Pilipinas Shell Midterms Stramahsisnxmxmmxah jsisjs PDF

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MALAYAN COLLEGES LAGUNAEnrique T. Yuchengco College of Business Cabuyao, Laguna A. 2020-PILIPINAS SHELL PETROLEUM CORPORATIONSubmitted to: Prof. Donn Enrique MorenoSubmitted by: Borbe, Krisela Mariz H. Buerano, Stephanie Raven P. Cortez, Jeric Christopher A. Crisostomo, Shekinah D. Gadoy, Angelica R...

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MALAYAN COLLEGES LAGUNA Enrique T. Yuchengco College of Business Cabuyao, Laguna A.Y. 2020-2021

PILIPINAS SHELL PETROLEUM CORPORATION

Submitted to: Prof. Donn Enrique Moreno

Submitted by: Borbe, Krisela Mariz H. Buerano, Stephanie Raven P. Cortez, Jeric Christopher A. Crisostomo, Shekinah D. Gadoy, Angelica Ruth A. Herrera, Madeleine A. Montillano, John Glenn B. Omega, Shania M. Valiente, Mark Jefferson

Bachelor of Science in Entrepreneurship

May 15, 2021

STRATEGIC MANAGEMENT AND BUSINESS POLICY STRATEGY FORMULATION AND ANALYSIS 1. SWOT ANALYSIS SUMMARY The results of the general environment and industry analyses is summarize in in Table 01 as opportunities, threats, strengths, and weaknesses with their indicated sources. Table 01 Pilipinas Shell SWOT Analysis Summary Opportunity

Source

01

Fuel Marking Program to Curb Fuel Smuggling in PH’s Oil Industry

Political/Legal

02

Field Testing on Fuel Products

Political/Legal

03

Lawmakers are Open to Amend Oil Deregulation Law

Political/Legal

04

Philippines Rising as a Major Regional Importer of Gasoline

Economic

05

Surge on Delivery Vehicles

Economic

06

Economic Growth Through Infrastructure Program

Economic

07

Rise in Car Sales

Economic

08

Striving for Natural Gas by 2040

Environmental

09

Dependency of Consumers on Oil and Gas to Fuel Transportation

Fiver Porter’s

Threats

Source

T1

Fluctuating Inflation Rates in 2021

Political/Legal

T2

OPEC+ Increase Crude Oil Prices

Political/Legal

T3

Oil Refinery Coming Back Once Pandemic Eases

Economic

T4

Oil Demand Crash due to COVID-19

Economic

T5

Factors Affecting the Oil Fluctuations in the Country

Economic

T6

Strict Quarantine Impositions due to COVID-19

Socio-Cultural

T7

Growth of E-Vehicle Industry

Technological

T8

Dominant Role of Suppliers in Dictating Prices

Five Porter’s

Strengths

Source

S1

Consistent Cash Generation

Finance

S2

Most Preferred Fuel Brand with 37% Rating

Mckinsey

S3

Quality Product and Services

Products/Services

S4

Strong Footprint and History in the Country

Mckinsey

S5

Robust Marketing Strategies

Marketing

S6

Integration in Shell Group Global

Mckinsey

S7

Attractive Dividend Policy

Financials

S8

Strong Corporate Governance

Management

S9

Globally Recognized Talents

Management

S10

World Class Supply Chain

Value Chain

S11

First to Offer Carbon Offset in Philippines

Marketing

S12

Efficient Fuel Retail Network

Value Chain

Weaknesses

Source

W1

Restricted Core Values

Mckinsey

W2

Negative Value and Cash Outlook

Financials

W3

Declining Liquidity Capabilities

Financials

W4

Variability in Inventory Gain/Losses

Financials

1.1. EXTERNAL FACTOR EVALUATION (EFE) Shown in Table 02 is the assessment of the key external factors that affects the company and how PSPC responds to each presented opportunity and threat. The weights given to each factor ranges from 0.0 (low importance) to 1.0 (high importance), indicating how important the factor is for the company to succeed in the industry. The ratings given in the EFE Matrix for PSPC refers to how effectively the company responds to the opportunities and threats. The rating value ranges from 4 to 1, where 4 means superior response and 1 indicates a poor response. The weights are multiplied with the given ratings, which gives the weighted score for each factor, and its sum gives a total of 3.40, indicating that the company has well- designed strategies to respond to meet opportunities and defend against threats. Table 02 Pilipinas Shell Opportunities and Threats Key External Factors

