Ateneo de Manila University

Graduate School of Business

Rockwell Campus, Makati

A STRATEGIC MANAGEMENT PAPER FOR

PHOENIX PETROLEUM PHILIPPINES INC.

In Partial Fulfillment of the Requirements for the Subject

Strategic Management (S07)

Submitted by:
Hillary Ynna P. Laqui

Submitted to:
Prof. Hans Clifford Yao, MBA
18 June 2022

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EXECUTIVE SUMMARY

Phoenix Petroleum Philippines Inc. is the third-largest player with a 7.45% market share in 2021.
The company started its operations in Mindanao as an oil distributor. Eventually, Phoenix ventured into
the retail service stations and successfully penetrated the Luzon and Visayas market. Aside from the
service station products of diesel, gasoline, LPG, and lubricants, it also expanded its market reach by selling
Jet A-1 and asphalt to the commercial sector. The company envisioned building an ecosystem for its
consumers around the Phoenix brand. To further add value and cross-sell lubricants and other after-
market specialties, Phoenix established its Autoworx Plus, where a motorist can shop for vehicle
accessories and avail of other vehicle-related services such as change oil, wheel alignment, and other
services related to vehicle maintenance. It also expanded its portfolio to non-fuel businesses, such as its
acquisition of FamilyMart, Conti’s, Wendy’s, the digital platform of Posible.Net for bill payment, and other
online solutions. This concept leads to the birth of Phoenix Blocks, a one-stop-shop wherein motorists can
refuel, dine and avail of various services. The company later on, launched its Limitless App for the
unification and digitalization of consumers’ brand loyalty to the Udenna group of companies.

The Philippine oil industry has been deregulated since 1998, making it easier for other players to
enter the market. In 2021, over 10,000 service stations were present across the country, the highest
number in the past five years. However, approximately 39.20% of these retail stations account for major
players (i.e., Petron, Shell, and Phoenix), holding a combined market share of 41.58%. The products in the
industry are homogeneous, making it easier for consumers to switch from one brand to another based on
price, location, and promotion, amongst other factors. Despite the continuous rise in oil prices, the
demand for oil remains inelastic both in the consumer and industrial sectors.

To remain competitive in the Philippine petroleum market, an extensive service station network,
number of supply points, operational efficiency, steady supply of oil and petroleum products, and financial
resilience are essential to any oil company aspiring to succeed in this industry. Petron remains the largest
oil refiner in the country, achieving the highest score of 3.38, followed by Pilipinas Shell with 3.30 and
Phoenix at 2.32. The results reflect the companies’ market share, as the Department of Energy (DOE)
reported.

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 For Phoenix to grow and sustain its market share, external factors affecting the industry are also
identified and analyzed. Based on the study, a sound economic performance, the government’s
infrastructure program, and the emergence of transport network vehicle service are some key factors that
will help the company expand. Moreover, the demand for petroleum products is set to grow with a 6.50%
CAGR from 2022 to 2025. The transport and commercial sectors mainly drive this. However, threats are
also considered, including the proliferation of illegal fuel trade, the rapid growth of smaller players, and
rising geopolitical tension, which makes crude oil prices fluctuate. As a result, Phoenix was able to garner
a score of 2.68, translating that the company was able to take advantage of the opportunities identified
and manage the threats.

The internal analysis then generates a score of 2.46 which means that Phoenix can still improve on
its strengths and weaknesses. According to its strengths, Phoenix capitalizes on its competitive prices,
wide product range anchored on technology, high level of support from the parent company, and the
utilization of joint ventures and partnerships for its programs. On the other hand, it should address its
weaknesses such as a limited number of distribution networks, ineffective optimization of its marketing
tools, weak operational efficiency, high exposure to debt, and weak customer service.

The factors identified are then pieced together to be further analyzed with the help of strategy
formulation tools such as the SWOT analysis, SPACE matrix, BCG matrix, Internal-External Matrix, and the
Grand strategy matrix. These tools yielded strategies such as market penetration, market development,
and product development. The Quantitative Strategic Planning Matrix (QSPM) reflected that market
penetration strategies are the most attractive strategies for Phoenix, with a 5.11 score. This is succeeded
by market development at 5.06 and product development at 2.33.

Phoenix's major strategies can then be summarized into expansion, brand loyalty, and market
development. Currently, Phoenix sits at a modest spot in terms of its service stations and supply points.
Hence, it is recommended that Phoenix improve its station count and reach. Brand loyalty then pertains
to further strengthen the Phoenix brand anchored on sustainable activities leveraging the Limitless App
and the use of social media. Lastly, Phoenix has good potential in developing new markets since it has
specialized CME and asphalt facilities. The company can bank on these resources to further expand and
grow.

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 These strategies will further defend Phoenix’s market share, being the third-largest oil company in
the country. Likewise, this will help Phoenix generate a sales revenue of Php 212 billion, with a net income
of Php 7.90 billion by 2025.

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TABLE OF CONTENTS
1. INTRODUCTION .................................................................................................................................. 13
1.1 Company Background .................................................................................................................... 13
1.2 Human Resource ............................................................................................................................ 13
1.2.1 Demographics ............................................................................................................................. 15
1.2.2 Organization Structure ............................................................................................................... 16
1.3 Nature of Products and Services .................................................................................................... 17
1.4 Location and Distribution Channel ................................................................................................ 19
1.5 Current Market Share .................................................................................................................... 23
1.6 Current Revenue and Profit ........................................................................................................... 24
2. RESEARCH DESIGN AND METHODOLOGY.......................................................................................... 26
2.1 Primary Data ................................................................................................................................... 26
2.2 Secondary Data .............................................................................................................................. 26
2.3 Methodology .................................................................................................................................. 27
2.4 Scope and Limitation of the Study ................................................................................................. 28
3. COMPANY’S VISION AND MISSION ................................................................................................... 28
3.1 Current Vision Statement .............................................................................................................. 28
3.2 Current Mission Statement ............................................................................................................ 28
3.3 Core Values ..................................................................................................................................... 28
3.4 Evaluation of Current Vision and Mission ..................................................................................... 29
3.5 Recommended Revised Vision Statement .................................................................................... 32
3.6 Recommended Revised Mission Statement .................................................................................. 34
4. hMACRO ENVIRONMENTAL ANALYSIS .............................................................................................. 37
4.1 Political Forces ................................................................................................................................ 37
4.1.1 ‘Build Build Build’ Program Continues and Further Pushes into Completion Amid Pandemic37
4.1.2 Rising International and Domestic Geopolitical Events ............................................................ 40
4.1.3 Proliferation of Illegal Fuel Trade .............................................................................................. 42
4.2 Economical Forces .......................................................................................................................... 43
4.2.1 Philippine’s Positive GDP Outlook ............................................................................................. 43
4.2.2 Depreciation of the Philippine Peso .......................................................................................... 46
4.2.3 Increasing Inflation and Stable Interest Rate ............................................................................ 48
4.3 Socio-Cultural Forces ...................................................................................................................... 48

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4.3.1 Deregulation of the Oil Industry ................................................................................................ 50
4.3.2 Automotive Industry Growth..................................................................................................... 51
4.3.3 Covid-19 Reshaping Consumer Behavior................................................................................... 55
4.4 Technological Forces ...................................................................................................................... 57
4.4.1 Emergence of ride hailing, online delivery, e-commerce, and digital wallet ........................... 57
4.5 Legal Forces .................................................................................................................................... 60
4.5.1 Implementation of the TRAIN and CREATE Laws ...................................................................... 60
4.6 Environmental Forces..................................................................................................................... 62
4.6.1 Emergence of Renewable Energy .............................................................................................. 62
4.6.2 Implementation of Biofuels Act of 2006 ................................................................................... 64
5. INDUSTRY AND COMPETITOR ANALYSIS ........................................................................................... 65
5.1 Industry Background ...................................................................................................................... 65
5.2 Industry Value Chain ...................................................................................................................... 67
5.3 Porter’s Five Forces Model............................................................................................................. 73
5.3.1 Rivalry of Competition ............................................................................................................... 74
5.3.2 Threat of New Entrants .............................................................................................................. 76
5.3.3 Bargaining Power of Suppliers ................................................................................................... 77
5.3.4 Bargaining Power of Buyers ....................................................................................................... 80
5.3.5 Threat for Substitute .................................................................................................................. 81
5.4 Strategic Positioning Analysis ........................................................................................................ 83
5.5 Market Size, Share, and Growth Trends ........................................................................................ 85
5.6 Market Analysis .............................................................................................................................. 86
5.6.1 Market Sector and Forecast ....................................................................................................... 86
5.6.2 Product Category and Forecast .................................................................................................. 90
5.6.3 Distribution Channels ................................................................................................................. 95
5.6.4 Key Competitors of Phoenix Petroleum Philippines Inc. .......................................................... 99
5.6.5 Critical Success Factors (CSF) ................................................................................................... 102
5.6.6 CSF Benchmarking versus Key Competitors ............................................................................ 107
5.6.7 Competitive Profile Matrix (CPM) ........................................................................................... 121
5.7 External Factor Evaluation (EFE) Matrix ...................................................................................... 122
5.7.1 List of Opportunities – Importance Weights and Firm’s Responsiveness .............................. 122
5.7.2 List of Threats – Importance Weights and Firm’s Responsiveness......................................... 127

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5.7.3 External Factor Evaluation (EFE) Matrix .................................................................................. 133
5.8 McKinsey’s 7s Framework............................................................................................................ 134
5.8.1 Strategy..................................................................................................................................... 134
5.8.2 Structure ................................................................................................................................... 135
5.8.3 System ...................................................................................................................................... 139
5.8.4 Style .......................................................................................................................................... 140
6. COMPANY ANALYSIS ........................................................................................................................ 142
6.1.1 Staff ........................................................................................................................................... 142
6.1.2 Skills .......................................................................................................................................... 146
6.1.3 Shared Value............................................................................................................................. 147
6.2 Company Internal Audit Questionnaire ...................................................................................... 148
6.2.1 Management Audit .................................................................................................................. 148
6.2.2 Marketing Audit ....................................................................................................................... 152
6.2.3 Production / Operations Audit ................................................................................................ 155
6.2.4 Research and Development Audit ........................................................................................... 158
6.2.5 Management Information Systems Audit ............................................................................... 160
6.2.6 Financial / Accounting Audit .................................................................................................... 162
6.3 ANALYSIS OF HISTORICAL FINANCIAL STATEMENTS ................................................................... 164
6.3.1 Statement of Financial Position (Balance Sheet) .................................................................... 164
6.3.2 Statement of Comprehensive Income (Income Statement) ................................................... 166
6.3.3 Cash Flow Statement................................................................................................................ 168
6.3.4 Key Financial Ratios .................................................................................................................. 170
6.3.4.1 Liquidity Ratio........................................................................................................................... 171
6.3.4.2 Leverage Ratio .......................................................................................................................... 172
6.3.4.3 Activity Ratio ............................................................................................................................ 174
6.3.4.4 Profitability Ratio ..................................................................................................................... 176
6.4 INTERNAL FACTOR EVALUATION MATRIX ................................................................................... 179
6.4.1 List of Strengths and Importance Weights .............................................................................. 179
6.4.2 List of Weakness and Importance Weights ............................................................................. 182
6.4.3 Internal Factor Evaluation Matrix ............................................................................................ 188
7. STRATEGY FORMULATION ............................................................................................................... 189
7.1 Strengths, Weakness, Opportunities, Threats (SWOT) Matrix ................................................... 189

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7.1.1 Strength-Opportunity (SO) Strategies ..................................................................................... 189
7.1.2 Strength-Threat (ST) Strategies ............................................................................................... 190
7.1.3 Weakness-Opportunity (WO) Strategies ................................................................................. 191
7.1.4 Weakness-Threat Strategies .................................................................................................... 192
7.1.5 Grouping of SWOT Strategies .................................................................................................. 193
7.2 Strategic Position and Action Evaluation (SPACE) Matrix........................................................... 195
7.3 Boston Consulting Group (BCG) Matrix ....................................................................................... 197
7.4 Grand Strategy Matrix.................................................................................................................. 198
7.5 Internal – External (IE) Matrix...................................................................................................... 199
7.6 Summary of Strategies ................................................................................................................. 200
7.7 Quantitative Strategic Planning (QSP) Matrix ............................................................................. 201
8. STRATEGIC CORPORATE AND FUNCTIONAL OBJECTIVES AND RECOMMENDED STRATEGIES ...... 202
8.1 Key Strategic Challenge and Recommended Corporate Strategic Objective ............................. 202
8.1.1 Key Strategic Challenge ............................................................................................................ 202
8.1.2 Reference Calculations and Assumptions for Strategic and Financial Objectives ................. 203
8.1.3 Recommended Corporate Strategic Objective ........................................................................ 204
8.2 Recommended Strategies ............................................................................................................ 205
8.3 Recommended Departmental Programs & Action Plans ............................................................ 215
8.4 Financial Projections .................................................................................................................... 224
8.4.1 List of Assumptions .................................................................................................................. 224
8.4.2 Statement of Financial Position (Balance Sheet) – Projection ............................................... 227
8.4.3 Statement Comprehensive Income (Income Statement)– Projection ................................... 229
8.4.4 Statement of Cash Flow – Projection ...................................................................................... 230
8.4.5 Financial Ratios – Projections .................................................................................................. 232
9. STRATEGY EVALUATION, MONITORING, AND CONTROL ............................................................... 232
9.1 Balanced Scorecard Strategy Map ............................................................................................... 232
9.2 Balanced Scorecard Strategy Objectives and Initiatives Matrix ................................................. 233
9.3 Balanced Scorecard Performance Monitoring Dashboard ......................................................... 235
10. CONTINGENCY PLAN .................................................................................................................... 238
APPENDICES .............................................................................................................................................. 240
BIBLIOGRAPHY.......................................................................................................................................... 249

