Competitive Strategy : Bharat Petroleum Corporation Limited

Brief Introduction of Bharat Petroleum/ Products and Services :

 Bharat Petroleum Corporation Ltd. Is a Public Sector Unit engaged in the exploration,
refining and distribution of petroleum products in various countries but primarily in India.

 BPCl has an app market cap of 68K crores and is ranked 280 in Fortune 2015 Rankings.
This is one of the seven Indian companies listed in the rankings.

 With a share of 23.29% ,sales of 36.65 MMT and refining capacity og 27.5 MMTPA is
India’s second largest oil marketing and refining company.

Bharat Petroleum is structured into eight business verticals namely Retail, Upstream, Industrial &
Commercial, Lubricants, LPG, Gas, Aviation and Refinery.

The products primarily produced/ marketed by BPCL are :

 Automotive Fuels , Gas, Lubricants, Aviation Fuels ,Industrial Fuels and Chemicals.

Division I Represent : I represent the Retail division of BPCL which is into logistics and marketing
of automotive fuels in India. This is the core division of BPCL and represent the bulk of BPCLs
turnover and trade. We approximately have 12000 retail outlet spread Pan India. Therefore for the
purpose of the assignment only Retail has been considered.

For formulation of a Growth Strategy we first analyse the Five Forces Framework of Porter and
study it for current and expected future scenario :

Force Current Scenario and Scenario Change Expected in 5 – 10 years

Expected in 3 – 5 years
Degree of Rivalry Medium – Cooling of crude prices and
deregulation of fuel pricing aids Reliance
and Essar’s increased aggression into
marketing.
Threat of Entry Low : Since the policies of the new Govt
are still under scrutiny and the Capex
requirements for entry are high as per
current policy, the likelihood of newer
entrants in the next 3 to5 years is low.
Threat of Substitutes Low : No major cost effective substitute
is likely to disrupt the market.
High : With overcrowding of retailers in fuel,
competition to intensify.
Medium : Multinational oil companies likely
to enter the market space. ONGC, Kuwait
Petroleum etc are likely to enter. Govt is expected
to simplify entry and reduce barriers to entry like
minimum capex investment. However since entry
into the petroleum market is a longdrawn process
with huge logistics backbone requirements the
intensity is expected to be medium. Moreover
the PSUs are firmly entrenched with upgraded
facilities.
Medium : Gas is likely to enter in few select
markets but the impact is likely to be medium
 Competitive Strategy : Bharat Petroleum Corporation Limited
Buyer Power Medium : With increase in marketing
outlets and competition, bargaining power
of large consumers is increasing. This is
evident in the cutthroat competition in
direct marketing and to some extent in
retailing also with companies offering
incentives in different forms. Fuels being a
commodity market is likely to put pressure
on margins.
Supplier Power Low : This is likely to be low due to the
following factors :
High capital requirement of OPEC countries
(Gulf based) and non consensus in
production limits.
OPEC countries preventing the entry of
Russian crude and American shale.
USA deliberately pushing exports of Shale
oil inspite of losses to destabilize OPEC.
Slowdown in demand of China and Europe.
Complementors Medium : With business and growth
centric policies of the Govt, India’s GDP is
forecasted to grow at 7%+ in the upcoming
decade. Manufacturing and concumption
demand likely to increase.
due to logistics constraints considering the
market geography.
High : Bargaining power of buyers is likely to
increase with increased competition and new
entrants keen to break into the market.
Medium : In the next 5 years, OPEC is
expected to form a consensus on production
levels, increasing crude prices and supplier power.
Likely to see sustained increase of prices. US shale
oil push not likely to be sustainable in the long
run. Impact likely to be medium as countries like
India expected to gain from increased trade ties
to Russia.
High : Impact of Make in India, liberalisation,
job creation, increased earnings likely to
complement highly towards increase in demand.
Favourable demographics for the next 15 to 20
years also complements.

