Assignment 1:

Company :
Attock Petroleum Limited (APL) is an associate company of the Attock Oil Group of Companies, which is the only fully vertically integrated Group in the Oil & Gas sector of Pakistan involved in Exploration & Production, Refining & Marketing. Attock Petroleum Limited (APL) is the 4th Oil Marketing Company in Pakistan to be granted a marketing license in February 1998. Though a new entrant in the field of oil marketing, APL has managed to establish its presence and reputation as a progressive and dynamic organization focusing on providing quality and environment friendly petroleum products and services in Pakistan and abroad. Its steady and substantially growing market share and customer confidence, which it enjoys, are manifestations of APL's successful policies. Type Founded Employees Headquarters Industry Oil Marketing Company 1998 950-990 Islamabad, Pakistan Petroleum/Oil & Gas Pakistan State Oil (PSO) Shell Pakistan Limited (SPL) Chevron Pakistan Ltd. (CPL) Total-Parco Pakistan Limited (TPPL) Byco Petroleum Pakistan Limited (BPPL) Bakri Trading Company Pakistan (BTCPL) Hascol Petroleum Limited Overseas Oil Trading Company (Pvt.) Ltd (OOTCL) etc.

Competitors

Mission:
To continuously provide quality and environment friendly petroleum products and related services to industrial, commercial and retail consumers, and exceeding their expectations through reliability, economy and quality of products and services. APL is committed to benefiting the community and ensuring the creation of a safe, responsible and innovative environment geared to client satisfaction, end user gratification, employees' motivation and shareholders value.

Vision:
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To become a world class, professionally managed, fully integrated, customer focused, Oil Marketing Company, offering value added quality and environment friendly products and services to its customers in Pakistan and beyond.

Goals:
The Corporate Goal of the Company is to become the predominant supplier of petroleum and value added products in Pakistan as well as neighboring countries.

Industry Analysis
Dominant characteristics
Market size 7.9%

Forces of changes

Key Survival Factors/ Attractiveness

Impact of environment or Life cycle stage Rapid global financial conditions for e.g: growth stage

In alignment with their aim of continuing growth and strengthening shareholder value, APLs future outlook as of 2012 Un-resolved is condensed in the Growth rate - 18% problems of following points: circular debt, Rivals scopepower and gas shortages, Setting up of Storage Competitive strategies are unstable security Facility at Port Qasim concerned with doing things situation, high Karachi, for import of better than rivals. APL can inflationary High Speed Diesel and achieve it by two main ways pressures and exports of Naphtha of being competitive. worst ever floods. Owing to these 1. By selling goods at lower factors, Development of prices than rivals. investment fell, Company Financed Retail investor Outlets targeting high 2. By differentiating product confidence trade areas and from those of rivals - which ebbed, poverty highways, thereby further enables APL to charge a and strengthening its higher price if desired. unemployment presence and market increased and the share. Vertical integration overall growth of the economy Vertically integrated declined. Setting up of Lubricant (backward) in Exploration & blending plant and Production (POL), & Refining The decline in the increasing focus on

(ARL, NRL)

Industry change
Industry change for APL is of Progressive type where the basic assets, activities, and underlying technologies remained stable

Product/service differentiation
APL will need to develop differentiated value propositions, to improve revenues and their bottom lines; by adopting a customer focussed approach and build strong brand equity. It can be achieved by offering nonfuel products and services. Non-fuel products, which offer higher margins compared to petroleum products, enable companies to sustain themselves, especially during times when oil prices are high. Fuel Based Proposition: APL can sell multiple grade fuels based on the octane ratings, with different prices at different stations, where the customer can hunt for a bargain. Non-Fuel Proposition: Based

overall economic growth and increase in the price of the petroleum products also had its impact on the annual oil industry trade for petroleum products which declined by 2% from 20.742 million M. Tons to 20.334 million M. Tons.

marketing of Gasoline Engine Oils and Industrial Lubricants. Development of Storage Depots locally at Mahmood Kot Multan, Machike and Tarujaba NWFP and Afghanistan to improve supply to retail outlets. Expansion of consumer base in other petroleum products locally and in Afghanistan. Increasing Storage Capacity of existing bulk oil terminal at Rawalpindi Bulk Oil Terminal (RBT) and Machike Bulk Oil Terminal (MBT), at a cost of Rs 322 million. Expansion of retail outlet network in Sindh, Upper Punjab and Afghanistan.