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LIST OF FIGURES
Figure 1–Phoenix Petroleum Logo .............................................................................................................. 13
Figure 2– Employee Gender Composition (2021) ....................................................................................... 15
Figure 3– Organization Structure ................................................................................................................ 17
Figure 4– Phoenix Product Portfolio ........................................................................................................... 18
Figure 5– Phoenix Depots and Terminals ................................................................................................... 20
Figure 6– Oil Industry Market Share (2021)................................................................................................ 23
Figure 7–Market Share of Oil Players (2016 – 2021) .................................................................................. 24
Figure 8– Volume Distribution (2021) ........................................................................................................ 25
Figure 9–Geopolitical Tension Effect on Oil Prices ..................................................................................... 41
Figure 10– GDP Growth Rate (2016 to 2026) ............................................................................................. 44
Figure 11–GDP Growth ............................................................................................................................... 45
Figure 12– Philippine Peso Exchange Rate vs. US Dollar (2019 to 2022).................................................... 47
Figure 13-Interest Rate (2018 – 2022) ........................................................................................................ 49
Figure 14 – Oil Industry Market Share (2021)............................................................................................. 51
Figure 15–Philippine Auto Industry Segment ............................................................................................. 52
Figure 16–Passenger Vehicle Sales (2017 – 2026) ...................................................................................... 53
Figure 17– Commercial Vehicle Sales (2017 – 2026) .................................................................................. 54
Figure 18–Market Demand (2017 – 2026) .................................................................................................. 54
Figure 19– Ride-Hailing and Taxi Revenue (2017 to 2025) ......................................................................... 57
Figure 20– Ecommerce Roadmap ............................................................................................................... 58
Figure 21–Digital Channels ......................................................................................................................... 59
Figure 22–TRAIN Law on Petroleum Products ............................................................................................ 60
Figure 23–Comparative Income Tax (2020) ................................................................................................ 61
Figure 24–Power Generation Mix (2020) ................................................................................................... 63
Figure 25– Petroleum Supply Chain ............................................................................................................ 66
Figure 26– Industry Value Chain ................................................................................................................. 67
Figure 27– Fractionating Column ................................................................................................................ 68
Figure 28– Cost Components of Fuel Pricing in the Philippines ................................................................. 71
Figure 29– Product Demand by Region (2021) ........................................................................................... 73
Figure 30–Porter’s Five Forces Model (Local Downstream Oil Industry) ................................................... 73
Figure 31– Crude Import by Origin 2021 .................................................................................................... 78
Figure 32– Product Import by Origin (2021) ............................................................................................... 79
Figure 33– Primary Energy Consumption in the Philippines (2020) ........................................................... 82
Figure 34– Strategic Positioning of Petroleum Companies ........................................................................ 83
Figure 35– Transport Sector Oil Demand at 9,416 KTOE (2020) ................................................................ 87
Figure 36– Transport Sector Oil Demand by Fuel Type (2020) ................................................................... 88
Figure 37– Services Sector Oil Demand by Fuel Type (2020)...................................................................... 88
Figure 38– Household Energy Demand (2020) ........................................................................................... 89
Figure 39– Phoenix Product Mix (2021)...................................................................................................... 94
Figure 40– Distribution Channel Map ......................................................................................................... 95
Figure 41– Oil Industry Market Share (2021).............................................................................................. 98

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Figure 42– Petron Corporation Logo .......................................................................................................... 99
Figure 43– Pilipinas Shell Petroleum Corp. Logo ...................................................................................... 100
Figure 44– Mystery Motorist Program ..................................................................................................... 115
Figure 45– Phoenix’s Ownership Structure .............................................................................................. 135
Figure 46– Phoenix’s Organizational Structure ........................................................................................ 138
Figure 47– Phoenix’s Senior Management from Different Oil Companies............................................... 141
Figure 48–Employee Gender Composition (2021).................................................................................... 143
Figure 49– Phoenix’s Employees Attend Online Town Hall Meeting ....................................................... 144
Figure 50– Phoenix’s Shared Values ......................................................................................................... 147
Figure 51– Sample LinkedIn Job Posting ................................................................................................... 151
Figure 52– Phoenix’s Mystery Motorist Program ..................................................................................... 186
Figure 53– Phoenix’s Customer Feedback Platform via Limitless App ..................................................... 186
Figure 54– SPACE Matrix for Phoenix ....................................................................................................... 196
Figure 55– BCG Matrix .............................................................................................................................. 197
Figure 56– Grand Strategy Matrix for Phoenix ......................................................................................... 198
Figure 57– Internal-External Matrix for Phoenix ...................................................................................... 199
Figure 58– Service Station Visualization: Two Islands, with Four Pumps ................................................. 207
Figure 59– Poro Point Freeport Zone........................................................................................................ 209
Figure 60– Limitless App ........................................................................................................................... 210
Figure 61– Pinoy Tsuper Hero Mechanics (2019 – Year 4) ....................................................................... 211
Figure 62– Phoenix Tsuper Club Card ....................................................................................................... 211
Figure 63– Social Media Users in the Philippines ..................................................................................... 212
Figure 64– Social Media Market Share (September 2021) ....................................................................... 213
Figure 65– E-commerce Platforms............................................................................................................ 214

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LIST OF TABLES
Table 1– Employee Distribution by Position (2021).................................................................................... 15
Table 2– Phoenix’s Depot and Terminal Capacity ...................................................................................... 19
Table 3–Inflation Rate (2019 – 2022).......................................................................................................... 49
Table 4-Supply Points of Oil Majors ............................................................................................................ 69
Table 5– Hauler Count Per Region (2022)................................................................................................... 70
Table 6– 2021 vs 2020 Product Demand in Million Litters (ML)................................................................. 72
Table 7– Number of Retail Outlets (2017 - 2021) ....................................................................................... 74
Table 8– Fuel Retail Outlet (2021) .............................................................................................................. 75
Table 9– Market Share of Oil Players (2016 – 2021) .................................................................................. 75
Table 10– No. of Oil Players and Investment (2018 – 2020) ...................................................................... 76
Table 11–Crude Import in Million Litters (ML) 2020 to 2021 ..................................................................... 78
Table 12–Finished Product Import in Million Litters (ML) 2018 to 2020.................................................... 79
Table 13– Household Final Consumption Expenditure in Php (2020 – 2021) ............................................ 81
Table 14– Phoenix Service Station Expansion (2010 – 2021) ..................................................................... 84
Table 15– Sales Volume of the Oil Industry (2015 – 2021)......................................................................... 85
Table 16-Forecasted CAGR (2022-2025) ..................................................................................................... 86
Table 17– Oil Consumption by Sector (2015 –2020) .................................................................................. 86
Table 18– Market Sector Forecast (2021 – 2025) ....................................................................................... 90
Table 19– Product Demand (2015 –2020) .................................................................................................. 90
Table 20– Phoenix 's LPG Market Share (2017 – 2020) .............................................................................. 92
Table 21– Demand Forecast (2021 – 2025) ................................................................................................ 93
Table 22 – Station Type Count per Oil Company ........................................................................................ 96
Table 23– Phoenix Estimate Dealership Cost ............................................................................................. 97
Table 24– Key Comparison of Competitors .............................................................................................. 101
Table 25– Distribution Network of Oil Players.......................................................................................... 107
Table 26– Geographical Distribution Network of Oil Players ................................................................... 107
Table 27– Activity Ratios ........................................................................................................................... 109
Table 28– Leverage Ratios ........................................................................................................................ 112
Table 29– Average NCR Pump Prices ........................................................................................................ 118
Table 30– Marketing to Revenue Ratio .................................................................................................... 119
Table 31– Competitive Profile Matrix ....................................................................................................... 121
Table 32– List of Opportunities and Importance Weights ........................................................................ 122
Table 33– Oil Consumption by Sector (2015 –2020) ................................................................................ 124
Table 34– List of Threats and Importance Weights .................................................................................. 127
Table 35– Eternal Factor Evaluation Matrix.............................................................................................. 133
Table 36– Employee Count (2019 – 2021) ................................................................................................ 142
Table 37– Activity Ratio (2019 – 2021) ..................................................................................................... 155
Table 38– Phoenix’s Depot and Terminal Capacity .................................................................................. 158
Table 39– Balance Sheet (2018 – 2021) .................................................................................................... 164
Table 40– Income Statement (2018 – 2021)............................................................................................. 166

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Table 41– Statement of Cashflows (2018 – 2021) .................................................................................... 168
Table 42– Phoenix’s Financial Ratios (2019 – 2021) ................................................................................. 170
Table 43– Oil Major Players Financial Ratios (2019 – 2021) ..................................................................... 171
Table 44– Liquidity Ratios of Industry Players (2019 – 2021) ................................................................... 171
Table 45– Leverage Ratios of Industry Players (2019 – 2021) .................................................................. 173
Table 46– Activity Ratios of Industry Players (2019 – 2021)..................................................................... 174
Table 47– Profitability Ratios of Industry Players (2019 – 2021) .............................................................. 176
Table 48– List of Strengths and Importance Weight ................................................................................ 179
Table 49– List of Weakness and Importance Weight ............................................................................... 182
Table 50– Major Oil Players' Service Station Distribution (2021) ............................................................. 182
Table 51– Oil Major Players' Supply Points Distribution .......................................................................... 183
Table 52– Leverage Ratio .......................................................................................................................... 185
Table 53– Activity Ratio ............................................................................................................................ 187
Table 54– Internal Factor Evaluation Matrix ............................................................................................ 188
Table 55– Strengths and Opportunities .................................................................................................... 189
Table 56– Strength-Opportunity (SO) Strategies ...................................................................................... 189
Table 57– Strengths and Threats .............................................................................................................. 190
Table 58– Strength-Threat (ST) Strategies ................................................................................................ 190
Table 59– Weaknesses and Opportunities ............................................................................................... 191
Table 60– Weakness-Opportunity (WO) Strategies .................................................................................. 191
Table 61– Weaknesses and Threats .......................................................................................................... 192
Table 62– Weakness-Threat (WT) Strategies............................................................................................ 192
Table 63– Market Penetration Strategies ................................................................................................. 193
Table 64– Market Development Strategies .............................................................................................. 193
Table 65– Product Development Strategies ............................................................................................. 193
Table 66– Strategic Alliances or Joint Venture Strategies ........................................................................ 194
Table 67– Backward Integration Strategies .............................................................................................. 194
Table 68– Horizontal Integration Strategies ............................................................................................. 194
Table 69– Related Diversification Strategies ............................................................................................ 194
Table 70– Unrelated Diversification Strategies ........................................................................................ 195
Table 71– Functional Strategies ................................................................................................................ 195
Table 72– SPACE Matrix Computation ...................................................................................................... 195
Table 73– BCG Table ................................................................................................................................. 197
Table 74– Summary of Strategies for Phoenix .......................................................................................... 200
Table 75– Quantitative Strategic Planning Matrix .................................................................................... 201
Table 76– Key Strategic Challenge Parameters ........................................................................................ 202
Table 77– Forecasted CAGR Computation (2022 – 2025) ........................................................................ 203
Table 78– Reference Calculation (2019 Actual to 2025 Forecasted) ........................................................ 203
Table 79– Oil Major Players’ Resulting CAGR (2022 to 2025)................................................................... 204
Table 80 – Annual Revenue Growth Objective (2022 to 2025) ................................................................ 205
Table 81– Total Station Count in the Philippines (2021) .......................................................................... 206
Table 82– Phoenix Station Type Distribution (2021) ................................................................................ 206

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Table 83– Recommended Service Station Distribution (2021) ................................................................. 207
Table 84– Phoenix’s Terminals and Depots .............................................................................................. 208
Table 85– Local CME Supply and Demand ................................................................................................ 215
Table 86– Phoenix’s CME Supply and Demand (202-2021) ...................................................................... 215
Table 87– Balance Sheet Projected (2022-2025) ...................................................................................... 227
Table 88– Income Statement Projected (2022-2025)............................................................................... 229
Table 89– Statement of Cashflows Projected (2022-2025) ...................................................................... 230
Table 90–Financial Ratios (2022-2025) Projected .................................................................................... 232

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 1. INTRODUCTION

1.1 Company Background

Figure 1–Phoenix Petroleum Logo

1.2 Human Resource

Phoenix Petroleum Philippines Inc. (herein known as "Phoenix") is the first Filipino independent
oil company listed on the Philippine Stock Exchange after implementing the Oil deregulation act of
19981. Tracing its roots in Davao City, Phoenix Petroleum is trading refined petroleum products and
lubricants, operating oil depots and storage facilities, and other allied businesses.

The company started as a small family business established by Mr. Dennis Uy, distributing
petroleum products to various entities in Mindanao. It was incorporated on May 8, 2002, as Oillink
Mindanao Distribution Inc. and later changed its name to Davao Oil Terminal Services Corporation in
2004. Cebu Pacific Air's aviation fuel requirements were its first largest acquisition, providing the lease
of storage tanks and into-plane services. Later on, it became the airline's exclusive logistics partner in
all Mindanao destinations. Next, Phoenix ventured into the retail of fuel which began with the
establishment of five gas stations in Davao and Mindanao and the introduction of the "Phoenix fuels
life" brand. The company was renamed Phoenix Petroleum Corporation in 2016. It also added Phoenix
lubricants and Autoworx Plus, a car care service center. During the same year, Chelsea Shipping
Corporation was acquired as a logistics and freight forwarding subsidiary to serve the company's
growing domestic requirements better.

1 Phoenix Company History https://www.phoenixfuels.ph/our-story-and-history/

13
 In July 2007, Phoenix became the first Davao-based company publicly listed on the Philippine
Stock Exchange, with 25% of its total outstanding shares offered to the public. Following this
milestone, the company received its ISO 9001:2000 quality system standards certification for its
Davao bulk plant and aviation fuel tank truck operations in 2008. Later the same year, Phoenix opened
its first retail service station in Marikina City. Since then, its retail network has expanded to various
parts of Luzon and Visayas, with 690 stations as of December 31, 2021. Phoenix is also engaged in
terminalling and hauling services that involve leasing storage spaces in its terminal depots and hauling
and in-plane services in 16 airports. In 2009, the company acquired a 60-hectare industrial park in
Batangas, later known as Phoenix Petrochemicals and industrial park, its largest terminal facility.

Expansion of operations led Phoenix to build its most modern terminal facility in Cagayan de Oro
in 2011. With this and other terminals and depots in major thoroughfares nationwide, the company
now owns the largest storage capacity among the local independent oil companies. In addition, to
support its rapidly growing fuel business, Phoenix inaugurated its own Coco Methyl Ester (CME)
Manufacturing plant in 2013, a first for a petroleum company that produces its CME and biodiesel
products to augment the scarcity of biofuel in the country.

In 2016, Chelsea Shipping, Phoenix Petrochemicals, and Industrial Park Corp. were sold to their
parent company, Udenna Corporation. This allowed Phoenix to focus on the core business of
petroleum. A year later, Phoenix expanded to other ancillary businesses with its acquisition of
Petronas Energy Philippines Inc. (renamed Phoenix LPG Philippines Inc. for its LPG arm) and Philippine
FamilyMart, the country's third-largest convenience store chain. It also established its regional trading
and supply arm, PNX Petroleum Singapore Pte. Ltd. In addition, in support of the government's major
'Build, Build, Build' program, Phoenix entered into a joint venture with a Thailand-based company,
TIPCO Asphalt and PhilAsphalt, to market bitumen in the Philippines in 2018. Following its expansion
efforts, Phoenix Pilipinas Gas and Power Inc. was incorporated in 2019 to sell and trade liquified
natural gas (LNG) wholesale.

