Professional Documents
Culture Documents
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1990, after PCs had become a common feature in the organization that the
unions began to accept the mainframe computer system in the organization.
However, by that time, the technology had progressed, and IOCL decided in
1992 to replace the mainframes with a distributed data processing
environment.
In the first 20 years of computerization, the focus had been on financial
systems, payroll and sales statistics. With the introduction of PCs, several
initiatives were launched to implement EDP in other aspects of work at IOCL.
The first online transaction processing program was implemented in 1989. A
distributed digital control system for refinery process controls was
implemented in 1993 and subsequently replaced by real-time operations
controls in 1996. At the time, key functions in various IOCL divisions were
sustained by different legacy software systems developed over the past
several years. Similarly, the financial management system (FMS), the
materials management system (MMS), and the online maintenance and
inspection system (OMNIS) were in operation in the refineries and pipelines
divisions. There were other legacy systems for stock and sales accounting in
the marketing division and for payroll in all divisions. EDP at IOCL worked on
minicomputer and PC-based platforms, and significant investments had been
made in these basic building blocks. There were also local and wide area
networks, but these operated on a limited scale with little standardization.
Like any other large organization, IOCL generated, collated and stored a vast
quantity of data, but the information was scattered among different legacy
systems, each designed to meet the specific needs of particular
divisions/functions/departments. These islands of information systems
lacked commonality, consistency and communicability.
PROJECT MANTHAN
A thought process was initiated by top management in March 1996 for
developing and implementing an integrated information processing,
transmitting and archiving system across the corporation. To initiate the
process of IT-based reengineering, workshops were conducted by the
functional expertise resource group with about 300 representatives from
different areas of the IOCL business.
The knowledge generated from these workshops provided the foundation for
Project Manthan. The project was thus conceptualized as common
information platform across the organization with a view to ensuring the
survival and growth of IOCL in the open market
The core group formulated the scope and objectives of the project, based on
the collective knowledge and experience of its members, a literature scan and
consultant presentations. The upgrade of hardware, use of a common
platform, integration of all functional modules and open architecture was
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conceptual
design
detailed design
construction
implementation.
Manthan has been a unique project embarked upon for the first time in India
by any organization of comparable size and complexity. The project stipulated
a quantum jump in technology for IOCL. Therefore, they, as they will as PwC,
4 had to face a number of unforeseen and multidimensional problems while
completing various stages. The methodology adopted by PwC in consultation
with the business managers and the IT group was also unique and novel for
IOCL. Therefore, a number of issues had to be revisited and rediscovered
during this stage. All these factors resulted in delays in the completion of the
project. 4PwA was renamed PricewaterCoopers (PwC) and, later in 2002, the
IT consultancy services of PwC they were taken over by IBM Consulting.
One such issue related to add-ons. The core team learned a great deal about
the organization over the course of the project that had not been as clear
earlier, including the fact that add-ons they were going to be far more crucial
than initially envisaged.
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Going Live
On August 31, 2001, the R&D centre became the maiden go-live site.
According to Rao, Originally, 22 pilot sites were to go live simultaneously on
September 1, 2001, but considering their progress, this looked unlikely;
meanwhile, the implementation had taken quite some time and the general
perception was, The Manthan group has been doing something for so many
months but nothing has come out. They realized that a quick win was
necessary for both the core team and the organization. They needed to
demonstrate to the organization that Manthan, as a concept, worked in real
time.
This is where the idea of a pilot out of a pilot emerged. The core team favored
the R&D centre as the maiden site as it offered many advantages, e.g.,
transaction opportunities for most of the SAP modules and proximity to the
head office of IOCL and the Project Manthan team. Until the rollout in R&D,
there were issues related to the morale of the core team.
There were no visible results and the team was in its own cocoon. Through
the quick win at R&D, the Manthan team grew in confidence.
With the experience gained at the R&D centre and at IIPM, the Manthan team
was ready to roll out SAP at other major locations. A dozen locations were
short-listed to go live on January 1, 2002. These units together represented
the entire spectrum of business operations in refineries, pipelines and
marketing.
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One option was to schedule all reporting and batch jobs after hours
when the transaction load was light.
Using the SAP message service whenever response time increased,
by requesting them to defer their reporting jobs in favor of business
transaction processing.
Another alternative was to remove the reporting load from the database
server and shift it to a business warehouse server. Although this would
free substantial resources for transaction processes, the reporting
server would require a substantial investment of time and money.
The Dilemma
Given the three-tiered ERP architecture, it
would be challenging to identify which factors
e.g., the SAP application, the database server,
the way in which the database has been
implemented, the communications bandwidth
constraints were bottlenecks. Puri knew,
though, that with more sites going live and
increasing end-user expectations, the efficient
performance of the technological system was
crucial.
Puri also understood that he did not have direct control over several causal
factors, such as the adequate allocation of bandwidth by the government-run
telecommunications provider. Such constraints resulted in several questions
for Puri with respect to the future course of Project Manthan. The primary
decision he needed to make was whether or not to proceed as planned with
implementation at the remaining sites. If he were to recommend continued
implementation, he would have to keep in mind that response times could
worsen due to the additional load of the new sites. If he were to recommend
stalling the implementation, he would have to account for the implications of
such a decision as well as come up with a suitable action plan to bring the
project back on track.
Puri began to consider the factors that pointed to continuing with the
implementation while simultaneously trying to resolve the response time
issues. The implementation exercise had gained considerable momentum,
and the core team was displaying great enthusiasm in the rollout to the
remaining sites. Puri knew that in this environment, any diversion would
impede the implementation and delay project completion. Additionally, Puri
had been feeling pressure from top management to complete the project,
which was already in its eighth year.
With the added load of new sites going live, the response time problem could
worsen. Any further delays in processing transactions could result in poor
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Problem Identification
There were a lot of difficulties regarding the remote areas and
government approval.
