Corporate Strategy

Explore the different opportunities to diversify your business in future. Arrive at a conclusion using Porter’s ‘3 Essential Tests’. Examine whether ‘Transfer of Skills’ and ‘Sharing Activities’ is possible across the value chains of your existing business and the recommended diversification

The reason of diversification is to create shareholder value and also to risk protection, it must meet three tests:

INTRODUCTION: I work for Retail Section of Bharat Petroleum Corporation Ltd. The Oil Marketing Companies Consist of Mainly 3 PSU catering to 95% Market Share- Indian Oil (IOCL)-47%, Bharat Petroleum (BPCL)-25%, Hindustan Petroleum (HPCL)-23% with a network of around 65000 retail outlets (Petrol Pumps).

Pvt Players – Reliance, Essar, Shell and Total- have also started their Retail outlets albeit with a very minimal Market Share of 5%.

Retail Market (PETROL PUMP) is explained as below:

Bharat Petroleum Corporation Limited has 7 Strategic Business units (SBU) wherein different Channels based on Customer needs is used. It sells vide variety of products like Petrol/Diesel/LPG/Gas/Aviation Fuel/Lubricants/PetroChem/Gas to various market segments . Gas SBU is newly formed and s dormant on Marketing side. Also PetroChem in I&C sector has started.

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FIGURE -1: DIFFERENT BUSINESS UNITS

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Porter’s 3 Essential Tests for Diversification.

BPCL diversification strategy BPCL Growth Strategy has two main themes:

1. Diversifying by Setting up new CNG (Natural Gas) stations thru JVs or standalone.
2.  Diversifying in Petrochemical sector

PORTERS 3 ESSENTIAL TESTS: 

1. The Attractiveness Test: The diversification to be directed towards potentially-attractive or actual attractive industries.

CNG: Customers are choosing a clearer cheaper fuel in the form of natural Gas Fuel like CNG to power their vehicles. Hybrid Cars, Gas propelled Buses, Autos, Taxis are taking a stride, Taking Example of Delahi to commercial Vehicle registration per annum has increased by 51% from 19227 in 2011 to 41190 in 2015. With Pollution causing diesel vehicles being banned in various states and legal agencies like Green Tribunals, Judiciary and Pollution Control Authorities going heavily on the same, CNG and similar Natural Gas Fuels are Fuels of Future. Govt is also planning to open several new outlets in Tier-2, 3 cities as well to change from a fuel based to Gas based economy which brings in a win win situation for the Government as well as the Customer.