More than being the fastest growing and leading independent oil company in the Philippines,
Phoenix has evolved into a formidable multi-industry institution serving the varied needs of the
growing Filipino market.

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 1.2.1 Demographics

As of December 31, 2021, Phoenix has a total of 654 employees2. Majority in the organization
holds a supervisory position at 38%. On the other hand, Phoenix has more male employees at 61% or
399.

Table 1– Employee Distribution by Position (2021)

Figure 2– Employee Gender Composition (2021)

2 Phoenix 2021 Annual Report https://drive.google.com/file/d/1oVIQeDXrn3tK-FrVMjI_CEY9BDl2CLaq/view

15
 1.2.2 Organization Structure

Phoenix is led by its chairman and chief strategy officer, Mr. Dennis Uy. He is not only the founder
of the Phoenix, but also of the Udenna Corporation, the parent company. Phoenix is one of Udenna
Corporation’s core business together with Chelsea Logistics Holdings Corporation, and Udenna Land.

Phoenix’s board has 11 directors, composed of esteemed professionals from the different
business sectors, judiciary, and from the oil industry. The executive team is composed of three chief
officers, one senior vice presidents, and four vice presidents. As of December 2021, the following are
the key personnel that oversee Phoenix’s operations and its employees:

• Mr. Henry Albert R. Fadullon – President and Chief Executive Officer

• Ms. Ma. Concepcion F. De Claro – Chief Financial Officer
• Mr. Charlie R. Valerio – Chief Digital Officer
• Mr. Allan Raymond T. Zorilla – Senior Vice President
• Ms. Soccoro T. Ermac-Caberos – Vice President for Corporate Legal
• Ms. Ma. Celina I. Matias – Vice President for Integrated Marketing Strategies
• Mr. Richard C. Tiansay – Vice President for Supply Chain, Pricing, and HSE
• Ms. Chonabeth I. Nazario – Vice President for Internal Audit

16
 Figure 3– Organization Structure

1.3 Nature of Products and Services

Phoenix is engaged in the downstream petroleum business, focused on trading of petroleum

products in both the wholesale and retail basis. Products include fuel, lubricants, LPG, and asphalt as
reflected in figure 3. It is also in the terminalling and hauling services, operating depots and terminals,
leasing of storage space, and into-plane services.

The organization is also a manufacturer CME with its Cagayan de Oro plant. The CME is a
government-mandated additive for all diesel requirements. Currently, Phoenix only supplies to all of
its service stations. In 2021, it had a 7.5-million-liter production with 7-million-liter sales3.

3 Interview with a Phoenix sales manager

17
 Figure 4– Phoenix Product Portfolio

The organization also has expanded its portfolio to include non-fuel businesses through the
acquisition of the convenience store, FamilyMart in 20184. FamilyMart opened its first and largest
store in the Udenna Tower, offering Japanese food selection and signature coffee from UCC. Likewise,
it is also expanding its traffic into the digital space via bills payment, money remittance, load bank
deposits, and other platforms powered by the Posible platform. Lastly, it also immersed itself into car
and repair maintenance via its Autoworx arm.

4
https://www.phoenixfuels.ph/phoenix-petroleum-completes-acquisition-of-philippine-family-mart/

18
 1.4 Location and Distribution Channel

When Phoenix first started its operations in 2005, it sourced its petroleum products within the
country, via supply sales from PTT Philippines Corporation and Total Philippines Corporations. But as
the company grew its operations, it decided to import starting September 20095.

Currently Phoenix imports almost 100% of its petroleum requirements from several foreign
regional sources via its wholly owned subsidiary, PNX Petroleum Singapore Pte. Ltd. The company
imports refined petroleum products from Taiwan, Singapore, China, Korea and Thailand among
others, which allows for much greater pricing flexibility and stability of supply. The products are
distributed to Phoenix’s import terminals in Davao, Cagayan de Oro, Subic, and Batangas via barge
through Chelsea Shipping Corporation. Table 2 then reflects the terminals and depots capacity6.

Table 2– Phoenix’s Depot and Terminal Capacity

5
Phoenix 2021 Annual Report https://drive.google.com/file/d/1oVIQeDXrn3tK-FrVMjI_CEY9BDl2CLaq/view
6
Phoenix 2020 Prospectus https://www.pds.com.ph/wp-content/uploads/2020/08/21-PNX-CP-SERIES-D-Final-Prospectus-F-
rev.pdf

19
 Figure 5– Phoenix Depots and Terminals

From the organization’s supply points, it is now distributed into its 690 stations across the country
via tank trucks. Phoenix has forged joint ventures with several hauling companies for the transport of
its petroleum across the country. Examples of which are JV Hauling and Trucking Corp and Road Fuel
Joint Transporter, Inc.

For its commercial and industrial business, products are still transported via tank trucks across the
country, directly to the accounts’ facilities. This business line is created to support any B2B’s fuel
requirement. Its customers include government and private accounts. Under this business unit is also
the fleet card accounts in which the organization gained 82 accounts last 2020. Aboitiz Power, Pilmico,
AC Energy, and Trans-Asia Shipping Fleet, Air Asia are some of Phoenix’s accounts.

Phoenix also provides into-plane services which are available in 16 airports which includes the
following:

20
 1. Bacolod
2. Cagayan de Oro
3. Caticlan
4. Cebu Mactan
5. CDO / Iligan Laguindangan
6. Cotabato
7. Davao City
8. Dumaguit
9. Ninoy Aquino International Airport
10. Kalibo
11. Iloilo
12. Tacloban
13. Pagadian City
14. General Santos City
15. Ozamis City
16. Butuan City

Some of its key accounts in the aviation industry includes Cebu Pacific, Philippine Airlines, and AirAsia.

For its LPG line, products are brought to its retail (i.e., LPG Super Hub) and commercial accounts
via bullet trucks. In 2020, Phoenix managed to expand its Super LPG by bringing in 229 new hubs and
334 dealer-exclusive partners7. To date, it has more than 600 LPG dealers and super hubs across the
country. To fully adapt in a pandemic-stricken environment, novel digital-based programs were
introduced. The organization launched a new and improved online order form on its official Facebook
page. To make it more convenient for their consumers, Phoenix added Visa and Master Card as
options for mode of payments.

Phoenix is mainly sourcing its lubricant requirements from Singapore and Thailand. It is also
expanding its lubricant business with new 597 retail trade outlets, 38 independent workshops, 175
Ka-Phoenix outlets, and two Autoworx Plus outlets.

7
Phoenix 2020 Annual Report https://www.phoenixfuels.ph/pdf/2020_Phoenix_Petroleum_Annual_Report.pdf

21
 In July 2020, Phoenix has completed the first phase of construction of its asphalt plant in Calaca,
Batangas8. The newly constructed facility has a two vertical storage tanks which can accommodate
6,200 metric tons of bitumen asphalt 60/70 (i.e., hot asphalt) that is mainly used in road construction.
The construction for the Polymer Modified Bitumen and Emulsion facilities is ongoing. The facility is
critical in producing high-quality performance asphalt intended for roads, expressways, and runways.

In 2021, it had its product launch, featuring Cold Patch Asphalt Mix9, which is considered to be an
innovative product, providing solution to road potholes and to do-it-yourself projects. Currently, the
product is now retailed in selected hardware stores across the country.

Phoenix has also established a one-stop shop for automotive car-care facility with the inception
of Autoworx Plus (AWP) in 2019. The five shops, mainly located in Metro Manila can accommodate
broad range of car needs with dedicated and well-trained technicians. The newly launched business
line is streamlined to deliver three main work groups: Service Center for the one-stop shop, Home Car
Care, and Sanitation Hubs (offered in Phoenix stations in Metro Manila, Olongapo, Cebu, Zambales,
and Cebu). Aside from the services, the shops also sell auto parts and accessories.

To further strengthen its non-fuel business, Phoenix acquired FamilyMart in 2018 from SIAL CVS
Retailers, FamilyMart Co., Ltd., and Itochu Corporation10. The convenience store offers wide-range of
ready to eat meals, auto-loading, bills payments (i.e., via Posible platform), and ATM services. It serves
as the convenience store arm of Phoenix stations, competing with Treats of Petron and Deli2Go of
Shell. Currently, there are over 80 stores in Luzon and three in Cebu.

Phoenix is also expanding its footprint in the digital space with its Limitless App11. The program
started in the midst of the pandemic in 2020, following a B2C model. It is an app-based lifestyle
rewards program containing all Udenna-led companies such as Conti’s, Wendy’s, and FamilyMart.
Members can earn points as they transact in Phoenix and other participating organizations. The
members can just conveniently show their QR codes, and they will earn 1 point for every Php 200
worth or purchase. Every 1 point is equivalent to Php 1 which can be used in purchasing. The app also

8
Phoenix Launches Asphalt Facility in Batangas https://www.bworldonline.com/corporate/2020/07/02/302728/phoenix-
launches-asphalt-facility-in-batangas/
9
Phoenix Cold Patch https://www.phoenixfuels.ph/phoenix-asphalt-introduces-diy-product-for-pothole-problems/
10
FamilyMart Acquisition https://www.philretailers.com/phoenix-completes-familymart-acquisition/
11
Limitless: A New World of Possibilities https://www.phoenixfuels.ph/limitless-a-new-world-of-
possibilities/#:~:text=For%20further%20convenience%2C%20members%20only,used%20towards%20purchases%20and%20vou
chers.

22
 offers promos and discounts to motorist up to 80% off on fuel purchases. 2020 closed with over
100,000 members and more than 216,000 transactions worth 62 million in sales.

1.5 Current Market Share

According to the Department of Energy’s Oil Supply and Demand Report for 2021, Petron
continues to be the market leader at 19.17%, followed by Shell at 14.96%. On the other hand, Phoenix
captures 7.45% of the market, making it the third major oil player in the country. The rest of the ~50%
comprises smaller independent players such as Seaoil, Unioil, PTT, generic or white stations, and end-
users or large fuel distributors.

Figure 6– Oil Industry Market Share (2021)

Based on a six-year analysis of the industry market share, it can be observed that there was a decline
among major oil players owing to the growing share of other players. For example, Petron experienced a
year-on-year decrease of 1.87%, Shell by 1.34%, while 0.27% for Chevron. In contrast, Phoenix is
increasing by 0.44%. The same is true for independent players, growing by 3.03%. The trend can be
observed since Republic Act of 8479 or Downstream Oil Industry Deregulation Act of 1998 was
implemented.

23
 Figure 7–Market Share of Oil Players (2016 – 2021)

1.6 Current Revenue and Profit

Phoenix’s revenue for 2021 significantly increased by 68.90% or Php 132 billion in comparison to
its 2020 performance12. This is mainly brought by the increase in fuel prices since the Dubai crude rose
64.4%. The company’s sales volume in 2021 registered to 4,655 million liters which is an improvement
of 9.7% versus 2020 at 4,245 million liters. This is mainly driven by automotive diesel oil (ADO),
contributing to 59.7% to total volume.

12
Phoenix 2021 Annual Report https://drive.google.com/file/d/1oVIQeDXrn3tK-FrVMjI_CEY9BDl2CLaq/view

24
 Figure 8– Volume Distribution (2021)

Likewise, the cost of sales is at Php 124.41 billion, translating into an increase of 74.6%. This is
mainly brought by the volume growth and increase in fuel prices. On the other hand, the selling and
administrative expense amounted to Php 5.53 billion, which is lower by 4.5% in comparison to the 2020
level. This is brought by the company’s efforts in improving its OPEX to Php 1.19 per liter, from Php 1.37
per liter in 2021. This resulted in a gross profit of Php 2.32 billion, or an increase by 87% versus 2020.
However, the gross margin was eroded as the company recorded a surge of finance cost by 82% or Php
3.50 billion. This resulted in a net loss of Php 462.57 million, a reversal of the Php 63 million recorded net
income in the previous year. According to Mr. Fadullon, the loss was then cushioned by its strong LPG
business both in the domestic and overseas market.

P&A Grant Thornton, the company’s external auditor, states that 2021 loss in net income is an
indicator that requires the company to evaluate its investment in joint ventures, property, plant, and
equipment, investment properties, and others13.

Phoenix then continues to pursue deleveraging strategy to manage its debts and operational
efficiency to have a strong balance sheet.

13
Bilyonaryo.Com https://www.bilyonaryo.com/2022/05/16/dennis-uy-spews-more-red-ink-phoenix-petroleum-flames-out-
with-p466m-loss-in-2021-auditor-pa-flags-possible-impairment/

25
 2. RESEARCH DESIGN AND METHODOLOGY

This paper used descriptive and exploratory research to attain the study’s objectives in assessing
the viability and sustainability strategies of Phoenix Petroleum Inc. Quantitative research was also
used for the rates and weights per factor, financial analysis and computations were done through a
thorough, factual, and careful analysis using historical and publicly available data and financial
performance.

2.1 Primary Data

Internal data of Phoenix were lifted from various sources including the company’s website
(www.phoenixfuels.ph), SEC 17-A, Audited Financial Statements and independent auditor’s report
acquired from P&A Grant Thornton, Annual reports, Investor’s presentations (e.g., minutes of the
board meeting, final prospectus of various years), various business articles and press releases.

Confidential information from the company were given from the different division heads and
Human Resources Department of the company.

2.2 Secondary Data

Secondary data came from Phoenix Petroleum's main competitors: Petron Corporation and
Pilipinas Shell Petroleum Corporation. The data gathered were from the published annual reports,
audited financial statements, and corporate websites. The information was also extracted from
various business industry articles and analyses, newsletters, and press releases, including government
websites such as the Department of Energy (DOE).

The strategic applications in this paper (e.g., strategy formulations, analysis, implementation,
evaluation, monitoring, and control) were anchored on the Strategic Management: A Competitive
Advantage Approach, Concepts and Cases, 16th edition by Fred R. David and Forest R. David.