A number of issues had to be revisited and rediscovered during this
stage. All these factors resulted in
delays in the completion of the project
The selection of an add-ons vendor
was a long process as integration of
supply chain management
One of the biggest challenges to
adopting the new IT system was the
level of computer proficiency in the
organization
The Response Time Issue: The poor response time had larger
organizational implications
With more sites going live and increasing end-user expectations, the
efficient performance of the technological system was crucial
There was uncertainty regarding response times, and it appeared
prudent to halt further implementation
Any further delays in processing transactions could result in poor
customer relations and compromise customer service
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Main issue
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workshops provided the foundation for Project Manthan. The project was thus
conceptualized as a common information platform across the organization
with a view to ensuring the survival and growth of IOCL in the open market
The cost-benefit equation was also seen in a positive light. Puri noted, Our
annual distribution cost and expenditure on project services and material
account for Rs34 billion3 and Rs40 billion respectively; even a one per cent
reduction through optimization and information analysis would entail a
substantial savings to IOCL.
Weaknesses:
1. There were a lot of difficulties regarding the remote areas and
government approval.
Sheela Ranjhan, deputy manager of information systems (IS), spoke about
the practical difficulties involved: As per normal policy, we try to have three
modes of communication to any point of sale location. The terrestrial network
forms the backbone and meets the requirements of applications that demand
high bandwidth, but as it is not dependable, we provide VSAT and ISDN
connectivity as backups. This is ideally what we would like to have in the new
situation, but our locations are largely based in remote areas of the country,
where the communication infrastructure is inadequate. During implementation,
we found that we could not generalize and that each location had to be looked
at on a case-by-case basis, which resulted in variations from our three-tier
communication setup. Further, we faced many challenges related to the
regulatory environment. For instance, installing VSAT at our aviation fuelling
stations required approval from a government body that represented several
ministries; this approval was not always forthcoming.
2. A number of issues had to be revisited and rediscovered during this
stage. All these factors resulted in delays in completion of the project.
The project was to be completed in four stages: (1) conceptual design, (2)
detailed design, (3) construction, and (4) implementation. As the project
evolved, Puri reflected on its progress: Manthan has been a unique project
embarked upon for the first time in India by any organization of comparable
size and complexity. The project stipulated a quantum jump in technology for
IOCL. Therefore, we, as well as PwC, had to face a number of unforeseen
and multidimensional problems while completing various stages. The
methodology adopted by PwC in consultation with the business managers
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and the IT group was also unique and novel for IOCL. Therefore, a number of
issues had to be revisited and rediscovered during this stage. All these factors
resulted in delays in the completion of the project.
3. The selection of an add-ons vendor was a long process as integration
of supply chain management
One such issue related to add-ons. The core team learned a great deal about
the organization over the course of the project that had not been as clear
earlier, including the fact that add-ons were going to be far more crucial than
initially envisaged. As A.C. Mishra, chief manager of IS for the add-ons group,
observed, IOCL is essentially a supply chain organization. In the deregulated
scenario, a package or tool for supply chain management is a must as
decision-making departmentally has led to sub-optimal operation in the past.
With add-ons, IOCL hopes to optimize its entire supply chain, from crude
procurement to finished product distribution. We went in for the add-ons as
the real time needs of IOCLs core business functions were not adequately
addressed by ERP software alone. The add-ons were essentially bolt-ons to
SAP R/3. The selection of an add-ons vendor was a long process as
integration of supply chain management was a new concept in India in 1998
and there was no benchmarking data available for the country. In October,
2002, Tata Honeywell was awarded the work. As a result, we embarked on
the prototype development of some select applications, to prove their utility in
the Indian environment and to build confidence amongst end-users. The
project team had taken up the implementation of a few packages such as the
laboratory information management system, crude scheduling packages for
the crude pipelines, demand forecasting for a few selected products in
representative areas, and at various end-user locations.
4. One of the biggest challenges to adopting the new IT system was the
level of computer proficiency in the organization.
One of the biggest challenges to adopting the new IT system was the level of
computer proficiency in the organization. Of the nearly 9,500 employees in
executive and supervisory roles, a large proportion had little experience with
computers, let alone with advanced systems such as an ERP. It became clear
to management that corporate-wide visibility for IT and the training of all its
employees on IT systems was going to be a key factor in project success and
the use of IT for business growth. Apart from launching IT-based training, in
1999-2000, IOCL provided personal computers for home use to all 9,500
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Opportunities:
1. Project Manthans cost-benefit equation was also seen in a positive
light.
The core group formulated the scope and objectives of the project, based on
the collective knowledge and experience of its members, a literature scan and
consultant presentations. The upgrade of hardware, use of a common
platform, integration of all functional modules and open architecture was
collectively perceived as a synergized system to meet IOCL business
requirements. The expectation was that, on completion of the project, IOCL
would be able to compete with the best in India and abroad on equal terms.
The cost-benefit equation was also seen in a positive light. Puri noted, our
annual distribution cost and expenditure on project services and material
account for Rs34 billion3 and Rs40 billion respectively.
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months but nothing has come out. We realized that a quick win was
necessary for both the core team and the organization.
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Threats:
1. The Response Time Issue: The poor response time had larger
organizational implications
The poor response time had larger organizational implications. While the
project was backed by top management and positioned as an IT-based reengineering exercise that would align with the business priorities of IOCL,
end-users facing slow response times had started to question whether their
requirements (such as time required to process a transaction) were being
fulfilled. For end-users with lower computer skills, slow response times
compounded the challenges they faced in adjusting to the new way of
transacting business. These users were now forced to navigate and utilize
computer screens that they considered complex and saw as taking longer to
complete business transactions than their earlier manual processes. Even to
end-users who had been proficient in computer use and accustomed to
customized stand-alone software, the response time delays proved to be
disruptive and a source of frustration. The project and change managers, who
had championed the new system at various units, saw the response time
delays as a source of embarrassment.
2. With more sites going live and increasing end-user expectations, the
efficient performance of the technological system was crucial.
Puri realized there were time and resource costs associated with sorting out
the response time problem. Given the three-tiered ERP architecture, it would
be challenging to identify which factors e.g., the SAP application, the
database server, the way in which the database has been implemented, the
communications bandwidth constraints were bottlenecks. Puri knew,
though, that with more sites going live and increasing end-user expectations,
the efficient performance of the technological system was crucial. Puri also
understood that he did not have direct control over several causal factors,
such as the adequate allocation of bandwidth by the government-run
telecommunications provider. Such constraints resulted in several questions
for Puri with respect to the future course of Project Manthan.
