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College of Arts and Sciences

Department of Legal Management


College of Arts and Sciences
Department of Legal Management

A STRATEGIC MANAGEMENT PAPER


ON
PILIPINAS SHELL
A STRATEGIC PETROLEUM
MANAGEMENT PAPER
CORPORATION
ON
PILIPINAS SHELL PETROLEUM CORPORATION

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

CHAPTER 1 INTRODUCTION ................................................................ 2

COMPANY PROFILE ................................................................................................. 2


ORGANIZATIONAL STRUCTURE ......................................................................... 3
NATURE OF BUSINESS ............................................................................................ 4

CHAPTER 2 RESEARCH METHODOLOGY ........................................ 7

RESEARCH DESIGN .................................................................................................. 7


SOURCES OF INFORMATION ...................................................................... 11
METHODOLOGY ..................................................................................................... 12
SCOPE AND LIMITATIONS ................................................................................... 15

CHAPTER 3 EXTERNAL ANALYSIS ................................................... 16

GENERAL ENVIRONMENT ................................................................................... 16


POLITICAL FORCE ......................................................................................... 16
ECONOMIC FORCE ........................................................................................ 19
SOCIAL FORCE ................................................................................................ 23
TECHNOLOGICAL FORCE ........................................................................... 25
ENVIRONMENTAL FORCE ........................................................................... 28
LEGAL FORCE ................................................................................................. 30
PORTERS FIVE FORCES ....................................................................................... 32
POTENTIAL ENTRY OF NEW COMPETITOR .......................................... 29
BARGAINING POWER OF SUPPLIERS ...................................................... 33
POTENTIAL DEVELOPMENT OF SUBSTITUTE PRODUCTS .............. 34
BARGAINING POWER OF CONSUMERS .................................................. 35
RIVALRY AMONG COMPETING FIRMS ....................................................... 35
EXTERNAL FACTOR EVALUATION ................................................................. 37
COMPETITIVE PROFILE MATRIX .................................................................... 42

CHAPTER 4 INTERNAL ANALYSIS .................................................... 44


COMPANY’S MISSION AND VISSION STATEMENT ..................................... 44
REVISED MISSION AND VISSION STATEMENT ............................................ 48
CORE VALUES ........................................................................................................ 49
NAME OF COMPANY ............................................................................................ 50
HISTORY............................................................................................................ 50
DISTINCTIVE COMPETENCY ............................................................................. 51
MANAGEMENT ....................................................................................................... 51
ORGANIZATIONAL STRUCTURE .............................................................. 51
HUMAN RESOURCE ....................................................................................... 54
OPERATIONS AND PRODUCTIONS .................................................................. 56
MARKETING ........................................................................................................... 59
RESEARCH DEVELOPMENT .............................................................................. 67
MANAGEMENT INFORMATION SYSTEM....................................................... 69
FINANCIAL .............................................................................................................. 70
INTERNAL FACTOR EVALUATION .................................................................. 71

CHAPTER 5 STRATEGY FOMULATION ........................................... 73


SWOT MATRIX ....................................................................................................... 74
STRATEGIC POSITION AND ACTION EVALUATION ................................. 77
SPACE MATRIX ..................................................................................................... 79
BCG MATRIX .......................................................................................................... 83
IE MATRIX .............................................................................................................. 85
TGS MATRIX ............................................................................................................... 86
SUMMARY OF MATRICES .................................................................................. 88
QSPM MATRIX ....................................................................................................... 89

CHAPTER 6 OBJECTIVES, RECOMMENDATIONS AND ACTION PLANS .. 95

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

CHAPTER 7 STRATEGY EVALLUATION AND MONITORING


AND CONTROL ..................................................................................... 117

BALANCE SCORECARD ..................................................................................... 117

CHAPTER 8 APPENDICES .................................................................. 103


EXECUTIVE SUMMARY
Petroleum is the primary material for a multitude of chemical products, including
pharmaceuticals, fertilizers, solvents and plastics. Petroleum is therefore integral to many
industries, and is of critical importance to many nations as the foundation of their industries.
Pilipinas Shell Petroleum Corporation is a Philippine-focused 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 all over the
country.

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

Petroleum is the primary material for a multitude of

chemical products, including pharmaceuticals, fertilizers,

solvents and plastics. Petroleum is therefore integral to many

industries, and is of critical importance to many nations as the

foundation of their industries. Pilipinas Shell Petroleum Corporation is a Philippine-focused

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

all over the country.

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

contributor to the continuous destruction of environment.

HEAD OFFICE OF THE COMPANY

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

The management team of Pilipinas Shell is composed of ten experienced members to

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

performance highlighted by a 3 fold reduction in station robberies.

Figures and Illustrations Table 1.1


NATURE OF BUSINESS

o Manufacturing of oil, gas and coal; Distribution of gaseous fuels.

o Pilipinas Shell 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. Pilipinas Shell Retail prides itself

4
in supplying Filipino motorists with quality products and excellent customer service

over the years.

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

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.

o Pilipinas Shell intend to

selectively expand its retail

network in profitable urban

centers, surrounding suburbs

and other emerging economic

regions and growing rural

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

innovative loyalty programs, forging or strengthening relationships with their dealers,

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

geographical positions of their various supply points.

6
CHAPTER 2

RESEARCH AND METHODOLOGY

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

alternative strategies are further discussed in this chapter.

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

alternative strategies, such as the Strengths-Weaknesses-Opportunities-Threats (SWOT) Matrix,

Strategic Position and Action Evaluation (SPACE) Matrix, Boston Consulting Group (BCG)

Matrix, Internal-External (IE) Matrix, Grand Strategy (GS) Matrix, and Quantitative Strategic

Planning Matrix (QSPM).

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

Forward Integration, Backward Integration, Horizontal Integration, Market Penetration,

Market Development, Related Diversification, Unrelated Diversification, Retrenchment,

Divestiture, and Liquidation.

Forward Integration is gaining ownership or increased control over distributors or retailers.

Pilipinas Shell can tie-up with its franchisees and give cash incentives or awards to a

franchisee with highest sales.

Backwad Integration is a strategy of seeking ownership or increased control of a firm's

suppliers.

Horizontal Intetgration is a strategy seeking ownership of or increased control over a firm's

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.

Market Development involves introducing present products or services into new

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

consumers, particularly the masses.

Product Development is a strategy which seeks to increase sales by improving or modifying

present products or services. Shell is continuously innovating their products in order to

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

oil companies' top fuel brands.

