take extra effort to
introduce its products to the market. They should find a way to attract customers to
patronage their product instead of the existing fuel their using. Designing a strategic
actions to communicate the companys product could improves customer awareness
and attract potential customers. And getting the patronization of customers may result in
increase of sales. Designing strategic action could also give the company control over
the plans and operations of the business. The disadvantage of this course of action is
the possibility of not receiving positive feedback from the market, it would be time
consuming and of course it would be very expensive for the company.
Focus on serving aviation fuel to airports in the Philippines when the
authorization has already been given to them. Being a strong player in the aviation
fuel market worldwide, TotalFinaElf has an advantage to this market. TPI already is an
expert and has mastered the operations in the aviation industry. However the problem is
that they are not certain if the Philippines authorization would allow them to supply in
NAIA International Airport which is a disadvantage to the company. Also if they focus on
aviation fuel market, their income would be limited and its investments in service station
will be wasted.

CONCLUSION:
After identifying different alternative course of action, as a CEO I would

pursue to design strategic actions to communicate the companys products to

potential customers as the most beneficial solution to resolve the companys
problem.
Designing strategic action to communicate the companys products would
be an effective way to achieve the companys objectives which are to become one
of the well-entrenched players in the oil industry in the Philippines, recover the
incurred losses of the company, open more service stations and to increase their
market shares in the oil industry.
Rivalry in fuel industry where TotalFinaEfl is in line to is very high, first TPI is
a new entrant in the market and that there are existing players in the setting up
barriers for new rivals could not easily penetrate in the market. So as a strategy
that the company should consider is by introducing an environment friendly
alternative to fuel oil. This will catch the attention of consumers especially those
who are environmental advocate. Through this the company could also gain the
government approval because of being environmental friendly.
TotalFinaELf establishing their market of course is threatened by potential
entry of new competitors so a strategic action should be made in order to ensure
the loyalty of its customers, this can be done by offering incentives to loyal
customers like freebies, discounts, free automobile services and, introducing a
reward point system to loyalty card holders. And of course advertising through TV
commercials, radios and newspapers would be of great help in achieving company
goals.

RECOMMENDATION:
The firm must have to build a backup and recovery strategy. A
company should always have a Contingency Plan in case problems will
arise in the future. Thus the most important to minimize the potential

problem is to prepare for it. Forecasting are one of the best solution. The
firm must be prepared, because it could be prevented. The only possible
solution is to prepare for it, before it happens. They should need good
decisions because; all of their decisions will affect the future. And the best
solution to it was to create a backup plan and improve their research and
development.

CASE STUDY: TotalFinaElf

Submitted by:
ANA MARIZ L. RETOLIN
Strategic Management
5:30-8:30PM

July 23, 2016