American International University-Bangladesh: A Term Paper On

AMERICAN INTERNATIONAL UNIVERSITY-BANGLADESH
A Term Paper On
“Gazprom Corporation”
Submitted to:
Professor Dr. M. Mahmodul Hasan
Faculty of Business Administration
Department of Management
Program: MBA
Subject: Strategic Management
Subject Code: 01361
Section: A
American International University Bangladesh (AIUB)
Submitted By:
Vhootum Pecha
Date of Submission: 7th December, 2014.
Term Paper on Gazprom Corporation
Letter of Transmittal
7th December 2014
Prof. Dr. Mahmodul Hasan

Faculty of Business Administration
American International University-Bangladesh
Banani, Dhaka.
Subject: Submission of Term Paper on Gazprom Corporation
Dear Sir,
First and foremost, we would like to thank our honorable course Teacher Professor Dr.
M. Mahmodul Hasan to encourage and influence us to prepare such a wonderful report
on one of the best multinational company in the globe “Gazprom”. However After a long
period of hard work we combined both our theoretical and practical knowledge we tried
to make the report as best as possible with the best guidance of our Faculty.
We are thankful to you to giving us such a challenging opportunity which actually help
us a lot to enhance International Standardized Academic knowledge and prove our
practical and theoretical capabilities. This opportunity has also helped us to achieve
knowledge about the modern corporate boniness environment and their applied
strategies.
Therefore, we firmly believe that, this report will be able to meet your approval. We
would genuinely appreciate to make further corrections where it seems necessary by
you.
Finally we are fervently requesting and hope that you would be kind enough to accept
our term Paper and oblige thereby.
Thanking You,
Sincerely yours,
Name( VHOOTUM PECHA) ID Signature
Roshni, QusharNahar(Group Leader) 14-97522-1
Mamtaj, Maisha 14-97521-1
Ahmed, ImtiazIjaz 14-97565-1
Farzin, Quader 11-94567-1
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Acknowledgement
Successful completion of any study generally requires support from various related
parties. To prepare this Term Paper, we have received adequate support from those
people who was very much generous to us.
First of all, we are very much grateful to Almighty God who gave blessings, courage, and
ability to prepare this Term Paper. We are very much grateful to Dr. M. Mahmodul
Hasan, Professor, Faculty of Business Administration, American International
University-Bangladesh (AIUB), for guiding us to complete our Term Paper. We are also
highly indebted to him for his scholarly and constructive suggestion which was of much
assistance to prepare this Term Paper.
We are also thankful and acknowledged to Gazprom without their direct help,
suggestion, and assistance which is mainly online based it was impossible for us to
complete this report.
We would also like to thank the authority of Gazprom for helping me by giving an
opportunity to interact with them through website.
Finally once again, we are very much grateful to Almighty that we are able to complete
this Term Paper successfully with the perfect cooperation of our group members.
The Group Members of

‘‘Vhootum Pecha’’
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Executive Summary
Gazprom Corporation is one of the world's leading integrated energy companies with
subsidiaries that conduct business across the globe. The company's success is driven by
the ingenuity and commitment of approximately 62,000 employees who operate across
the energy spectrum. However, currently it has active operation more than 180
countries around the globe where it is it is engaged in every aspect of the oil, gas, and
geothermal energy industries, including exploration and production; refining,
marketing and transport; chemicals manufacturing and sales; and power
generation. Gazprom is one of the world's Seven Sisters "Super-Major" oil companies as
of 2013; it ranked Seventeenth in the Fortune Global 500 list of the world's largest
companies 2014. Through conducting this research it has found that there are several
strategies which are followed by the Gazprom Corporation in order to run its
core business in a proper way in the modern competitive market across the world. The
company is continuing its operation by keep in mind the slogan of "Dreams Come True!”
and with a Vision of “Making a difference and providing energy solutions that are
number one in the world”.
Accordingly the company has a strong Value Chain for it Upstream and Downstream
with a modern supportive activities and functions. Moreover it is also found that
according to the BCG Matrix currently the company in the Star Position as they already
have a huge market share as well as high market growth. On the other hand the CPM
analysis says that Chevron is the very strong competitors in the world market. Finally
the QSPM analysis indicates that currently the Gazprom Corporation should “Focus on
Business Exploration in Asia” rather than “Focusing in Africa”.
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Table of Content
SL No. CONTENTS Page No.

Letter of Transmittal I
Acknowledgement II
Executive Summery III
Table of Content IV
CHAPTER- 1
1.0 Introduction of the Term Paper 07
1.1. Definition of Strategy 08-09
1.2. Most Strategic Management Model
PESTEL Analysis of Gazprom Corporation 10

Portal’s Five Force’s Model of Gazprom Corporation 11-13
SWOT Analysis of Gazprom Corporation 14
Strategic Group Map of Gazprom Corporation 15
Blue Ocean Strategy of Gazprom Corporation 16
Open innovation of Gazprom Corporation 16
McKinsey – Seven S-Models( Organogram of 17