Overall study of the five forces therefore shows that although the overall attractiveness to the fuel
market in India is likely to remain constant or slightly increase in the immediate future i.e 3 to
years, the market in 5 to 10 years will lose attractiveness. There will be margin pressures, with
increased competition, higher buyer bargaining power of buyer/suppliers and also threat of new
entrants. Therefore comprehensive strategy needs to be built in view of the expected scenario.

Now for deeper understanding of the corporate strategy we can analyse the market using Ansoff’s
Matrix.

While strategizing for the future the vision of BPCL needs to be kept in mind and alignment of
strategy to vision is essential for direction. BPCL vision is

 To be the most admired global energy company leveraging talent and technology,
 To be the first choice of customers always,
 To exploit profitable growth opportunities outside energy
 To be a role model for Health, Safety and Environment
 To be a great org to work for
 To be a learning organization and
 To be a model corporate entity with social responsibility
 Competitive Strategy : Bharat Petroleum Corporation Limited

Using the Seven Strategic Degrees of Freedom Framework the following Strategies can be worked
out.

Strategy for Near Future ( 3 to 5 years) Strategy for longer term future ( 5 to
10 years)
Attracting Maximimi

Considering the impending competition, the clear short term The strategy of maximizing Existing customers
strategy should be maximizing existing customers. This is also could become harder as competition stiffens . This
sing

aided by the fact that petroleum is a largely commodity market, is a continuous process and is a short term as well
low differentitation of the core products between competitors as a long term strategy.
and BPCL has core competency in retailing. Some strategic ideas
could be
Under : *approach
this Introduction of cloud
for the short based loyalty *ideas
term strategic Enhancement
could be : Long Term Approach to attracting new customers
 Focus on specific customer segments like women, could be penetration into the rural/ agriculture
new
Value Delivery Products or ServicesCustomers

travelers, tourists etc and attract these specific market. This market has very unique requirements
Existing

segments selected though innovative
approaches/services etc so as to become preferred
for the segments.
Innovation of products and services is a continuous movement .
Customers
and needs a completely new approach radically
different from traditional fuel retailing.
Innovation of Products in the longer term future.

In the short term the strategy could be effectively used for Automotive fuels could see the start of a shift from
of

growth : Some strategic ideas could be : polluting to non polluting fuels. For example many
Innovation

a. Leveraging automation for sales promotion targeted to cities and towns are mandatorily on CNG for
specific customer profile. this could be done by profiling commercial vehicles. There are various gas
the customers and cross promoting FMCG and other producing companies which could supply product
products and fuels though tieups to BPCL. There has been enhancement in fuel cell
b. Building a unique loyalty scheme which is hassle free technology and use of hydrogen fuel could be a
and high utility for customers. commercial reality. Therefore innovation in
c. Cater to specific premium segment though specialized product is important and this will also be in line
outlets
Under short termini.ecities
withinwith special
5 years, branded
the – performance
value delivery system with
A lot our vision and
of changes cancommitment to Health
be done in value , Safety
delivery
Innovation of the

could be innovated . Some ideas could be :
 Introduction of geo positioning locks for security of
product in transit. These locks would open only at
the specific retail outlet.
 Various improvement in systems and processes in
terms of accounting – auto adjustment of
accounts, ordering system etc can be done.
 Auto indenting based on physical tank stock
uploaded on server from the automation system in
System
systems for the longer term.
 Accounting could be changed for a
dealer from the current buy from
company and then sell to only sell. i.e
the stock at the outlet could be
replenished at the cost of company and
only actual sales be transferred to
company. This will eliminate
transactional issues. However huge

