Assignment MGT162

Executive Summary The market for petroleum products is highly competitive, with major multinational corporations especially in a mix-market country. PETRONAS markets its products directly to customers as well as through its network of service stations, LPG dealers and industrial dealers. What sets them apart are the variety of products, services, promotional strategy, product branding and image, company identity and marketing strategies. The marketing strategy that been analyzed in this assignment are Dealing with Competition, Segmentation, Targeting Strategy, and Positioning, and Marketing promotion – Integrated Marketing Communications (IMC) and Promotion Mix. In a market, there would be two different market categories: consumer markets and business markets. As for oil and gas company, PETRONAS falls into both market categories which are consumer markets and business markets. Meanwhile, PETRONAS also considered as business market which they selling their oil and gas to business companies for resale or producing another products. PETRONAS major product sale are fuels and lubricants for Malaysia’s market. Meanwhile, lubricant products produced by PETRONAS into five categories that are passenger car motor oil, motorcycle oil, duty engine oil, industrial & marine oil and, transmission and gear oil. Under these segments, PETRONAS offered varieties of products which key is to target different group of market and increase market shares. After examining the market segmenting for PETRONAS products, PETRONAS will then have to devise a promotional effort to market their products. PETRONAS, like any other company, has its own promotion mix.

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INTRODUCTION NAME OF THE COMPANY On August 17, 1974, the first Malaysian oil and gas company was founded namely as PETRONAS, short for Petroli[ram National Berhad. It is wholly be owned by the Government of Malaysia. The corporation is vested with the entire oil and gas resources in Malaysia and is entrusted with the responsibility of developing and adding value to these resources. Its business activities include (i) the exploration, development and production of crude oil and natural gas in Malaysia and overseas; (ii) the liquefaction, sale and transportation of LNG; (iii) the processing and transmission of natural gas and the sale of natural gas products; (iv) the refining and marketing of petroleum products; (v) the manufacture and sale of petrochemical products; (vi) the trading of crude oil, petroleum products and petrochemical products; and (vii) shipping and logistics relating to LNG, crude oil and petroleum products. HISTORY PETRONAS was established in August 1974 and operates under the terms of the Petroleum Development Act passed in October 1974. It was modeled on PERTAMINA, the Indonesian state oil and Gas Company founded in 1971 in succession to PERTAMINA, which had been set up in 1958. According to the 1971 plan, PETRONAS' goals would be to safeguard national sovereignty over oil and gas reserves, to plan for both present and future national need for oil and gas, to take part in distributing and marketing petroleum and petrochemical products at reasonable prices, to encourage provision of plant, equipment, and services by Malaysian companies, to produce nitrogenous fertilizers, and to spread the benefits of the petroleum industry throughout the nation. In 1976, PETRONAS went downstream for the first time when it was chosen by the Association of South East Asian Nations (ASEAN) to begin construction on the second ASEAN joint industrial project, a urea plant. The subsidiary, Asean Bintulu Fertilizer (ABF), is based in Sarawak and now exports ammonia and urea all over the world. Also in 1976, Malaysia became a net exporter of oil, but exports were at such a low level as to make the country 2

ineligible to join Organization of the Petroleum Exporting Countries (OPEC). This situation benefited to Malaysia and PETRONAS, by allowing the company a degree of commercial and political flexibility and reinforcing PETRONAS' chief purpose, Malaysian self-reliance. Until 1978, PETRONAS has supervised its foreign partners' oil activities taking no direct role in production, when the government saw to the creation of a subsidiary for oil exploration and production, PETRONAS Carigali. It began its work in an oil field off the Peninsula. PETRONAS retained its supervisory powers over all oil and gas ventures, particularly on issues of health and safety and environmental control. In early 1970s, the government was determined to develop Malaysia's natural gas as well as its oil Shipping Company (MISC). In 1982 PETRONAS Carigali formed an exploration and production company with Société National Elf Aquitaine of France, it allowed Elf better terms for recovering costs than it had offered in earlier ventures. This development came against the background of the government's imposition of a depletion policy on PETRONAS. In 1983, PETRONAS went into refining and distribution. It initiated the construction of refineries at Malacca and at Kerteh in order to reduce its dependence on Royal Dutch/Shell's two refineries at Port Dickson and Esso's refinery in Sarawak. By 1990, 252 service stations carried the PETRONAS brand, all but 20 on a franchise basis, and another 50 were planned. Some were set up on grounds of social benefit rather than of strict commercial calculation. In 1991, PETRONAS sold the Bumiputra bank back to another state company, Minister of Finance Incorporation and announced its intention to concentrate on oil, gas, and associated activities in future. During the mid to late 1990s, international exploration, development, and production remained key components in PETRONAS' strategy along with diversification. In 1994, the firm has its first overseas production at Vietnam and established its first retail station outside of 3