Gazprom Corporation)
CHAPTER -2
2.0 Strategic Model Analysis
2.1. SWAN Analysis of Gazprom Corporation 19
2.2. Value Chain Analysis of Gazprom Corporation 20-21
2.3. Visa Model Analysis of Gazprom Corporation 21
2.4. SMARTER Model Analysis of Gazprom Corporation 22
2.5. BCG Matrix Analysis of Gazprom Corporation 23
2.6. Pure Objective Model of Gazprom Corporation 24
2.7. GREAT Model of Gazprom Corporation 24
CHAPTER-3
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3.0 Current Situation Analysis and Discussions
3.1. Market Analysis including Market Segmentation 26-27
3.2. CPM Analysis of Energy Sector 28
3.3. EFE Matrix Analysis of Gazprom Corporation 29
3.4. TOWS Analysis of Gazprom Corporation 30
3.5. QSPM Analysis of Gazprom Corporation 31
3.6. Financial Analysis of Gazprom Corporation 32-34
3.7. Break Even Analysis of Gazprom Corporation 35
3.8. Competitors Analysis of Gazprom Corporation 36-37
3.9. KSF’s Analysis of Gazprom Corporation 38
3.10. Strategy Evaluation and Contingency Plan of Gazprom Corporation 39-40
CHAPTER- 4
4.0 Concluding Statements
4.1. Recommendations 42
4.2. Conclusion 43
CHAPTER - 5
5.0 References 45
www.Blog Spot.com (Cover Page of our report) 46
www.academia.edu (cover Page of our report) 47
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Chapter – One
Introduction
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 Definition of Strategy
Strategy is a high level plan to achieve one or more goals under conditions of
uncertainty. Strategy becomes ever necessary when it is known or suspected there are
insufficient resources to achieve these goals. Strategy is also about attaining and
maintaining a position of advantage over adversaries through the successive
exploitation of known or emergent possibilities rather than committing to any specific
fixed plan designed at the outset.
Strategy is often the difference between:
 success and failure, between mediocrity and excellence

 a great manager and average managers
 stumbling through life and moving ahead with purpose
Strategic Management (Theory: 2000 – 2010)
• Strategic Management can be defined as (1) the art and science of formulating,
(2) implementing, and (3) evaluating cross-functional decisions that enable an
organization to achieve its objectives.
• Strategic Management focuses on integrating management, marketing,

finance/accounting, production/operation, research and development (R&D) and
computer information systems to achieve organizational success.
Strategic Management (Theory: 2011 – 2015 ±)

• Strategic management involves strategy development, which is comprised of five
stages:
1. discovery,
2. strategic thinking,
3. strategic planning,
4. strategy roll-out,
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5. Strategy tune-up/adjustment.
1. Discovery requires all members of the team to individually gather information on
an agreed upon set of attributes affecting the organization.
2. Strategic thinking, which can be defined as ‘the generation and application of

business insights on a continual basis to achieve competitive advantage’. The
advertising slogan, or business slogan most associated with Gazprom is: "Dreams
Come True!”
Vision
At the heart of The Gazprom Way is our vision “Making a difference and providing
energy solutions that are number one in the world”
Mission
“Our mission is to supply high-quality energy products to our (Russian) customers,
to do business with integrity and responsibility, to be a caring employer and an
efficiency leader, and to achieve long-term and balanced growth of our Company.”
3. Strategic planning stage utilizes the insights form the strategic thinking phase to
assemble a mission statement, set goals and objectives, audit the organization for
internal strengths and weaknesses, assess the external environment for
opportunities and threats, evaluate strategic options, and then select and
operationalize an organizational strategy.
Russia's Lukoil, Gazprom to Jointly Explore Barents Sea Shelf
4. The strategy roll-out phase turns the strategy into activities and offerings and
ensures that the strategy is communicated well throughout the organization.
5. The strategy tune-up phase is a meeting held several times per year to keep track of
the progress of the implemented strategy.
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Most Strategic Management Model
There are several Strategic Models are available and used in different organizations.
PESTEL – analysis of Gazprom

Political Economical
Russian Federation is successor of the Russian economy dependent on the
USSR. global commodity prices fluctuation.
Taxation – moderate .but one-time Annual GDP growth rate 3.5-4%
windfall tax is used in Russia on occasions GAZPROM increase Russia
representing a risk. economic level because of Gazprom
Governments have great influence on 50% share are Russian Government
the health, education, and infrastructure. holds.
GAZPROM follows public policy and Oil and gas represent 25% GDP;
other legislative priorities that are reviewed 50% federal budget, 80% of export.
regularly.
Social/Socio-cultural Technological
GAZPROM supports various social GAZPROM and Perm machine
projects contributing to culture, science etc builders address equipment
upgrading their technology.
Egalitarianism- mutual support, principal
Ecological and environmental
of sharing equal distribution of benefit. aspects, such
Health consciousness, population growth as R&D activity, automation,
rate, age distribution, career attitudes and technology incentives and the rate
emphasis on safety. of technological change.
GAZPROM also host the European Karate Nanotechnology is a stumbling
Cup. priority.
Siemens supply control tools and
electrical systems for South Stream’s
offshore section of GAZPROM.
Environmental/Ecological Legal
Weather, climate, and climate change, Discrimination law, consumer
which may especially affect industries such law, antitrust law, employment law,
and health and safety law.
as tourism, farming, and insurance.
GAZPROM follows Code of
68% of energy produced in the country Corporate Governance.
pollutes the fossil fuels.
Intellectual property –ambiguity of
According to official data, 75% of surface
the legislation.
water polluted.
Air pollution is the caused for 18% They follow environmental policy 0f
ISO 14001.
childhood and 10% adult diseases.
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 Porter’s Five Forces Model of Gazprom