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

stations dedicated for providing water and air for vehicles.

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

stations in which consumers can rest and eat.

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

expenses of the company.

Divestiture is selling a division or part of an organization. If despite of implementing 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

alone convenient stores like 7-Eleven, Ministop and such.

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

different information to support the contents of this strategic management paper.

11
\

2.3 METHODOLOGY

Research Steps Application to Strategic Management

Process

1. Defining the research objectives The main objective of the researcher is to

explore appropriate strategies for Pilipinas

Shell Petroleum Corporation in order to attain

its vision, mission and objectives

2. Planning a research design The researcher used the secondary data

analysis in construing the external analysis of

Pilipinas Shell, these data includes the news

articles, researches and other data provided by

the company. Lastly, the researcher used the

observation method for the strategy

formulation of Pilipinas Shell, based from the

internal and external analysis.

3. Planning a sample The researcher gathered most of the internal

information through the help of Professor De

Guia, the researcher was able to obtain more

relevant information when it comes to the oil

industry in general.

12
4. Collecting the data The researcher gathered most of the

information from Pilipinas Shell through

research method. The researcher used different

online resources in obtaining external

information of the company, such as the

different news website of ABS-CBN News,

GMA News, Rappler, and Philippine Daily

Inquirer.

5. Analyzing the data The data gathered from different sources were

analyzed by the researcher by formulating

opportunities and threats, as well as strengths

and weaknesses, and from these the researcher

formulated different alternative strategies that

is feasible for the company, the top alternative

strategy that came up is Product Development,

while the second alternative strategy is Market

Development, and the third alternative

strategy is Market Penetration.

13
6. Formulating the conclusions and In formulating the most feasible alternative

preparing the report strategy for Pilipinas Shell, the researcher used

different matrices such as SWOT Matrix, IE

Matrix, BCG Matrix, Grand Matrix, and

QSPM Matrix. The top alternative strategy that

resulted from these matrices is the Product

Development, while the second alternative

strategy is Market Development, and the third

alternative strategy is Market Penetration. For

the top alternative strategy, considering the

main strategic issue for Pilipinas Shell is their

environmental reputation, the researcher

recommends that Pilipinas Shell should

develop a new fuel product that produces no

carbon footprints.

Table 2.1 Research Methodology

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

EXTERNAL ANALYSIS OF PILIPINAS SHELL PETROLEUM CORPORATION

Pilipinas Shell Petroleum Corporation is a Philippine-focused integrated downstream

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

Shell FuelSave Diesel in our stations all over the country.

3.1 General Environment

3.1.1 Political Forces

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,

and the public.

3.1.1.1 Department of Energy monitoring as of 2019

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.

3.1.1.2 Investors keen on drilling for oil and gas - DOE

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

push to revive the country’s upstream petroleum industry.

3.1.1.3 New oil, gas field discovered off – Southern Cebu

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

Declaration of Commerciality (JDC) with service contractor China International Mining

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

contractor started in 2009.

3.1.1.4 Petroleum Service Contract

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

4 (East Palawan Basin).

18
Relevance:

• The conflict over the Panatag Shoal which has oil and gas reserves

• The fuel smugglers being the Bureau of

Customs' one of the biggest problems

• The continuous conflict over the disputed island which is rich in different natural

resources, particularly oil and gas reserves.

• 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.

3.1.2.1 Level of Economic Growth

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.

3.1.2.2 Effects of Inflation

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,

and other fuels in the near term.

Figures and Illustration Table 3.1

3.1.2.3 Tax Reform Train Law – Excise Tax

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.

Figures and Illustration Table 3.2

22
Relevance:

 Expansion of the Philippine economy. Manufacturing and other industries grew faster

than services.

 An additional excise tax for petroleum products.

 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

3.1.3.1 Philippine Crude Oil Suppliers

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)

and South Korea (31 MB)

23
3.1.3.2 Other Petroleum Distributor and Suppliers

o Milestone Petroleum Marketing Corporation (MPMC) is a prime distributor of fuels to the

Philippine commercial-industrial sector. Its product line includes Shell-branded regular

fuel oil (RFO or bunker fuel), diesel fuel, kerosene and special fuel oils (SFO).

o OMNI PETROLEUM CORPORATION (OPC) is an emerging key player in the

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

of lubricants, different types of greases and various grades of asphalt.

3.1.3.3 Consumers' Preference

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

buying their products.

24
Relevance:

• Every product in the country depends on gasoline

• 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

3.1.4.1 Shell Philippines Exploration B.V. (SPEX) - Tabangao Refinery

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

The Malampaya deep-water gas-to-power

project signalled the birth of the natural gas industry in

the Philippines. It delivers up to 20% of the country’s

electricity requirements using indigenous resources of

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

supply of natural gas to power the Luzon electricity grid.

3.1.4.3 North Mindanao Import Facility

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

by providing substantial storage for finished petroleum products.

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

from conventional fuels, such as, gasoline and diesel.

27
Relevance:

• The three refineries of helped Shell to produce a quality petroleum products.

• The Malampaya signalled the birth of the natural gas industry in the Philippines.

• Continuous exploration in the Malampaya

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.

3.1.5.1 Response to Global Warming

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

which is the most-friendly form of developing biofuels

3.1.5.2 Natural Calamities

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.

3.1.5.3 Oil Depletion

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

liquid fuels that we get from petroleum.

29
Relevance:

• Shell promotes a healthy and safe environment to all by trying to meet the global energy

demand and limit CO2 emissions

• A healthier environment through the continuous search of alternatives that limit the

emissions of CO2

3.1.6 Legal Force

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

the Philippines are discussed.

3.1.6.1 Oil Deregulation

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

supplier to provide these requirements.

3.1.6.2 Presidential Decree 87 or The Oil and Development Act of 1972

It is an act promoting hasten discovery and production of indigenous petroleum through

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.

3.1.6.3 Department of Energy Circular No. 2002-08-005

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:

• Oil Deregulation Law promotes healthy competition in the oil industry

• More competitors might enter the oil industry since the Oil Deregulation law promote such

3.2 INDUSTRY ANALYSIS (PORTERS ANALYSIS)

PORTER’S FIVE FORCES

Potential Entry of New Competitor Low to Moderate

Bargaining Power of Suppliers Low

Potential Development of Substitute Low

Products

Bargaining Power of Consumers Low to Moderate

Rivalry among Competing Firms High

Figures and Illustration Table 3.3

Potential Entry of New Competitor (LOW TO MODERATE)

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

pose a barrier to them.