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Bargaining Leverage: Competitors had very close position and they can
graft market. Indian Oil Corporation Limited is operating in manufacture
oriented business; it offers water purification plant and provides fresh water,
so there is no room for bargaining in their business operations. If barriers to
entry are high, then there are fewer competitors in the industry and
consequently, profitability is higher. Ideas and knowledge that provide
competitive advantages are treated as private property when patented, and
prevents others from using the knowledge and thus creates a barrier to entry.
Since there are no adjustment or process to patent in this industry and so
profitability is still high.
Indian Oil Corporation Limited had huge number of buyers. But
competitors had very close position and they can graft market if Indian
Oil Corporation Limited made any mistake.
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High fixed costs: Industry needs huge infrastructure and needs investment
at the initial level. And to become competitive a company has to invest in the
infrastructure and a country where the people like to hang around in the shops
so the sizes should be big. For covering the huge fixed cost the firms want to
grab the biggest portion of a market, which boosts up the rivalry among the
competitors. Thats why we have found the fixed cost very High.
As Indian Oil Corporation Limited and other firms have already
invested in the market and has established its plants, it has become
very risky for these firms to cover the huge fixed cost, thus boasting the
rivalry. It is not desired for any company.
High exit barriers: The firms operating have to bear huge fixed cost in
technology, infrastructure and building distribution network which are
dedicated to that industry. So we have found the barriers of exit barrier High.
Indian Oil Corporation Limited has invested a lot in different products in
the coffee industry and is planning to invest more as it has expanding
outside the country. So the exit barrier for the company is high.
Industry Competitive Structure: The competitive structure of an industry to
the number and size distribution of companies in it, something that strategic
managers determine at the beginning of an industry analysis. It is High.
Indian Oil Corporation Limited has been fighting well in the rural area
like monopoly but in the metropolitan cities the competition was very
tight. So the industry competitive structure is very high.
Product Differentiation: Indian Oil Corporation Limited manufacturers use
almost the similar kind of technologies in their production system which
means the features and usage of their produced products are very much
similar; means the product differentiation is low.
This similarity in usage and features are threats for Indian Oil
Corporation Limited as customers may buy products from the new
entrants or from other companies.
Industry Demand: The demand for fresh water is simple enormous all over
the world. This demand for high end products is High in the country as the
business sector is expanding and the government has re-designed the whole
setup of its administration and is encouraging to expand even in the rural
area.
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possible in the country which shows the patents and proprietary knowledge is
not highly restricted.
Patents and proprietary knowledge security is not very high in the
country which is not a benefit for both Indian Oil Corporation Limited
and other competitors in the market.
Absolute Cost Advantages: Market provides the opportunity of first mover
advantage which means the firm who enters in the market at the beginning
period of a particular industry that firm would get the cost advantage over
other. From a strategic perspective, barriers can be created or exploited to
enhance a firm's competitive advantage. So, absolute cost advantage is
Moderately Low.
Indian Oil Corporation Limited is not having this cost advantage as it
had entered in the country with lots of product varieties which had
impact on the local peoples consumption as it had entered in the
market after there were some competitors already present.
Asset specificity inhibits entry into an industry: Some industry uses
assets like technologies or raw materials which are very much specific to the
industry. Means no other modification of that technology or raw materials
used in the production process is possible to produce any other product or to
use in any other industry. That is why we found asset specificity very High.
As the asset specificity is high in the market this means Indian Oil
Corporation Limited doesnt have the opportunity to get asset
advantage.
Possibility of merger and joint venture: It is seen previously that not only
present rivals that pose a threat to firms in an industry; the possibility that new
firms or a merger along with joint venture of two small firms may enter the
industry also affects competition, through competitive pricing strategy. New
entrants bring a desire to gain market share and often have significant
resources. Their presence may force prices down and pressure on profits.
Analyzing the threat of new entrants involves examining the barriers to entry
and the expected reactions of existing firms to a new competitor. The
companies in industry has not restricted from merger and joint venture. So the
entry of FDI is not quite restricted which means the FDIs possibility is high.
This possibility of merger and joint venture is a high threat for Indian Oil
Corporation Limited as new entrants can easily grave some market
share.
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The original Indian plate survives as peninsular India, which is the oldest and
geologically most stable part of India; it extends as far north as the Satpura
and Vindhya ranges in central India. These parallel chains run from the
Arabian Sea coast in Gujarat in the west to the coal-rich Chota Nagpur
Plateauin Jharkhand in the east. To the south, the remaining peninsular
landmass, the Deccan Plateau, is flanked on the west and east by coastal
ranges known as the Western and Eastern Ghats; the plateau contains the
nation's oldest rock formations, some of them over one billion years old.
Constituted in such fashion
The San people were the first settlers; the Khoikhoi and Bantu-speaking tribes
followed. The Dutch East India Company landed the first European settlers on
the Cape of Good Hope in 1652, launching a colony that by the end of the
18th century numbered only about 15,000. Known as Boers or Afrikaners, and
speaking a Dutch dialect known as Afrikaans, the settlers as early as 1795
tried to establish an independent republic.
After occupying the Cape Colony in that year, Britain took permanent
possession in 1815 at the end of the Napoleonic Wars, bringing in 5,000
settlers. Anglicization of government and the freeing of slaves in 1833 drove
about 12,000 Afrikaners to make the great trek north and east into African
tribal territory, where they established the republics of the Transvaal and the
Orange Free State.
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The discovery of diamonds in 1867 and gold nine years later brought an influx
of outlanders into the republics and spurred Cape Colony prime minister
Cecil Rhodes to plot annexation. Rhodes's scheme of sparking an outlander
rebellion, to which an armed party under Leander Starr Jameson would ride to
the rescue, misfired in 1895, forcing Rhodes to resign. What British
expansionists called the inevitable war with the Boers broke out on Oct. 11,
1899. The defeat of the Boers in 1902 led in 1910 to the Union of India,
composed of four provinces, the two former republics, and the old Cape and
Natal colonies. Louis Botha, a Boer, became the first prime minister.
Organized political activity among Africans started with the establishment of
the African National Congress in 1912
The dependency on foreign agencies for funding was extremely high in India.
The earlier record of foreign manufacturers in India had been poor with little
success. The lack of infrastructure and resources creates many new
challenges for Indian Oil Corporation.