To get a larger share of the customers' wallet, non-fuel products and services are necessary. Non-fuel revenues contribute significantly for the petroleum retailers.

The non-fuel products and services can be broadly grouped into 3 categories: Convenience stores Stores) Auto Care Services Ancillary Services (C

Economy of scale
Economies of scale for APL consists of new capital investments for new storage terminals, storage tanks, R & D, new Retails Outlets etc.

Barriers to entry
Govt. Policies Environmental Laws Regulations Licenses Huge start up capital required Access to inputs is difficult

Situation Analysis
External F=Favorable Porter S=Strong/M=Medi
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environme nt
Social/cultur al
Favorable Based on following factors Location of retailing, manufacturing, and service businesses Attitudes toward business Lifestyles Traffic congestion Inner-city environments Average disposable income Buying habits Attitudes toward saving Attitudes toward leisure time Attitudes toward product quality Attitudes toward customer service Social programs Social responsibility

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Buyers

um/W=Weak
Medium
The power of buyers describe the effect that APL customers have on the profitability of its business. Since APL has many large as well as small buyers incl. bulk institutions, industries, distributors, dealers, individuals, third parties etc. Overall buyers have lesser power than APL due to fact that direct consumers do not have many options for their demands. However, APL must be creative in dealing with consumers, usually by offering loyalty programs and increasing perceived value. APL has benefit of offering products that are in demand even in strikes or in adverse conditions, firstly due to its substantial distribution & supply chain network & secondly due to availability of product all the times because of its facilities/terminals in both the group refineries i.e. ARL & NRL.

Demographi c Trends

Favorable Based on following factors

Supplie rs

Medium
For APL, one of the main

 Levels of Disposable Income Population Changes By Race, Age, & Area Attitudes Towards Leisure Time Attitudes Towards Customer Service Regional Changes in Preferences Rising Consciousness for the Natural Environment

supply decisions lies within key suppliers, i.e NRL & ARL. Since both the main suppliers of petroleum products to APL lies with same group of companies, therefore APL has advantage of having mutual benefits with the suppliers. Since the petroleum products prices are regulated by the govt., it means that APL has minor role in supplier process. However a managed demand & supply chain maintained by APL can increase the profits.

Economic Trends

Favorable Based on following factors Interest Rates Inflation Rates Unemployment Trends Tax Rates Budget Deficits Stock Market Trends Foreign countries economic conditions Import/export factors Demand shifts for goods/services Income differences by region/customer Price fluctuations Exportation of labor & capital Monetary policies Fiscal policies

Rivals

Weak
Threats of rivalry can be reduced by employing a variety of tactics. By minimizing price & distinguish products from competitors by innovating or improving features. Other tactics include focusing on a unique segment of market, distributing product in a novel channel or trying to form stronger relationships and build customer loyalty. There are small numbers of competitors for APL, but they have quite larger market share as compared to APL. The market and demand is growing, offering opportunities for future growth without extreme rivalry. However, staying

 ECC policies (European policies) OPEC policies (Organization of Petroleum exporting countries)

ahead of the rivals is the key for future success.

Political/Leg al

UnFavorable Based on following factors Government Regulations and Deregulation Special Tariffs Environmental Protection Laws Pak-Foreign Country Relationships Import-Export Regulations World Oil, Currency, and Labor Markets The Rise of Democracies Worldwide Local, State, National, and Foreign Elections

Substit utes

Weak
APL can reduce the threat of substitutes by using tactics such as staying closely in tune with customer preferences and differentiating its products by branding. Substitutes for oil industry are alternate fuels & alternate energy solutions such as coal, solar gas, solar power, wind energy, hydro power, waves power and even nuclear energy. Customers are quite loyal to existing products. Even if switching costs are low, customers may have allegiance to a particular brand.