The five forces model is a framework that analysts use to evaluate the interior factors
affecting competition and the external factors affecting bargaining power.
1. Rivalry among Existing Firms (Low)
2. Threat of New Entrants (Very Low)
3. Threat of Substitute Products (Low)
4. Bargaining Power of Customers (Low)
5. Bargaining Power of Suppliers (Moderate)
Portal’s Five Forces of Gazprom Corporation
Bargaining Power of Suppliers:
High competition among suppliers:

High levels of competition among suppliers act to reduce prices to producers. This is a
positive for Gazprom Corporation. “High competition among suppliers (Gazprom
Corporation)" will have a long-term negative impact on this entity.
Diverse distribution channel:
The more diverse distribution channels become the less bargaining power a single
distributor will have. This positively affects Gazprom Corporation. "Diverse distribution
channel (Gazprom Corporation)" will have a long-term positive impact on this entity.
Volume is critical to suppliers:

When suppliers are reliant on high volumes, they have less bargaining power, because a
producer can threaten to cut volumes and hurt the supplier’s profits.
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Bargaining Power of Customers:
Low buyer price sensitivity:

When buyers are less sensitive to prices, prices can increase and buyers will still buy the
product. Inelastic demand positively affects Gazprom Corporation.
Product is important to customer:

When customers cherish particular products they end up paying more for that one
product. This positively affects Gazprom Corporation.
Large number of customers:

When there are large numbers of customers, no one customer tends to have bargaining
leverage. Limited bargaining leverage helps Gazprom Corporation.
Intensity of Existing Rivalry:
Government limits competition:

Government policies and regulations can order the level of competition within the
industry. When they limit competition, this is a positive for Gazprom Corporation.
Large industry size:

Large industries allow multiple firms and produces to prosper without having to steal
market share from each other. Large industry size is a positive for Gazprom
Corporation.
Exit barriers are low:

When exit barriers are low, weak firms are more likely to leave the market, which will
increase the profits for the remaining firms. Low exit barriers are a positive for Gazprom
Corporation.
Threat of Substitutes:
Substitute is lower quality:

A lower quality product means a customer is less likely to switch from Gazprom
Corporation to another product or service.
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Substitute has lower performance
A lower performance product means a customer is less likely to switch from Gazprom
Corporation to another product or service.
Substitute product is inferior:

An Inferior product means a customer is less likely to switch from Gazprom Corporation
to another product or service.
High cost of switching to substitute:
Limited number of substitutes means that customers cannot easily switch to other
products or services of similar price and still receive the same benefits.
Threat of New Competitors:
Strong distribution network required:

Weak distribution networks mean goods are more expensive to move around and some
goods don’t get to the end customer.
Strong brand names:

If strong brands are critical to compete, then new competitors will have to improve
their brand value in order to effectively compete. Strong brands positively affect
Gazprom Corporation.
High learning curve:

When the learning curve is high, new competitors must spend time and money studying
the market before they can effectively compete.
Entry barriers are high:
When barriers are high, it is more difficult for new competitors to enter the market.
High entry barriers positively affect profits for Gazprom Corporation.
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 SWOT – analysis of Gazprom
Strengths Weaknesses
Old deteriorating pipeline systems
Dominant market share globally in the which are still in use can lead to
natural gas business as a result of having operational accidents and other
large natural gas and hydrocarbon leakages etc., which can impact its
reserves in Russia, which gives it a huge finances and revenue
platform of growth Due to the Russian Government
Sponsorship of sports teams and control on their assets, they cannot
events gives good visibility to the brand solve any matter on their own.
Products are admired around the The clients have confirmed that they
globe. are using low quality products.
They have major operating margins The client has confirmed that they
due to which their customer base is very are using low quality products which
strong and due to which their products cost same as the original products.
are admired around the globe.
Opportunities Threats
Science and Technology agreements (with Governmental Regulation leading to
United Metallurgical company, Severstal, unfavorable pricing policies can result in
Chelyabinsk Pipe Rolling Plant, Petro losses for the company and hamper its
Vietnam, VNG, Gasunie) will help it growth plans.
develop newer technologies to reduce Fluctuation in crude oil and natural gas
operating costs and increase efficiency. prices due to Grow-politics and other
They will grow internationally as well if reasons can cause heavy losses to the
they spread the pipeline scheme in other company
countries. If Gazprom were to drop its ordinary,
Growth in the market expanding their responsible image, it might not know how
business internationally. to jeep enough of the market to prolong to
Gazprom is able to start of this option if it exist.
is successful in competently providing They may face some technical problems
streaming pleased to a client which in their industry and this thing may delay
relatively than a per-screening basis their work.
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 Strategic Group Map:
1. Extent of product (or service) diversity: Petroleum, natural gas, and
other petrochemicals
2. Extent of geographic coverage: Gazprom segment there market in Geographic
segmentation.
3. Number of market segments served: Gazprom doing their business in several

countries.
4. Distribution channels used: Further increase in sales volumes through premium
channels (aviation fuel, ship fuel and lubricants)
5. Extent of branding: Russia, Central Asia, Europe.
6. Marketing effort: Gazprom views its mission in supplying consumers with
natural gas, other energy resources and derivatives. In 2012 Gazprom Group sold
466.8 billion cubic meters of gas.
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7. Product (or service) quality: organization of quality assurance activities
according to the requirements of international standards (ISO 9000) and effective
normative documents.
8. Pricing policy: Gazprom more than doubled the price it paid to Turkmenistan,
Uzbekistan and Kazakhstan – from between $140-160 per thousand cubic meters
(Mcm) of gas to the January 2009 average price of $340/Mcm. This price is expected to
decrease during 2009.
 Blue Ocean Strategy:

It is a business strategy book first published in 2005 and written by W. Chan Kim and
Renée Mauborgne of The Blue Ocean Strategy Institute at INSEAD. The book illustrates
what the authors believe is the high growth and profits an organization can generate by
creating new demand in an uncontested market space, or a "Blue Ocean", than by
competing head-to-head with other suppliers for known customers in an existing
industry. Gazprom is competing head to head with Chevron & ConocoPhillips.
 Open innovation:
It is a paradigm that assumes that firms can and should use external ideas as well as
internal ideas, and internal and external paths to market, as the firms look to advance
their technology.
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8) McKinsey – Seven S-Models
Business Environment/Strategy: GAZPROM Company is competitive
in the market and it also increase economy of the country like Russia. GAZPROM
also follow the Government rules and regulation and pay the tax to the
Government as it is controlled by Government of Russia.
Shared Values: GAZPROM Company try to introducing them in this
sector as superior and becoming one the reputed company in the world as Oil &
Gas Industry.
Structure: As the GAZPROM is controlled by Government of Russia it
follows the Organizations Structure and Departments as like Russian
Government. The GAZPROM company management is well maintained.
Staff: Every company strengths in their staff and it also sometimes
become weakness of a company or organization’s GAZPROM staff is most
experience people and they know their works very well.
System/Infrastructure: GAZPROM use the most recent technology
system for their exploration to consumers. GAZPROM also follow the customer’s
needs and try to give the better resources to them.
Skills: GAZPROM takes the most skilled people to do the work and also
take knowledgeable person for maintain and work done properly.
Style: GAZPROM try to emphasize on quality, and also encourage staff’s
to do their teamwork, reinforce standards of products.
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Chapter– Two
Strategic Model Analysis
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 SWAN - analysis of Gazprom
Strengths
• Products are admired around the globe.
• Sponsorship of sports teams and events gives good visibility to the brand
• The have major operating margins due to which their customer base is very
strong.
• Dominant market share globally in the natural gas business as a result of
having large natural gas and hydrocarbon reserves in Russia.
Weaknesses
• Due to the Russian Government control on their assets, they cannot
solve any matter on their own.
• Old deteriorating pipeline systems which are still in use can lead to
operational accidents and other leakages etc.
• The client have confirmed that they are using low quality products which
cost same as the original products..
ACHIEVEMENTS
• GAZPROM has pioneered the Russian Arctic shelf
development.
• GAZPROM’s shares to be included in Moscow Exchange
Quotation List A2.
• Blue Stream gas pipeline supplied its 100th billion
cubic meter of Natural Gas to Turkey.
• 2013 we can see that GAZPROM is in Second Position
in the world.
NEXT STEP
• Conservation of Resources.
• Expands its business globally.
• Gas price for Ukraine set at USD 485 per 1,000
cubic meters.
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Value Chain Analysis of Gazprom
Primary Activities:
Supply Chain
Management & Fuel, raw materials, inventory management &
Operations Production, assembly
Distribution Shipping, delivery, network
Sales and Marketing Advertising, market research and planning,

dealer & Consumer service, support and
& Service complaint and dispute resolution
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Support Activities:
Product R&D,
Technology and
Systems development Equipment design, software, telecommunication
Human Resource
Management Recruiting, hiring, training
· General General management, finance, legal

and regulatory affairs, safety &
Administration security, overhead functions.
 VISA Model- of Gazprom Corporation
VISION “Making a difference and providing energy solutions that are

number one in the world”
To become a large, Russia-based international player, possessing a

STRATEGY regionally-diversified portfolio of assets across the entire value
chain, actively participating in regional development.
ACTION PLAN In the framework of creating an integrated system of development of
long-term and medium-term plans, this document and in setting
tasks for the coming period is determinate.
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 SMARTER Objectives Model-of Gazprom Corporation
Specific To obtain 8% market share within the first year of operations within the
industry.
Measurable Increase market share of light petroleum products in Russia to 77%

Taking into account primary and secondary research and facts from
Achievable market share data GAZPROM do believe the objectives set are achievable.
In view of the amount of financial resources and manpower expertise we

Realistic
at GAZPROM do believe that objectives set are realistic.
It is the expectation that the 5% market share objectives set

Time oriented
for GAZPROM will be achieved by 2013.
Evaluation of any strategies is very essential in respect to identify so far

achievements. OEMS is a modern strategy taken by Gazprom to identify
Encompassing
and evaluate performances.
Any strategy which has taken to achieve short term goal or long term
vision has to be reviewed after a certain period of time to identify
Reviewed
the progress and obstacles.
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 The BCG MATRIX of Gazprom Corporation
Decision Analysis:
In this circumstance we can say GAZPROM is the star in our BCG chart because they
have Huge and excellent market position and concentration on alternative oil and Gas
Industry in the world. As GAZPROM is Russian Oil & Gas Company as its present
situation we come to conclude that GAZPROM is one of the most successful Oil & Gas
Company in the world and 2013 survey we can see that GAZPROM is in Second Position
in the world so, we can say that GAZPROM Company in BCG Matrix it is a STAR.
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 PURE Objectives of Gazprom Corporation