26
 2.3 Methodology

Framework Tools Activities Outputs

Ten Essential Mission Statement Vision and Mission
Components of a Evaluation/Formulation Statements
Mission statement
External Factor General Industry Opportunities and
Evaluation (EFE) Matrix Environment Analysis Threats
Porter’s Five Forces Competitive Profile Industry Analysis
Model Matrix (CPM)
David’s Functional Internal Factor Company Analysis Strengths and
Analysis Evaluation (IFE) Matrix Weaknesses
David’s Matching Tools -SWOT Matrix Strategy Formulation Objectives and
-SPACE Matrix Strategies
-BCG Matrix
-IE Matrix
-Grand Strategy Matrix
David’s Matching Tools Quantitative Strategic Prioritization of Recommended
Planning Matrix Strategies Strategies
(QSPM)
Implementing Market Segmentation Action 500 Proforma
Strategies and Product Positioning Financial Statements
Norton and Kaplan’s Strategy Evaluation and Performance
Balanced Scorecard Control Measures Strategy
Map

27
 2.4 Scope and Limitation of the Study

This study is conducted to determine the financial capacity of Phoenix in relation to its proposed
strategy. It focuses on the domestic operations and distribution of petroleum products in the
Philippine Petroleum industry, financial analysis of Phoenix vis-a-vis its competitors, Petron
Corporation and Pilipinas Shell Corporation which determines the strengths and weaknesses of the
company and its competitiveness amongst market leaders. Moreover, the discussion will only be
based on 2018 to 2021 data of the different organizations (i.e., annual reports and investor disclosures
of publicly listed oil firms, Department of Energy).

3. COMPANY’S VISION AND MISSION

3.1 Current Vision Statement

“To be an indispensable partner in the journey of everyone whose life we touch14”

3.2 Current Mission Statement

Lifted from the Phoenix Petroleum Philippines Inc. website (n.d.), the following are its mission:

• We deliver the best value in products and services to our business partners
• We conduct our business with respect, integrity, and excellence
• We provide maximum returns to our shareholders and investors
• We create opportunities for learning, growth, and recognition for the Phoenix Family
• We build programs to nurture the environment and welfare of the communities we serve

3.3 Core Values

Phoenix Petroleum Philippines Inc. also adheres to the following values15:

• Integrity - We adhere to the highest standards of ethics and conduct. Our reputation defines who
we are.
• Excellence - We aim to be the best in everything we do.

14
Phoenix’s Vision, Mission, and Values: https://www.phoenixfuels.ph/vision-mission-and-values/
15
Phoenix’s Vision, Mission, and Values: https://www.phoenixfuels.ph/vision-mission-and-values/

28
 • Service - We value all our stakeholders and provide unrivaled customer experience.
• Innovation - We welcome opportunities to create at all times new and better products, services
and ideas.
• Teamwork - We value relationships. We achieve goals through collaborative efforts.
• Stewardship - We nurture our resources responsibly.

3.4 Evaluation of Current Vision and Mission

Current Vision Statement

Phoenix’s current vision statement generally fails to meet the four parameters. It is written to
appeal and to project that it is a reliable partner. However, its ambiguity may pose confusion to its
readers, details of the evaluation are as follow:

Vision Statement Evaluation

No. Parameters Yes / No Part of the Statement Brief Explanation

1 Does it clearly answer No "To be an Too broad, as it does not

the question: What do indispensable partner" specify what industry nor
we want to become? points out which aspect of life
it wants to create an impact.

2 Is it concise enough yet
inspirational?
No "of everyone whose The choice of words can be
life we touch" inspirational, but it lacks a
deeper purpose and provides
no direction since it is not
grounded on any term related
to the industry.

3 Is it aspirational?
It is aspiring something;
No “indispensable partner
However, it does not show a
in the journey"
clearly defined target.

29
 4 Does it give clear No None The indication of when the
indication as to when it vision will be attained is
should be attained? absent in the statement.

Current Mission Statement

Based on David’s checklist of the mission statement, Phoenix ranked 6/10. The current vision
statement does not mention specific customers or target market and products & services offered to the
market.

No. Parameters Yes / No Part of the Statement Brief Explanation

1 Customers No None The mission statement did not

clearly define who the
customers are. The closest
thing is the term "business
partner" which can also refer
to the company's strategic
partners.

2 Products / Services
Yes “We deliver the best The mission statement states
value in products and products and services;
services to our however, it does not
business partners” specifically indicate the
products and services that the
company offers.

Similar to the vision, the

3 Markets No
mission statement does not
clearly state the category of

30
 the company nor the markets
it caters to

4 Technology No None It did not identify how these

products and services were
produced.

5 Concern for survival / Yes "We provide The firm commits itself in
growth / profitability maximum returns to growing financially to provide
our shareholders and good returns to its
investors" shareholders and investors.

6 Self-concept No None Phoenix failed to highlight its

competitive advantage

7 Philosophy Yes "We conduct our The company cultivates a

business with respect, culture of respect, integrity,
integrity, and and excellence that guide the
excellence" organization in all its business
activities.

"We conduct our The statement resonates the

8 Concern for public Yes
business with respect, company’s concern for its
image
integrity, and image towards the community
excellence" as being socially responsible
and environmentally
"build programs to
conscious. It also upholds
nurture the
itself as a company of respect,
environment and
integrity, and excellence.
welfare"

31
9 Concern for employees
Yes "We create There was a clear indication
opportunities for that Phoenix shows concern
learning, growth, and for its employees.
recognition for the
Phoenix Family"

10 Nation building Yes "We build programs to It can still be further improved
nurture the to give the reader a more
environment and concrete picture of Phoenix's
welfare of the contribution to the country.
communities we
serve"

3.5 Recommended Revised Vision Statement

To maintain its market position as the third-largest oil company (1) in the next three years (4),
committed to delivering operational excellence, innovative and world-class products, and services (2),
upholding to be an indispensable partner in the Filipino community (3).

The proposed vision statement now introduces Phoenix as a homegrown oil company that seeks
to strengthen its spot of being a major oil player in the country. It upholds to be of service to the
Filipino community as it leverages on delivering world-class service and products, marked with
excellence and innovation.

32
No. Parameters Yes / No Part of the Statement
1 Does it clearly answer Yes “To maintain its
the question: What do market position as the
we want to become? third-largest oil
company”
2 Is it concise enough yet Yes "committed to
inspirational? delivering operational
excellence, innovative
and world-class
products and services”
3 Is it aspirational? Yes "upholding to be an
indispensable partner
in the Filipino
community"
4 Does it give clear Yes "in the next three
indication as to when it years"
should be attained?
Brief Explanation
It points out that the company
is in the petroleum industry
and points out its objective of
cementing its spot as a major
player
Words are derived based on
the company's core values.
Operational excellence-supply
stability and resilience
Innovative and world-class
products and services -at par
with global standards
Committed to the Filipino
community (i.e., internal and
external stakeholders)
Despite external factors that
threatened the company, it
aspires to become the
country’s partner
As Phoenix celebrates its 20th
years in the Philippines this
2022, it has remained
steadfast and resilient,
33
 hurdling many social-
economic changes. It now
aims to continue its journey in
serving the Filipinos through
quality products and excellent
service.

3.6 Recommended Revised Mission Statement

“Phoenix Petroleum upholds to fuel the Filipino people (1,7) in the petroleum industry (1,3) by ensuring
a reliable supply of world-class petroleum products (2,4,6,7). It adheres to delivering operational
excellence, product innovation, (4,6,7) and outstanding customer service to ensure every customer
makes their trip come alive. All are driven by sustainable growth in profitability (5) and community
development programs to foster the nation and future generations (8, 10). We then leverage on our
people (6) and continuously empower them, contributing to Filipino ingenuity and talent (9, 10). “

The recommended mission statement ranks 10/10 based on David’s checklist. Aside from
delivering world-class products and excellent customer service, it also recognizes the role of a robust
supply and value chain that contributes to the success of the company. It also takes a stance of its role
in the Filipino community as it advocates for nation building.

34
No. Parameters Yes / No Part of the Statement Brief Explanation

1 Customers Yes “the Filipino people” These include employees,

industries, and the Filipino
community.

2 Products / Services Yes “world-class This statement cements

petroleum products “ Phoenix’s commitment to
delivering exceptional
products and services
compliantly and at par with
government and globally
mandated standards.

Pertains to the downstream

3 Markets Yes “in the petroleum
petroleum industry given that
industry”
the country does not have
crude oil reserves.
“reliable supply of
4 Technology Yes
world-class petroleum Statements reinforce
products” Phoenix's competitive
advantage in the production
and quality of petroleum
“operational
products, operations, and the
excellence, product
entire value chain.
innovation”

5 Concern for survival / Yes “All are driven by Denote viability against the
growth / profitability sustainable growth in ever-changing petroleum
profitability” industry.

35
 “We then leverage on
6 Self-concept Yes The company recognizes the
our people and
competitive advantages of its
continuously
talented human capital,
empower them”
supply stability, and excellent
value change as the main
“reliable supply of …
drivers of its legacy.
products”

“operational
excellence”

7 Philosophy Yes Phoenix acknowledges its role

and impact on the country and
“upholds to fuel the will continuously invest in
Filipino people” growing its operations and
reliance to cater to the
country's needs.

This statement ensures that

8 Concern for public Yes “community
the company’s actions and
image development
decisions are geared towards
programs to foster the
the betterment and
nation and future
development of Philippine
generations”
society.

9 Concern for employees Yes “We … people and The company believes in the
continuously power and competency of the
empower them” Filipino workforce that drives
the company's success.

“to foster the nation

10 Nation building Yes The company also
and future
acknowledges the need to be
generations”

36
 socially responsible and give
“empower them, back to Filipino society.
contributing to Filipino
ingenuity and talent”

4. MACRO ENVIRONMENTAL ANALYSIS

4.1 Political Forces

4.1.1 ‘Build Build Build’ Program Continues and Further Pushes into Completion
Amid Pandemic

Infrastructure is a tool to reduce poverty and drive economic growth. The current framework of
infrastructure development in the Philippines, like other developing countries, is profit-driven hence,
focused on economic infrastructure. On the other hand, growth in high-income countries such as the
USA, Singapore, Japan, South Korea, and Taiwan includes substantial public investment in social
infrastructure such as health and education (e.g., public hospitals and public schools). The country's
transport network has struggled for centuries to keep pace with rising levels of urbanization. Given
the country's archipelagic nature, the geographic feature of the Philippines has historically hindered
the creation of an efficient transport network. Furthermore, this also poses as an obstacle to the
increased productivity and growth posed by the country's numerous islands and congested road
system. In addition, economic activities are centralized in key cities such as Metro Manila, Cebu, and
Davao, which have caused overpopulation, and port and traffic congestion. The financial cost of the
lack of transportation in Metro Manila alone has risen to Php 3.5M per day in 2018 and may increase
to Php 5.4 billion a day by 2035 if interventions are not implemented16.

16Transport Sector Assessment, Strategy, and Road Map https://www.adb.org/sites/default/files/institutional-

document/33700/files/philippines-transport-assessment.pdf

37
 Initially launched in 2017, the 'Build, Build, Build' (BBB) program is the centerpiece infrastructure
program of the Duterte Administration that aims to spur and sustain economic growth to usher in the
country's "Golden Age of Infrastructure .17" It seeks to address the considerable infrastructure backlog
in the country by accelerating public infrastructure and government spending from an average of 2.9%
of GDP during the Aquino government to around 7% at the end of Duterte's term. The program
focuses on projects that integrate inter-island connectivity and simulate development, including
major road upgrades, railways, and port systems. The "Build, Build, Build" (BBB) program is aligned
with the National spatial strategy, which seeks to address wide income disparities across the country
by interconnecting regions to markets, therefore, attracting more investments and spurring improved
economic growth in a country that is poised to become one of Asia's fastest-growing economies. The
global institutions such as the World Bank and the Asian development bank have been pushing for an
infrastructure offensive, especially in developing countries. As early as the 1980s, the World Bank
proposed the engagement of the private firms to fund and undertake these projects instead of the
Keynesian idea of giving the state a more significant role in economic development, especially in terms
of extensive public spending. However, it was only until the current administration's Build, Build, Build
program which allowed the prioritization of infrastructure. This ongoing long-term project has
generated 6.5 million jobs since it began in 2016.

17
Build-Build-Build https://www.manilatimes.net/2021/07/26/supplements/build-build-build-projects-usher-in-golden-age-of-
infrastructure/1808345

38
 The COVID-19 lockdown and further containment measures drastically slowed down economic
activity in the Philippines, resulting in a 9.6% contraction in the country's GDP last 202018. Apart from
the government's social amelioration program to mitigate the socio-economic fallout caused by the
pandemic, the country's top economic managers pinned high hopes on the government's BBB
program as an essential strategy to help pump-prime the economy towards recovery due to its job
generation and multiplier effects. From July 2016 to December 2020, the government's Department
of Public Works and Highways completed the construction, rehabilitation, and improvement of 26,494
kilometers of roads, 5,555 bridges, and 10,376 flood-mitigation structures19, taking advantage of the
mobility restrictions imposed during the lockdown to hasten the speed of these pending projects.
NEDA estimated that Php 100 billion in infrastructure spending generates indirect and direct
employment from 140,000 to 162,000 jobs. In late 2019, the government revised its priority list from
the 75 infrastructure flagship projects (IFPs) to 100 IFPs, with an overall increased cost of Php 4.4
trillion. The additional projects are focused on transport and mobility, information communications
technology (ICT), power and energy, urban development and redevelopment, including disaster risk
mitigation and water resources. In addition, a portion of the budget intended for the BBB was
reallocated to build evacuation centers and health and quarantine facilities that house COVID-19
patients in isolation or in need of medical treatment.

Despite the reallocation of monetary resources and upcoming National Elections in May, the
current administration pushes for the completion of its remaining projects before the election ban
starting March 25 to May 8, 2022. The election ban shall be implemented within 45 days to insulate
government procurement from partisan political activities, usually in new projects designed to
influence the public during the upcoming May 9, 2022, elections.

18 Philippine Economy https://www.reuters.com/markets/currencies/philippine-gdp-grows-77-yy-q4-beats-forecast-2022-01-

27/#:~:text=Robust%20consumer%20spending%20ahead%20of,by%20prolonged%20COVID%2D19%20lockdowns.
19
https://www.manilatimes.net/2021/06/19/business/top-business/govt-infra-teams-vows-to-fast-track-projects/1803809

39
 The delivery and completion of the BBB projects within the target timeframe under the current
administration will not only steer and drive the country's economic recovery amid the pandemic and
in the post-pandemic era. Such projects will enhance, improve, and further develop the transportation
and mobility in the country. The BBB will also facilitate balanced development and, to a greater extent,
diffuse economic activities and development from the urban centers of the government toward rural
areas or the countryside. In addition, the transport-related infrastructure projects will ease traffic and
the road congestion in the National Capital Region and other urban areas like Metro Davao and Metro
Cebu. Still, it will also facilitate an easier transport of people and goods from one place to another.
Hence, the completion of all these infrastructure projects, in the long run, would not only, to a greater
extent, sustain, accelerate, and achieve the desired economic growth of the country but, most
importantly, will improve the Philippines' global competitiveness.