Technology Trends

Favorable Based on following factors Technology adoption practices show little sign of changing, although much has been made at industry conferences of the need for a new

Threat Weak of new entrant APL has less threat of new entrants to business due s

to high start up cost, Govt. policies, regulations, licenses, suppliers etc. Start up costs are huge for new OMC business entering the industry. The more commitment needed

wave of technology to mitigate rising operating costs and open new resources to development. Technology is definitely a key factor in the decisions made by major resourceholding nations to grant operating licenses to international operators. As such, large operators are refocusing their research, development, and deployment efforts on technology areas relevant to the competition for new acreage, such as the exploitation of difficult gas resources and the sustainable production of resources heavily contaminated with hydrogen sulphide (H2S) and carbon dioxide (CO2. Given that future performance is based on managing change and improving organizational and personal learning, APL recognize that new technology provides return on investment and improves knowledge, agility,

in advertising, research and development, capital assets, the lesser is the chance of new entrants to the industry. Switching cost is high. In situations where customers face significant onetime costs from switching suppliers, it is less attractive for new firms to enter the industry and difficult to lure the customers away from their previous suppliers. Enhancing APL brand image, utilizing patents and creating alliances with associated products can minimize the threat of new entrants.

& communication at all levels.

Global

Favorable Based on following factors Population growing older Increase in younger population Ethnic balance changing Gap between rich and poor widening

Favorable Overall Based on following general environment factors Over the last years Pakistan has seen a tremendous exportation of labor. Capital is not only left a vacuum on organization. Monetary policies and Fiscal policies are changed every year. The person or businesses engaged in business for profit making or non profit organizations always have to keep an eye on the economic structure of the countries. As far as the tax rates are concerned, government also

Overall Compe titive Environ ment

PSO has been the market leader in fuel marketing and supply industry, having a market share of 68%. The 2009-2010 sales level of the three industries that make up the sector, APL, Shell and PSO. This sector comparison has been made on the basis of APL, Shell and PSO financial statements. In FY10, net sales of PSO stand the highest at Rs 743 billion, followed by Shell at Rs 198 billion and APL at Rs 83 billion. Although being the smallest among the three major OMCs, sales APL grew by the greatest proportion. Over the period 2009-2010, PSO sales grew by 21.23% while APL sales showed a growth of 33.83% and Shell witnessed a growth of 26.62%.

changes the tax rate with the passage of time. So it affects the economic forces. OPEC policies have also a major effect on the economic factors. Provincial rather than federal solutions Youth getting more independent Steady change in ethnic balance More educated consumers Higher average lifespan Increase in number of youth Minorities have more say (including women) Ethnic balance changes due to the migration of the people from different areas to different areas. This affects the ethical behavior very much. As the traditions and norms are very much different in different areas of Pakistan, therefore the behavior of the migrated people also have a major affect on the behavior of the resident people.

The earnings growth in the sector shows that PSO witnessed the highest earnings growth of 235% versus 16.61% for APL and -36.96% for Shell. PSO had reported a net loss in FY09 due to the liquidity crisis, thus it profits grew phenomenally in FY10. Although APL witnessed the highest sales growth, the profitability growth of APL was the lowest, indicating inefficiency in management of costs. Fluctuation in international oil prices has rendered the performance of Oil Marketing Companies (OMCs) unpredictable in terms of productivity. Sales are directly linked with the international oil prices, therefore, any increase or decrease will affect the industrys performance accordingly. APLs sales volume of both diesel and petrol increased on the back of developing retail fuelling strategies and expansion of its retail distribution network. Total industry annual trade of diesel declined by 3.9% whereas petrol (Mogas) increased by 27.0%. APL managed to increase its sales volume and market share of both diesel and petrol by establishing new pumps and firm marketing strategies. However, by distancing itself from the

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Due to the increased gap between rich and the poor, there is a tremendous change in the social behavior of the people. The factors are same as in Pakistan but with a little difference, due to the strategies that are different in order to run the social factors.

Furnace Oil market, in order to keep way from the circular debt menace, APL lost its market share by 280bps (from 7.32% in FY07 to 4.52% during FY10) in furnace oil (FO) segment. However benefits obtained were prevention of rising financial charges and increased concentration on retail network expansion. The annual sales volume of diesel and petrol increased by 67% and 87% respectively, compared to industry average of 27% and -3% respectively. Consequently, APLs market share increased from 3.5% to 6.2% for diesel and from 3.3% to 4.9% for petrol. Overall, APL recorded the highest volumetric sales at 1.5 million M. Tons for the year under review up by 7% over last year, thereby improving its market share from 6.6% to 7.0%.

