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ONGC

Individual Assignment 4

03 DECEMBER 2018

N ISHIT V ORA
PGFS-60
Situational Analysis

SWOT

Strengths of ONGC – Internal Strategic Factors

As one of the leading companies in its industry, ONGC has numerous strengths that enable it
to thrive in the market place. These strengths not only help it to protect the market share in
existing markets but also help in penetrating new markets. Based on Fern Fort University extensive
research – some of the strengths of ONGC are:
 Highly skilled workforce through successful training and learning programs. ONGC is
investing huge resources in training and development of its employees resulting in a
workforce that is not only highly skilled but also motivated to achieve more.
 High level of customer satisfaction – the company with its dedicated customer relationship
management department has able to achieve a high level of customer satisfaction among
present customers and good brand equity among the potential customers.
 Strong Free Cash Flow – ONGC has strong free cash flows that provide resources in the
hand of the company to expand into new projects.
 Automation of activities brought consistency of quality to ONGC products and has enabled
the company to scale up and scale down based on the demand conditions in the market.
 Reliable suppliers – It has a strong base of reliable supplier of raw material thus enabling
the company to overcome any supply chain bottlenecks.
 Strong Brand Portfolio – Over the years ONGC has invested in building a strong brand
portfolio. The SWOT analysis of ONGC just underlines this fact. This brand portfolio can be
extremely useful if the organization wants to expand into new product categories.
 Highly successful at Go to Market strategies for its products.
 Strong dealer community – It has built a culture among distributor & dealers where the
dealers not only promote company’s products but also invest in training the sales team to
explain to the customer how he/she can extract the maximum benefits out of the products.

Weakness of ONGC – Internal Strategic Factors

Weakness are the areas where ONGC can improve upon. Strategy is about making choices and
weakness are the areas where a company can improve using SWOT analysis and build on its
competitive advantage and strategic positioning.
 Limited success outside core business – Even though ONGC is one of the leading
organizations in its industry it has faced challenges in moving to other product segments
with its present culture.
 The profitability ratio and Net Contribution % of ONGC are below the industry average.
 Need more investment in new technologies. Given the scale of expansion and different
geographies the company is planning to expand into, ONGC needs to put more money in
technology to integrate the processes across the board. Right now, the investment in
technologies is not at par with the vision of the company.
 High attrition rate in work force – compare to other organizations in the industry ONGC
has a higher attrition rate and have to spend a lot more compare to its competitors on
training and development of its employees.
 Organization structure is only compatible with present business model thus limiting
expansion in adjacent product segments.
 The company has not been able to tackle the challenges present by the new entrants in
the segment and has lost small market share in the niche categories. ONGC has to build
internal feedback mechanism directly from sales team on ground to counter these
challenges.
 Investment in Research and Development is below the fastest growing players in the
industry. Even though ONGC is spending above the industry average on Research and
Development, it has not been able to compete with the leading players in the industry in
terms of innovation. It has come across as a mature firm looking forward to bring out
products based on tested features in the market.

Opportunities for ONGC – External Strategic Factors

 New environmental policies – The new opportunities will create a level playing field for all
the players in the industry. It represents a great opportunity for ONGC to drive home its
advantage in new technology and gain market share in the new product category.
 Lower inflation rate – The low inflation rate brings more stability in the market, enable
credit at lower interest rate to the customers of ONGC.
 The new technology provides an opportunity to ONGC to practices differentiated pricing
strategy in the new market. It will enable the firm to maintain its loyal customers with great
service and lure new customers through other value-oriented propositions.
 The market development will lead to dilution of competitor’s advantage and enable ONGC
to increase its competitiveness compare to the other competitors.
 Organization’s core competencies can be a success in similar another products field. A
comparative example could be - GE healthcare research helped it in developing better Oil
drilling machines.
 The new taxation policy can significantly impact the way of doing business and can open
new opportunity for established players such as ONGC to increase its profitability.
 Stable free cash flow provides opportunities to invest in adjacent product segments. With
more cash in bank the company can invest in new technologies as well as in new products
segments. This should open a window of opportunity for ONGC in other product
categories.
 Economic uptick and increase in customer spending, after years of recession and slow
growth rate in the industry, is an opportunity for ONGC to capture new customers and
increase its market share.

Threats ONGC Facing - External Strategic Factors

 New environment regulations under Paris agreement (2016) could be a threat to certain
existing product categories.
 Increasing trend toward isolationism in the American economy can lead to similar reaction
from other government thus negatively impacting the international sales.
 Shortage of skilled workforce in certain global market represents a threat to steady growth
of profits for ONGC in those markets.
 Liability laws in different countries are different and ONGC may be exposed to various
liability claims given change in policies in those markets.
 Changing consumer buying behaviour from online channel could be a threat to the existing
physical infrastructure driven supply chain model.
 The demand of the highly profitable products is seasonal in nature and any unlikely event
during the peak season may impact the profitability of the company in short to medium
term.
 Growing strengths of local distributors also presents a threat in some markets as the
competition is paying higher margins to the local distributors.
 As the company is operating in numerous countries it is exposed to currency fluctuations
especially given the volatile political climate in number of markets across the world.
Generic Strategies
Portfolio Analysis