 Positive: Customer has positive attitude toward GAZPROM (Because we know that
GAZPROM is one of the world large energy company).
 Understood: The communication like products offering and positioning is different
according to geographic locations.
 Recorded: Customer information is recorded in database of Gazprom.
 Ethical: GAZPROM maintain strong business ethics (Transparency of financial and
business activities).
 GREAT Model of Gazprom Corporation

Goals:  Goal is to establish itself as a leader among global energy companies by
diversifying sales markets, ensuring reliable supplies, increasing operating
efficiency.
Roles:  Employee should be passionate and dedicated about what they need to do.
Expectations:  Increasing capitalization and credit ratings.
Accountabilities They are responsible and able to take care of our employees, and to be a
/ Abilities: leader on efficiency, guaranteeing long-term, stable growth for the company.
Strong financial, and physical, reputational and human resource.
Timing:  North America’s gas self-sufficiency will stimulate further gas demand
growth in the region by 0.9–1.3 % over the period up to 2030.
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Chapter– Three
Current Situation Analysis
and Discussion
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 Market Analysis including Market Segmentation
Market Analysis: Gazprom is not only a global energy Company, it is also one of the
major suppliers of natural gas on the planet, and it continues to focus on further
diversification of deliveries of this fuel to its international customers. In 2012 Nord
Stream pipeline reached its design capacity, and it is the first gas pipeline in history to
directly connect gas transportation systems of Russia and Europe. We launched
construction of South Stream, which is the largest investment project in Europe. In
2012 Gazprom the starting point of South Stream, Russkaya compressor station
Geographic Segmentation: - According to the exploration we can say

that Gazprom segment there market in Geographic segmentation. Because we know
that Gazprom doing their business in several countries.
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Market segmentation
Company analysis includes a history of JSC Gazprom, a business segment analysis of the
segments JSC Gazprom operates through, a looking at the organization structure of the
company, a geographical operating segments analysis.
Target markets: Target markets of Gazprom are different countries government.
 Russia
 Central Asia
 Europe
Targeted segment of customers:
Aircraft refueling
Marine fueling
Ship bunkering
Motor oils
Bitumen materials & coke.
Positioning: Gazprom is world number one energy company. Gazprom is not only a
global energy Company, it is also one of the major suppliers of natural gas on the planet.
Marketing
Over 70 % share in the Russian gas market

25.4% share in the European gas market
1.44 mln tons LNG sales
6% of total Russian oil export to far abroad
63.9 mln tons refined products sales
13% Share of oil products sales through the network of gasoline
stations in total sales of refined products.
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 The Competitive Profile Matrix (CPM)

CPM Analysis of oil Producer and refining industry
Gazprom Chevron ConocoPhillips

Critical success factors Weight Rating Score Rating Score Rating Score
Advertising 0.20 3 0.60 4 0.80 3 0.60
Quality of Service 0.15 4 0.60 3 0.45 3 0.45
Price competition 0.10 4 0.40 4 0.40 3 0.30
Management 0.05 3 0.15 3 0.15 2 0.10
Financial situation 0.20 3 0.60 3 0.30 3 0.60
Global Expansion 0.15 4 0.45 4 0.60 2 0.30
Customer loyalty 0.10 3 0.30 3 0.30 2 0.20
Market share 0.05 4 0.20 2 0.10 4 0.20
Total 1.00 3.30 3.10 2.75
4=Major Strength; 3= Minor Strength; 2= Minor Weakness; 1=Major Weakness
The Competitive Profile Matrix (CPM) identifies a firm’s major competitors and
its particular strengths and weaknesses in relation to an individual firm’s strategic
Position. Score Systems:
4 = Major Strength
3 = Minor Strength
2 = Minor Weakness
1 = Major Weakness.
Gazprom is strongest on Infrastructure & Service quality, Strong Brand equity, financial
strength and Customer base as indicated by rating 4. Overall Gazprom is the strongest
because it earned total score of 3.30.Chevron has taking place with 3.10 score and last
but not the list ConocoPhillips has the last position with 2.75 score.
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 The External Factor Evaluation (EFE) Matrix of Gazprom
Key External Factors Weight Rating Weighted Score
Opportunities
The rapid growth in Europe is 0.20 4 0.80
demanding for more resources.
Growth in the market expanding 0.10 3 0.30
their business internationally.
Unending pipe line will help to finding 0.05 4 0.20
new resources.
They will grow internationally as 0.15 3 0.45
well if they spread the pipeline scheme
in other countries.
Threats
Governmental Regulation leading 0.20 4 0.80
to unfavourable pricing policies can
result in losses for the company and
hamper its growth plans.
GAZPROM might not know how to 0.15 3 0.45
keep enough of the market to prolong
to exist.
Fluctuation in crude oil and 0.10 3 0.30
natural gas prices due to grow-politics
and other reasons can cause heavy
losses to the company
Face some technical problems in 0.05 3 0.15
their industry and this thing may delay
their work.
4 = Response is Superior
3 = Response is Above Average Rating
2 = Response is Average
1 = Response is Poor
1.00 3.45
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 TOWS – analysis of Gazprom Corporation