Weighted

Weight

Rating

O1-Fuel Marking Program to Curb Fuel Smuggling in PH’s Oil Industry

0.03

4

0.12

O2-Field Testing on Fuel Products

0.02

4

0.08

O3-Lawmakers are Open to Amend Oil Deregulation Law

0.02

4

0.08

O4-Philippines Rising as a Major Regional Importer of Gasoline

0.10

4

0.40

O5-Surge on Delivery Services

0.05

4

0.20

O6-Economic Growth through Infrastructure Programs

0.06

4

0.24

O7-Rise in Car Sales

0.08

2

0.16

O8-Striving for Natural Gas by 2040

0.04

3

0.12

O9-Dependency of Customer on Oil and Gas to Fuel Transportation

0.08

4

0.32

Score

OPPORTUNITIES

THREATS

T1-Fluctuating Inflation Rates in 2021

0.06

2

0.12

T2-OPEC+ Increase Crude Oil Prices

0.09

4

0.36

T3-Oil Refinery Coming Back Once Pandemic Eases

0.04

4

0.16

T4-Oil Demand Crash due to COVID-19

0.08

4

0.32

T5-Factors Affecting the Oil Fluctuations in the Country

0.07

3

0.21

T6-Strict Quarantine Impositions due to COVID-19

0.08

4

0.32

T7-Growth of E-Vehicle Industry

0.01

1

0.01

T8-Dominant Role of Suppliers in Dictating Prices

0.09

3

0.27

1.00

-

3.49

TOTAL

Ratings Legend: 4 – Superior Response; 3 – Above Average Response; 2 – Average Response; 1 – Poor Response

For the reasoning behind the importance and ratings for each external factor, a weight of 0.03 was given to O1 as the researchers perceive the factor of lesser importance in comparison to the others, but PSPC is in full support with the program and have complied accordingly, thus its high rating of 4. O2 is also given a rather lower weight but PSPC responds very well to this given their quality products that are within standards, assuring consumers with safe and regulated fuel products. Although O3 was also given lower importance weight, the company has a superior response to this with their shared price risk management tools designed as cost-effective ways to manage fuel costs which are cap pricing, fixed pricing, and collar pricing. O4 was given the highest importance with the weight of 0.10 and a rating of 4 with their strategic response as the researchers perceive the major decisions of the company to open a new import site and turn their old refinery into another import facility, both done in the year 2020, for reduced operating expenses and carbon emissions as well as increasing oil supply within the country in order to recover from the adverse effects of the COVID-19 pandemic. Both O5 and O6 were given such weights as the researchers perceive for them to come hand in hand, given the new road infrastructures provide ways for ease in accessibility, delivery, and transacting with suppliers, retailers, and consumers, to which PSPC now also provides safe no contact transactions with their Shell Go+ App and option to purchase some of their petroleum products online.