Phoenix's entry into this business segment comes when macroeconomic conditions in the
Philippines are seen as favorable for construction and infrastructure projects. In addition, it is
expected that demand for asphalt products and road building and paving materials will grow from
new private developments and new public initiatives. The inclusion of asphalt as part of Phoenix's
portfolio complements and completes its range of petroleum-related product offerings.

4.1.2 Rising International and Domestic Geopolitical Events

Energy plays a unique role in global politics, guaranteeing military strength, transportation of
people and goods, and social well-being. The worldwide interplay of supply and demand sets the price
of oil and gas. Changes in oil price and availability will continue to pose an effect on the economic
growth potential, international security, and political stability of oil importing countries. To a
significant extent, many contemporary regional energy-driven contentions among producing, transit,
and market states determine the world's energy security framework. While many industrialized
countries are working aggressively to develop non-fossil fuel-based and alternative energy sources,
their emerging counterparts continuously rely on relatively cheaper hydrocarbon-based energy
sources to increase their productive capacities for the foreseeable future.

40
 The geopolitics of energy has developed into a considerable study, analysis, and contention area.
The contention arises from the inequality of crude oil reserves due to geography and uneven
distribution among nations. Some oil-producing countries, such as OPEC or Russia, enjoy a surplus
that offers the possibility of exporting hydrocarbon resources to oil-consuming ones.

Figure 9–Geopolitical Tension Effect on Oil Prices

41
 4.1.3 Proliferation of Illegal Fuel Trade

Oil Smuggling, the Philippines has adulterated fuel products in its supply chain, costing the country
as much as $750 million a year in lost tax revenue. Twenty-one years after the Downstream Oil
Industry Deregulation Act of 1998 was enacted into law, the country was flooded with new players in
the petroleum industry. The law promotes the liberalization of the downstream oil industry and free
competition. The law allows the petroleum industry to level the market's playing field and encourages
fair trade and competition which used to be dominated by the three major oil players, the "Big 3"—
Petron, Shell, and Caltex. Although fuel pump prices did not decrease upon enactment of the law, it
entails procedures for maintaining transparency and accountability. The DOE continues to monitor,
assess, and evaluate the international and local oil market, ensuring all players in the industry follow
suit. Unfortunately, the law's enactment also opened the doors for illicit trade and rampant oil
smuggling for the new entrants.

The Philippines entirely imports oil, whether crude oil or refined petroleum products. While the
major players (i.e., Petron, Shell, and Phoenix) continues to dominate with a combined market share
of 41.53%, the DOE (2021)20 notes that suggested retail prices (SRP) of the Big 3's stations reflect
international oil market movements, including the local tax component. However, smaller oil
companies have enjoyed the advantage of oil smuggling and illicit trade. National fuel tax and subsidy
programs implemented in the Philippines create significant arbitrage opportunities exploited illegally,
robbing the government of much-needed fiscal revenue. The Department of Finance estimates that
Php 26.90 billion is lost annually due to oil smuggling. Chanco (2019) opined that upon implementing
the TRAIN Law, tax revenue losses have increased to about 30% as small players took advantage of
this increased tax as additional profit gains. In addition, fuel fraud perpetuates harmful auto
emissions, disrupts supply chains, and causes lost confidence in the national government.

20
FY 2021 Market Share (Petroleum Products)
https://www.foi.gov.ph/requests/aglzfmVmb2ktcGhyHQsSB0NvbnRlbnQiEERPRS00MTY3NTYxMzA3MjgM

42
 In efforts to curb oil smuggling in the Philippines, the TRAIN Law mandates implementing fuel
markings (Lopez, 2019). Governments often use this system that blends an invisible marker into fuel
at low concentrations, usually measured in parts per billion, to trace energy as it moves through the
supply chain. Despite the marker's low concentration, its presence or absence in the fuel may be
detected at retail outlets with user-friendly but highly advanced analyzers. While fuel marking systems
have been in existence since 1950, recent developments in marker technology include advances in
analytical capacities and the technical foundation for highly accurate and effective fuel-marking
programs.

The oil companies face intense competition in the sale of petroleum products and other related
products in the markets it operates. Because of the commodity nature of petroleum products,
competition in the Philippine and international markets is based primarily on aggressive pricing and
discounting to capture market share. In addition, oil smuggling and illegal trade of petroleum products
result in decreased sales volume and prices for legitimate oil players in the Philippines.

4.2 Economical Forces

4.2.1 Philippine’s Positive GDP Outlook

The Gross domestic product is a standard measure of the income earned from the production of
local goods and services in a country within a specified time frame. It is one of the broad indicators
that capture economic activity.

The Philippine economy is in a dire economic situation due to the COVID-19 outbreak. In the first
quarter of 2020, the country's GDP contracted by 0.2%, resulting in the worst economic performance
since the 1998 financial meltdown. In addition, significant economic growth drivers both on the supply
and demand side deteriorated due to the mobility restrictions and lockdowns imposed to curb the
spread of the virus. Furthermore, due to industry's streamlining processes and workforce, the
unemployment rate in April 2020 soared to a record-breaking 17.7%, leaving approximately 7.3
million Filipinos jobless.

43
 Figure 10– GDP Growth Rate (2016 to 2026)

According to the economic study published by the Asian Development Bank (ADB), the Philippines
GDP is expected to grow by 6.0% in 202221, up from the previous forecast of 5.5%. Forecasts are within
the average for the Southeast Asian region. On the other hand, the Philippine government aims for
7% to 9% GDP growth this 2022, as elections occur.

The Philippines expanded to 5.6% in 2021 after registering 7.7% growth for the fourth quarter,
which was brought by the loosened pandemic-related restrictions, facilitating more business
activities. As a result, the 2021 performance was slightly up than the adjusted target range of 5% to
5.5%. It also reversed a 9.6% contraction in 2020 when the country imposed stricter lockdown
measures to contain the Covid-19 virus.

21
https://www.bworldonline.com/infographics/2022/04/07/440840/adb-keeps-2022-philippine-gdp-growth-forecast-at-6-
expects-6-3-in-2023/#:~:text=US%20Commodity%20futures-
,ADB%20keeps%202022%20Philippine%20GDP%20growth%20forecast,%25%2C%20expects%206.3%25%20in%202023&text=T
HE%20Asian%20Development%20Bank%20(ADB,from%20the%20Russia%2DUkraine%20war.

44
 Figure 11–GDP Growth

The main contributors were the industry and services sectors, which grew by 8.2% and 5.3%. The
growth was driven by increased household consumption, government spending, and public
construction on the expenditure side.

The pandemic erupted when the global oil market was weak, and prices were under pressure.
Though a commodity, the petroleum industry was heavily impacted by the effect of the COVID-19
pandemic. Suppliers abroad are experiencing the same impact on their respective countries, with
some refineries in the region permanently shutting down. The drastic drop in international and
domestic flights left aviation fuel in a depressed state, a high-margin product on which most
petroleum companies depend financially. In addition, the high mobility restrictions brought about by
the varying quarantine measures led to drastic drops in retail gasoline as fewer vehicles were on the
road, companies shifted their employees to a work-from-home arrangement, and logistic limitations
were enforced. Industrial fuel is also experiencing a downward trend as most manufacturing facilities
and industries are forced to temporarily suspend operations or permanently close and withdraw from
the country due to the sustained detrimental effects of the pandemic. This is very evident in Phoenix's
financial statements over the past year.

Despite an economic contraction in 2020, the Philippine economy gradually improved in 2021 and
is expected to rebound in 2022, driven by the return to more robust economic activities as long as the
government enforces strict minimum health and safety standards to arrest the transmission of the
COVID-19 variants. The country's growth hinges on its ability to manage the COVID-19 pandemic
effectively. Consumer and business confidence spiraled down after several reversions of the lockdown

45
restrictions, foreshadowing a problematic recovery ahead. Nonetheless, the pandemic management
is improving because of the rollout of a national vaccination program, the decline in cases, and the
gradual reopening of the industries, including the consumer-facing sectors. The positive outlook stems
from increased government spending on infrastructure as it expedites its projects and ramps up
spending, especially with pre-election activities, which will boost towards the end of 2022.

Phoenix benefits significantly from the reopening of the Philippine economy since fuel demand
increases in parallel with the rise in economic activity. This poses an opportunity for the company to
increase its revenues upon fulfillment of the demand.

4.2.2 Depreciation of the Philippine Peso

The relationship of oil prices and exchange rates of emerging economies, such as the Philippines,
is relevant. Such economies have been increasingly significant in producing the country's gross
domestic product (GDP) as the main component in most supply chains. However, since the economic
growth and energy prices are proportional to each other, the progress of the emerging countries is
susceptible to fluctuations in oil prices. In addition, since the financial systems of emerging countries
are not sufficiently deep, these economies are exposed to changes in international capital flow. In
turn, capital flow movements are related to oil prices through the changing resource allocations and
judgments of the Organization of Petroleum Exporting Countries (OPEC).

Since the first quarter of 2020, the rapid rise in domestic transmission of COVID-19 has disrupted
crucial economic activities and value chains, causing a massive reduction in demand nationwide.
Moreover, the spread of COVID-19 to the country's rural areas is expected to have a much more
significant impact on the Philippine economy. The uncertainty about handling the pandemic level of
aggregate demand hurt investor confidence, as evidenced by the downward trend in the stock
market, bringing more volatility in the exchange rate and further depressing oil prices. The
uncertainties in the Philippine business climate triggered a swift outflow of capital, causing the rapid
depreciation of the exchange rates amongst ASEAN countries. The Philippine Peso weakened

46
 substantially during the onset of the COVID-19 pandemic22. A significant contraction of imports
lessened the demand for US Dollars, contributing to a slight appreciation of the Philippine Peso during
the nationwide lockdown mid-year 2020. This appreciation peaked until May 2021, then slowly
weakened towards 2H 2021. The Peso weakened in end-2021 close to 51 or by P2.79 or 6.2%, vs.
48.02 at the end of 202023. The weakening was brought by the recovery of the US Dollars and the
increased imports by 29.7% to $95.31 from $73.48 billion in 2020, outweighing the increase in exports
by 16.1% to $62.1 billion from $53.48 billion. The trend was also observed until February 2022 and is
perceived to further weaken as high as P52 due to the Russia-Ukraine conflict, which created a surge
in oil prices, creating a domino effect in other consumer products.

Figure 12– Philippine Peso Exchange Rate vs. US Dollar (2019 to 2022)

The Philippines is highly dependent on OPEC for its oil supply, whether as a crude oil resource or
finished product. Thus, movements in foreign exchange rates and energy prices influence the
Company's importation costs and profitability. Most of Phoenix's transactions are carried out in
Philippine Peso, its functional currency, while it’s cost for imported products and other supplier-
related expenses are denominated in US Dollars. Changes in a currency, such as the conversion of US
Dollars to Philippine Pesos, affect the company's financial condition. When the Peso depreciates,
higher foreign currency denominated costs effectively affect its financial condition. There are no
guarantees that the company can increase its Peso-denominated product prices to offset increases in

22 https://www.manilatimes.net/2021/09/21/news/peso-expected-to-decline-vs-us-dollar/1815553
23 https://tradingeconomics.com/philippines/currency

47
 its costs of goods sold or other costs resulting from the depreciation of the Philippine currency.
Conversely, the Peso value will not decline or fluctuate against the US Dollar. Any significant
devaluation of the Peso could harm the company's profitability, results of operations, and overall
financial conditions.

From January 2020 to March 2022, the Peso's value against the US Dollar fluctuated from an
average of P49.43 to a high of P51.28. While the Company seeks to limit its exposure to foreign-
denominated liabilities by engaging in hedging instruments such as options and currency forwards, its
disclosure of the exchange rate of these two currencies will always be present. To mitigate these risks,
Phoenix limits its foreign currency-denominated liabilities by passing on such additional costs by way
of adjustments to its selling prices.

4.2.3 Increasing Inflation and Stable Interest Rate

4.3 Socio-Cultural Forces

At the early onset of the pandemic, the inflation rate was relatively low, with the consumer price
index (CPI) averaging 2.4% in 2020. The harsh economic conditions such as increased unemployment
rate, anemic consumer confidence, and reduced remittances have contributed to lower price
pressures. Although food and non-alcoholic beverages inflation spiked upon the imposition of the
lockdown in NCR in March, it has since slowed down due to the gradual reopening of the economy
two months after. 2021 ended with its CPI below 4%, driven by slower food inflation.

While January and February 2022 inflation remained stable at an average of 3.0%, the rate leaped
to 4% in March, driven by the soaring gas prices brought by the ongoing conflict in Eastern Europe24.
In addition, the more expensive oil prices rippled through other major commodities such as wheat.
As a result, the Bangko Sentral ng Pilipinas has raised its forecasted inflation for full year 2022 from
3.4% to 3.7% (Rivas, 2022).

24
https://business.inquirer.net/345308/inflation-grows-4-in-march

48
 Table 3–Inflation Rate (2019 – 2022)

Due to the increasing inflation rate25, the Bangko Sentral ng Pilipinas has kept the interest rate at
a record low of 2%26. The board also cited that it would continue to develop its plans for the gradual
normalization of policy support.

Figure 13-Interest Rate (2018 – 2022)

The business is capital intensive and requires Phoenix's ability to obtain external financing in the
future. The cost of such funding is subject to various uncertainties, including the conditions of the
financial markets, potential changes in monetary policies concerning bank interest rates and lending
policy, and the performance of the company's operations.

25
https://psa.gov.ph/content/summary-inflation-report-consumer-price-index-bottom-30-income-households-2012100-april-
2022
26
https://business.inquirer.net/344156/bsp-key-rate-kept-at-record-low-2-despite-high-
prices#:~:text=The%20Monetary%20Board%20(MB)%20kept,range%20despite%20rising%20price%20pressures.

49
 4.3.1 Deregulation of the Oil Industry

The Republic Act No. 8479, also called as the Oil Deregulation Law, provides the necessary
regulatory framework for the oil industry in the Philippines.