STRENGTH WEAKNESS SCORE
Dominant market share globally in Old deteriorating pipeline

the natural gas business as a result of systems which are still in use can
having large natural gas and lead to operational accidents and
hydrocarbon reserves in Russia, which other leakages etc.
gives it a huge platform of growth Due to the Russian Government 3.30
Sponsorship of sports teams and control on their assets, they cannot (CPM)
events gives good visibility to the brand solve any matter on their own.
Products are admired around the The clients have confirmed that
globe. they are using low quality products
The have major operating margins which cost same as the original
due to which their customer base is products.
very strong. And due to which their The client have confirmed that
products are admired around the globe. they are using low quality products
which cost same as the original
products.
OPPORTUNITIES THREATS SCORE
Science and Technology agreements Governmental Regulation

(with United Metallurgical company, leading to unfavorable pricing
Severstal, Chelyabinsk Pipe Rolling policies can result in losses for the
Plant, Petro Vietnam, VNG, Gasunie) company and hamper its growth
will help it develop newer technologies plans.
to reduce operating costs and increase Fluctuation in crude oil and 3.45
efficiency. natural gas prices due to grow- (EFE)
They will grow internationally as politics and other reasons can cause
well if they spread the pipeline scheme heavy losses to the company
in other countries. If Gazprom were to drop its
Growth in the market expanding ordinary, responsible image, it
their business internationally. might not know how to jeep enough
Gazprom is able to start of this of the market to prolong to exist.
option if it is successful in competently Face some technical problems in
providing streaming pleased to a client their industry and this thing may
on a point in time practice base delay their work.
relatively than a per-screening basis.
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 QSPM Analysis of GAZPROM Corporation
Alternative-1 Alternative-2
Exploration on Asia-Pacific Exploration on Africa
Weight Attract Total Weight Attract Total
Key Factors iveness Attractive iveness Attra
Score ness Score Score ctive
ness
Score
Strengths
Strong position in the financial 0.20 4 0.80 0.15 2 0.30
market & provide information.
Sponsorship of sports teams and 0.15 3 0.45 0.15 4 0.45
events gives good visibility to the brand.
Products are admired around the 0.10 3 0.30 0.10 3 0.30
globe.
Customer base Major operating 0.05 2 0.10 0.10 3 0.30
margins are very strong.
Weakness
lead to operational accidents and 0.15 3 0.45 0.10 0 0.00
other leakages etc
Fewer resources due to which are 0.15 2 0.30 0.20 3 0.60
they making in insufficient quantity of
products. 0.10 2 0.20 0.10 1 0.10
They cannot solve any matter on their
own Due to the Russian Government 0.10 2 0.20 0.10 2 0.20
Using low quality products.
Sum weights 100% 100%
Opportunities
Unending pipe line will help to 0.15 3 0.45 0.15 3 0.45
finding new resources.
Rapid growth in Europe is 0.15 3 0.45 0.15 2 0.30
demanding Increasing their growth in
the market 0.10 2 0.20 0.10 3 0.30
Expanding their business
internationally. 0.05 3 0.15 0.10 2 0.20
Rapid growth in Europe is
demanding for more resources
Threats
Governmental Regulation leading to 0.15 2 0.30 0.20 1 0.20
unfavorable pricing policies.
Gazprom were to drop its ordinary, 0.20 1 0.20 0.10 3 0.30
responsible image.
Their work may be delay due to 0.10 2 0.20 0.15 2 0.30
technology
Fluctuation in crude oil and natural 0.10 3 0.30 0.05 2 0.10
gas prices due to grow-politics
Sum weights 100% 100%
Sum Total Attractiveness Score 5.05 < 4.4
31 | P a g e
 Financial ratios & Analysis:
Name Unit 2011 2012 2013

Financials per boe of production
Revenues, net RUB/boe 2,917 4,148 3,294
Operating income RUB/boe 591 687 736
EBITDA adj. RUB/boe 712 736 408
Net Income RUB/boe 398 419 408
Market Capitalization RUB/boe 1,658 1,532 1,514
Profitability Ratios
Net Margin % 16 15 15
EBITDA adj. Margin % 29.1 26.2 26.6
ROE % 25.0 23.0 20.0
ROA % 16.2 14.9 12.9
ROACE % 21 19 17
Efficiency ratios
Assets Turnover day(s) 367 366 416
Trade Receivables Turnover day(s) 17 17 19
Leverage Ratios
Total Debt to EBITDA % 82 80 99
Short-Term Debt to Total Debt % 20.0 31.7 16.7
Gearing % 21 16 18
Net Debt to Market Capitalization % 27 23 27
Liquidity Ratios
Cash Ratio times 0.3 0.4 0.7
Quick Ratio times 0.8 0.8 1.1
Current Ratio times 2.0 1.7 2.1
32 | P a g e
Return on Equity (ROE): Return on Equity is calculated by net profit/ total equity.
ROE is one the most important indicator of an organization’s profitability and growth
potential. It is the rate of return to shareholders or the percentage return on each $ of
equity invested in the organization.
Return on Equity
20%
15%
16% 15%
10% 13%
5%
0%
2011 2012 2013
Return on Assets (ROA): Return on asset means net profit/total assets. It shows the
ability of management to acquire capital and liabilities at a reasonable cost and invest
them in profitable investments. This ratio indicates how much net income is generated
per taka of assets. Higher the ROA more profitable the Organization. From the graph it
is clear that ROA is fluctuating, but it is ration continuously decreasing from 2011 to
2013.
20%
15%
Return on Asset
16% 15%
10% 13%
5%
0%
2011 2012 2013
33 | P a g e
Current Ratio
2.5
2
2 2.1
1.5 1.7
1
0.5
0
2011 2012 2013
Current Ratio: The current ratio is a financial ratio that measures whether or not a
firm has enough resources to pay its debts over the next 12 months. It compares a firm's
current assets to its current liabilities. Current ratio of Gazprom in 2011 is 2 but slightly
decrease in 2012 into 1.7 and 2013 its move on to 2.1.It indicates the liquidity of the
company facing ups and downs though in this three years.
Earnings per Share: The EPS or Earning per Share is equal to Net Income divided by
total number of shares outstanding in the market. In 2013 the EPS was 9.40 which is
little lower than the last year EPS of 13.32 in 2011. The EPS has declined due to decrease
the net income after tax as well as lower return on Investment.
34 | P a g e
 Break Even Analysis