Competitor Environment
Major competitors:

Pakistan State Oil (PSO) Shell Pakistan Limited (SPL) Chevron Pakistan Ltd. (CPL) Total-Parco Pakistan Limited (TPPL)

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Byco Petroleum Pakistan Limited (BPPL) Bakri Trading Company Pakistan (BTCPL) Hascol Petroleum Limited Overseas Oil Trading Company (Pvt.) Ltd (OOTCL)

Competitive edge:
Attock Oil Group of Companies, which is the only fully vertically integrated Group in the Oil & Gas sector of Pakistan involved in Exploration & Production (POL), Refining (ARL, NRL) & Marketing (APL).

Internal Circumstances
Core competencies:
Ethical Principles and Moral Values APL promote a commitment to the highest moral values and ethical principles, demanding both personal and professional dedication towards the realization of these values and principles.

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Commitment and Cooperation Two core fundamentals for the success of any business are complete employee commitment and cooperation. APL foster an environment of solid teamwork and professionalism to ensure that employees engage in both personal and professional development. Environment Consciousness APL believe that its responsibility to safeguard natural resources for future generations and actively engage in environment friendly practices, policies and management techniques. Corporate Social Citizenship APL strongly believe in the promotion of societal well-being and awareness within ones community, actively engaging in activities and initiatives to meet this objective. Maximum Stakeholder Return Through streamlined business processes and commitment to total quality management APL seeks to ensure maximum company performance and rewards for shareholders and stakeholders alike.

Distinctive competencies:
APL is part of the first fully integrated oil company of the sub-continent. APLs sponsors include Pharaon Commercial Investment Group Limited (PCIGL) and Attock Group of Companies. Pharaon Group is engaged internationally in diversified entrepreneurial activities, including Hotels, Oil Exploration, Production and Refining, Manufacturing of Petroleum Products, Chemicals, Manufacturing and Trading of Cement, Real Estate etc on the other hand, the Attock Group of companies consist of The Attock Oil Company Limited (AOC), Pakistan Oilfields Limited (POL), Attock Refinery Limited (ARL), Attock Petroleum Limited (APL), Attock Information Technology Services (Pvt.) Limited (AITSL), Attock Cement Pakistan Limited (ACPL) etc thus, the strong backward and forward linkages give APL a strong competitive advantage. APL is the only local oil marketing company which has its retail oultlets and operations outside Pakistan. Currently, APLs retail outlets are operational in Afghanistan. APL has monopoly of marketing some substantial petroleum products in Pakistan namely Asphalt & Lube Base Oil, which are only produed by NRL in Pakistan.

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Financial Situation:
Overall internal circumstances: Favourable Aggressive marketing strategy combined with increase in the sales volume of different petroleum products, improved product mix and higher international oil prices resulted in continuation of journey on the path of success and growth. The Company earned profit after tax of Rs 2,753 million for the nine months ended March 31, 2011 (2010: Rs 2,323 million). The profitability translated into earnings per share of Rs 39.83 (2010: Rs 33.61 per share).

Resources :
Financial:
Recapitulation of the year 2010-11 shows Companyturnover and profitability continued to record a rising trend as its turnover and gross profit for the year increased to Rs.109,395 million and Rs. 4,714 million respectively.

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SWOT Analysis:

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Strengths
APL is ranked at the Pakistan's 3rd largest energy company and is positioned as a local oil marketing company headquartered in capital central city Islamabad Operates petrochemical businesses nationwide through the network of its subsidiaries and retail outlets Participates in Karachi Stock Exchange, and is listed in the KSE 100 Index; APL shows strong brand loyalty for oil; Strong brand management driven by the Turning Fuel Around slogan. APL's net profit increase by 18% despite record increase in oil and gas prices.

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Recapitulation of the year 2010-11 shows Companys turnover and profitability continued to record a rising trend as its turnover and gross profit for the year increased to Rs.109,395 million and Rs. 4,714 million respectively.