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

your timing hands-on over the business is a must.

Bargaining Power of Suppliers (LOW)

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

attractive options in meeting energy needs throughout the world.

Potential Development of Substitute Products (LOW)

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

same distance traveled.

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.

As to Quality of Substitute, Electric vehicles typically convert 59%-62% of the electrical

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.

Bargaining Power of Consumers (LOW TO MODERATE)

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

balance between quality of product and price.

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.

Rivalry among Competing Firms (HIGH)

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

enough to attract the attention of motorists.

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

are dependent upon the petroleum products

• Although there will be a continuous development of substitutes for fueledvehicles, people

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.

Summary and Conclusion

3.3 EXTERNAL FACTOR EVALUATION

Key External Factors Weight Rating Weighted

Score

Opportunities

Political: Petroleum Service Contract will help boost the 0.05 2 0.10

country's energy security, now more necessary than ever

given the volatility of world market prices of oil.

Economic: Expansion of Philippine economy 0.10 2 0.20

37
Social: It signals opportunities for crude oil-supplying 0.05 3 0.15

countries that help satisfy the powerful demand needed to

help the Filipino economy continue to grow.

Legal: Under the Oil Deregulation Law, people can put up 0.10 3 0.30

gasoline stations practically wherever and whenever they

want.

Technological: Exploration of possible alternatives to a 0.05 3 0.15

cleaner and more efficient petroleum products

Legal: Under the Oil Deregulation Law, petroleum 0.05 2 0.10

companies have freedom over pricing, export and

importation of oil products etc.

Industry: Low threat of potential development of 0.10 2 0.20

substitutes

Technological: Low bargaining power of suppliers 0.07 3 0.21

Threats

Downstream Oil Industry 0.03 2 0.06

Deregulation encourage competition among existing oil

companies.

38
Fuel smugglers sell oil products in a lower price 0.10 3 0.30

Additional excise tax in petroleum products 0.10 2 0.30

Price preference of consumers 0.10 2 0.20

Oil depletion 0.05 2 0.10

Government regulations 0.05 2 0.10

Total 0.93 2.47

Figures and Illustration Table 3.4

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

well as the competitors within the same industry.

3.4.1. Petron Corporation

Product/Service
STRENGTHS WEAKNESSES
Offering

Petron offers • The Petron brand itself • High investment in research


different fuel and development
• Good marketing strategy
products such as
• Tax structure
• High quality equipment
PetronXtra
• Wide range of oil and fuel
Advance Euro 4,
products
Petron Blaze
100 Euro 6,
Petron XCS
Euro 4, etc.

Figures and Illustration Table 3.5

40
3.4.2 Caltex Philippines

Product/Service
STRENGTHS WEAKNESSES
Offering

Caltex Philippines The Caltex brand itself • Weak advertising

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

Delo Engine oils.

Figures and Illustration Table 3.6

41
COMPETITIVE PROFILE MATRIX (CPM)

Pilipinas Shell Caltex


Petron
Corporation Philippines
Corporation

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

INTERNAL ANALYSIS OF PILIPINAS SHELL PETROLEUM CORPORATION

4.1 COMPANY’S MISSION, VISION

VISION

To be the most admired and trusted company that powers progress for the Filipino through

high-quality energy products & services.

MISSION STATEMENTS

 We delight our Customers with high quality fuels, lubricants & specialties, and best-in-

class technical & convenience services.

 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 partner with Government and Communities in promoting social investments and

advocacies that contribute to national development.

 We deliver consistent, attractive and increasing returns for our Shareholders through

operational excellence, superior value propositions and strong corporate governance.

44
VALUES

Honesty, Integrity, Respect, Care, Humility, Commitment

Parameters Y/N Explanation

Does it Yes Pilipinas Shell is a Philippines

clearly focused integrated

answer the downstream refining and

question: marketing company. It

What do we focuses on turning crude oil

want to into a range of refined

become? products, which are moved

and marketed for domestic,

industrial and transport use.

Pilipinas Shell more than just

working on to provide high-

quality fuels to its consumers,

the company is also

concerned with its Corporate

Social Responsibility.

45
Is it concise Yes It provides practical advice on

enough yet how to comply with laws and

inspirational? regulations and how to relate

to customers, communities

and colleagues. Pilipinas

Shell's vision statement is

concise but everything is

embodied in it.

Is it Yes It is empowering it clarifies

aspirational? the standards we expect

them, employees, to follow

and the behaviours we expect

to them to adopt.

Does it give No

clear

indication as

to when it

should be

attained?

Figures and Illustration Table 4.1

46
Mission

Parameters Y/N Explanation

Customers Yes "We delight our Customers with high quality fuels, lubricants &

specialties, and best-in-class technical & convenience services."

Markets No

Technology Yes “We delight our Customers with high quality fuels, lubricants &

specialties, and best-in-class technical & convenience services.”

Concern Yes “We partner with Government and Communities in promoting social

for investments and advocacies that contribute to national development.”

survival, "We deliver consistent, attractive and increasing

growth and returns for our Shareholders.."

profitability

Philosophy Yes "..operational excellence, superior value propositions and strong

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

image comply with all relevant legislation and regulations.”

47
"We partner with Government and Communities in promotic social

investments and advocacies that contribute to national development."

Concern Yes “We attract and retain the best Employees through very competitive

for remuneration and growth opportunities.”

employees

Concern Yes “Our core values are honesty, integrity and respect for people. “

for nation

Figures and Illustration Table 4.2

Revised Vision and Mission

Revised Vision

To be the most admired and trusted company that powers progress for the Filipino for the next

years through high-quality energy products & services.

48
Revised Mission

We, Pilipinas Shell Petroleum Corporation, aim to be the top oil provider in the Philippines

through the following:

• 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

services in Luzon, Visayas, and Mindanao.

• 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 partner with Government and Communities in promoting social investments and

advocacies that contribute to national development.

• We deliver consistent, attractive and increasing returns for our Shareholders through

operational excellence, superior value propositions and strong corporate governance.

Figures and Illustration Table 4.3

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

values and comply with all relevant legislation and regulations.

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.

5.1 DISTINCTIVE COMPETENCY

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

Figures and Illustration Table 5.1

51
BOARD OF DIRECTORS

An experienced Board of 11 independent and executive directors is in place to represent the

interest of Pilipinas Shell’s shareholders.