Malaysia in Cambodia. In 1995, a subsidiary was created to import, store, and distribute liquefied petroleum gas (LPG). In 1996, PETRONAS entered the aromatics market by way of a joint venture that created Aromatics Malaysia Sdn Bhd that formed a contract with China National Offshore Oil Corporation and Chevron Overseas Petroleum Ltd. to begin exploration of block 02/31 of the Liaodong Bay area in China. While the Asian economy as a whole suffered from an economic crisis during 1997 and 1998, Malaysia was quick to bounce back due to successful government reforms. From its new headquarters in the Petronas Twin Towers, the state-owned concern continued its development in the oil and gas industry that was officially opened on Malaysia's 42nd National Day, August 31, 1999 in the Corporation’s 24th anniversary year. PETRONAS entered the new century determined to expand its international efforts. The company forged deals for two new exploration plots in Pakistan and began construction on the Chad-Cameroon Integrated Oil Development and Pipeline Project. By 2002, PETRONAS had signed seven new PSCs and secured stakes in eight exploration blocks in eight countries, including Gabon, Cameroon, Nigeria, Egypt, Yemen, Indonesia and Vietnam. In 2004, Minister in the Prime Minister's Department, Datuk Mustapa Mohamed stated that PETRONAS contributed RM 25 Billion to the country's treasury accounting for 25% of revenue collected via dividends and other revenues. PETRONAS continuously provides the Malaysian government dividends from its profits. PETRONAS is ranked among Fortune Global 500's largest corporations in the world. Fortune ranks PETRONAS as the 95th largest company in the world in 2008 and 80th largest in 2009. It also ranks PETRONAS as the 13th most profitable company in the world and the most profitable in Asia.

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TYPES OF PRODUCT Main Product

Associated Product

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COMPANY MILESTONES IN 2010 Exploration & Production 1-PETRONAS through PETRONAS Carigali together with partner United National and Gas Limited acquired deepwater Blocks MD4, MD5 and MD6 in Myanmar. 2-Awarded a PSC for Block SK320, offshore Sarawak, to MDC Oil and Gas (SK320) Ltd, a subsidiary of Abu Dhabi owned Mubadala Development Company, and to PETRONAS Carigali 3- PETRONAS, through PETRONAS Carigali, inked an alliance agreement with Dowell Schlumberger (Malaysia) Sdn Bhd to undertake the redevelopment of the Samarang field, offshore Sabah. Through the alliance, PETRONAS Carigali will leverage on Schulumberger’s renowned subsurface technology, employing proven and new technologies, whilst enhancing staff capabilities in EOR.

Oil Business 1-PETRONAS Dagangan launched its new and improved PRIMAX 97 petrol, replacing PRIMAX 3. 2-PLI and PROTON Holdings Berhad signed a supply, technical and commercial collaboration agreement, paving the way for greater business integration and cooperation in the area of automotive lubricants and functional fluids. 3-PETRONAS Lubricants International Sdn Bhd (PLI) introduced PETRONAS Syntium Moto, a range of premium grade synthetic motorcycle engine oils for the Malaysian market. Gas Business 1-MLNG successfully delivered its first LNG cargo to Shikoku Electric Power Co Inc, Japan under a long term contract of 15 years. 2-PETRONAS signed a MoU with Mitsubishi Corporation to jointly develop a solar 6