Under the Oil Deregulation Law, any person may import or purchase any quantity of crude oil and
petroleum products from foreign and domestic sources. In addition, an individual can lease or own
and operate refineries and other downstream oil facilities. They can also market crude oil and
petroleum products either in a generic name or in its trade name or use the same for its requirement.
Furthermore, the same law declared as policy of the state the liberalization and deregulation of the
downstream oil industry to ensure a genuinely competitive market under a regime of fair prices and
sufficient and continuous supply of environmentally clean and high-quality petroleum products. To
ensure the attainment of these objectives, the DOE, in accordance with relevant government
agencies, promulgated the Implementing Rules and Regulations of the Oil Deregulation Law in March
1998 through Department Circular No. 98-03-004 and the Supplementing Rules and Regulations of
the Oil Deregulation Law in June 1998 through DOE Circular No. 98-06-00927. The rules require any
individual or entity engaged in any activity in the downstream oil industry to comply accordingly.

The DOE is the lead government agency overseeing the oil sector. With the enactment of the Oil
Deregulation Law, the regulatory functions of the DOE were reduced. Deregulating the downstream
oil industry effectively removed the rate-setting function of the then Energy Regulatory Board, leaving
the price-setting to market forces. The DOE's current role is solely to monitor prices and violations
under the law, including prohibited acts such as cartelization and predatory pricing.

The enactment of the law in the Philippines encouraged free competition. Since then, the industry
has seen the entry of more than 200 market participants. Although significant oil players, namely
Petron, Shell, and Phoenix, continue to capture 41.58% market share of the total demand, other
independent players such as Unioil, Seaoil, Insular, Liquigas, South Pacific, TPC, Jetti, Pryce Gas, SL
Harbor, Isla LPG, Marubeni, FLC, PTT, Microdragon, TWA, Petrotrade, Eastern and WSC, as well as the
end-users who imported directly for their requirement, captured 53.11% of the market28.

27
https://www.doe.gov.ph/laws-and-issuances/department-circular-no-98-03-004?withshield=1
28
DOE-OIMB Report 2021 https://www.doe.gov.ph/downstream-oil/oil-supply-demand-2021

50
 Figure 14 – Oil Industry Market Share (2021)

Phoenix operates in a deregulated business environment, selling its products to individuals and
commercial and industrial customers. The enactment of the Downstream Oil Industry Deregulation
Law in 1998 effectively removed the rate-setting function of the Philippine government through the
former Energy Regulatory Board, leaving price setting to market forces. It also opened the oil industry
to free competition, which allowed Phoenix to enter and become an oil player.

4.3.2 Automotive Industry Growth

The Philippine automotive industry is relatively smaller than those of other Association of
Southeast Asian Nations (ASEAN) countries, despite the population of 110 million and increasing GDP
averaging 6.60% in 2015 – 2019. Foreign carmakers then run General Assembly operations, further
attracted by the comprehensive automotive resurgence strategy program. Japanese carmakers such
as Toyota, Mitsubishi, Honda, and Nissan heavily invest in the country for car manufacturing and
assembly. The Philippine government intends to revamp the sector into a regional manufacturing hub
by 2027. This is a challenge since the country has to compete with automotive manufacturing hubs

51
 like Indonesia and Thailand (Economist Intelligence Unit, 2021). In the previous years, the industry
faced adversities with implementing the TRAIN Law and soaring oil prices.

According to Fitch Solutions, the Philippine automotive industry of the Philippines is divided into
two segments – vehicles and motorbikes. The vehicle segment is composed of passenger vehicles,
electric vehicles, and commercial vehicles, as reflected in figure 15.

Passenger vehicles (PV) are defined as any four-wheeled motor vehicle designed to transport
persons and not primarily transport goods29. In contrast, commercial vehicles (CV) refer to wheeled
motor vehicles designed to transport persons and goods/cargoes. Examples of which are light
commercial vehicles, buses, trucks, and particular purposes vehicles such as ambulance and fire
trucks. Motorbikes are any two or three-wheeled vehicle fitted with an auxiliary motor, with or
without sidecars.

Figure 15–Philippine Auto Industry Segment

29
https://boi.gov.ph/wp-content/uploads/2018/02/Automotive-July-3-2017.pdf

52
 In the Philippines, an estimated 42 passenger cars per 1,000 people is observed in 2021. Such a
figure is considered low compared with neighboring ASEAN countries such as Thailand, Indonesia, and
Malaysia. Their estimated passenger car per 1,000 people is 400 cars. The Economist Intelligence Unit
(2021) stated that the disposable income per head is expected to rise by about to rise by $500 from
2022 to 2026; however, the said increment is not enough to facilitate mass car ownership. As a result,
the car penetration rate will barely move in five years, with 45 passenger cars per 1,000 people. The
rapid population growth of an average of 1.3% per year will outweigh the rise in car sales.

Figure 16–Passenger Vehicle Sales (2017 – 2026)

CV sales comprise more than two-thirds of the total sales due to the growing popularity of sports
utility vehicles (SUVs) and pick-up trucks in the light CV segment. However, due to the pandemic, the
market declined nearly half in 2020, and recovery was modest in 2021. The Economist Intelligence
Unit (2021) then asses that the light CV segment will grow at an average of 8% in 2022 – 2026, with
the sales rebounding to pre-pandemic levels. Likewise, the medium and heavy CV segment, such as
trucks, is considered minor but robust, as it bounced back with a growth of 37.70% in 2021. It has a
forecasted CAGR of 8.30% covering 2022 – 2026.

53
 Figure 17– Commercial Vehicle Sales (2017 – 2026)

The Philippines is the second-largest producer in ASEAN after Thailand when it comes to
motorbikes. The production in the country for the first three quarters of 2021 is at 639,268, which is
55% higher than in 2020. This segment is forecasted to further increase as the number of motorcycle
e-hailing (e.g., Angkas, Grab, Joyride), food and goods delivery (e.g., Food Panda, Grab, Lalamove)
flourish.

Figure 18–Market Demand (2017 – 2026)

54
 The government promotes vehicles run on alternative energy to reduce the country's dependence
on imported oil products. Moreover, components used to produce electric cars and hybrid can be
imported tariff-free. In June 2021, the Senate passed the Electric Vehicles (EV) and Charging Stations
Act aimed to design a strategy for the adoption of EVs. It was approved by the House of
Representatives in September 2021 and is still for ratification30. The Board of Investment also started
a campaign to boost the funding and usage of EVs in the country. They are targeting to have 21% EVs
on the road by 2030.

The growth in the automotive industry signals a good forecast for Phoenix in terms of volume and
sales. Phoenix is currently the third oil player in the country and is continuously growing in market
share. The organization must continue to hold on to this momentum to capture all types of consumers
(i.e., private, public, two-wheeled vehicles, and four-wheeled vehicles). On the other hand, it must
also look into the developments in the alternative fuel demand.

4.3.3 Covid-19 Reshaping Consumer Behavior

The first cases of COVID-19 were identified and traced from a wet market in Wuhan, China. The
emergence of COVID-19 coincided with the Chinese Lunar New Year holiday, which is the most
celebrated time of the year in China. The holiday triggers a massive human migration as individuals
travel back to their hometowns, accounting for over 5 million trips in and out of China over 40 days.
As a result, the World Health Organization declared the outbreak as a public health global emergency
on January 30, 2020, and a pandemic on March 2020. Since then, the coronavirus has been one of the
most significant global human challenges to date. It has fundamentally changed the world, acting as
a catalyst that adjusts, shapes, and re-orders the globe across multiple dimensions.

The recession's severity was felt by economies worldwide, as jobs were lost, and businesses
closed or implemented structural cost reductions to survive. Global trade registered its worst
contraction in post-war history. In most developing economies like the Philippines, the pandemic
threatens to reverse the efforts made in poverty reduction and the shared prosperity enjoyed in

30
Philippine News Agency https://www.pna.gov.ph/articles/1154869

55
 recent years. A quarter of household breadwinners who worked in February, before the government
implemented lockdown measures, were no longer working in August 2020. Many employers could
retain most of their workforce but re-organized their structure and had to make adjustments in
working conditions to keep the Company afloat. Given the catastrophic global implications of COVID-
19, the pandemic was able to bring lasting change in consumer and behavioral patterns, accelerating
slow-moving macro trends and creating new ones.

The Philippines is a youthful yet vibrant consumer market with strong growth potential. The
shopping experience is essential to Filipino consumers, who visit malls to purchase and as a family and
social activity. Aspiring middle-class consumers see shopping in modern retail as a representation of
a lifestyle, but at the same time, they are not ostentatious spenders. The typical Filipino consumer
prioritizes his family life and is rather conformist and spontaneous. Based on 2020 data, 78.50% of
the Philippine population are social media users. Thus, social networks and platforms have been an
effective marketing tool in penetrating the Philippine market. Consumer expectations in online and
offline shopping experiences have dramatically influenced and inspired new behaviors for consumers.
The current environment remains dynamic and unexpected, redefining what it means to have a
superior customer experience, from speed and selection to safety and sanitation.

Social distancing protocols drove physical separation and heightened the need for connection
with loved ones. Social media has become more central to consumer interaction and exploration.
With millions of people across all age groups spending more time on social platforms, they are also
discovering more brands and making new purchasing decisions based on experiences in these social
channels. Since Filipinos are among the most socially conscious consumers globally31, 86% of them
are willing to pay for an additional for products and services that come from companies committed
to positive social and environmental impact.

As COVID-19 spread and government-imposed lockdowns took effect, retailers saw consumer
priorities shift. Local and regional lockdowns forced all but most essential retail locations to close.
Initially, consumers moved en masse to online / e-commerce platforms with a clearer demand for
home delivery and other fulfillment options for both essential and non-essential goods. As the

31
https://www.marketing-interactive.com/filipinos-among-socially-conscious-consumers-world

56
 mobility restrictions are put to ease, consumers begin to return to retail locations where they feel
safety is a priority. Most brands observed an uptick in apparent consumer confidence as long as the
retailer or mall continues to enforce strict health protocols. Consumers demanded a new delivery
experience that weaved both digital and physical experiences. Retailers must be agile enough to meet
consumers' online and in-person demands over an extended shopping season.

4.4 Technological Forces

4.4.1 Emergence of ride hailing, online delivery, e-commerce, and digital wallet

With the emergence of technology, convenience has been a buzzword. The ride-hailing sector in
the country rose due to the convenience it provides to a motorist in getting to their destination. Grab
Philippines operate a big chunk of the industry. Earlier this year, the Land Transportation Franchising
and Regulatory Board (LTFRB) approved the operations of other multiple transport network
companies (TNC) such as Joyride, TokTokgo, OWTO, and ePickMeUp (Dela Cruz, 2022). In 2021, the
industry revenue stood at $837 million and was estimated to hit $1 billion starting in 202332.

Figure 19– Ride-Hailing and Taxi Revenue (2017 to 2025)

32
Statista https://www.statista.com/forecasts/1274400/philippines-revenue-ride-hailing-
taxi#:~:text=Revenue%20of%20the%20ride%2Dhailing,to%20almost%201.1%20billion%20dollars.

57
 The pandemic indeed ushered in the emergence of online food and goods delivery. In 2021, the
food delivery sector registered gross revenue of Php 55 billion, 33% of which were ordered from the
restaurants, while the remainder were home-cooked. Subscriptions to food delivery aggregators such
as Food Panda and Grab increased by 61% (Masigan, 2021). Such home delivery services are being
embraced mainly by families with children. Research shows that people subscribe to food delivery
aggregators due to food cravings, lack of time to cook meals, and convenience.

Moreover, the rise of e-commerce was also observed at the height of the pandemic as brick-and-
mortar businesses were severely affected by lockdown measures. In 2020, the e-commerce industry
contributed 3.4% or $12 billion to the country's GDP (Hani, 2021). Reports ranked the Philippines with
the highest e-commerce adoption next to Indonesia. The government aims to further improve this
industry to $24 billion or 5.5% of the GDP by 2022. To support this objective, the government launched
its e-commerce roadmap in 2021.

Figure 20– Ecommerce Roadmap

Likewise, digital channels have seen a rapid increase of 18% uptake, with 45% of consumers saying
that this is their preferred channel of contacting and connecting with brands in the future. While many

58
consumers are looking forward to go back to their “normal" shopping habits, both consumers and
retailers continue to explore low- or no-contact delivery methods and new ways to minimize shopping
time in stores. Home delivery is preferred by 66% of consumers interest with just 18% opting for in-
store pick-up and 16% for curbside pick-up.

Figure 21–Digital Channels

Following the trend of digitizing, financial institutions needed to adapt to continue the
transactions/interactions they used to have with their consumers. A lot of Filipinos are now using
digital platforms to conduct transactions such due to the impact of the coronavirus pandemic on their
daily lives, especially limitations on physical movement imposed by the crisis. More importantly, nine
out of ten local users of electronic payment platforms now prefer making cashless transfers over the
traditional cash payments due to public health considerations. The Philippine central bank (i.e.,
Bangko Sentral ng Pilipinas, BSP) is at the forefront of digitizing financial transactions, working closely
with private entities and cybersecurity protection agencies to ensure that payments are made quickly
but secured. As a result of the pandemic, e-payments have spiked by over 5,000%. This is owed to the
increasingly ubiquitous use of QR codes to transfer money between people and merchants. The new
transaction method is here to stay, with an overwhelming 99% of Filipinos who states that they plan
on using digital payments even after community quarantine measures are eased. The use of
technology made digital payments, e-commerce, telemedicine, and online education possible. This

59
has helped the Philippine economy cope with social-distancing standards, business continuity, and
public service delivery

4.5 Legal Forces

4.5.1 Implementation of the TRAIN and CREATE Laws

Last December 19, 2017, the Tax Reform for Acceleration and Inclusion Law or Republic Act No.
10963 (the "TRAIN Law") was signed into law and took effect on January 1, 2018. The increase in excise
tax rates on petroleum under the TRAIN Law will significantly increase the company's excise taxes and
value-added tax payable on its importation of petroleum products. Accordingly, for the period
covering 2018 to 2020, there shall be a scheduled increase in the excise tax on fuel.

Figure 22–TRAIN Law on Petroleum Products

While the TRAIN's first package of the Comprehensive Tax Reform Program ("CTRP") of the
Duterte administration brought about extensive changes to individual income taxation, it did not
include changes in corporate income taxation. This is expected to be addressed in the second package
of the CTRP, which was approved by the lower house last September 10, 2019.

60
 In light of the COVID-19 Pandemic, package 2 of the CTRP was recalibrated and referred to as the
Corporate Recovery and Tax Incentives for Enterprises Act ("CREATE"). This was done to make it more
relevant and responsive to the needs of businesses, especially those facing financial difficulties, and
to increase the ability of the Philippines to attract investments that will benefit the public interest. As
a result, the Corporate Recovery and Tax Incentives for Enterprises Act (CREATE Act) was enacted on
March 26, 2021. The purpose of the law is to grant tax relief to companies who are financially
distressed and to provide transparent tax provisions. This further increases the competitiveness of
the Philippines. With the new CREATE ACT, corporate income tax will now be reduced to 25% from
30%. Hence, making the Philippines at par with the other Southeast Asian countries, as shown in figure
23.