Exchange risk usually affects businesses that export and/or import, but it can
also affect investors making international investments. For example, if money
must be converted to another currency to make a certain investment, then any
changes in the currency exchange rate will cause that investment's value to
either decrease or increase when the investment is sold and converted back
into the original currency.
Indian Oil Corporation Environmental is a
Canadian based company that wants to
operate in Indian market
So it is obvious that Indian Oil
Corporation would need to transfer
money to India to give dividend to its
shareholders.
As India and most of the Asian countries have well bilateral relationship we
believe the transfer of money would not face any kinds of restriction from
the Indian government, nether the exchange rate between these two
countries fluctuates that much which could be a matter of worry.
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Social Risk
The market where Indian Oil Corporation was planning to serve was directly
connected to the general public, more specifically the society. Asian society
has been very well coming and very moderate in nature.
Indian Oil Corporation need to be very careful about the basic believes
of the society while they introduce any new product mix.
Indian Oil Corporation should be careful about this and do business by
not violating the social values and norms.
However we suggest Indian Oil Corporation should look for opportunity
to introduce products and events focused to the norms of the Asian
society.
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political Risk
Economic policy over the forecast period will continue to focus on increasing
both economic growth and investment in order to create employment. The
history of India is one of the grand epics of world history and can be best
described in the words of India's first Prime Minister Jawaharlal Nehru as "a
bundle of contradictions held together by strong but invisible threads". Indian
history can be characterized as a work in progress, a continuous process of
reinvention that can eventually prove elusive for those seeking to grasp its
essential character.
Political risk in Asian market for business firms is really low, means the
government is very welcoming to investment.
But the firms need to follow the Asian countries laws strictly and need to
pass all the regulatory checks Asian countries governments have.
Beside this a firms need to have good relation with the high government
officials for advantages and opportunities.
India benefits from its stable political environment. This lessens the risk of
political instability leading to changes in policy that might have a negative
impact on the business operating investment.
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Technological Risk
Technology enables key processes that a company uses to develop, deliver,
and manage its products, services, and support operations. Understanding
the role that technology plays in enabling core business operations
establishes the framework for understanding where relevant technology risks
lie.
By understanding the role that technology plays in supporting various
business functions, company management is in a better position to determine
the relative importance of these functions and prioritize the systems,
applications, and data involved. Technology risks are present throughout the
company and must be addressed as a whole.
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Procedural Risk
Economical Risk
The economy is highly vulnerable to external shocks arising from the global
financial crisis, which increases the risk that market
oriented reforms will give way to more protectionist
policies aimed at protecting the domestic economy.
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Product/Services Demand
Application:
Since 1976, the oil industry had operated under the government-controlled
administered price mechanism (APM) for petroleum products. The APM
ensured a fixed level of profitability for the government-owned oil companies
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Financial Resources
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telephone call to the other end of the city would occur trouble free. The
optimal and efficient performance of the new centralized approach at IOCL
called for a telecommunications network unparalleled in the history of
corporate India. In 1996, not only was the telecommunications sector
controlled by the government, the reliability of connections and bandwidth
adequacy was in doubt.
The Manthan team, however, felt that a multitiered communications strategy
would provide nearly 100 per cent uptime with adequate bandwidth. IOCL saw
this as an opportunity to implement a single integrated communication
network for the entire organization, dissolving divisional boundaries by
providing voice, video and data connectivity throughout the country.
Management Philosophy
While Puri and his team had faced several challenges in designing and
implementing Project Manthan, slow response time threatened to escalate the
challenge to a new level. As the Indian petroleum market continued to
undergo deregulation and an excess refining capacity appeared for the first
time, customers had the flexibility to source their needs from companies that
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offered the best service at the least cost and time. One of the key business
requirements from Project Manthan had been its beneficial impact on the
customer relationship. Lengthy transaction processing delays (e.g. the
generation of a sales invoice) could, however, trigger customer migration to
other oil companies. The Manthan team, however, felt that a multitiered
communications strategy would provide nearly 100 per cent uptime with
adequate bandwidth. IOCL saw this as an opportunity to implement a single
integrated communication network for the entire organization, dissolving
divisional boundaries by providing voice, video and data connectivity
throughout the country.
Delphi Technique
Demographic Changes
The PSUs certainly helped establish a core industrial base in India. However,
they had come to be known for their low productivity, unsatisfactory quality of
goods, excessive manpower utilization, inadequate human resource
development and low rate of return on capital. For instance, between 1980
and 2002, the average rate of return on capital employed by PSUs was only
3.4 per cent as against the average cost of borrowing of 8.7 per cent. In 1992,
the Indian government as part of a decisive move to stimulate the economy
began to disinvest in many PSUs and deregulate various sectors of the
economy, allowing private and foreign participation and ownership in nearly
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Financial Analysis
The Indian oil refinery sector is
passing through a period of weak
refining margins. The gross
refining margins (GRMs) of most
domestic refining companies
have been on a declining trend
over 1999-2003 on account of
factors such as global supply
overhang and de-growth in
demand for petroleum products,
especially light and middle
distillates in major consuming
countries. Furthermore, the
historically low level of price differential between light-sweet and heavy-sour
crude oils made a significant negative impact on the GRMs of complex
refineries.
The GRMs of domestic refineries may remain weak over the medium term in
line with low international refining margins, resulting from expected increase in
global surplus capacity; moderate light-heavy differentials and lower importduty differentials between petroleum products and crude oil. Higher-thananticipated recovery in demand for petroleum products in major markets,
delays in planned projects and closure of unviable refinery capacities may
translate to some upside to GRM levels in the medium term.
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Current Ratio
Cash Ratio
Profitability Ratio
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companies can sell more without taking market share away from other
companies, resulting in high profits.
Demand condition was high in both the countries India and France. In India
there was a confirm sales of 10000 tones yearly.
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industries that can use and coordinate particular activities in the value chain
together, or that are concerned with complementary products.
To operate in both the country, India and France Indian Oil Corporation has to
bring the required supply on its own. In short; there were not too many related
and supporting industry, though India had CMC(real estate developing
industry) but France had none.
Introduction
In the introduction stage of the life cycle, an industry is in its infancy. At this
stage market size and growth is slight. Perhaps a new, unique product
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offering has been developed and patented, thus beginning a new industry.