photovoltaic demonstration project in Malaysia. 3-PETRONAS signed a Gas Sales Agreement with upstream contractors Sarawak Shell Berhad and PETRONAS Carigali for natural gas to be produced from three fields in Block SK308 offshore Sarawak. General 1-YBhg Tan Sri Mohd Hassan Marican ended his tenure as President and CEO of PETRONAS, having helmed the corporation since 1995. 2-YBhg Dato’ Shamsul Azhar Abbas succeeded as the President & CEO, and Acting Chairman of PETRONAS. 3-PETRONAS received a Master Award for Oil and Gas category during the Brand Laureate 4-Awards in recognition for its brand excellence amongst the top best brands in Malaysia and the world. 5-PETRONAS was awarded the Certificate of Merit in Education by the Government of Vietnam for PETRONAS’ significant contribution to the country’s education development in 2009. 6-PETRONAS received recognition from the Malaysian Government for the Company’s outstanding contributions in the field of corporate social responsibility (CSR) at the Prime Minister’s CSR Award 2009. 7-PETRONAS won three awards altogether, comprising Best Overall CSR Program

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PLANNING

I)

Mission statement "To develop and add value to petroleum resources wherever it operates, converting these resources into higher-value products that would satisfy the needs of customers and bring benefits to the people."

II)

Goals PETRONAS’ goal was to improve efficiency and control by automating manual activities via straight-through processing. There are few ways to create PETRONAS to achieving their organizational goals and well know their products to all over country such as promote it in the ways of campaign, through internet, and so on. MISSION Support PETRONAS’ aspiration in developing Malaysia into a Subsurface products and expertise center and serving the interest of the Malaysian Oil & Gas industry in establishing and enhancing their business capabilities in the subsurface sector. VISION To establish Malaysia as a hub of excellence for subsurface products solutions for oil & gas and petrochemical industry in the Asia Pacific region.

III)

Objective 8



Support and engage with PETRONAS’ initiative to develop Malaysia into a



Subsurface products and expertise center. Provide a platform for foreign expertise and the Malaysian industry to collaborate and create business relationships so as to increase local capability



in subsurface technology. Provide business opportunities among members and actively participate in



tenders and or projects locally or internationally. Encourage and mobilize services companies to fully engage with PETRONAS, and become active players in sharing and developing subsurface



expertise. Promote agenda and programs that will enhance and work closely with PETRONAS, including technical conferences, forums, etc.

IV)

Single used plans Single-use plans are created to address short-term challenges or provide guidance for short-term initiatives. Single-use plans can be created in teams or by individual managers. The scope of these plans is generally smaller than the scope of standing plans. For example, single-use plans can be created for specific work groups or departments to guide their contributions to short-term company objectives. There are two type of single-use plans which is Programmes and projects. Company like petronas also has a lot of single use plans. For example is,

i) Programme- coordinates complex activities which are related to a major non-recuring goal. bring out inner leader Through strategic collaboration with University of Melbourne, programmed such as Business Management Excellence and the Management Development Programmed are developed to prepare senior and general managers for leadership excellence. In enhancing and preparing the senior and general managers for visionary leadership we have collaborated with DUKE CE to develop the valuable Senior Management Development Programmed. ii) Project- coordinates a set limited-scope task or activity.

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PETRONAS and China National Petroleum Corporation (CNPC) signed a Memorandum of Understanding (MoU) to collaborate in the area of Enhanced Oil Recovery (EOR). This MoU will enable PETRONAS to enhance its EOR technology and capability by tapping into CNPC’s expertise.

ORGANIZING

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PETRONAS Corporate Structure BOARD OF DIRECTORS