Figure 23–Comparative Income Tax (2020)

Given the vulnerability of the Philippine petroleum industry to price sensitivities of petroleum
products, any increase in taxes will have a corresponding impact on the prices of petroleum products,
which in turn could negatively affect the business of Phoenix. The fiscal incentives enjoyed by Phoenix
may be affected. There can be no assurance that the taxes, duties, and tariffs may not change going
forward, and Phoenix's financial condition will be adversely affected during these increases.

To mitigate this risk, the company's corporate affairs department is dedicated to monitoring
compliance with regulations and anticipating any new rules that the authorities may implement. This

61
 ensures that any additional costs resulting from changes in the legal and regulatory environment can
be expected and prepared for by Phoenix.

4.6 Environmental Forces

4.6.1 Emergence of Renewable Energy

The Philippine power sector currently depends on fossil fuels, about 77%, and is expected to
increase the use of coal-based plants to meet future energy demand, negatively affecting
environmental outcomes. The coal consumption in the power sector increased from 7 million tons
(MT) in 2006 to 15.5 MT in 2014 (Mondal, Rosegrant, Ringler, Pradesha, & Santos-Valmonte 2018).
This makes the Philippines, among the emerging economies, struggle to abandon fossil fuel sources
to sustain economic growth. The country's self-sufficiency in primary energy supply has decreased in
recent years. The renewable energy share declined from 43% in 2012 to 40% in 2014. Total direct
energy supply and final energy consumption were 36.01 million tons of oil equivalent (MTOE) and
22.36 MTOE in 2006 and increased to 47.5 MTOE and 28.57 MTOE in 2014, respectively. The
Philippines remains heavily reliant on oil imports for its primary energy source, exposing its energy
system to political unrest, price volatility, and the risk of unfavorable foreign exchange rates.

In 2006, the Biofuels Act was passed, which mandated all oil companies to infuse 10% bioethanol,
and 2% bioethanol/ coco methyl ester (CME) components to all gasoline and diesel grades sold,
respectively. The law was enacted to ensure the availability of alternative and renewable clean energy
and promote sustainable job-generating economic growth through the induced demand-driven
increase in agricultural production of local bioethanol and CME, a diversification strategy of the sugar
and coconut industry that empowers marginalized local farmers. Currently, most oil companies still
import bioethanol since it is cheaper than domestic sources that lack subsidies from the government
and investments made by local bioethanol producers.

Coal is the Philippines' dominant energy source, with a 57% share in gross power generation as of
December 2020, as the majority of the operating power plants are powered by coal33. While coal is
inexpensive, Philippine electricity prices are amongst the highest in Southeast Asia. They are

33
Statista: https://apslibrary.ateneo.edu:2478/statistics/1266240/philippines-power-generation-share-by-source/

62
considered relatively high compared to global standards, at roughly US$0.20 or Php 10 per kWh.
Manila Electric Company (MERALCO), the biggest utility company operating globally, largely relies on
coal for its baseload power source. The use of coal in the power generation sector is marked with
high-efficiency, low-emission technologies, and lower costs for bringing electricity to a country
already burdened by high rates. However, the common utilization of renewable energy, primarily to
fuel power plants, is confounding for a nation. Renewable energies, including solar, wind, hydro,
geothermal, and biogas, are viable domestic generation options. The constant use of traditional fossil
fuels underscores the issue of energy security and the concern about its sustainability, as both sources
are known significant contributors to carbon emissions.

Figure 24–Power Generation Mix (2020)

On the side of consumption, the Philippine government has been advocating electric vehicles or
e-vehicles under Executive Order 488 of 2006 to support the manufacturing of electric cars and reduce
the country's fossil fuel consumption further. E-vehicles have been introduced in some major cities in
the Philippines to transport residents, tourists, and transient workers. However, the price of these e-
vehicles appears to be steep for most Filipinos. The modern jeepneys, which are being introduced as
an alternative to the traditional jeepneys, cost about Php 1.2 to 1.6 million– a price that seems out of
reach for Filipino jeepney drivers and operators (CNN Philippines, 2020).

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 Despite the systematic deflationary nature of renewable energy prices in the world market and
capital market support, emerging economies like the Philippines continue to lag behind global trends.
As a result, they are locking long-term exposure to coal, oil, and LNG importation. As a result, the
country is likely to remain heavily reliant on oil imports for the time being, with minimal investment
in new domestic exploration and development under the current regulatory structure and global
conditions.

Currently, Phoenix continues to explore possible investments in alternative fuels to complement

its current product portfolio and enable the company to adapt to potential changes in consumer
preferences. The company remains abreast of the shift in the landscape of both local and international
fuel markets. It thus aims to be at the forefront of providing alternative fuel sources to traditional
gasoline via its Vietnam and Philippine investments in LPG. This will allow the company to remain
highly competitive not only in the fuel oil category but also in other significant product categories in
anticipation of shifts in market demand.

4.6.2 Implementation of Biofuels Act of 2006

The Biofuels Act of 2006 mandates the blending of biofuels of oil companies into their oil products
to offer ethanol-blended gasoline products. The Biofuels Act also calls for incentives for biofuels
producers. A 5.0% ethanol blend is mandated for gas by 2009 and 10.0 % by 2011. For diesel products,
a 1.0 % blend of biodiesel was required by 2007 and 2.0 % by 200934. Taxi owners and operators
continue to convert their units to allow the use of LPG instead of gasoline to save on costs and improve
their profitability. LPG pumps are slowly increasing in retail service stations of oil companies, and new
companies are entering the LPG retail service station industry to capture this growing market.

Another alternative fuel is compressed natural gas ("CNG"). While Congress has passed the law
providing incentives to producers and users of CNG, the necessary infrastructure has not yet been

34

https://apps.fas.usda.gov/newgainapi/api/report/downloadreportbyfilename?filename=Biofuels%20Annual_Manila_Philippine
s_10-18-2017.pdf

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 finalized. For example, the planned "mother" and "daughter" natural gas 110 stations of Shell,
intended for use by public buses plying the route of Southern Luzon, remain not operational35.

Incorporated on July 31, 2006, Phoenix, under its subsidiary Phoenix Global Merchantile (PGMI),
entered the business of manufacture, production, and creation of all kinds of motor, and all other
transportation lubricants, fluids, and all sorts of additives and other petroleum products intended for
motor vehicles and other transportation. PGMI started its operations in 2007 and temporarily ceased
its operation in 2008 but resumed its business in October 2015 by selling acid oil and coconut fatty
acid distillates; both are by-products from the manufacturing of coconut methyl ester (CME). This
allowed Phoenix a head start and a monopoly on the local supply of CME, which caters to its industry
competitors and exports.

5. INDUSTRY AND COMPETITOR ANALYSIS

5.1 Industry Background

Crude oil is a yellow-to-black liquid natural resource found in geological formations beneath the
Earth's surface. It consists of long-chain hydrocarbons and other organic compounds. It is refined into
various types of petroleum products through fractional distillation, a separation technique used to
isolate components of a liquid mixture by its boiling point. Refineries and blending facilities combine
various gasoline blending components and fuel ethanol to produce the finished fuel (e.g., diesel and
gasoline) sold for use in different service stations.

According to Kramer (2019), organizations and companies in the petroleum industry are
categorized into three categories based on their location and supply chain: (1) Upstream, which
involves crude oil exploration through mining and drilling. Production and exploration companies fall
in this category. (2) midstream involves transportation of natural gas and crude oil, and (3)
downstream includes the refining and distributing of the crude oil. The Philippine petroleum industry
is characterized to be in downstream oil and gas production.

35
https://www.greencarcongress.com/2005/06/shell_opens_fir.html

65
 Figure 25– Petroleum Supply Chain

Oil importing countries like the Philippines purchase foreign crude oil or finished petroleum
products abroad and are shipped using tankers. For a refiner like Petron Corporation, crude oil is
received in a refinery to process fuel and other petrochemicals before storage. For product importers,
fuel is stored in bulk terminals. From the bulk terminal/storage, the product is then transported to
depots and smaller terminals across the country using barges and tankers. Lorry trucks haul fuel
products for delivery to different service stations where automobile owners can purchase fuel. Figure
25, lifted from the U.S. Energy Information Administration (EIA), magnifies the typical petroleum
supply chain.

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 5.2 Industry Value Chain

To further elucidate the activities in the oil industry such as procurement, manufacturing, and
marketing activities, an industry value chain is presented in figure 26.

Figure 26– Industry Value Chain

Importation of Crude Oil or Finished Petroleum Product

The Philippine Petroleum industry relies heavily on crude oil imports, the bulk coming from the
Middle East. However, the government continues to enforce the minimum inventory requirement
(MIR), considering the continuous risks that the downstream oil industry faces, such as geopolitical
instability, weather disturbance, and supply transportation issues from the country of origin to the
Philippines. As a result, the refining petroleum companies are mandated to have a 30-day MIR, while
bulk importers of finished products must have at least a 15-day worth of inventory36.

Currently, only Petron operates a refinery in Limay, Bataan. The rest of the oil companies in the
country are importing finished products. This happened when Shell decided to convert its refinery in
Tabangao, Batangas and convert, into a full import terminal last 202037. Phoenix then holds between

36 DOE-OIMB Report 2020 https://www.doe.gov.ph/downstream-oil/oil-supply-demand-2020?withshield=1

37 https://www.reuters.com/article/us-pilipinas-shell-refinery-idUSKCN25906J

67
 30 to 40 days of inventory and uses the average method to account for its inventory38. As a result,
financial results are primarily affected by the difference between the price and cost of its petroleum
products, accounting for more than 99% of the total cost of goods sold.

On the other hand, importations are conducted via letters of credit, while domestic purchases are
made with invoices, covering 70% of the importer’s total cost of goods sold. The prices are based on
the average MOPS with an agreed premium. The imported products are then offloaded directly at the
company’s depots with their port facilities to accommodate fuel tankers.

Inventory, Warehousing, and Logistics

For a refiner like Petron, the raw material is transferred to its refining plant in Limay, Bataan, for
further processing via very large crude containers. Then, the crude must undergo fractional distillation
to separate the mixture into different parts, called fractions (BBC, n.d.). These fractions from the crude
oil have other uses and properties, as exemplified in the figure below.

Figure 27– Fractionating Column

They are commonly transferred through the pipeline and marine vessels from the refinery or after
importing the finished products to the bulk plants/ terminals nationwide. Bulk storage facilities in
strategic locations aid in lowering the costs of transport, making it more affordable to the end-user as

38
https://www.pds.com.ph/wp-content/uploads/2020/08/21-PNX-CP-SERIES-D-Final-Prospectus-F-rev.pdf

68
 the freight charges are passed on. Petron being the number one player in the country, has the most
extensive network with 32 depots or terminals and one lube warehouse, as reflected in table 4.

Table 4-Supply Points of Oil Majors

Product Distribution and Transportation

From bulk plants and terminals nationwide, the finished product is transported to the company's
retail network of stations or commercial end-users through pipeline transfers, marine vessels, and
tank trucks. LPG is transported to end-user through bullet tanks

The engagement of third-party haulers is an industry practice since logistics is not part of the core
business. The major players—Shell and Petron, both forge exclusive and long-term contracts with
hauling companies for outbound logistics. In the case of Phoenix, it utilizes its sister company, Chelsea
logistics, to deliver its products to its end-user. As of March 31, 2022, the DOE has recorded 61
haulers39.

39
eFOI Request https://www.foi.gov.ph/requests/aglzfmVmb2ktcGhyHQsSB0NvbnRlbnQiEERPRS0wNjg2MTMzNTk3ODAM

69
 Table 5– Hauler Count Per Region (2022)

Marketing and Sales

Oil companies continuously seek to improve and broaden their product and service offerings to
cater to a broader market, including retail customers with higher purchasing power. Furthermore,
most oil companies are upgrading their retail stations and operational facilities to enhance customer
experience, improve the brand, provide better offers to their customers, and maintain operational
excellence throughout their respective supply chains.

Phoenix and other players face intense domestic competition in selling refined petroleum
products and other related products in the Philippines. Industry players compete based on product
quality and offerings, promotions, customer service, operational efficiency, distribution network, and,
most significantly, pricing.

Competition is driven and dictated primarily by the price, as oil is considered an essential
commodity. In addition, differences in product specifications and other overhead costs such as
transportation, distribution, and marketing costs account for the price differentials amongst the
industry players.

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 While pricing depends on supply and demand, the geographic location and the regional trading
of crude oil also play an essential role in determining the fuel price in countries. The DOE mandates
the Mean of Platts Singapore (MOPS) in a deregulated local petroleum market. MOPS considers the
daily average of all trading transactions between the supplier and distributor of petroleum products
as assessed and summarized by the Standard and Poor’s Platts, a Singapore-based creator of financial
market indices specifically for price assessments in energy and commodities information.

The Department of Energy then decided to standardize the pricing scheme along with this new
directive. Aside from uniformity, it would allow transparency and easier monitoring to ensure that all
oil players adhere to the principle of fair pricing as mandated by the Downstream Oil Industry
Deregulation Act of 1998. The DOE employs a specific price build-up to estimate the costs and
adjustments shown in figure 28.

Figure 28– Cost Components of Fuel Pricing in the Philippines

Prices in the oil industry are volatile. Such changes in the international market for crude may not
immediately reflect a change in the fuel prices nationwide since MOPS is updated weekly. The DOE
regularly monitors the prices in the global market vis-à-vis the service stations' pump prices, ensuring
that the price adjustments are reasonable and aligned within a specific trading area.

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 Aside from prices, oil companies craft different promotions to entice and capture the market. This
aims to strengthen the brand further. Promotions include tie-ups with credit card companies (e.g.,
Petron-BPI, Shell-Citibank, and Phoenix-RCBC). Each company also launched its loyalty program.
Mostly this is done via cards or mobile applications. To illustrate this, Petron 2018 re-launched its
Petron Value Card to capture each segmented market, Shell then tied up with SM Advantage Card,
and Phoenix launched its Limitless App. For corporate accounts, the oil companies also have their
respective fleet card programs to lock in volume for a period of time.

Market / End-user demand

According to DOE’s 2021 report, the total demand for petroleum products was at 5,936 ML,
increasing from 2020 by 8.70%. Such increase was due to the gradual ease of Covid-19 protocols,
enabling more people to travel.