 Lydia B. Echauz INDEPENDENT DIRECTOR

 Cesar A. Buenaventura INDEPENDENT DIRECTOR

 Fernando Zobel de Ayala INDEPENDENT DIRECTOR (Filipino)

 Mona Lisa Bautista de la Cruz DIRECTOR (Filipino)

 Luis C. la Ó(Filipino)

 Cesar G. Romero DIRECTOR (Filipino)

 Jose Jerome Rivera Pascual III DIRECTOR (Filipino)

 Anthony Lawrence D. Yam DIRECTOR(Filipino)

 Anabil Dutta DIRECTOR (Indian)

52
MANAGEMENT TEAM

An experienced management team of 10 members is in place to enable a strong track record of

delivery.

 Cesar G. Romero PRESIDENT (Filipino)

 Jose Jerome Rivera Pascual III TREASURER / VICE PRESIDENT FOR

FINANCE (Filipino)

 Anthony Lawrence D. Yam VICE PRESIDENT FOR RETAIL (Filipino)

 Jan-Peter Groot Wassink VICE-PRESIDENT FOR MANUFACTURING(Dutch)

 Dennis C. Javier VICE PRESIDENT FOR WHOLESALE COMMERCIAL

FUELS (Filipino)

 Ramon Del Rosario VICE PRESIDENT FOR EXTERNAL AND GOVERNMENT

RELATIONS (Filipino)

 Jannet Cruz- Regalado VICE PRESIDENT FOR LEGAL (Filipino)

 Carlo D. Zandueta,VICE PRESIDENT FOR HUMAN RESOURCES (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

also available for further professional development and network making.

Shell also encourages their employees through salary bonus depending on individaual

performance and contribution (project implementation) and business performance on the world

market. Assignment of overseas project, specifically in Royal Dutch Shell.

SBO-Manila provides processing services related to finance, human resources, procurement,

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

as Gas Mo Bukas Ko (GMBK), Sanayan ng Kakayahan sa Agrikultura (SAKA), and Sanayan sa

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

augment their current income.

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

Figures and Illustration Table 5.2

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.

Figures and Illustration Table 5.3

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

with high-performance computers using advanced algorithms to produce an accurate geological

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

successes in oil and gas exploration.

Figures and Illustration Table 5.4

5.5 MARKETING

In Marketing, the products, consumer behaviour, the way how the company advertise

their products and the marketing research will be discussed.

Well-Known Fuel Products of Pilipinas Shell

59
Shell FuelSave

Shell FuelSave is the regularly priced fuel that is designed to last

longer compared to standard fuels. It can enable you to do more and

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

are designed to last longer.

Shell FuelSave Gasoline Fuel Efficiency

Shell FuelSave Gasoline is our regular priced gasoline that is

designed to last longer. With Active Efficiency Ingredients, Shell

FuelSave gasoline is designed to improve engine efficiency.

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

formula, which can help maintain inlet valves clean.

60
Smoother Running

Shell FuelSave Gasoline is designed to reduce energy losses in the engine, which can help improve

the engine’s efficiency and help motorists get a little further.

Shell FuelSave Diesel Fuel Efficiency

Shell FuelSave Diesel is our regular priced diesel that is designed

to last longer. With Active Efficiency Ingredients, Shell FuelSave

Diesel is designed to improve engine efficiency.

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

and prevent deposits building up in the engine.

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

best performance, both in laboratory conditions and on-road testing.

Shell V-Power Diesel Product Benefits

Performance: New Shell V-Power Diesel provides the best performance. It

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

Performance: New Shell V-Power helps to remove up to 80% of

performance-robbing deposits. The DYNAFLEX technology not only

helps to improve engine condition, it helps maximize the energy obtained

from the fuel. Laboratory tests show that friction-reducing molecules

decrease energy wasted from heat. Less energy wasted helps improve engine efficiency and

performance. Shell V-Power Gasoline cleans and protects the engine.

Shell V-Power Racing Product Benefits

Shell V-Power Racing has enhanced octane for improved performance

and efficiency. Shell V-Power Racing contains powerful cleaning

technology designed to help remove and prevent the build-up of fuel

system deposits and a new friction-busting molecule helping engine efficiency. Shell V-Power

Racing is a unique formulation containing the latest generation of friction-reducing technology

and powerful cleaning technology to help restore performance.

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

excellent service of well-trained experts, customers get to enjoy world-

class service without breaking the bank.

Shell Helix

Shell Helix engine oils are designed to meet your needs,

whatever your driving challenges. From the first synthetic

motor oil designed from natural gas to premium multi-grade

oils for everyday driving environments, the Shell Helix

range has an oil to suit every engine.

Shell Helix Ultra with Pureplus technology

Shell Helix Ultra is the first synthetic motor oil designed from natural gas that gives you

long lasting engine performance. Shell PurePlusTechnology is a revolutionary process that

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,

enhance fuel economy and enable better engine cleanliness.

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

innovative lubricant technology, smarter products and energy efficient

engineering solutions that ultimately promote cleaner energy, smarter

mobility and a sustainable energy future.

Shell Advance

Shell Advance is a line of engine oils specially formulated for

motorcycle and scooter engines that provides maximum protection and

keeps your bike running smoothly and responding perfectly. Shell

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 Select Convenience Store

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,

refreshments, groceries, newspapers, magazines and hot meals.

Deli-to-Go

We aim to transform retail stations into a one-stop shop for motorists, with

their newest addition - Shell Select offerings— Deli2Go. Launched to further

amplify the Shell customer experience, these hearty meals and snacks at Deli2Go are tasty, fresh,

and affordably priced.

66
5.6. RESEARCH AND DEVELOPMENT

In Research and Development, the potential of developing new products and improving

existing products will be discussed.

5.6.1 Developing New Product

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

performance but also safety, efficiency, and economy

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

benzene-precursors to the reforming (gasoline upgrading) unit. Furthermore, all specifications of

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.