The first step in the analysis is to determine sales level, and price are likely to generate
by a company sales force or a sales agency. The next step is to estimate the Fixed cost
(FC) and variable cost (VC) volume through each channel. The fixed costs of engaging a
sales agency are those of establishing company sales office. The final step is comparing
Break even sales volume and quantity.
 B
E
A VC 10
FC 8,000 million
= Price 2000
million
BEV
BEQ 400 MW
1600,000
F
i
x
ed Costs or Expenses
Contribution Margin Ratio
Break-even quantity (BEQ) = (Fixed cost / Price* Variable cost)
Break-even volume (BEV) = (Fixed cost *Price/ Variable cost)
35 | P a g e
 Competitor analysis of Gazprom Corporation
Few companies– especially large, diversified oil companies – can boast both
unquestioned stability and significant long-term growth opportunities.
Sector Overview:
In the immediate future, major oil company earnings are threatened by tepid global
economic growth. For the past decade, emerging markets, especially the BRIC countries
(Brazil, Russia, India, and China) have been driving energy demand growth. IMF and
World Bank estimates of 2012 growth have been notably tepid. ConocoPhillips (COP),
Petro Bangla, British Petroleum (BP), Nexen, Santos, Chevron and Gazprom all
achieved record or near record earnings in 2011.Gazprom’s long-term outlook and
competitive advantage hold much promise.
The major players in the global oil & gas industry and main competitors of Gazprom
worldwide are:
1. Chevron
2.Shell oil
3. ExxonMobil (XOM)
4. ConocoPhillips (COP)
5. Petro Bangla
6. Santos
7. Nexen
8.Bangladesh Petroleum Exploration
Company (BAPEX)
The local companies do not possess much threat for Gazprom Bangladesh because they
lack highly in technology and expertise if compared to Gazprom. Rather these
36 | P a g e
companies play the role of a customer for the international oil and gas companies. Petro
Bangla purchases gas from Gazprom Bangladesh. The major international competitors
of Gazprom Bangladesh in Bangladesh are Shell oil, ExxonMobil and British Petroleum
do not have operations in Bangladesh. ConocoPhillips has not started its operation yet
but they have completed the deal with Bangladesh.
In the competitor analysis Gazprom has competitive advantages that are given below:
1. Good market share

2. Spending on alternative energy
3. Investment in high profile project
4. Global expansion
5. Customer loyalty
6. Using Advanced technology
7. Utilization the capacity properly
37 | P a g e
 KSF Analysis (Industry Key Success Factors) of Gazprom
Technology-related KSFs Manufacturing-related KSFs

•
Expertise in a Particular Quality Control Know-How
technology Low-cost product design and
Ability to improve production engineering
processes Access to attractive supplies of
skilled labor
Distribution-related KSFs Marketing-related KSFs
A strong network of Brand Name

wholesale/dealers Fast, accurate technical
Direct Sales via internet – retail assistance
products Customer guarantees and
warranties
Clever Advertising
Skills & Capability-related KSFs Other types of KSFs
A talented workforce Overall low costs