Some analysts even add an embryonic stage before introduction. At the
introduction stage, the firm may be alone in the industry. It is possible that
substantial research and development costs have been incurred in getting the
product to this stage. In addition, marketing costs may be high in order to test
the market, undergo launch promotion and set up distribution channels. It is
highly unlikely that companies will make profits on products at the Introduction
Stage.
INDIAN OIL
CORPORATION
LIMITED
Products at this stage have to be carefully monitored to ensure that they start
to grow. Otherwise, the best option may be to withdraw or end the product.
Growth
Like the introduction stage, the growth stage also requires a significant
amount of capital for the firm. The goal of marketing efforts at this stage is to
differentiate a firm's offerings from other competitors within the industry. If the
new product is successful (many are not), sales will start to grow and new
competitors will enter the market, slowly eroding the market share of the
innovative firm.
The product starts to be exported to other markets and substantial efforts are
made to improve its distribution since competition mainly takes place more on
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the innovative capabilities of the product than on its price. This phase tends to
be associated by high levels of profits.
Maturity
As the industry approaches maturity, the industry life cycle curve becomes
noticeably flatter, indicating slowing growth. Some experts have labeled an
additional stage, called expansion, between growth and maturity. In fact, the
rate of sales expansion is typically equal to the growth rate of the economy.
The Maturity Stage is, perhaps, the most common stage for all markets. It is in
this stage that competition is most intense as companies fight to maintain their
market share. Here, both marketing and finance become key activities.
Marketing spend has to be monitored carefully, since any significant moves
are likely to be copied by competitors.
The Maturity Stage is the time when most profit is earned by the market as a
whole. Any expenditure on research and development is likely to be restricted
to product modification and improvement and perhaps to improve production
efficiency and quality.
Decline
In the Decline Stage, the market is shrinking, reducing the overall amount of
profit that can be shared amongst the remaining competitors. At this stage,
great care has to be taken to manage the product carefully. It may be possible
to take out some production cost, to transfer production to a cheaper facility,
sell the product into other, cheaper markets. Care should be taken to control
the amount of stocks of the product.
Ultimately, depending on whether the product remains profitable, a company
may decide to end the product. In this phase, sales decrease at an
accelerating rate, causing the plotted curve to trend downward.
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Indian Oil
Corporation
Limited industry
Fragmentation Stage
Fragmentation is the first stage of the new industry. This is the stage when the
new industry develops the business. At this stage, the new industry normally
arises when an entrepreneur overcomes the twin problems of innovation and
invention, and works out how to bring the new products or services into the
market.
Shake-out
Shake-out is the second stage of the industry lifecycle. It is the stage at which
a new industry emerges. During the shake-out stage, competitors start to
realize business opportunities in the emerging industry. The value of the
industry also quickly rises.
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Maturity
Maturity is the third stage in the industry lifecycle. Maturity is a stage at which
the efficiencies of the dominant business model give these organizations
competitive advantage over competition. The competition in the industry is
rather aggressive because there are many competitors and product
substitutes. Price, competition, and cooperation take on a complex form. Some
companies may shift some of the production overseas in order to gain
competitive advantage.
Decline
In the stage of decline, some companies may leave the industry if there is no
demand for the products or services they provide, or they may develop new
products or services that meet the demand in the market. In such cases, this
will create a new industry.
Here are some of the reasons why we said that this industry is in the Shake
out stage.
The industry was generating huge revenue and was attracting investment
from private and government sectors. A huge number of companies
already had invested in this industry.
Required levels of skilled people were locally vastly available.
Infrastructure was already established although not of the global standard.
All areas of this industry had targeted market present locally and those
markets were showing huge demand.
The industry was generating huge revenue and was attracting investment
from private and government sectors.
Quality suppliers are also present locally and globally.
Targeted customers are showing positive attitudes towards the new
innovations introduced by the companies in the industry.
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Alternative
Alternative 1
Do nothing
This alternative will provide them
with less work or probably no
work to do. This strategy will
require the company to simply
follow its previous footsteps.
Following this strategy would
mean that the decision to take an
active interest in Delays in
completing front-end
transactions were not well
received by customers and
threatened to compromise user
co-operation in moving the
corporation to a more
contemporary information processing platform. Moreover, Puri wondered if
any such pause might further erode user confidence in the project as a whole.
Yet, continuing on without sorting out the problem seemed to pose its own
dangers; the competitive environment did not seem to allow for the possibility
by pausing the implementation to try to solve the problem.
Doing nothing would mean that they will lose this ever growing market through
which they could have increased their annual sales and would have been able
to regain their market shares.
Marketing insight:
They dont require any conventional marketing plan to promote their product.
As they are doing nothing they probably dont have any work to do or improve
their product status in the market. They dont have to do any promotional
activities to promote their product in the market or make their product known
to the consumers.
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Financial insight:
As they are doing nothing for their product, they dont require any investment
to promote or make any necessary changes in their production. They dont
need any investment to come up with any new product innovation to market
their product or increase their sales.
HRM insight:
From the case we got no idea whether they have any proper management or
HR department, due to less information provided. So we are guessing that
they dont have any HR department neither they have any proper
management style. There is very high possibility that they might face future
difficulties managing their product or their employees due to their lack of
proper management.
Pros:
They have no risk as they are not entering into new market.
Occupy more time to study the competitors trend and come up with
new R&D
Easier to sustain current revenues earned solely from the Cash-cow
products
Increased focus on existing brands saves time for extending product
line
Cons:
They will lose the market which is developing and encouraging foreign
investments.
Though the do nothing would buy ample time for Indian Oil Corporation to
come up with new ideas and R&D, but the opportunity cost is very high for
such strategy. In this alternative, the competitors would enjoy the markets
impressive growth and simply take the cream out of the industry and leaving
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residuals. Therefore, unless they faces severe break down both financially
and strategically the Do Nothing strategy is not recommended.
Alternative 2:
In response to time issues, Indian Oil Corporation
should remove the reporting load from the database
server and shift it to a business warehouse server.
Puri recognized that the slow response time had huge business and
organizational implications. Delays in completing front-end transactions were
not well received by customers and threatened to compromise user cooperation in moving the corporation to a more contemporary information
processing platform. Moreover, Puri wondered if any such pause might further
erode user confidence in the project as a whole.