BPCL is a PSU and therefore acquisitions and mergers are In the long term , this could be a viable strategy
Geographi Improving
Industry

governed by the GOI . In the short term the current industry
structure does not provide viable acquisition options or merger
authorities to BPCL.
However one short term strategy in order to avoid price war and
retain competitive advantage is to enter into strategic partnering
Short Term Strategical Expansion : There are still pockets which
are unrepresented by BPCL. Strategic expansion into the
Structure
cal
provided GOI provides the autonomy to the
company to decide. This being a commodity
market acquiaition of other OMCs could
strategically allow faster market penetration and
expansion. Currently apart from the PSUs there are
Long Term Geographical Expansion is the only
major viable opportunity than should be

unrepresented micro market geographies of the North East,
Ladakh, Andamans etc could be a profitable strategy.
Expansion
aggressively pursued. BPCL is already into
exploration in Mozambique, New Zealand,
Australia and Brazil. Future retailing and refining in
these countries could provide the impetus for
 Competitive Strategy : Bharat Petroleum Corporation Limited
BPCL has a wide network of retail outlets approx 12000 all across
Stepping out into New
Business Arenas India. The posession of these sites itself can provide wide value to
the company for diversification of business. Today the growth
areas in India are telecom. For telecom the biggest hurdle is
creation of infrastructure for its networks. BPCL could setup
cellular network towers in its petrol stations and these could be
leased out for profit to telecom companies. The retail outlets are
spread out extensively across the nook and corners of India and
this could be a profitable growth option. Also these outlets could
serve as rural retailing options – like convenience stores etc in
rural areas. These strategies are also in line with BPCL vision to
enter non energy high growth areas.
BPCL has a wide network of retail outlets and close
connection to all major logistic companies in India.
BPCL network could serve as logistic booking and
transaction centres for an umbrella logistics
company under which the individual logistic
companies could be affiliated. Indian economy is
growing and so is logistics. BPCL could also tieup
with ecommerce partners for setup of pickup hubs
in rural areas in the petrol stations.

Using the Ansoff network the strategies could be clearly laid out as under :

Present Market New Market

Market Penetration Market Development
Present Products

Deep penetration into the rural markets
in India through development of new
models for logistical efficiency could be
used for increasing market share. New
and innovative loyalty programs and
premium products could be marketed
Product Development
New Products
Economies of Scale
BPCL has recently merged with NRL
in Eastern India . This refinery in the
fast East has scope of expansion but
due to restricted market in North East
, the expansion and development of
marketing network in Bangladesh
Diversification

Economies of Scope
Development of gas as an alternative to Diversification into telecom network,
the scarce resource of petroleum, could retailing in rural areas could be viable
be a game changer for the future. The as BPCL already has a core advantage
innovations in use of gas for vehicles , of a spread out network pan India.
fuel cell technologies etc can be a cue. This could be done in partnership
with existing players in these
Possible implication of selected strategies on future business operations :

Penetration into Rural Areas and Specific Consumer Segments : This strategy could have a huge
positive impact on market share. However the rollout would require huge expansion of manpower
for operations. It will also require an upgraded transportation network ang logistic improvements.

Market Development in Africa, Latin America , Bangladesh, Burma, Sri Lanka etc. : With enough
refining capacity and also success in exploration activities in Moxambique and Brazil this could be
a future long term strategy. However this could require very high capital, manpower, skill
 Competitive Strategy : Bharat Petroleum Corporation Limited

development and induction of experienced manpower. Each strategy will have to be analysed
critically using available tools for stability and viability in the long term.

Development of Gas : BPCL is already in the energy domain and has experience with CNG and LNG
marketing through JVs. This would be an easier strategy in line with core competencies in BPCL.
The strategy however will require huge planning and infrastructural backbone for transportation
and handling of gas. Potential studies and careful planning will be key. Govt policies in the future
will also be a key element to consider.

Diversification : This will require a totally different operational setup or SBU and will require
changes in organsiational structure. Company would also have to induct experienced manpower
and possibly outsource many of the operations through partnerships with existing players. This
could be a step in developing new capabilities and explore BPCLs vision to foray into non energy
growth areas.