As for the O7 with a weight of 0.08, the number of car sales matters for the company as it directly relates to the possible increase or decrease in the number of their oil and petroleum consumers. They continuously respond to this by providing marketing materials such as advertisements, promotions and collaborations to retain their current consumers and encourage new ones. O8 is given a 0.04 weight given its relevance in the current situation such as the coronavirus pandemic. Their current strategy for this time is to make sustainable decisions to help them bounce back from the loss of revenue from 2020. And although it might not be one of their top priorities for the year, they still give importance to this and thus gave a rate 3 for the company’s response. O9 is given both high weight and rate with a 0.08 and 4 respectively with the reason being transportation has a big importance in the current economy with its current situation. Both for the use of Business to Business transactions and to end consumers. T1 has always played an important role because both the inflation and the global oil industry play a big role in the country’s economy. It’s given a 0.06 weight and a rate of 2 for the company’s response as they always create their projections and strategies based on the economy’s inflation rates to maximize their supply chain. T2 has a weight of 0.09 due to the fact that the country has most of its fuel imported from other countries including the OPEC+ members. And the uncertainties for the demand and supply of crude oil prices greatly affects the price the company sets on their line of products. Lastly for the T3, with a weight of 0.04 for the reason being that PSPC is still one of the leading companies in the country and one of the most chosen brands among its competitors. With a rate of 4 innovating their strategies and making calculated decisions based from the current situation and projections for the upcoming future. As for the T4, with a weight of 0.08 for the reason being that PSPC is forced to act upon this issue as COVID-19 is happening currently. Although they are somewhat forced to respond their response towards this issue is good and that is why the weight given to T4 is 4 as PSPC continuously looks for other strategies to be able to adapt to the current situation. T5 is given a weight score of 0.07 for the reason being that PSPC responds well to this as they have decided to turn their refinery from a manufacturing facility to a world-class import facility despite experiencing such losses. With a rate of 3 innovation their strategies and making calculated decisions based on the current situations such as the COVID-19 Pandemic. T6 is given a weight of 0.08 as this is connected to T4 and T5 with the strict quarantine impositions due to COVID-19. With this it is also given the same rate as 4 as PSPC continuously makes strategies that are better fit as of the situation and also for the future of the company. PSPC is quick to react and come up with strategies to adapt in the situation. T7 is given a weight of 0.01 and a rate of 1 as PSPC’s strategies does not focus on the growth of the E-Vehicle Industry, they have not come up with any plans as of now to be able to cater in this particular market as they are focusing on the current situation to be able to gain back the losses the company faced due to the COVID-19 Pandemic. Finally, T8 is given a weight of 0.09 as PSPC still remains one of the roles of suppliers in dictating prices in the country together with major competitors. PSC continuously makes strategic decisions in maintaining this role and that is

why T8 is given a rate of 3. In conclusion, a total weighted score of 3.49 was calculated upon analyzing and assigning both weights and ratings to the external factors as examined by the researchers. This shows that PSPC is effective in its strategies in exploiting the given opportunities and responding accordingly towards presented threats. 1.2. INTERNAL FACTOR EVALUATION (IFE) As shown in Table 03, each key factor was assigned a weight ranging from 0.00 (Low Importance) to 1.0 (High Importance). The value indicates how important the factor is for PSPC’s success in the industry. Besides this, the ratings in PSPC’s IFE refer to how strong or weak each factor is for the company. The numbers vary from 4 to 1, with 4 indicating a major strength, 3 indicating a minor strength, 2 indicating a minor weakness, and 1 indicating a major weakness. As seen from the table above, only 3 and 1 can be given to strengths, and 2 and 1 to weaknesses. As a result, PSPC’s IFE has a total weighted score of 3.19 which is considered a high score and an indicator that the company is doing relatively well against its competitors. Table 03 Pilipinas Shell Strengths and Weaknesses Key External Factors

Weighted

Weight

Rating

S1-Consistent Cash Generation

0.10

4

0.40

S2-Most Preferred Fuel Brand with 37% Rating

0.08

4

0.32

S3-Quality Product and Services

0.09

4

0.36

S4-Strong Footprint and History in the Country

0.06

3

0.18

S5-Robust Marketing Strategies

0.07

4

0.28

S6-Integration in Shell Group Global

0.05

3

0.15

S7-Attractive Dividend Policy

0.02

3

0.06

S8-Strong Corporate Governance

0.06

4

0.24

Score

STRENGHTS

S9-Globally Recognized Talents

0.05

3

0.15

S10-World Class Supply Chain

0.07

4

0.28

S11-First to Offer Carbon Offset in Philippines

0.07

4

0.28

S-12Efficient Fuel Retail Network

0.06

4

0.24

W1-Restricted Core Values

0.03

2

0.06

W2-Negative Value and Cash Outlook

0.07

1

0.07

W3-Declining Liquidity Capabilities

0.06

1

0.06

W4-Variability in Inventory Gain/Losses

0.06

1

0.06

1.00

-

3.19

WEAKNESSES

TOTAL

Ratings Legend: 4 – Superior Response; 3 – Above Average Response; 2 – Average Response; 1 – Poor Response