5.7 MANAGEMENT INFORMATION SYSTEM

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

Debt to Equity Ratio


40.45 35.73
Debt to Total Asset Ratio
15.36 18.39
Long Term Debt to Equity
21.91% 11.87
Ratio

Efficiency

Inventory Turnover
8.17 12.47
Fixed Asset Turnover
13.60 22.22%
Total Asset Turnover
2.59 2.22
Profitability

Operating Profit Margin


6.64% +7.48

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

INTERNAL FACTOR EVALUATION

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

Sufficient manual and technical capabilities of workers 0.05 3 0.30


Great employer-employee relationship 0.04 4 0.16
Continuous innovation of product 0.05 4 0.20
Values the corporate social responsibility 0.05 3 0.15
Coaching and mentorship strategies 0.05 3 0.15

71
Weaknesses
High cost of operating equipment 0.05 2 0.10

Occupational safety of their employees in the 0.03 2 0.06


refineries

Lack of operational knowledge in use of new 0.05 2 0.10


technology
Consumers' price preference 0.10 1 0.10

Environmental issues 0.10 2 0.20

Process for intellectual property 0.08 2 0.16

The innovation must conform with Philippine product 0.10 2 0.20


standards
Bargaining with labor groups 0.05 1 0.05

Total 1 2.63

Figures and Illustration Table 5.6

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

operations of Pilipinas Shell Petroleum Corporation can be said to be continuously expanding in

the oil industry. Overall, there are strategies by the company that are being used or utilized properly

that to respond to their weaknesses.

72
CHAPTER 5

STRATEGY FORMULATION OF PILIPINAS SHELL PETROLEUM CORPORATION

Pilipinas Shell Petroleum Corporation is a Philippine-focused integrated downstream 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 Shell FuelSave Diesel

in our stations all over the country.

73
6.1 A SWOT Matrix for Pilipinas Shell Petroleum Corporation

Strengths Weaknesses

1. Shell's brand name itself 1. High cost of operating

equipment
2. Strategic advertising

2. Occupational safety of their


3. High quality equipment
employees in the refineries
4. Sufficient manual and technical
3. Lack of operational
capabilities of workers
knowledge in use of new
5. Great employer-employee
technology
relationship
4. Cannot meet the price
6. Continuous innovation of
demand of consumers
product
5. Environmental issues
7. Values the corporate social

responsibility 6. Process for intellectual

property
8. Coaching and mentorship
7. The innovation must
strategies
conform with Philippine

product standards

8. Bargaining with labor group

74
Opportunities SO Strategies WO Strategies

1. A law that regulates the 1. Expansion of branches 1. Capitalize on improved


entry of potential oil to reach a bigger market safety measure [W2,
company through its [S1, S2, O2, O4, O7] O2, O5]
financial and technical 2. Competitive pricing 2. Conduct more trainings
capabilities 3. [S1, S2, O6] for the employees [W3,
2. Expansion of 4. Give freebies or promos O2, O5]
Philippine economy to some regular Shell 3. Generate more
3. Filipinos are customers upon reaching innovative marketing
inherently attracted to a certain price [S2, S6, campaigns
promos and discounts O3] [W4, O3, O7]
4. Under the Oil 5. Develop a cheaper fuel 4. Invest in highly
Deregulation Law, in order to attract more developed
people can put up consumers [S6,O3, O6] environmental research
gasoline stations and development [W5,
practically wherever O5, O7]
and whenever they
want.
5. Exploration of
possible alternatives to
a cleaner and more
efficient petroleum
products
6. Under the Oil
Deregulation Law,
petroleum companies
have freedom over
pricing, export and
importation of oil
products etc.
7. Low threat of
potential development
of substitutes
8. Low bargaining
power of suppliers

75
Threats ST Strategies WT Strategies

1. Downstream Oil Industry 1. Develop more branding 1. Develop marketing

Deregulation encourage advertisements with campaigns to empower

competition among existing advanced research and the competency of oil

oil companies. development [S1, S2, T2] industry [W5.T6]

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]

petroleum products such as evolving less

4. Price preference of carbon footprint

consumers movement [S7, T8]

5. Oil depletion 3. Have a partnership

6. Government regulations training or seminar with

7. Enforcement of Intellectual TESDA or other company

Property Code enhancing labor skills

8. Enforcement of Clean Air [S4, T6]

Act 4. Have a partnership with

organizations advocating

a healthier environment

[S7, T8]
6.2 Strategic Position and Action Evaluation

Internal Strategic Position External Strategic Position

Financial Position (FP) Stability Position (SP)

Liquidity Petroleum Service Contract will help


Leverage boost the country's energy security,
Efficiency now more necessary than ever given
Profitability the volatility of world market prices of
oil.

Expansion of Philippine economy

It signals opportunities for crude oil-


supplying countries that help satisfy the
powerful demand needed to help the

Filipino economy continue to grow.

Under the Oil Deregulation Law, people


can put up gasoline stations practically
wherever and whenever they want.

Exploration of possible alternatives to a


cleaner and more efficient petroleum
products

Under the Oil Deregulation Law,


petroleum companies have freedom
over pricing, export and importation of
oil products etc.

Low bargaining power of suppliers

77
Competitive Position (CP) Industry Position (IP)

Shell's brand name itself Low threat of potential

Strategic advertising development of substitutes

High quality equipment

Sufficient manual and technical capabilities of workers

Great employer-employee relationship

Continuous innovation of product

Values the corporate social responsibility

Coaching and mentorship strategies

High cost of operating equipment

Occupational safety of their employees in the refineries

Lack of operational knowledge in use of new technology

Consumers' price preference

Environmental issues

Process for intellectual property

The innovation must conform with Philippine product standards

Bargaining with labor groups

78
6.3 SPACE Matrix for Pilipinas Shell Corporation

Financial Position (FP) Ratings

High cost of operating equipment 2

Process for intellectual property 2

Total 4

Industry Position (IP)

DOE Circular No. 2003-05-006 regulates the entry of potential oil 3


company through its financial and technical capabilities.

Expansion of Philippine economy 5

Under the Oil Deregulation Law, petroleum companies have freedom over 3
pricing, export and importation of oil products etc.