Yet, continuing on without sorting out the problem seemed to pose its own
dangers; the competitive environment did not seem to allow for the possibility
of pausing the implementation to try to solve the problem. It was April 8, 2003,
and top management, concerned about the implications of the slow response
times, expected a recommendation within 10 days about whether to proceed
with implementation in the remaining sites.
The response time issues had cropped up following the end of a month. The
month-end period in IOCL involved consolidation of all past transactions for
monthly reporting purposes to aid management decision-making. When the
response time issue first came up, the Basis team responded by deferring
processing of reporting applications to free up resources for business
transactions. This action had improved response time to an extent. Puri
learned from his team, however, that other factors could have contributed to
the poor response times: hardware configuration and installation, database
design and installation, the way SAP had been implemented, the nature of the
processes as well as their loads (i.e. transactions and reporting load), and
communication bandwidth limitations. However, the extent of the contribution
of each factor was uncertain. Additionally, Puri was aware that the recent
version upgrade to 4.6C might have put a higher resource demand on existing
production systems.
Alternative was to remove the reporting load from the database server and
shift it to a business warehouse server. Although this would free substantial
resources for transaction processes, the reporting server would require a
substantial investment of time and money.
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Marketing insight:
They need to require any conventional marketing plan to promote their
product. As they are doing this they probably dont have any work to do or
improve their product status in the market. They have to do any promotional
activities to promote their product in the market or make their product known
to the consumers.
Financial insight:
As they are doing this for their product, they need to require investment to
promote or make any necessary changes in their production. They need all
investment to come up with any new product innovation to market their
product or increase their sales.
HRM insight:
From the case we got no idea whether they have any proper management or
HR department, due to less information provided. So we are guessing that
they dont have any HR department neither they have any proper
management style. There is very high possibility that they might face future
difficulties managing their product or their employees due to their lack of
proper management.
Pros:
They will not lose the market which is developing and encouraging
foreign investments.
Cons:
They have risk as they are not entering into new market.
They need to put an effort in order to assume control of the target firm.
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Alternative 3:
The company should examine the availability of inhouse skills as well as the current systems set-up
and recommend the structure and the skills required
for operating, maintaining, and upgrading the
proposed corporate system.
One of the biggest challenges to adopting the new IT system was the level of
computer proficiency in the organization. Of the nearly 9,500 employees in
executive and supervisory roles, a large proportion had little experience with
computers, let alone with advanced systems such as an ERP. It became clear
to management that corporate-wide visibility for IT and the training of all its
employees on IT systems was going to be a key factor in project success and
the use of IT for business growth.
This essentially addresses the Management oversight of the organizations
control processes for providing assurance on the system. Audit reviewed the
adequacy of the monitoring processes and how much these had been
successful in continuous improvement of the system.
There was a need to submit status reports to Senior Management regarding
achievement of planned objectives, deliverables obtained, meeting of
performance targets etc. and any such information as may be required by the
Senior Management for monitoring and review regarding the progress made
towards achievement of the identified goals. Such reports could greatly
facilitate Management in initiating timely action and controlling the effective
progress of the Project. However, Audit found that Business Warehousing and
portal for Management Reporting as recommended by the Consultants had
not been installed.
In the absence of the same, Management reporting through SAP was virtually
absent. Though basic measurements to be monitored had been identified and
assessment methods and techniques had been defined, the processes had
not been adopted across the entire organization and decisions were made
based on the expertise of a few individuals.
Marketing insight:
They need to require any conventional marketing plan to promote their
product. As they are doing this they probably dont have any work to do or
improve their product status in the market. They have to do any promotional
activities to promote their product in the market or make their product known
to the consumers.
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Financial insight:
As they are doing this for their product, they need to require investment to
promote or make any necessary changes in their production. They need all
investment to come up with any new product innovation to market their
product or increase their sales.
HRM insight:
From the case we got no idea whether they have any proper management or
HR department, due to less information provided. So we are guessing that
they dont have any HR department neither they have any proper
management style. There is very high possibility that they might face future
difficulties managing their product or their employees due to their lack of
proper management.
Pros:
They will not lose the market which is developing and encouraging
foreign investments.
Occupy more time to study the competitors trend and come up with
new R&D
Easier to sustain current revenues earned solely from the Cash-cow
products
Increased focus on existing brands saves time for extending product
line
Cons:
They have risk as they are not entering into new market.
They need to put an effort in order to assume control of the target firm.
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Alternative 4:
Design the system with open architecture so that
the continuing advancements in technology for
hardware, software, and communications can be
seamlessly assimilated without disrupting the totality
of the process.
Puri realized there were time and resource costs associated with sorting out
the response time problem. Given the three-tiered ERP architecture, it would
be challenging to identify which factors e.g., the SAP application, the
database server, the way in which the database has been implemented, the
communications bandwidth constraints were bottlenecks. Puri knew,
though, that with more sites going live and increasing end-user expectations,
the efficient performance of the technological system was crucial.
At the time, key functions in various IOCL divisions were sustained by
different legacy software systems developed over the past several years, (e.g.
the marketing division had the terminal documentation module (TDM) to
capture data at point-of-sale units such as bulk storage terminals, the plant
documentation module (PDM) for operations at liquefied petroleum gas (LPG)
bottling plants, and the IndAir system for aviation fuel stations). Similarly, the
financial management system (FMS), the materials management system
(MMS), and the online maintenance and inspection system (OMNIS) were in
operation in the refineries and pipelines divisions.
There were other legacy systems for stock and sales accounting in the
marketing division and for payroll in all divisions. EDP at IOCL worked on
minicomputer and PC-based platforms, and significant investments had been
made in these basic building blocks. There were also local and wide area
networks, but these operated on a limited scale with little standardization.
Marketing insight:
They need to require any conventional marketing plan to promote their
product. As they are doing this they probably dont have any work to do or
improve their product status in the market. They have to do any promotional
activities to promote their product in the market or make their product known
to the consumers.