As for the reasons for importance and rating, S1 was given a weight of 0.10 points and a rating of 4 as the researchers perceived that this factor is an important and major strength as the company is consistent with its cash-generating and cash-saving strategies, which include reducing combined CAPEX and OPEX for capital growth and supply-chain investments. S2 and S3 both have a relatively high weight and rating as establishing their own brand and providing good quality products and services highlight their competitive edge. S4 was given such weight and rating corresponding to the company’s long history of business in the country, it was able to establish its perceived value and was able to continuously put in the mind of the consumers a positive brand image. S5 got a high importance and weight as the company’s robust marketing efforts highlight their competitive advantage. Besides this, S6 was assigned an average point as the researchers view it good that the company is connected and aligned with its global group, which will evidently enable it to implement effective and efficient world-class programs and strategies. For S7, it was given a low score as the researchers assessed that it will not affect much of the company’s performance. S8 was also given a relatively high score due to the company’s strong corporate ethics and good governance which indicates that PSPC is putting the best

interests of its stakeholders and is deemed excellent in managing their people, resources, and systems. This could signify that PSPC will be able to ensure corporate growth and long term corporate success. Meanwhile, S9 received such a score as it is clearly excellent that the company has competent and world-class employees that would help PSPC achieve their desired outcomes and corporate goals. Next, S10 and S11 both got a weight of 0.07 and a rating of 4 as the researchers consider them as major strengths. Having a world-class supply chain could enable the business to reduce costs and improve cash flow, also, being the pioneer of carbon offsetting in the country will help the company position itself in the market and improve their competitive edge. Lastly for the Strengths, S12 got a relatively high weighted score as having an efficient fuel retail network ensures that PSPC’s operations in the retail market are going smoothly and that consumers are satisfied with the products and services offered by the company. On the other hand, a total weight of 0.7 and a rating of 1 which signifies W2 to be a major weakness. A significant factor of this decision was the company’s Net Income loss of Php 21B in the year 2020 which was driven by a significant decrease in sales due to the COVID-19 Pandemic as well as its Impairment Losses of Php 11B which resulted to the transition from an oil-refinery to a world-class import terminal. The researchers have also considered W3 and W4 as a major weakness of the company with an equal weight of 6% which were caused by the company’s immense decrease in inventory by 78.43% as well as its declining liquidity capabilities leading to a 0.90 current ratio in year 2020. This therefore signifies that PSPE is not capable enough of paying its current liabilities with its current assets. Lastly, a minor weakness of the company is its restricted core values with a weight of 0.03. Due to the transition to an import terminal, the company’s core values are less aligned to its current strategy. This may affect PSPC’s long-term performance through a reduced productivity level, dismantled sense of commitment and lessened goal setting in the workplace. In conclusion, a total weighted score of 3.19 was calculated upon analyzing and assigning both weights and ratings to the internal factors as examined by the researchers. 2. STRATEGY FORMULATION This section contains the various strategy formulation tools (SWOT, SPACE, BCG, IE, and GRAND) and other relevant analytical and matching tools that will utilize to device strategic options and directions for Pilipinas Shell. 2.1. IE-MATRIX The researchers have assigned weights based on its relative significance to the company’s performance and a rating whether the factor is a major or minor strength, weakness, and how well or poorly the company responds to the opportunities and threats. Upon assigning weights and ratings in the Internal Factor Analysis (IFE), and External Factor Analysis (EFE), the researchers came up with a total of 3.49 high weighted score for EFE and

a strong weighted score of 3.19 for IFE. Seen on the plot from above, the scores fall under Quadrant I which therefore signifies that PSPC should grow and build their current strategies through Vertical or Horizontal Integration, Market Penetration, Market Development or Product Development.

Figure 01: Pilipinas Shell IE Matrix

2.2. TOWS ANALYSIS The internal and external variants of the SWOT analysis will be utilized to devel...