Problem 4B

1. VISION

A leading Oil and Gas Multinational of Choice

2. Mission

We are a business entity, Oil and gas is our core business, we add value to this
resource, we contribute to the wellbeing of the society.

3. IDENTIFY PETRONAS STRATEGIES

In 2015 - 2017 there are six strategies PETRONAS’ mapped out to build
resilience, maintain competitiveness and profitability for long term positioning and
sustainability. The following include:-

 Integration Strategies (Forward Integration)

 Integration strategies (backward integration)
 Intensive strategies (Product Development)
 Diversification (Unrelated Diversification)
 Intensive Strategies (Market Penetration)
 Cash generation (Market penetration)
 Growth project (Market development)
 Achieving strategies (Horinzontal integration)

PETRONAS’ are still remaining to review its strategies in 2015 to 2016

4. DEFINE PETRONAS’ STRATEGIES

INTEGRATION STRATEGIES(FORWARD INTEGRATION)

 Forward integration involves gaining ownership or increased control over
distributors or retailers. Increasing numbers of manufacturers (suppliers) are pursuing a
forward integration strategy by establishing websites to sell their products directly to
consumers.

INTENSIVE STRATEGIES (PRODUCT DEVELOPMENT)

Product development is a strategy that seeks increased sales by improving or

modifying present products or services. Product development usually entails large
research and development expenditures.

INTEGRATION STRATEGIES (BACKWARD INTEGRATION)

Backward integration involves pursuing backward integration by purchasing its own

ships to transport its own oil and gas, especially it is liquefied neutral gas. Petronas is
directly procuring new LNG ships to meet its LNG transportation requirement. This
strategy will allow PETRONAS to have direct access to LNG shipping capacity at the
lowest possible costs.

DIVERSIFICATION (UNRELATED DIVERSIFICATION)

Unrelated diversification is a form of diversification when the business adds new

or unrelated product lines and penetrates new market.

CASH GENERATION (MARKET PENETRATION)

Market Penetration is seeking increased market share for present products or

services in present markets. To seek increased market share or new product introduction
can grab by volume discounts, advertising, lower prices, or bundling as a strategy for
greater marketing efforts.

GROWTH PROJECT (MARKET DEVELOPMENT)

 Market Development is a growth strategy whereby a business attempts to find
new groups of buyers as potential customer for its existing products and service which is
other meanings market development is introducing present products or services into new
geographic area.

ACHIEVING STRATEGIES (HORIZONTAL INTEGRATION)

Horizontal Integration is seeking ownership or increased control over competitors.

It also the acquisition of additional business activities that are at the same level of the
value chain in similar or different industries. This can be achieved by internal expansion
through a reinvestment of operating profit or by external expansion through a merger or
acquisition.

5. HOW PETRONAS IMPLEMENT THE STRATEGIES

FORWARD INTEGRATION

In order to better respond to the high volatility surround global crude prices,
PETRONAS undertook a Corporate Enhancement Program (CEP) to realign its operating
strategy and business model. CEP aimed to improve PETRONAS’s operations through (i)
the demarcation of its international and regional upstream operations; (ii) integration of
exploration and production operations and its sales of natural gas and LNG into single
Upstream Business unit; and (iii) streamlining and optimization of Downstream Business
unit.

PRODUCT DEVELOPMENT

2015 has been a year that has seen significant strides in PETRONAS’ key focus
technologies, including Geolmaging. PETRONAS has made exciting development in a
series of advanced algorithms designed to help make better sense of seismic data and get
 a clearer picture a dynamic subsurface conditions. These Geolmaging technologies have
improved PETRONAS’ ability to identify opportunities.

RETRENCHMENT:

 Petroleum National Bhd (Petronas) is considering retrenchments for some of its 51,000
staff as one of the options as the national oil company confronts the realities of low oil
prices. A reduction to Petronas’ 51,000-strong workforce will come as the firm tries to
slash RM50 billion from its operating and capital expenditure (capex) over the next four
years.
DIVESTITURE:
Divesting its non-core assets has been a strategy for Petronas for some time now.
Sharbini added that Petronas was focusing more on finding oil assets, considering that it
was a “very gassy” company, with 65%-70% of its portfolio of assets being gas-related.
“Although the assets may not be very big, when the right time comes and if we see any
opportunity, we will do it,” he said at the CEO strategic dialogue session during the 19th
Asia Oil and Gas Conference.

UNRELATED DIVERSIFICATION

PETRONAS Downstream Business is a made up of multiple business and is

focused on adding value to the molecules, on the foundation of being operationally and
commercially excellent. PETRONAS focus is to enhance market competitiveness,
mitigate external and internal challenges as well as maximize its future growth potential.

MARKET PENETRATION

PETRONAS president and group chief executive officer Datuk Wan Zulkiflee
Wan Ariffin told an English daily that in the next few years, the company should focus
firstly on cash generation. Cash generation is plants that must be tip-top condition
running all the time. The products also must be sell at the best value, so it has to be all
across the value chain for greater marketing efforts.
 MARKET DEVELOPMENT

PETRONAS needs to deliver on its growth projects - the Refinery and

Petrochemical Integrated Development (RAPID), the Floating Liquefied Natural Gas
(FLNG), more projects on Sabah and the project in Canada. These project need to deliver
it well, no cost overruns, and on time and with good health and safety levels.

HORIZONTAL INTEGRATION

In achieving strategy, investing in technology better talent management and

improved work culture were the three other measures cited by PETRONAS president.
The current tumultuous time provides a good window of opportunity to address all the
inefficiencies within the organization. 51,000-strong workforce, has no immediate plan to
lay off staff with some having been redeployed to the RAPID project.

6. THE BENEFIT GAINED BY PETRONAS IN IMPLEMENTING THE

STRATEGIES

1) Social performance and human right

Social Performance is a key consideration in business and project decision making.

Benchmarked against international standards and best practices, Social performance in
PETRONAS is defined as managing impacts arising from areas of business while
contributing to the society in a responsible manner. In a nutshell, PETRONAS aspire for
their business presence to positively benefit local communities by conforming to the
unique social standards in countries of operations.

2) Health & Safety of the Community

As a socially-responsible corporate citizen, PETRONAS endeavour for their business
presence to positively benefit local communities wherever their operated. The young
generations are the future leaders and it is essential that provide a healthy environment
for these generations in the communities in which their operated. PETRONAS believe
that the best way to build tomorrow’s strong communities is to actively contribute to
organizations, programmes and initiatives that promote the health and safety of the local
communities.

3) Socio Economic and Community Development

PETRONAS views education sponsorships and capability development as an effective

enabler for people to leverage on their inherent strengths. PETRONAS pursue strategic
social, environmental and community outreach programmes in Malaysia as well as
internationally aim to promote lasting socio-economic benefits.
Example: Petronas Education Sponsorship Programmes
PETRONAS also promotes volunteerism by encouraging employees to lead social and
capability building efforts in community. Inclusion of community outreach modules in
PETRONAS are embedded through the various communication platforms via new-hire
induction, leadership and management programmes.

4) Protecting the Environment

In undertaking the business activities, it also cares for the environment wherever
PETRONAS operate by adopting responsible environmental management practices in
every aspect of operations. Besides that, they also contribute to the conservation and
biodiversity of the environment for the benefit of the community.

Besides taking every reasonable and practicable step to prevent and eliminate the risk of
injuries, health hazards and damage to property in carrying out their operations according
to international HSE standards, PETRONAS also invest in community-related initiatives
in urban renewal and environmental conservation, both in Malaysia and abroad. These
community projects are aimed at creating sustainable benefit and tangible value to the
communities with whom they work.