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Case study: PSO

Introduction

Pakistan State Oil Company Limited, namely PSO is the largest oil marketing
company of Pakistan. PSO deals in the storage, import, distribution and marketing of
Petroleum products, petrochemicals, fuels etc. Since its beginning in 1976 the
company has been meeting more than 70% of the countrys fuel needs. Being the
largest of the three marketing companies in Pakistan, PSO has consistently
maintained a competitive advantage over its competitors Shell and Caltex. PSO
continues to expand its physical, technical and marketing resources to meet the
requirements of the country. It is enjoying a brand and loyal image in the industry. Its
most popular products are kerosene oil, furnace oil, lubricants and diesel. Its major
consuming industries are sugar mills, oil mills, power plants and paint industry.

It has several major departments such as customer service, finance and IT,
HR and services department and corporate planning department. Among them, the
management committee deals in solving strategic issues whereas the executive
committee deals with internal matters. Other departments control the compensation,
employment and organizational matters.

Need for Strategic Issues:

The need of assessing the older strategies of PSO arose when the following
features appeared as great advancing hurdles in the progressive path of the
company. They are:

1. Decrease in market share due to deficient business model.


2. Low performance of company due to unfriendly affairs of the management
with dealers and transporters.
3. Deficiency of educated employees and professionalism in HR department.
4. Lack of merit based promotions resulting in reduced in manpower.
5. Politics among organizational sector.
6. Physical infrastructure was out-dated and lacked modern technological
facilities.
7. No department for corporate planning and capital budgeting existed.
8. There was no positive attitude towards updating the old strategies.
9. Financial reporting system lacked in presentation and documentation.
10. PSO lacked in providing quality products as shown by its competitors.
11. Poor market research and negligence towards customers opinion and
feedbacks resulted in reduced popularity among the customers.

Strategy Formulation to address the issues:

It was known that strict measures should be taken to solve above mentioned
issues so that PSO can have long term progress in the industry. In this regard
several steps were devised as mentioned in the below figure:
New vision:

The company revised its vision and focused on providing its customers best
quality products and services which would make them excel in future too.

Strategic shift:

In order to reform the strategy into an advanced one, PSO launched new
environmental friendly products such as:

PCMO: GTX magnetic, GTX plus, PSO CNG oil etc.


DEO: CR ultra, CR plus, DEO 8000 etc.
Motor cycle oil: PSO range, Blaze-7 etc.

Moreover, in order to present new market strategy, PSO introduced new vision
outlets which increased in a short interval of time. It initiated modified customer
service by offering following services that transformed it into customer focused
company:

PSO loyalty cards


Automated car wash service
New marketing and media research services.
It also transformed its logo to a new one to promote its name and brand.

Leadership and its succession:

PSO initiated an independent board in which the management committee


worked on making new strategies and controlling capital budgets. A meeting was
held once in a week to review and discuss the on-going corporate activities.
Leadership was based on modelling new behaviour by considering root causes,
making novel ideas and promoting cultural environment. It all resulted in strong
maintenance, communication among employees and customers and enhanced
feedback system.

A management committee was designed that chose new leader according to


criteria based upon factors such as being customer focused, global competitive,
trustworthy and to be cost conscious.

System Infrastructure:

PSO presented a conceptual framework on which implementation strategy


was based. New departments were made such as corporate performance reporting
system (CPR), Matrix management department and capital resource planning,
management and optimization system (CAPEX).

CPR performed functions like obtaining and analysing up to date sales and
expenditures, translating them into standards and comparing performances with past
ones. This department mainly focused on implementing and performing its assigned
tasks. Thus, it laid basis of a strong, responsible and accountable business strategic
unit.

Matrix management performed duties such as avoiding duplication of


resources, performing shared support functions. Its major outcome was enhanced
coordination and cost effective operations.
CAPEX mainly developed the corporate investment plan. It managed capital
resources online; helped in manual budgeting by re-allocation, record reconciliation
and monitoring of data, facts and figures.

Human Resources Changes:

HR department is a key source for corporate transformation. The steps taken by


this were:

1. Initiating a voluntary separation scheme


2. Presenting a performance based system that awarded its employees with
incentives, promotions, awards and letters of appreciation.
3. PSO offered compensation packages based on employees performance.
4. Modern IT based work environment was provided.
5. A proper gymnasium was made for employees physical fitness
6. Enhancement in team work and team spirit was achieved by reducing the
organizational layers and thus increasing the team decision efficiency.

Organizational changes:

Following amendments were made within the organization:

The investment planning process was reconstructed.


A proper model was devised for profiting the business and its productivity.
A comprehensive corporate plan was designed.
Management committee was redefined strategically. It monitored corporate
renewal and market success, performed numeric presentation to show
graphically the progress among market.
Corporate plan and departmental business plan together formed a strategic
framework for maintaining corporate practices.
This corporate plan assessed companys growth on the international basis
and through employees attitude toward customer satisfaction and financial
performance.

Sustainability challenge:

PSO strategy needed to be sustained for achieving future goals. For this,
internal system was developed which helped in maintaining and achieving the new
strategy. Older failures like state-orders driven company, based on government
funds and facing high debt and low employee productivity transformed to a company
driven by market forces, enjoying high market share and earnings and gaining high
profits.
These all above formulated strategies are summarized in the figure given
below:

PSO opted for the new strategies in order to maintain its brand, popularity and
progress among its competitors. It was necessary since SHELL and CALTEX were
making progress gradually by proposing advanced and quality products and
services. For example, SHELL believes in value delivery to the customers,
environmental protection, management of resources, providing benefits, safety and
respect to the people. In order to follow its principles of sustainable development
Shell is involved in number of activities which involve the free eye camps and
medical camps in the northern areas of Pakistan, Shell road safety program and
Shall Tameer program. Shell Pakistan has showed its full commitment to the benefits
of society by its above mentioned activities. Similarly, CALTEX have thousands of
branded retail outlets and gas stations. It provides quality engine lubrication and
enhanced engine performance for years. Continuing with this tradition, Caltex is
introducing the latest products i.e. new Havoline with Deposit Shield.
These companies, thus, made PSO to promote their products and services in
best possible way to make an edge over them. This competitive environment will be
helpful in future too for PSO to advance and reconstruct their strategies accordingly
and maintain their brand, services and quality production.