Fuel smugglers sell oil products in a lower price 4

Additional excise tax in petroleum products 5

Government regulations 4

Enforcement of Intellectual Property Code 5

Enforcement of Clean Air Act 5


Low threat of potential development of substitutes 3

Total 37

Stability Position (SP)

Expansion of industries that are heavily dependent on oil products -3

Exploration of possible alternatives to a cleaner and more efficient -3


petroleum products

Filipinos are inherently attracted to promos and discounts -3

Price preference of consumers -4

Oil depletion -2

Low bargaining power of suppliers -3

Downstream Oil Industry Deregulation encourages competition among -3


existing oil companies

Total -21

Competitive Position (CP)

Shell's brand name itself -1

Sufficient manual and technical capabilities of workers -3

High quality equipment -3

80
Continuous innovation of produc -3

Great employer-employee relationship -3

Strategic advertising -2

Values the corporate social responsibility -3

Coaching and mentorship strategies -3

Occupational safety of their employees in the refineries -4

Lack of operational knowledge in use of new technology -4

Cannot meet the price demand of consumers -2

Environmental issues -2

The innovation must conform with Philippine product standards -2

Bargaining with labor groups -4

Total -39

Conclusion

SP Average is -21.0 ÷ 7 = -3.0 IP Average is 37 ÷ 9 = +4.11

CP Average is -39 ÷ 14 = -2.79 FP Average is 4 ÷ 2 = +2.0

Directional Vector Coordinates: X-axis: (+4.11) + (-2.79) = (+1.32)

Y-axis: (+2.0) + (-3.0) = (-1.0)

81
Figures and Illustration Table 6.1

Analysis:

THE PILIPINAS SHELL SHOULD PURSUE COMPETITIVE STRATEGIES

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,

Market Penetration, Market Development and Product Development.

82
6.4 The BCG Matrix

Relative Market Share Position

High Medium Low

1.0 .50 0.0

High +20  Backward, Forward, or


Horizontal Integration  Market Penetration
 Market Penetration  Market Development
INDUSTRY GROWTH RATE

 Market Development  Product Development


 Product development  Divestiture

STARS QUESTION MARK


(Percentage)

I
II
Medium 0
 Product Development
 Retrenchment
 Diversification
 Divestiture
 Retrenchment
 Liquidation
 Divestiture
DOGS
CASH FLOWS
IV
Low -20 III

Figures and Illustration Table 6.2

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

alternative strategies Market Penetration, Market Development, Product Development, and

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

 Backward, Forward, or Horizontal Integration


 Market Penetrattion
 Market Development
 Product Development

THE IFE TOTAL WEIGHTED SCORES

Strong Average Weak


3.0 to 4.0 2.0 to 2.99 1.0 to 1.99

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

Penetration or Product Development or both.

6.6 The Grand Strategy Matrix


RAPID GROWTH MARKET

Quadrant I
Quadrant II 1. Product Development

STRONG COMPETITIVE COMPETITION


Market Penetration
WEAK COMPETITIVE COMPETITION

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

SLOW COMPETITIVE GROWTH


Figures and Illustration Table 6.4

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

Integration, Backward Integration, Market Development, and Related Diversification. Although

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

STRATEGIES MATRICES TOTAL

SWOT SPACE BCG IE GSM TOTAL

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

Strategy 1 Strategy 2 Strategy 3


Market Market Product
Penetration Developm Developm
ent ent

Key Internal Factors Weight AS TAS AS TAS AS TAS

Opportunities

1. DOE Circular No. 2003-05- 0.05 2 0.10 4 0.20 3 0.15

006 regulates the entry of

potential oil company through

its financial and technical

capabilities.

2. Expansion of Philippine 0.10 2 0.20 3 0.30 4 0.40

economy

3. Filipinos are inherently 0.05 4 0.20 2 0.10 3 0.15

attracted to promos and

discounts

89
4. Under the Oil Deregulation 0.10 2 0.20 4 0.40 3 0.30

Law, people can put up

gasoline stations practically

wherever and whenever they

want.

5. Exploration of possible 0.05 2 0.10 3 0.15 4 0.20

alternatives to a cleaner and

more efficient petroleum

products

6. Under the Oil Deregulation 0.05 2 0.10 3 0.15 4 0.20

Law, petroleum companies

have freedom over pricing,

export and importation of oil

products etc.

7. Low threat of potential 0.10 2 0.20 3 0.30 4 0.40

development of substitutes

8. Low bargaining power of 0.07 1 0.07 2 0.14 4 0.28

suppliers

90
S 1

Strategy 1 Strategy 2 Strategy 3


Market Market Product
Penetration Developm Developm
ent ent

Key Internal Factors Weight AS TAS AS TAS AS TAS

Threats
1. Downstream Oil Industry 0.03 2 0.06 4 0.12 3 0.09
Deregulation encourage
competition among existing
oil companies.

2. Fuel smugglers sell oil 0.10 4 0.40 2 0.20 3 0.30


products in a lower price

3. Additional excise tax in 0.10 2 0.20 3 0.30 4 0.40


petroleum products

4. Price preference of 0.10 4 0.40 2 0.20 3 0.30


consumers

5. Oil depletion 0.05 - - - - - -

6. Government regulations 0.05 1 0.05 2 0.10 4 0.20

7. Enforcement of Intellectual 0.02 - - - - - -


Property
Code

8. Enforcement of Clean Air 0.05 - - - - -


Act

Total 1.00

91
S 1
Strategy 1 Strategy Strategy
Market 2 3
Penetratio Market Product
n Develop Develop
ment ment

Key Internal Factors Weight AS TAS AS TAS AS TAS

Strengths

1. Shell's brand name itself 0.10 2 0.20 4 0.40 3 0.30

2. Strategic advertising 0.10 4 0.40 2 0.20 3 0.30

3. High quality equipment 0.05 1 0.05 2 0.10 4 0.20

4. Sufficient manual and 0.05 1 0.10 3 0.15 4 0.20


technical capabilities of
workers

5. Great employer-employee 0.04 2 - -- - - -


relationship

6. Continuous innovation of 0.05 2 0.10 3 0.15 4 0.20


product

7. Values the corporate social 0.05 2 0.10 1 0.05 4 0.20


responsibility

8. Coaching and mentorship 0.05 4 0.20 2 0.10 3 0.15


strategies

92
S
Strategy 1 Strategy Strategy 1
Market 2 3
Penetratio Market Product
n Develop Develop
ment ment

Key Internal Factors Weight AS TAS AS TAS AS TAS


Weaknesses

1. High cost of operating 0.05 - - - - - -


equipment
2. Occupational safety of their 0.03 - - - - - -
employees in the refineries
3. Lack of operational 0.05 - - - - - -
knowledge in use of new
technology
4. Consumers' price 0.10 3 0.30 2 0.20 4 0.40
preference
5. Environmental issues 0.10 1 0.10 3 0.30 4 0.40

6. Process for intellectual 0.08 - - - - -


property
7. The innovation must 0.10 3 0.30 1 0.10 4 0.40
conform with Philippine
product standards
8. Bargaining with labor 0.05 - - - - - -
groups
Total Weight for Strengths and 1

Sum Total Attractiveness Score 4.13 4.41 6.12

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

to promos, discounts and freebies.