BCG Matrix of ONGC

ONGC- Oil and Natural Gas Corporation Limited is the Indian based multinational gas and oil Company, whose
headquarter is located in Dehradun, India. As the one of a leading Corporation, it has now relocated its
registered office in the major city of India, i.e. New Delhi. It is the PSU- Public Sector Undertaking of Indian
Government, under the administrative domain of Ministry of the Petroleum and the Natural Gas. In the sector
of gas and oil production and exploration, it is the biggest company of India. About 70% of the crude oil in
India is produced by ONGC, which is equivalent to the 30% of the total demand of the country, and about
62% of the natural gas it produces. The on-going upstream production and exploratory efforts of ONGC are
the most important segment of the primary E&P business activities in India along with the responsibilities of
accreting and finding the gas and oil reserves (ONGC, 2018). It is necessary for the company to carry out the
analysis and evaluation, in order to be more profitable and able to generate more oil and gas to meet the
consumer demand. BCG matrix will help the company in deciding the investment purpose, and allocation of
resources. Here is the detailed BCG analysis of the ONGC;

Cash Cows

These items are responsible for the prime revenue generation of the company because of the high market
share and low market growth rate. High market share reflects to high volume of sales, and low market growth
means low consumption of cash for the milking purpose. The products must be maintained to lead the
market. Natural Gas is the cash cow for the company, as it serves highest in this category to the consumers.

Stars

These are the products which have high market share, which means they have high volume of sales, but high
market growth which also reflects to the high consumption of cash for the investment purpose. The company
must focus on the implementation of the effective strategies for turning the star into cash cow. Crude oil is
the star product for the ONGC, as it explores and produce 70% of it, which covers overall 30% of the consumer
demand. As being the public sector company, it needs to work hard to maintain the lading position and
increase the percentage for serving the consumers.
Question Marks

The items have the high market growth and has the potential to grow more in future in terms of market
share, as these items have low market share. The market share needs to be increase by the help of heavy
investment and some effective strategies, or else this will be the dog item for the company. Motor Spirit is
the question mark item for the ONGC, because of multiple competitors in the market. The quality of the
service and products needs to be improved. It is necessary for the company to invest in this to make it
profitable and reduce the burden.

Dogs

These items have the low market growth rate and low market share, which means they consume much more
than any other, and become the burden on the company. They have to shut down if the conditions worsen
and the investment can be used somewhere else. Kerosene/ AIF is the dog item for the ONGC, as it consumes
much cash of the government, but generate very less. The company needs to focus to this area, to make it
star item, or else the consumption of cash will make it negative for the company.
ANSOFF Matrix

Market Penetration:

 India’s largest crude oil and natural gas producer.


 Strong brand name.
 High profit making.
 It produces about 30% of India's crude oil requirement.
 Contributes 77% of India's crude oil production and 81% of India's natural gas production.

Market Development:

ONGC’s target audience mainly lies in Enterprises looking for energy for production, people for
petrol diesel for vehicles and domestic uses.

Product Development:

As India's biggest oil and gas exploration organisation, ONGC is positioned as the future of India's
energy
Petrol and its by-products being the key products undergoing new developments.

Diversification:

Oil & Natural Gas Corporation (ONGC), India's leading exploration & production company. ONGC
has recently announced plans to diversify along the energy chain. The diversification is planned to
enhance revenue growth and provide stability in earnings. Currently, the company witnesses
significant fluctuation in margins due to the volatility in oil prices. Diversification will also help bring
down the heavy tax burden and enable better utilization of free cash flows.
Expansion

ONGC is exploring feasibility of sourcing LNG on competitive basis to meet long-term


natural gas demand of India and thereby furthering energy security of the country. ONGC is also
planning to invest in Regasification Terminal with total capacity of 5-10 mmtpa as envisaged in
Perspective Plan - 2030.
Oil and gas are going to remain mainstay of the company for a long time to come, however,
the fossil fuel, the source of which is finite would be facing increasingly difficult challenges to
explore and exploit. Further, with the increasing focus of the world community on environment,
clean energy is slated to play increasing role in energy basket of any country.
ONGC has imbibed this emerging reality in its stated mission of providing value linkage to other
sectors of energy business. In order to create growth opportunities and maximize shareholder
value, along with its continued thrust for exploration & production of hydrocarbon, ONGC intends
to play an important role in development of nonconventional energy resource for the country.
ONGC’s resource base is an enabler in creating such growth opportunities.
ONGC has already taken a concrete step in this direction by setting up a 51 MW wind farm
in Gujarat. BD&JV is now taking the initiative further for significant addition of capacity in the
portfolio. The Group is also actively examining and pursuing various prospects in the domains of
offshore wind, solar, hydro and nuclear energy sources while engaging with some of the best
players in the respective domains.
A gas-based urea fertilizer plant in Tripura is in active consideration by ONGC for early
monetization of new gas discovery in the acreage awarded to ONGC in NELP III round. The project
is envisaged to be set up in Joint Venture mode with one of a leading fertilizer company of India
and Government of Tripura based on techno-commercial viability.