PRESIDENT & CHIEF EXECUTIVE OFFICER

EVP FINANCE

VP TREASURY

EVP GAS & POWER

FINANCE & ACCOUNTS SERVICES

EVP DOWNSTREAM

EVP EXPLORATION & PRODUCTION

VP CORPORATE STRATEGIC PLANNING

HEAD TAX

VP TECHNOLOGY & ENGINEERING

VP HUMAN RESOURCE MANAGEMENT

GROUP CEO KLCC (H) SB

PRESIDENT/CEO MISC BERHAD

Organization’s Chain of command There is a chain of command that extends from upper organization levels to the lowest levels and clarifies who reports to whom. The orders move from upward to downward and suggestions move downward to upward direction. For example, the Finance Department is in charge of treasury, tax, finance and accounts service meanwhile Gas and Power Department is in charge of global LNG, infrastructure and utilities .The continuous improvement section is made for this purpose. It encourages employees to give their suggestions and share the new ideas. Span of control Span of control of this organization is narrow. This is because in PETRONAS organization there are higher numbers of communication issues among different management levels. The jobs are formalized, there are explicit job descriptions, numerous organizational rules, and clearly defined procedures covering work procedures. But in spite of formal rules and regulations, PETRONAS keeps on changing to keep a pace with the changing environment. So, it is strict but not rigid organization. In effort to be more flexible and responsive, there has been distinct trend in this organization toward decentralizing decision-making. 11

Types of departmentalization Organizational structure is the formal framework by which jobs tasks are divided, grouped, and coordinated. PETRONAS is a function-based organization. The tasks are divided into separate jobs and then these jobs are grouped together under different departments i.e. functional departmentalization is found in organization. Each major area is kept under the manager who is specialist in that concerned field and is responsible for all activities, which that department performs. Line & staff responsibilities Managers with line authority in an organization are those who are directly responsible for achieving organization goals. Line authority is represented by a standard chain of command start with a board of directors and extends downwards through various levels in organization. This type of authority is mainly based on legitimate power. For example, managers involved with manufacturing may limit line functions to production and sales.

MOTIVATION

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Every company is responsible for their employees need. To ensure their employees give fully commitment to achieve goals that set by the company, top level management need to motivate their employees by giving satisfaction to done the job. According to Abraham Maslow (1954), to motivate our workers, management can provide individuals needs by five districts level. Level of individuals need 1. Physicological- the most fundamental

PETRONAS provide to their employees  PETRONAS has provide enough

human needs.

facilities to their workers such as, cafeteria, toilet,hall prayers and

2. Safety-is a need for security in both



mosque, transportation, Every new workers that sign contract

physical and interpersonal events day to

with PETRONAS, the company will

day life.

provide life insurances to guarantee

3. Social-needs or belongingness needs.



their safety. Each year PETRONAS held events, such as sport events and recreational

4. Self-esteem-individuals needs for the



high regard of others.

programmed. PETRONAS give maternity benefits to their workers they also have staff care services.

5. Self-actualization-needs for self fulfillments.



PETRONAS develop PETRONAS leadership centre (PLC), to increase their workers performances.

But, according to Frederick Herzberg (1959), there are two factor that influence people’s attitudes toward work. The factor is Hygiene Factor (Dissatisfier) and Satisfier Factor (Motivating). 1. Hygiene Factor (Dissatisfier) Hygiene factor is associated with the work setting of an individual, often called job context. Hygiene factor causes feelings of job dissatisfaction. In PETRONAS, they have 13

provide good job context that can be a factor causes feelings of job dissatisfaction. For example, the working condition. Petronas has provide good working condition with enough facilities to their workers such as cafeteria, toilet, transportation and many more. 2. Satisfier Factor (Motivating) Satisfier factor also known as motivating factor. Where hygiene factor is often associated with job context, satisfier factor, on the other hand, is related to the job content of individual. Satisfier factor causes feelings of satisfaction. Meaning to say, the workers will find their own encouragement if they feel enjoy with their work and they love it.

LEADING

In Petronas, the top level of management such as its Chairman of Executive Officer (CEO) uses behavioural theories based on the managerial grid model. In general, managerial grid is a behavioural leadership model developed by Robert R. Blake and Jane Mouton. It is originally identified five different leadership styles based on the concern for people and the concern for production. Regarding the Petronas leadership approach for its employees, it highly concerns both of its employees and production which is coordinated as (9,9) based on the managerial grid model at below: 14

Petronas uses Team Management approach as it is very concerned both of its production and its employees. While the company focuses on its oil and gas production, but at the same time, the company also concern for its employees’ welfare. For instance, the company rewards its loyal employees and their families in terms of receiving life insurance, health care coverage maternity benefits, staff care services and also recreational programmes.

CONTROL

Controlling is the process of regulating organizational activities, so that actual performances conform to expected organizational standards and goals.