94
CHAPTER 6

OBJECTIVES, RECOMMENDATIONS AND ACTION PLANS

Pilipinas Shell Petroleum Corporation is a Philippine-focused integrated downstream

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

Shell FuelSave Diesel in our stations all over the country.

6.1 Strategic Objectives

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

• To continuously increase employee satisfaction by providing more incentive programs

• To maintain a productive and positive employee environment

95
Operations or Internal related Objectives

• To provide a safer workplace for laborers in Pilipinas Shell refineries

• To ensure compliance with the Philippine laws and government regulations Other Finance

related Objectives

• To increase capital by 20%

• To increase profit by 30%

Marketing or Customer related Objectives

• To give customers the best value for the cost

• To continuously provide a good customer service

6.1.1. Strategic Issues

Strategic Issues are the big problems or challenge that a company is facing.

Strategic Issue #1: Environmental image of Pilipinas Shell

Being one of the biggest oil players in the country, there is a connotation that the

company is also one of the biggest contributors of air pollution.

Strategic Issue #2: Security risk on Malampaya to the laborers

96
In order to effectively execute the different strategies or plans of the company, the welfare

of its employees should be taken into consideration.

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

to meet the demand of the consumers.

6.1.2. Strategic Objectives

Strategic Objective #1:

• To ensure compliance with the Philippine laws and government regulations

Strategic Objective #2:

• To provide a safer workplace for laborers in Pilipinas Shell refineries

Strategic Objective #3:

• To increase capital by 20%

97
6.1.3 Financial Objective

Years Revenue Net Income

2019 143,601,450.3 7,815,963.75

2020 150,781,522.82 9,046,891.37

2021 165,859,675.09 9,951,580.51

2022 182,445,642.61 10,946,738.56

2023 200,690,206.87 12,041,412.41

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.

6.2 Recommended Business Strategies

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.

98
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.

6.2.1 Strategy Ranked Number 1: Product Development

Product Development is a strategy which seeks to increase sales by improving or modifying

present products or services. Pilipinas Shell should introduce new fuel product/s produces no

carbon footprints without compromising the demanded cost by the consumers.

6.2.2 Strategy Ranked Number 2: Market Development

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.

99
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.

6.3 Recommended Organizational Strategies

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.

100
6.4 Strategy Map

Maximize Maintain high


Shareholder profitability
FINANCIAL Value

Consumer Customer
Satisfaction Loyalty
CUSTOMER

INTERNAL BUSINESS
Produce high Maximize
PROCESS
quality products operational
effectiveness

Increase employee
LEARNING AND satisfaction
GROWTH

101
6.5 Financial Projection

Projected Income Statement

Year 2019 2020 2021 2022 2023 2024

Sales 136,763,28 143,601,45 150,781,52 165,859,67 182,445,64 200,690,20


Revenues 6 0 2.815 5 2 6
.3 .1 .61 .87
Cost of 112,461,54 118,084,62 123,988,85 136,387,73 150,026,51 165,029,16
Sales 6 3.3 4.47 9.91 3. 5
90 .29
Gross 24.301,740 25,516,827 26,792,668 29,471,935 32,419,128 35,661,041
Margin .35 .19 .70 .57
Selling 10,562,727 10,773,981 11,312,680 12,443,948 13,688,343 15,057,177
Expenses .54 .62 .68 .55 .90
General 2,500,333 2,550,339. 2,677,856. 2,945,642. 3,240,206. 3,564,227.
and 66 64 31 54 19
administrat
ive
expenses
Other 470,707 475,414.07 499,184.77 549,103.25 604,013.58 664,414.93
operating
income,
net
Finance (1,058,018 (1,026,277. (1,077,591. (1,185,350. (1,303,885. (1,434,274.
Expenses ) 46) 33) 47) 51) 06)

102
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

Retained 7,434,107 7,806,296 9,037,223 9,941,913 10,937,071 12,031,744


Earnings at
the end of
the year

Growth Rate based on Sales Revenue

Growth Rate 1 (2016, 2017)= (156,977,696-224,084,825)= -29.95%


224,084,825
Growth Rate 2 (2017, 2018)= (136,763,286-156,977,696)= -12.88%
156,977,696
Growth Rate= (-29.95%)+(-12.88%)= -21.41%
2

103
Projected Financial Position

2019 2020 2021 2022 2023 2024


ASSETS
Current 4,274,2 8,054,588.2 (147,709,0 672,281,85 548,129,27 792,232,210
Assets 66 3 91 4 3.95 .48
Cash .74) .41
Receivabls, 8,821,5 9,968,382.0 161,248,3 115,134,81. 12,664,829 13,931,312.
net 77 1 23.93 22 .34 28
Inventories 16,381, 17,200,466. 16,884,20 19,866,539. 21,853,193 24,038,512.
,net 397 85 13.0 21 .13 45
1
Prepaymen 9,379,1 10,785,974. 162,106,7 12,457,800. 13,703,580 15,073,938.
s and other 08 2 95.73 20 .22 24
current
assets
TOTAL 38,856, 596,350,87 845,275,973
CURREN 348 46,0 323,355,1 32,3 6 .45
T ASSETS 09,411 20 24,339 .64
Non-
current
Assets
Long-term 4,056,0 4,867,234.8 155,892,1 171,481,33 188,629,46 207,492,410
receivable, 29 19.36 1.29 4.42 .86
rentals and
investmen,
net
Property 23,378, 29,222,897. 181,465,5 199,612,12 219,573,33 241,530,667
and 318 5 65.19 1.71 3.88 .26
equipment,
net
Deferred 330,31 396,372 151,197,7 166,317,48 182,949,23 201,244,156
income tax 0 13.42 4.74 3.23 .56
assets, net
Other 3,988,2 4,785,895.2 155,806,7 2,086.29 188,526,12 18,088,725.
assets, net 46 12.78 2.46 891