Financial insight:
As they are doing this for their product, they need to require investment to
promote or make any necessary changes in their production. They need all
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HRM insight:
From the case we got no idea whether they have any proper management or
HR department, due to less information provided. So we are guessing that
they dont have any HR department neither they have any proper
management style. There is very high possibility that they might face future
difficulties managing their product or their employees due to their lack of
proper management.
Pros:
They will not lose the market which is developing and encouraging
foreign investments.
Occupy more time to study the competitors trend and come up with
new R&D
Easier to sustain current revenues earned solely from the Cash-cow
products
Increased focus on existing brands saves time for extending product
line
Cons:
They have risk as they are not entering into new market.
They need to put an effort in order to assume control of the target firm.
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Alternative 5:
The company should deliberate centralized control
with decentralized customer response.
Puri also understood that he did not have direct control over several causal
factors, such as the adequate allocation of bandwidth by the government-run
telecommunications provider. Such constraints resulted in several questions
for Puri with respect to the future course of Project Manthan. The primary
decision he needed to make was whether or not to proceed as planned with
implementation at the remaining sites.
If he were to recommend continued implementation, he would have to keep
in mind that response times could worsen due to the additional load of the
new sites. If he were to recommend stalling the implementation, he would
have to account for the implications of such a decision as well as come up
with a suitable action plan to bring the project back on track.
Puri also had to come up with a strategy to address the growing discontent of
end users and management related to the poor response times. In doing so,
he knew that the suitability of a centralized IT architecture at Indian Oil would
be revisited. Puri also had to decide which of the existing group of vendors
should be brought in to help with the problem without compromising the
momentum of the project.
Marketing insight:
They need to require any conventional marketing plan to promote their
product. As they are doing acquisition they probably dont have any work to
do or improve their product status in the market. They have to do any
promotional activities to promote their product in the market or make their
product known to the consumers.
Financial insight:
As they are doing for their product, they need to require investment to
promote or make any necessary changes in their cafes or production. They
need all investment to come up with any new product innovation to market
their product or increase their sales.
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HRM insight:
From the case we got no idea whether they have any proper management or
HR department, due to less information provided. So we are guessing that
they dont have any HR department neither they have any proper
management style. There is very high possibility that they might face future
difficulties managing their product or their employees due to their lack of
proper management.
Pros:
They will continue to have diminishing market share. They should not
lose the amount of huge investment which they already have done in
the market if they stay focused on operation of the sector. This would
translate into profits for the company.
They will not lose the market which is developing and encouraging
foreign investments.
Cons:
They have risk as they are not entering into new market.
They need to put an effort in order to assume control of the target firm.
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Recommendation
Our strategy recommendations for the managers of IOCL are to design the
system with open architecture so that the continuing advancements in
technology for hardware, software, and communications can be seamlessly
assimilated without disrupting the totality of the process.
Conditionally, they must accept the costs and technological challenges of
distributing to every conceivable market. Selling costs may be higher in
remote regions, but the advanced technology must be available, and it must
be reasonably priced. Additionally, IOCL can look to the competition for clues
as to what products they should phase out, so that they can utilize plant
capacities for strong sellers and new innovative offerings.
So for this IOCL company should present their product according to the local
demand. For that they can come up with several techniques of ERP
technique, because it is popular and cost effective, and distribution will be
more flexible in comparison to cost.
At the time, key functions in various IOCL divisions were sustained by
different legacy software systems developed over the past several years, (e.g.
the marketing division had the terminal documentation module (TDM) to
capture data at point-of-sale units such as bulk storage terminals, the plant
documentation module (PDM) for operations at liquefied petroleum gas (LPG)
bottling plants, and the IndAir system for aviation fuel stations). Similarly, the
financial management system (FMS), the materials management system
(MMS), and the online maintenance and inspection system (OMNIS) were in
operation in the refineries and pipelines divisions.
There were other legacy systems for stock and sales accounting in the
marketing division and for payroll in all divisions. EDP at IOCL worked on
minicomputer and PC-based platforms, and significant investments had been
made in these basic building blocks. There were also local and wide area
networks, but these operated on a limited scale with little standardization
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As they are doing this for their product, they need to require investment
to promote or make any necessary changes in their production. They
need all investment to come up with any new product innovation to
market their product or increase their sales.
They will not lose the market which is developing and encouraging
foreign investments.
Occupy more time to study the competitors trend and come up with
new R&D
Easier to sustain current revenues earned solely from the Cash-cow
products
Increased focus on existing brands saves time for extending product
line
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Do nothing
They will lose the market which is developing and encouraging foreign
investments.
The company should examine the availability of inhouse skills as well as the current systems set-up
and recommend the structure and the skills required
for operating, maintaining, and upgrading the
proposed corporate system.
They have risk as they are not entering into new market.
They need to put an effort in order to assume control of the target firm.
They have risk as they are not entering into new market.
They need to put an effort in order to assume control of the target firm.
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Implementation
This case presents the challenges the IOCL faces in India. Not only is IOCL
up against only one or two competitor, but it must also compete with many of
local brands, many of which have a better position in the market. The case
provides background information on the history of IOCL in India, trends in the
Indian oil purification market, and competition by US filter and the many local
oil purification firms. In addition, IOCL's strategies for competing are outlined.
The main question raised by the case is what marketing strategies IOCL can
implement to better compete in India.
Indian Oil Corporation Limited might face difficulty as they need to buy some
of their raw materials from the local suppliers and High concentration means
Indian Oil Corporation Limited has option to choose from abroad suppliers.
Indian Oil Corporation Limited has a great opportunity which might destroy if
not supported well by the suppliers by providing quality raw materials at right
amount and at right time. In the case of Indian Oil Corporation Limited the
Competitive Rivalry within industry was founded as High because of the
following factors which jointly made up this part of the porters five forces
model:
General Implementation:
Implementation is the process of turning plans into actions, and involves all
the activities that put the marketing plan to initiate market expansion to work.
Successful implementation depends on how well the business blends its
people, organizational structure and company culture into a cohesive program
that supports the marketing plan.
For its further success, IOCL must impose several key changes. Supply
needs to be on time and meet the demand from plants. It must also be
efficient so as not to build technological problems. It is very dangerous for a
technological company like IOCL to be lagging behind in tech side. So it must
focus on a efficient production process all over its operations in India including
its home country Chile. As most of the tools including machinery are to be
procured from the parent company in order to maintain the world class quality
and speed of production and production facilities it would be essential to
ensure the speed of the movement of these things across borders.