Process Technology and Operations The Process Technology and Operations job area at PETRONAS represents the largest technical population in PETRONAS encompassing upstream to downstream businesses. We bring our expertise to crucial areas: from oil and gas extraction facilities and manufacturing plants to the 15

petrochemical refineries and chemical laboratories. We supervise day-to-day operations, advise on optimum operations, research and develop new processes and products, and provide analytical lab services – amongst others. Process crude oil and natural gas by PETRONAS:-

There are many types of controls in management. PETRONAS also has use one of that way to control their production and services. For example is PETRONAS Technical Standards. The objective is to set the recommended standard for good technical practice to be applied by PETRONAS’ in oil and gas production facilities, refineries, gas processing plants, chemical plants, marketing facilities or any other such facility, and thereby to achieve maximum technical and economic benefit and requirements. In management usually the company from the upper level management must set performances for the lower level management. The standard must be same with target so the company can compared the actual performances. The standard must be measureable and accepted by all members & in line with organization strategic planning.

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Secondly, company measures the actual performances. PETRONAS must decide what to measures, when to measure and how frequently to measures. Thirdly, PETRONAS must compare actual performances with standards. This step involves determining if actual performances compare to standards falls. If performances match the standard, no corrective action is required. Finally, PETRONAS take corrective actions if a performance does not meet the standard this step must be apply. For example PETRONAS provides incentives to enhance performances of their workers.

COMMUNICATION

Business Communication Business communication is used to relay information within the business and promote services, products or organizations, as well as deal with legal and other similar issues. It covers several topics including branding, marketing, advertising, customer relations, public relations and consumer behavior, among others.

PETRONAS company has five major stakeholder groups, which include:-

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i. Governments - comprises the Malaysian Government and the various local governments where PETRONAS has its operations. ii. Customers – consists of retailers/dealers and end-users of its products and services. iii. Employees iv. Local community - people living in countries/places where PETRONAS runs its operations v. Environment There is several type communication uses by PETRONAS, one of that is verbal communication. It is o occurs either orally or in writing. For example is oral communication, this is a form of spoken information, such as meeting, group discussion and many more. Another type or verbal communication is written communication, whereby organizational member share information by disseminating messages, such as reports forms manuals and many more. PETRONAS also use electronic communication to conveys information to their stakeholder especially customers and local community. Electronic communication is gradually playing a major role in management due to challenges and demands of globalization that managers encounter. It enhances the speed of message delivery and happen in real time. Some example of electronic communication used by PETRONAS is:i)

Telecommuting- workers is linked to central office or employment location. PETRONAS has many oil rig at many places around the world, they need to

ii)

communicate each other, so to make easier telecommuting the solution. Electronic mail (e-mail)- PETRONAS also use e-mail to reduced the cost and time of works. This is because e-mail is one of effective and faster way to use to transfer the information. Every PETRONAS workers needs to have an e-mail account so they can

iii)

easily know information given by management. The internet- PETRONAS use this platform to transfer their information to their stakeholder. For example PETRONAS use YouTube as one of the way to advertise their products. PETRONAS also use Facebook as platform to advertise their products

iv)

and to convey the latest news about their company. Social responsibility- PETRONAS use this approach to communicate with local community. For example PETRONAS hosted “Sentuhan Kasih” programmed. This programmed hosted a series of gatherings for underprivileged children from orphanages and shelter homes in and around our areas of operations, in the spirit of 18

sharing and caring. Between 300 and 500 staff volunteers provided cash donations and engaged with more than 1,000 children who participated in the programme in 2010.

CONCLUSION

Overall, PETRONAS has ventured into the oil and gas industry for quite some time. With an aggressive market, PETRONAS has adapted to that environment by delivering products and services at their best ability. It is imperative that PETRONAS take the necessary actions to operate a sustainable business and be mindful of the impacts on the environment. There are steps that can be implemented immediately so it will not lose out on its competitive advantage. Changes must take effect from the top level management and instilled right down to the people working on the ground level. Leaders should first to make the move so there will be less resistance to change. As we have seen, Petronas Bhd has become the most stable and elite company after 42 years of establishment. By knowing about the company corporate profile, business and corporate 19

social responsibility, it will make us proud to become Malaysian. Although we are still development country, we have Petronas Bhd which can compete with other giant company and can place our country name equally with other multinational company.

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