TOTALFINAELF

COMPETING IN A DEREGULATED OIL INDUSTRY

Caguicla, Rochelle Angelica B.
Conde, Kimberly Anne L.
Dellosa, Jeremiah R.
Garces, Arielle Ana M.
Patria, Jaimelyn L.
Pelayo, Irene Eunicar C.
I.
II.
III.

Time context: 2001

Viewpoint: CEO, TotalFinaElf Philippines, Inc. (TPI)
Major Policy Statement
TotalFinaElf Philippines Inc. (TPI), a wholly owned subsidiary of the FrenchBelgian oil firm, TotalFinaElf, is one of the biggest new players in the oil industry in
the Philippines. TPI entered the Philippine market in 1997; and, it is engaged in the
selling of heavy fuel for manufacturing companies, LPG, lubricants, greases and
special fluids. TPI plans to enter the aviation fuel and maritime industry in the
Philippines and aims to be a major player by focusing on innovation, profitability,
continued growth, and high standards in their operations.

IV.

Current Operational Plans

Management
- Total S.A. merged with Belgian company Fina and Elf Aquitaine, a French

company, forming TotalFinaElf.

Marketing
- TPI focuses on the quality of their products and services. They ensure that
their products are of high quality, and their services are always excellent. All
of their stations are equipped not only of the standard equipment and
amenities; but also of top-of-the-line fiberglass-coated storage tanks, high
technology car wash, lube bays, minor mechanical jobs, air conditioned

comfort rooms, and popular shops like La Boutique convenience store, Le

Croissant, Hen Lin, Tobys House of Nuts and Flowers by Sylvia. .

Operations
- The company operates in 17 Asian countries including China, Taiwan, South
Korea, Thailand, Malaysia, and Cambodia. The company also serves aviation
-

market in many airports in Europe, Africa, US, Singapore and Hong K ong
TPI has 39 service stations located in Metro Manila and as far south as Lucena
and further north in Tarlac. It has also established 200 LPG outlets in Metro

Manila.
The retail and industrial business accounts for 85 percent of its entire earnings

while the remaining 15 percent comes from lubricants and LPG.

Finance
- Its biggest investment in Asia is in the Philippines.
- The business plan of the TPI for the first five years, 1997-2002, involves an
-

amount of $120 million.

As of 2000, TPI spent $60 million for the construction of an import terminal
in Mariveles, Bataan; gasoline station and LPG refilling station; and the
acquisition of Camping Gaz Philippines, and 15 percent Shell Gas Eastern,

V.

Inc.
TPI allocated $30 million for an expansion program that would include 20

new service stations.

An additional P750 million was to be used to finance the construction of a so-

called wet terminal (fuel storage) in Tondo, Manila.

Human Resource
- Employs 130,000 employees in more than 100 countries.
Social Responsibility Applications
Beyond the commodity which oil, TPIs service stations underline expensive
facilities which offer high-quality products and service excellence. TPI is

VI.

anchored on the quality of their products and service they offer to customers.
Statement of the Problem

How will TPI ensure its survival in the Philippine market, given the different
environmental forces in the country such as a seemingly saturated market with wellentrenched players and a deregulated oil industry?
Statement of Objectives
Long Range
- To be one of the well-entrenched players in the oil industry in the

VII.

Philippines in the next three years

To be able to market bunker fuels to the maritime industry and aviation

fuel to Philippine airports by 2005

To be able to generate profits, and start recovering from losses, by

2002.
To open 100 service stations by 2003

Short Range
-

To increase its market share in the oil industry (by how many %, by

when?)
SWOT Analysis

VIII.

Strengths

Weaknesses

All

equipment and amenities

High quality products and excellent

stations

have

standard -

Their products are based on imported

diesel

and

gasoline

prices

in

Singapore which are normally priced

-

services
Offers wide variety of products
Established more than 200 outlets in

Metro Manila
A strong player world-wide in the

aviation fuel market

Fourth largest oil and gas company

higher and subject to greater price

fluctuations

in the world and the largest in

3

than

locally

refined

products
Doesnt have their own oil refinery in

the Philippines
A new player in the oil industry in the

Europe

Philippines
Opportunities

LPG market is one of the fastest growing businesses for TPI

Investments are projected to reach

Well-entrenched competitors
There are 181 new players that

P36

2001
The oil refineries of the Big 3 control

up to 95 percent of the local oil supply

Constant changes in the laws and

billion

terminals,
-

Threats

for

storage

service stations
Aviation fuel

new

import

facilities

market

in

entered in the market as of December

and
the

regulatory policies of the country

Philippines is still open for new
-

entrants like TPI

The US economys recovery and

make investing inefficient

As for fuel demand, there

are

estimates indicating a drop by about

development is seen as beneficial to
1.5 to 2 percent with the entry of
the

economies

of

developing
-

countries
IX.

natural as in the market

Change in foreign exchange rates

Alternatives Courses of Action

1. Construct its own local base oil refinery in the Philippines
2. Design strategic actions to communicate the companys products to potential
customers
3. Focus on serving aviation fuel to airports in the Philippines once the authorization

X.

has been approved

4.
Analysis of Alternatives
1. Construct its own local base oil refinery in the Philippines
Advantages
- can sell oil at lower prices

Disadvantages
- costs high capital investment

- less transportation expense

- will create employment for Filipinos

complications

risky

because

of

government

- increase in output of production

- may cause environmental damages

- difficulty in finding a location

2. Design strategic actions to communicate the companys products to potential

customers
Advantages
Disadvantages
- improves customer awareness of its - possibility of not receiving positive
products

feedback from the market

- can attract potential customers

- time consuming

- has control over the plans and - expensive

operations of the business
- patronization of customers may
result to increase in sales
3. Focus on serving aviation fuel to airports in the Philippines when the
authorization has already been given to them
Advantages
Disadvantages
- already a strong player in the - uncertainty of authorization
aviation

fuel

industry

in

other - the investments in service stations

countries

will be wasted

- TPI is already an expert and has - limited source of income

mastered

the

operations

in

the - the payback period may be longer

aviation industry
- has a prospected client which is
NAIA

XI.

Decision Statement
After careful deliberation and thorough analysis of the alternatives, the group
selected ACA#2 which is to design strategic actions to communicate the companys
products to potential customers as the most beneficial solution to resolve the
companys problem.
ACA#2 was chosen because compared to ACA#1 and #3, it is the most
effective way to achieve the companys objectives which are to become one of the
well-entrenched players in the oil industry in the Philippines, recover the incurred
losses of the company, open more service stations and to increase their market shares

XII.

in the oil industry.

Implementation Program
Strategies
1. Introduce an environment friendly alternative to fuel oil
a.
Tactics
1. Promote the companys products
a. Offer incentives to loyal customers like freebies, discounts, free automobile
services and coupons
b. Advertise through TV commercials, radios and newspapers
c. Reward points to loyalty card holders
2. Apply market segmentation
a. Screen and select locations which are not yet dominated by the Big 3
b. Construct mini service stations which also carry other companys products

XIII.

XIV.

such as LPG, lubricants, greases and special fluids

Proposed Operational Plan
Management
Marketing
Operating
Finance
Human Resource
- Decentralization or assignment of managers in all service stations
Other Problems and Recommendations
6

Other Problems

XV.

Recommendations

Management Lessons Learned

1.