104
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

105
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

Share 1,681,0 1,933,216.7 152,811,4 168,092,54 184,901,79 203,391,973


capital 58 00 0 4 .87
.35 .39 .42
Share 26,161, 31,195,254. 183,536,5 201,890,19 222,079,21 244,287,134
premium 736 01 39.52 3 2 .10
.47 .82
Treasury (507,1 (60,8527.2) 150,142,5 165,156,82 181,672,50 199,839,759
shares 06) 69 6 8 .68
.26 .18 .80
Retained 5,111,8 5,878,648.2 156,954,1 172,649,51 189,914,46 208,905,911
earnings 68 03 3 5.14 .66
(deficit) .43 .77
Other 480,71 553,791.75 637,974.7 166,499,30 183,149,23 201,464,158
reserves 7 4 4 5 .53
.57 .03
TOTAL 32,928, 38,952,383. 644,082,5 874,288,37 961,717,21 1,057,888,9
EQUITY 273 46 87.30 8.38 6.22 37
.84
TOTAL 70,609, 80,099,544. 988,850,1 1,253,532,6 1,376,029, 1,513,631,9
LIABILITI 251 26 51.77 9. 030 33
ES AND 29 .62 .68
EQUITY

106
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

Activities Timeline Team Responsible


Preparation of presentation

May 2019 Legal group


Presentation to be

presented to the viewers

Seminar

Awareness of new laws or May 2019 Legal group

rules and regulations

passed

107
Legal Program: Law Compliance Checking

Activities Timeline Team Responsible

Seminar

To be knowledgeable of the June 2019 Legal group


steps to take to assure
compliance of law
Checking of the products,
papers, and other internal
matters
June 2019 Legal group and HR group

Awareness if there is non-


compliance to the law
Modification of matters that
are not aligned with the
Philippine law
Legal, Operational,
June 2019
HR, and Finance Department
Alignment of the company's
pursuits
with the law

108
Operations/Productions Department
Operations Management Program: Planning for product development

Activities Timeline Team Responsible

Seminar

Awareness of the July 2019 Legal group

company's rights toward

intellectual property

Meeting with the

Finance and HR

Department
Operations, HR, and Finance
May 2019
Department
Discussion of the steps to be

taken by the Finance and

HR

109
Operations Management Program: Carbon-Neutral Fuel
Activities Timeline Team, Responsible

Fuel component study 2019-2020 Innovative group

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

Determination whether the


product is effectively
without carbon emission

Operations Management Program: Carbon-Neutral Fuel test drive


Activities Time line Team Responsible

Testing of product 2021 Operations group


effectiveness
Determination whether the
product is effectively
without carbon emission
Introduction of the product 2021 Marketing group

Consumers will try Carbon-


Neutral Fuel

110
Marketing Department
Marketing Program: Development of posters for new fuel product

Activities Timeline Team Responsible

Creation of posters 2021 Marketing Creatives Group

Softcopy design of new

poster

Printing 2021 Marketing Creatives Group

Hardcopy design of new

poster

Delivery to stores 2021 Operations group

Posting of new poster

Marketing Program: Competitor audit

Activities Time Table Persons or Units


Responsible
Business checking of Petron June 2019 Marketing Research Group
and Caltex
Status of Petron and Caltex

111
Marketing Program: Enhancement of Shell Select store and gasoline station design

Activities Timeline Team Responsibble

Creation of various store August 2019 Operations group


designs

Design of new store and


station look

Submission for approval September 2019 Mrketing group

Approval of the designs

Renovation of stores and November 2019 Operations group


stations

Human Resource Department

Activities Timeline Team Responsibble

Seminar June 2019 HR group

Work efficiency June 2019 HR group


examination
Know what are the things to
improve to
the newly hired employees
Training per se July 2019 HR group
Improvements of the newly
hired employees

112
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

Determination of suitable Apri-May 2019 HR group

applicants

Selection of the most

suitable engineers among April-May 2019 HR group

the applicants

Hiring

The selected applicants will May 2019 HR group

report to work

113
HR Program: Hiring of experienced scientists
Activities Timeline Team Responsible

Advertisement of job

posting

April 2019 Marketing group

Submission of resume of

interested applicants

Interview

Apri-May 2019 HR group


Determination of suitable

applicants

Selection

Selection of the most April-May 2019 HR group

suitable engineers among

the applicants

Hiring

May 2019 HR group


The selected applicants will

report to work

114
HR Program: Training of new employees
Finance Department
Finance Management Program: Budget allocation for research and development

Activities Timeline Team Responsible

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

Acquire necessary tools to


effectively study the
development
of a product

115
Finance Management Program: Budget allocation for product modification
Activities Timeline Team Responsible

Meeting with research and June 2019 Finance, and


development group Research and
Development Group
Agreement of the budget
needed of the research and
development unit
Meeting with potential June 2019 Budget and operations group
suppliers of raw materials

Deal with suppliers


Purchase of the necessary July 2019 Budget and
raw materials Operations group

Acquisition of the necessary


raw materials

Finance Management Program: Budget allocation for store and station renovation
Activities Timeline Team Responsible

Inspection of stations October 2019 Budget Group and Operations


Group
Determination of branches
that will undergo
renovation
Meeting with construction October 2019 Budget Group and Operations
suppliers Group
Purchase of the necessary November 2019 Budget Group and Operations
tools and equipment, and Group
supplies
Acquisition of the necessary
tools and equipment

116
CHAPTER 7

STRATEGY EVALUATION AND MONITORING AND CONTROL

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

Internal Process Perspective

7.1 Balance Scorecard

Financial Perspective

Objective Indicator Target Initiatives

Maintain high Ensure return on Increase net income Improve market

profitability investment, check by 15% development

revenue

Maximize Ensure sales and Increase net sales by Improve Market

shareholder value earnings 12% Penetration

117
Customer Perspective

Objective Indicator Target Initiatives

Consumer Efficient customer Decrease consumer Gain customer


satisfaction service in Shell complaints
gasoline stations loyalty

Retain customer Reward Shell patrons Attract more Improve market


loyalty through consumers into
giving promos or patronizing Shell penetration
freebies

Internal Business Perspective

Objective Indicator Target Initiatives

Strengthen Create more CSR Build a good Training and

Corporate Social related projects, reputation to the development

Responsibility specifically for public with regard programs

green environment to environmental

concerns

Increase employee Give more incentives Decrease employee Incentives and

satisfaction or turnover rewards

provide a reward and inefficiency

and recognition

program

118
Learning and Growth Perspective

Objective Indicator Target Initiatives

Development and Employees feedback Willingness to be the Create team

training programs best in their job to organization to

exceed client’s strengthen the

expectations organization

Maintain strong Customer loyalty Increase by 100% Conduct events that

relationship with would strengthen the

customers customer relationship

119
CHAPTER 8

APPENDICES

120
121
122
123