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achieved without reliable power sector, adding that it is a known fact that any
serious minded nation must put its power sector on a sound pedestal.
Their next step should be to test the new services for the markets and see
how they take it.
Project Scope
ERP
Add-on Software Packages
Hardware procurement
Communication network
Transition management
Why ERP?
SAP Overview
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SAP Benefits
Terrestrial Network
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Functional Implementation
Marketing:
For any new market growth plan is useless if it is not made known to the
consumers properly. Talking to the consumers in the way they will understand
best is the job of the marketing department. No matter how fine the new
products are without the proper marketing it wont be able to bring revenue for
the company.
Firstly, when attempting to implement a new Marketing plan a business must
address its target market and conduct the relevant information to insure the
new marketing plan both differs from the old and is better for the business.
When conducting market research a business must first define the problem
and then gather the appropriate information to solve the problem. There are 3
types of information a business can gather to solve its problems.
IOCL through its market research has addressed all three types of research to
define the problem raised by shareholders and gathered information to serve
their needs.
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Finance:
Without a proper guideline of how to run this plan financially it would not be
possible to even initiate the market research and market development
process.
Financial forecasts are predictions of future events relating strictly to expected
costs and revenue costs for future years. There are five major marketing
expenditures, which include:
research costs,
product development costs,
product costs,
promotion costs and
Distribution costs.
All this costs will have to be
estimated by financial analysts
to in order to predict the future
profitability of the strategy.
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costs and revenues are forecasted, management can then decide which
combination of marketing mix strategies will deliver the most sales revenue at
the lowest cost.
Human Resource:
As we have expanded over the decades, our company has benefited from the
various cultural insights and perspectives of the societies in which we do
business. Much of our future success will depend on our ability to develop a
worldwide team that is rich in its diversity of thinking, perspectives,
backgrounds and culture.
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As we have expanded over the decades, our company has benefited from the
various cultural insights and perspectives of the societies in which we do
business. Much of our future success will depend on our ability to develop a
worldwide team that is rich in its diversity of thinking, perspectives,
backgrounds and culture.
We are determined to have a diverse culture, from top to bottom that benefit
from the perspectives of each individual.
Employee Forums: We believe that a sense of community enhances our ability to attract, retain,
and develop diverse talent and ideas as a source of competitive business
advantage.
In the U.S., through employee forums, employees can connect with
colleagues who share similar interests and backgrounds. In those forums and
elsewhere, employees support each other's personal and professional growth
and enhance their individual and collective ability to contribute to the company
Mentoring Programs:
The FPI Company is creating a system of mentoring programs that include,
one-on-one mentoring, group mentoring and mentoring self-study tools. Oneon-one mentoring programs designed to foster professional growth and
development. These programs promote trusting
relationships for networking, coaching, career
counseling and life lessons.
The benefits of mentoring also strengthen
our company. Mentoring increases the flow
of information across organizational lines
and encourages diverse thinking and crossfunctional learning. They should have a
strong commitment to hiring interns through The Company Internship
Programs. The company offers a number of internship programs for
undergraduate and graduate students. The company also has internship
programs focused on graduate students in the areas of marketing and
fountain operations.
Training & Development
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when those are finally there. Some amount of acceptance and familiarity
should be there beforehand.
Thirdly, massive investment is needed to bring up-to-date technology of oil
extraction along with technical experts and trainers who would be there 24x7
to assist the machines and train the employees first hand to operate those.
A number of Human resource experts along with technical experts on oil
extraction are to implement this recommendation. The HR experts are to
handle the relationship issues during these crucial times of change. The
technical experts are to conduct the training and development of employees
with the help of HR department.
The recommendation is likely to be implemented in the facilities of the IOCL
Company. The training for the employees can take place in the factory
grounds and the training for the managers can take place in the office
compounds.
This recommendation should be implemented as soon as possible at
strategically suitable time when both investments and opportunities of
expansion are available. But it should be soon as competition.
Total Integration
Integrated business planning (IBP) refers to the technologies, applications
and processes of connecting the planning function across the enterprise to
improve organizational alignment and financial performance. IBP accurately
represents a holistic model of the company in order to link strategic
planning and operational planning with financial planning.
By deploying a single model across the enterprise and leveraging the
organizations information assets, corporate executives, business unit heads
and planning managers use IBP to evaluate plans and activities based on the
true economic impact of each consideration.
Such a massive Plan cannot be implemented without the assistance of every
department supporting the entire organization. Financial department has done
the forecasting, marketing department has conducted research on product
development to ultimately launce new tastes of IOCL in the new country Chile,
in the market when HR has been working relentlessly to keep up the level of
the work of the organization at a certain world class standard
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IOCL is one of the most recognizable successful companies around the globe.
Having established a leading brand that fascinates consumers all over the
world, it is widely regarded as one of the most booming power generation
organizations having achieved huge success. The most important function of
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6. Evaluation of performance
Integrated marketing communications aims to ensure consistency of message
and the complementary use of media. The concept includes online and offline
marketing channels.
Online marketing channels include any e-marketing campaigns or programs,
from search engine optimization (SEO), pay-per-click, affiliate, email, banner
to latest web related channels
for webinar, blog, microblogging, RSS, podcast,
Internet Radio, and Internet
TV. Offline marketing
channels are traditional print
(newspaper, magazine), mail
order, public relations,
industry relations, billboard,
traditional radio, and
television.
A company develops its
integrated marketing
communication program using
all the elements of the
marketing mix (product, price,
place, and promotion). Integrated marketing communications plans are vital to
achieving success. The reasons for their importance begin with the explosion
of information technologies. Channel power has shifted from manufacturers to
retailers to consumers.
Together, with successful implementation of this strategic plan in to action, we
believe that IOCL can gain its market share in a profitable manner in Chile.
In conclusion, IOCL is a successful company, mostly because it has managed
to position its brand in a way that takes advantage of all the elements of
marketing mix, i.e. product, place price and promotion/distribution. In doing
so, it achieves to develop a personality and distinguish itself from competition,
while offering consumers a clear view of its values of quality and efficient
production. This leads to increased loyalty and satisfaction.
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