Short-delivery-time capability A strong balance sheet and access
to financial capital
Supply Chain Management
Patent Protection
Capabilities
Strong e-commerce
38 | P a g e
 Strategy Evaluation & contingency plan
According to Prof. James Rumelt’s 4 criteria of strategy evaluation we focused on the 2nd
criteria which is consonance.
 The Nature of Strategy Evaluation
The strategic-management process results in decisions that can have significant, long
lasting consequences. Erroneous strategic decisions can inflict severe penalties and can
be exceedingly difficult, if not impossible, to reverse. Most strategists agree, therefore,
that strategy evaluation is vital to an organization’s well-being; timely evaluations can
alert management to problems or potential problems before a situation becomes critical.
Strategy evaluation includes three basic activities: (1) examining the underlying bases of
a firm’s strategy, (2) comparing expected results with actual results, and (3) taking
corrective actions to ensure that performance conforms to plans.
 Contingency Plan
A basic premise of good strategic management is that firms plan ways to deal with
unfavorable and favorable events before they occur. Too many organizations prepare
contingency plans just for unfavorable events; this is a mistake, because both
minimizing threats and capitalizing on opportunities can improve a firm’s
competitive position. Regardless of how carefully strategies are formulated,
implemented, and evaluated, unforeseen events, such as strikes, boycotts, natural
disasters, arrival of foreign competitors, and government actions, can make a
strategy obsolete.
We suggested that effective contingency planning involves a seven-step process:
 Identify both beneficial and unfavorable events that could possibly derail the
Strategy or strategies.
39 | P a g e
 Specify trigger points. Calculate about when contingent events are likely to occur.
 Assess the impact of each contingent event. Estimate the potential benefit or
harm of each contingent event.
 Develop contingency plans. Be sure that contingency plans are compatible with
current strategy and are economically feasible.
 Assess the counter impact of each contingency plan. That is, estimate how much
each contingency plan will capitalize on or cancel out its associated contingent
event. Doing this will quantify the potential value of each contingency plan.
 Determine early warning signals for key contingent events. Monitor the early
warning signals.
 For contingent events with reliable early warning signals, develop advance action
plans to take advantage of the available lead time.
40 | P a g e
Chapter-Four
Concluding Statements
41 | P a g e
 Recommendations
Gazprom Corporation is world’s seven sister’s oil companies and one of the largest in
energy sector. Company is in matured stage as their strategies align with their goal and
guideline to achieve vision. Gazprom has lots of competitive advantages which offset
their negligible weaknesses. However, after analyzing all strategic models and internal
and external assessments there are few drawbacks of Gazprom corporations which
might significantly affect their long terms achievements and brand image. There are few
factors which need to be highlighted for company’s sustainable growth. Following are:
Create product awareness through promotion for refined products to reverse its
constant revenue fall.
Innovation and introduction of eco-friendly technologies to comply with
environmental regulations.
Ensuring transparency in operational excellence in management system (OEMS).
Distributing authority and responsibility for risk management between the
Company’s structural units.
Making all employees aware of Gazprom’s basic principles and approaches.
Marketing strategies for renewable energy through CSR.
Product ranges and variations must communicate to end user from competitors
(BP or SHELL).
42 | P a g e
 Conclusion
According to the 7th December we can conclude our term paper by giving this concluding
statement:
Energy sector has become one of the rising and most demanding business sectors once
human civilization experienced technological innovation. Since then there are plenty of
organizations diversifying their business in energy sector and as we know that
GAZPROM is one of the most reputed Oil & Gas Company in the world. GAZPROM
started its journey in 1989 and its maximum share is owned by Government and its
control is under the Government also. This report was to analyze the current corporate
strategy of GAZPROM and its market position in the World and then give some
recommendation if change is necessary. After the analysis was conducted come to
conclude that if a change of strategy, that the company become differentiation to low
cost and increase their marketing strategy and also increase better quality of products, is
necessary for the long term success of the company and GAZPROM dream will come to
be one of the leader among global energy companies.
43 | P a g e
Chapter–Five
References
44 | P a g e
 References
Book:
1. Fred. R David, Strategic Management: Concepts and Cases, (12/e), Pearson Prentice
Hall
Related visited website address:
 http://www.zargaz.ru/en/about-us/company
 http://en.wikipedia.org/wiki/Gazprom
 http://markets.ft.com/research/Markets/Tearsheets/Financials?s=GAZP%3AM
CX
Annual Reports:
1. gazprom-annual-report-2013-en
45 | P a g e

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AMERICAN INTERNATIONAL UNIVERSITY-BANGLADESH

Prof. Dr. Mahmodul Hasan

Subject: Submission of Term Paper on Gazprom Corporation

The Group Members of

SL No. CONTENTS Page No.

Executive Summery III

PESTEL Analysis of Gazprom Corporation 10

Blue Ocean Strategy of Gazprom Corporation 16

Open innovation of Gazprom Corporation 16

McKinsey – Seven S-Models( Organogram of 17

Strategy is often the difference between:

 success and failure, between mediocrity and excellence

Strategic Management (Theory: 2000 – 2010)

• Strategic Management focuses on integrating management, marketing,

Strategic Management (Theory: 2011 – 2015 ±)

2. Strategic thinking, which can be defined as ‘the generation and application of

PESTEL – analysis of Gazprom

 Porter’s Five Forces Model of Gazprom

2. Threat of New Entrants (Very Low)

3. Threat of Substitute Products (Low)

4. Bargaining Power of Customers (Low)

5. Bargaining Power of Suppliers (Moderate)

Portal’s Five Forces of Gazprom Corporation

Bargaining Power of Suppliers:

High competition among suppliers:

Diverse distribution channel:

Volume is critical to suppliers:

Low buyer price sensitivity:

Product is important to customer:

Large number of customers:

Intensity of Existing Rivalry:

Government limits competition:

Large industry size:

Exit barriers are low:

Substitute is lower quality:

Substitute product is inferior:

Threat of New Competitors:

Strong distribution network required:

Strong brand names:

High learning curve:

Entry barriers are high:

 SWOT – analysis of Gazprom

3. Number of market segments served: Gazprom doing their business in several

 Blue Ocean Strategy:

 SWAN - analysis of Gazprom

Value Chain Analysis of Gazprom

Distribution Shipping, delivery, network

Sales and Marketing Advertising, market research and planning,

· General General management, finance, legal

 VISA Model- of Gazprom Corporation

VISION “Making a difference and providing energy solutions that are

To become a large, Russia-based international player, possessing a

 SMARTER Objectives Model-of Gazprom Corporation

Measurable Increase market share of light petroleum products in Russia to 77%

In view of the amount of financial resources and manpower expertise we

It is the expectation that the 5% market share objectives set

Evaluation of any strategies is very essential in respect to identify so far

 The BCG MATRIX of Gazprom Corporation

 PURE Objectives of Gazprom Corporation

 GREAT Model of Gazprom Corporation

 Market Analysis including Market Segmentation

Geographic Segmentation: - According to the exploration we can say

Target markets: Target markets of Gazprom are different countries government.