Weaknesses

Dependency of prices to OGRA tariff (Oil & Gas Regulatory Authority) Lesser fixed assets with respect to operations Dependency on ARL & NRL for businesses Restricted to Govt. policies for new construction of new retail outlets

Opportunities
Investment in the research of alternative fuel methods, including hydrogen, natural gas, wind and solar over the forthcoming decade; Expansion of operations to Afghanistan further & other neighboring countries Extension of strategic oil and gas acquisitions in Pakistan; Launch of more flexible price policy to compete main rivals; Capital investment in acquiring latest assets & R&D programs

Threats
Environmentally unsound policies due to oil and toxic spills; Occasional refinery explosions; Corrosion in pipelines; Competition from PSO, Shell, Chevron etc. Ceasing operations in a number of potential locations with their further rebranding ; Sale of corporate-owned stations; Lawsuits considering the companys ecological activities; Operational Losses due to temperature rise/down, personal errors etc. Consequential damages due to leakages, thefts etc.

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Challenges:
The biggest challenge growth companies face is dealing with the constant range of issues bidding for more time and money. Effective management is required and a possible new business plan. Volatility in International Oil Prices and Regulatory Risk: Oil prices are directly affected by its global supply and demand. Factors that influence demand and supply include economic conditions, operational issues, natural disasters, weather, political instability and conflicts or actions by major oil-exporting countries. In addition to this, OGRA also controls these prices through implementation and adjustment of levies, duties and subsidies. Prices are the key drivers of an OMCs profitability. Higher prices translate into increased revenues and vice versa. Price fluctuations have direct impact on Companys development and investment plans. Further, imposition / enhancement of duties, taxes, other levies and revision in pricing formula of products remain a possibility. The Company continues to focus on efficient mix of products maintaining sustainability and generating growth. OGRA has demonstrated a strong commitment and taken a number of steps to deregulate the Oil and Gas sector in line with the overall vision of a liberalized economy. Security Risks: The entire world in general and Pakistan in particular is facing security threats. Deteriorating law and order situation may result in disruption in the supply chain of the oil industry at any point in time resulting in halting the economic growth and development. The OGRA with the support of International agencies has taken concrete steps of eliminating terrorism. The oil industry has adopted extra precautionary security measures to avoid any such risk. The Company in particular has taken the specific insurance cover against this risk as one of the precautions.

Strategic Recommendations:
Corporate level:
To enable APL to attain new heights of success through investment in human capital, implementation of lean production methods and a commitment to Total Quality and Environment Management, APL plans, with the help of Almighty Allah, to further expand its existing retail network and penetrate untapped markets with pro-active measures and effective planning, implementation and execution. APLs objective is to successfully deliver

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premium quality products and services, which will translate into maximum customer satisfaction. Beyond the technical excellence of its products, APL intends to set an example in all dimensions of its entrepreneurial activities. APL sees its employees committed to the self-defined models of economic, social and ecological responsibility, which means not only economic success but also conscientious interaction with its employees, people and the environment.

Business Level:
The ultimate objectives of the Companys management are to come up to the expectations of all the stakeholders and adopt a balanced approach in this regard, which is also reflected precisely in the corporate strategy and the core values. The priorities for action are set and reviewed at regular intervals to grab the available opportunities and minimize the risks and threats arising due to change in the internal and external environment.

Overall Analysis (scale of 0 to 10):

Effective:
6+6+8+7+9 5 The presence of two refineries in the Attock Oil Group augurs well for the company which has spread its operations rapidly in the past and is continuing to do so with aggressive expansion plans going forward. With fuel demand expected to remain robust in the country, especially in the furnace oil segment, volume growth is expected to register a substantial increase. In order to meet the mid country fuel demands, a terminal was built and commissioned at Machike recently. This terminal connects APL with MFM (Mehmoodkot-Faisalabad-Machike) pipeline and WOP (white oil pipeline). This terminal has a storage capacity of High Speed Diesel, Superior Kerosene Oil and Premier Motor Gasoline. This storage/dispatch facility has further increased APLs market share and is a step towards companys prosperous future. The other major achievement is in the sector of quality assurance unit, by setting up of quality control lab at Machike and mobilization of another quality control mobile unit for central Punjab. Further, APL also entered into a Joint Venture with Askari CNG, which is currently operating 52 CNG outlets, to convert 20 of its existing CNG outlets into multi-fuel facility outlets. APL was awarded the contract of DGP-ARMY for = 7.2

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supply of petroleum products throughout Pakistan for the year 2010-11, ie an institutional customer, thereby diversifying its customer base.

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