Table 6– 2021 vs 2020 Product Demand in Million Litters (ML)

Relative to 2020, there was an increase in demand for diesel oil by 8.20%, 13.80% for gasoline,
and 3.50% for LPG. Demand mostly comes from the National Capital Region, capturing 23.85%,
followed by North Luzon, South Luzon, and Mindanao, as illustrated in figure 29.

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 Figure 29– Product Demand by Region (2021)

5.3 Porter’s Five Forces Model

Most of the petroleum companies in the Philippines are all positioned in the downstream
petroleum business. Downstream operations involved converting oil and gas into the final product. In
some cases, this also includes refining crude oil into gasoline, natural gas, diesel, and other forms
(Chen, 2021).

Figure 30–Porter’s Five Forces Model (Local Downstream Oil Industry)

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 5.3.1 Rivalry of Competition

Conclusion: High

In line with the Oil Deregulation Law’s (Republic Act 8479) objective of promoting a more
competitive petroleum industry, the DOE encourages active participation from the private sector to
establish and operate fuel stations. Furthermore, there is also a surging number of retail outlets at
8.67% since 2017. The law’s enactment entailed that the entry of new players resulted in increased
competition based on product, price, promotion, place, efficiency, and services.

Table 7– Number of Retail Outlets (2017 - 2021)

Based on DOE’s 2021 data in table 7, there are ~10,000 stations, with Petron, Shell, and
Chevron representing only 36%, while the remainder is new players as reflected in table 8. The
number of new players continuously increases and erodes the major players (i.e., Petron, Shell, and
Phoenix) market share. Independent players already cover more than 50% of the entire oil industry.

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 Table 8– Fuel Retail Outlet (2021)

Table 9– Market Share of Oil Players (2016 – 2021)

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 5.3.2 Threat of New Entrants

Conclusion: Moderate

The petroleum industry is capital-intensive, with the sophisticated and expensive infrastructures
needed from upstream to downstream. Downstream players usually spend for facilities (e.g.,
refineries, import terminals, pipelines, service stations) that require significant capital. Likewise,
setting up other units and facilities also requires a great deal of money to maximize the supply chain
fully.

The number of players and investments can be observed in table 10. The number of players has
been steadily increasing by 10.22% since 2017. Investment is then growing at 62.01% due to the
significant infrastructure that needs to be set up.

Table 10– No. of Oil Players and Investment (2018 – 2020)

To illustrate such spending in the industry, Petron completed the construction of its Php 1.06
trillion refinery with a capacity of 180 MBCD in 2014. The oil giant also relocated and reconstructed
its lube oil blending plant to the North Harbor with a total cost of Php 4 billion. Its annual capacity is
at 90MKL on a single shift.

Moreover, Shell in 2018 finished the construction of its Bitumen production facility, which
approximately cost Php 689 million40. The company also completed its construction of the 90-million-
liter North Mindanao facility in Cagayan de Oro, valued at Php 6 billion41. It is also heavily investing in
shifting its Tabangao, Batangas refinery into a 263-million-liter capacity import terminal and

40
https://www.shell.com/business-customers/bitumen/news/news-and-media-2019/shell-completes-philippines-first-ever-
locally-blended-bitumen.html
41 https://www.manilatimes.net/2016/07/19/business/shell-opens-p6-b-mindanao-facility/274727

76
constructing its Darong import facility, a joint project with Northern Star Energy and DMCI
Construction and Equipment Resources Inc.

On the other hand, Phoenix gained the controlling interest in the Malampaya gas field after the
company acquired Shell’s 45% for $460 million (Burgos, 2021). But then, in 2022, Mr. Dennis Uy
decided to open the possibility of sharing this share to ease its debt (Royandoyan, 2022).

Hence, the threat of new players in the oil and petroleum industry has a high barrier to entry
considering the significant amount of investment for infrastructure, facility, technology, and other
CAPEX-driven costs. Aside from this, oil players are also bearing the burden of risk mitigation for
foreign exchange and volatile oil prices.

5.3.3 Bargaining Power of Suppliers

Conclusion: High

The upstream petroleum industry (i.e., oil and gas exploration and production) is mainly the
source of oil globally. These countries are dubbed the Organization of Petroleum Exporting Countries
or OPEC. They are significantly influential in the global supply and price of crude oil, to which they
were dubbed an international Oil Cartel. The organization's primary purpose is to coordinate and unify
petroleum policies among its member countries and ensure stable oil markets and a regular supply of
petroleum products to its consumers. OPEC has 13 member countries and collectively supplies 41.9
percent of global crude oil production (OPEC, n.d.). The CNN Editorial Research (2021) opined that
approximately 79.40% of the world's proven crude reserves are under OPEC's control. Furthermore,
member countries are ultimately controlling their production in compliance with the agreed policies
of OPEC; thus, the significant market share of OPEC influences oil prices.

The Philippine petroleum industry, a downstream market, is highly dependent on the global
demand for crude and processed petroleum imports. Given this condition, the prices are more likely
subject to changes in oil prices, foreign exchange, and geopolitical instability.

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 In 2021, the country imported various types of crude oil, mainly the Brent blend. Most crude oil
imports from the Middle East account for almost 95.70%, the bulk coming from Saudi Arabia, as shown
in table 11.

Table 11–Crude Import in Million Litters (ML) 2020 to 2021

Figure 31– Crude Import by Origin 2021

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 Moreover, the country’s import of finished products in 2021 increased to 18,694 ML or 14%. The
improvement is caused by the easing travel restrictions.

Table 12–Finished Product Import in Million Litters (ML) 2018 to 2020

Finished products are primarily sourced from China at 30.01%. Product import mix is comprised
of a majority of diesel at 43.10%, gasoline at 21.20%, LPG at 16.80%, and the remainder is composed
of other products (e.g., kerosene, avturbo, fuel oil).

Figure 32– Product Import by Origin (2021)

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 Petron’s crude oil is supplied by Saudi Aramco, the state-owned petroleum company of Saudi
Arabia, and from Kuwait Petroleum Corporation. On the other hand, other raw materials such as crude
and base oil are sourced by Petron’s trading arm, Petron Singapore Trading Pte. Ltd42.

Shell is then affiliated with its parent company which guarantees the company long-term and
secure access to finished products via its Asia-Pacific trading arm, Shell International Eastern Trading
Co (SITECO)43. This enables Pilipinas Shell to have a term agreement, allowing a consistent and reliable
source.

On the other hand, Phoenix sources its supply from its trading arm, PNX Petroleum Singapore Pte.
Ltd. It acquires the supply from the refineries in the region. At times, the company also gets its
requirements from other local players.

5.3.4 Bargaining Power of Buyers

Conclusion: Moderate

The buyers in the oil industry can be classified into two: retail and commercial. The retail segment
consists of motorists on the road, household consumers, and other small businesses. On the other
hand, the commercial segment consists of large-scale businesses such as the aviation industry, fishing
accounts, manufacturing plants, and others. Under a deregulated industry, the brands and
competition have been tight. This now translates that the buyers will have options for sourcing their
fuel requirements. While they enjoy an array of choices, the demand for petroleum is inelastic since
it is a commodity. Hence, the buyers will continue to purchase it regardless of the price. Table 13
reflects that next to food items and miscellaneous goods and services, housing, water, electricity, and
gas have a huge chunk of the household expenses (Philippine Statistics Authority, n.d.).

42 https://www.petron.com/investor-relations/our-annual-reports/
43
https://pilipinas.shell.com.ph/sustainability/pilipinas-shell-annual-and-sustainability-report-2021.html

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 Table 13– Household Final Consumption Expenditure in Php (2020 – 2021)

The retail segment selects where to purchase based on the service station's proximity. This
somehow outweighs the price since stations are clustered together to reflect almost the same prices
as each other, especially if they are under the same brand. However, there are areas where Petron
and Shell's prices are higher than other brands. Motorists are still considering brand preference, brand
loyalty, and marketing campaign.

The commercial buyers who buy in bulk or large volumes have certain leverage in the market. In
this segment, firms play heavily in terms of prices. To acquire a particular buyer or account, firms offer
competitive prices, following a specific formula scheme (i.e., based on the mean of platts of Singapore
or wholesale posted price). Accounts also look for good discounts and payment terms (e.g., 30 days
to pay).

5.3.5 Threat for Substitute

Conclusion: Low

Renewable and other alternative sources of energy (e.g., solar, hydro, wind, geothermal) have
been developed and explored throughout the years; however, private and public transportation in
the Philippines remains heavily dependent on diesel and gasoline. Likewise, machines and equipment

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used for commercial production and systems use petroleum as their energy source. This is supported
by the 2020 fuel type consumption, as reflected in figure 33.

Alternative energy sources may progress yearly, but no direct substitute for petroleum products
(i.e., diesel and gasoline) has been found to date. Therefore, the Philippine market will still have to
adapt to energy source changes with the need to establish the demand for renewable energy and its
supply.

Figure 33– Primary Energy Consumption in the Philippines (2020)

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 5.4 Strategic Positioning Analysis

The graph below illustrates Phoenix’s position vis-à-vis its competitors in terms of its supply
points and distribution channel.

Figure 34– Strategic Positioning of Petroleum Companies

The x-axis describes the number of supply points (i.e., depots, warehouses, and terminals
nationwide) anchored at ten supply points. Companies whose supply point count is less than 15 are
classified under “few supply points,” while those above references are classified as having “many
supply points.”

On the other hand, the y-axis- describes the number of retail network stations in the Philippines
based on 400 service stations. Companies with less than the reference service stations are categorized
as “lean distribution channels,” while those above 400 have a “wide distribution network.”

The market positioning analysis reviews the oil industry’s leaders and followers based on supply
chain management (SCM) and service station presence. It is noted that a strong SCM and brand
presence are key factors that make an oil player successful. According to the map, Petron is situated
in the first quadrant and is the highest. The top company has 32 supply points and 2,424 stations,
followed by Shell with 1,120 stations with 30 supply points. Phoenix comes in to be the third player

83
with 690 stations with ten supply points. It can then be concluded that Petron has the advantage since
it gives its brand more visibility and presence as it reaches the consumers easily. It then has the upper
hand in its robust supply chain as it can be more efficient in terms of its transshipment and freight
cost. However, the fleet of service stations can also be a disadvantage if not managed properly in
terms of distancing and pricing. Stations that are situated in close proximity can lead to cannibalization
in terms of volume, specifically when different dealers manage these stations. Aside from this, the
distance can create prices and margin degradation if not strategically done (i.e., lower prices in one
cluster can affect another high-priced cluster).

Phoenix has been expanding its stations by since 2010, which allowed them to capture market
share by 7.45% in 2021. Hence, it can be surmised that station count directly impacts the market
share. Therefore, Phoenix must strategically expand to gain market share.

Table 14– Phoenix Service Station

Expansion (2010 – 2021)

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 5.5 Market Size, Share, and Growth Trends

Table 15– Sales Volume of the Oil Industry (2015 – 2021)

The total sales for petroleum products grew by 51.72% from 2015 to 2019, with a compound
annual growth rate (CAGR) of 11%. The growth throughout the years can be attributed to the good
economic performance supported by the government's thrust of build-build-build. On the other hand,
the slight drop in sales in 2019 is linked to the implementation of the second tranche (i.e., additional
Php 2 liter to Php 9 per liter) of TRAIN Law.

Based on the five-year CAGR, Phoenix is the main driver. The leading independent player and a
newest third player registered a 34% CAGR. Its growth improved as it aggressively expanded its service
stations from 454 in 2015 to 655 in 2019, translating into a 44% increase based on table 15. Other
major players, Petron and Shell, had a positive CAGR of 9%, reflecting the firm's resiliency despite the
challenges in the industry.

The industry's good performance was disrupted when the pandemic hit in 2020, causing a dip in
revenue of the total market by 37.21%. However, in 2021, as the pandemic eases, the industry has
recovered by 43.64% vs. 2020.

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 According to the MarketLine Industry Report, the industry will grow by 6.50% from 2022 to 2025.
This translates into a Php 371 billion industry by 2025.

Table 16-Forecasted CAGR (2022-2025)

On the other hand, the varying market share among oil companies is caused by the company's
network of stations, supply points, consumer preference, and price. Petron is still considered the
market leader, despite its declining market share since 2015. Shell then follows it.

5.6 Market Analysis

5.6.1 Market Sector and Forecast

Table 17– Oil Consumption by Sector (2015 –2020)

According to DOE’s Key Energy Statistics Report, the transport sector accounted for 64% of oil
consumption, followed by the services sector at 11.80%, and the industry sector at 8.62%.

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Transport – 64.47% of total petroleum demand

The transport sector comprises four components, road transport, water, domestic air, and
railway. Based on 2020 data, road transport accounted for 89.90% of demand at 8,496 KTOE, followed
by water transport at 7.70% with 729 KTOE, and domestic air transport at 211 KTOE.

Road transport posted a 20.70% decline due to mobility restrictions of the pandemic. This was
evident as the average traffic congestions in Metro Manila declined by 30%44. Likewise, cargo
throughput and passenger volume also declined by 8.40% and 70.30% according to the data of the
Philippine Ports Authority45. Domestic air transport experienced the significant nosedive, as it
experienced a 65.10%46 reduction a result of the suspension of domestic flights starting March 2020.

Figure 35– Transport Sector Oil Demand at

9,416 KTOE (2020)

The decline posted in an overall downtrend in the volume per fuel type. Diesel and gasoline
accounted for most volume among petroleum products at 92%, followed by bioethanol. Diesel
declined by 14.90% while gas by 24.20% due to the suspension and reduction in operating capacities
of the PUVs.

44 6 COVID-19 and Transport in Asia and the Pacific: Guidance Note (ADB, December 2020)
45 Summary Port Statistics 2019 and 2020 (Philippine Ports Authority)
46 Key Energy Statistics 2020 (Department of Energy)

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 Figure 36– Transport Sector Oil Demand by Fuel
Type (2020)

Services – 11.80% of total petroleum demand

The services sector which accounts for the trade and service, saw an increase in demand by 4.53%
versus 2019. This is a result of the government’s “flattening the curve measures”47. During the first
part of the year, almost all large, medium, small and micro-sized establishments (MSMEs) were
closed. As the country experienced a relatively lower case, some of these establishments gradually
opened.

Figure 37– Services Sector Oil Demand by Fuel

Type (2020)

47
Key Energy Statistics 2020 (Department of Energy)

88
 The services sector is primarily reliant on diesel at 40.70%, which experienced an increase of 10%
due to the lower pump prices. Moreover, the frontline operations, particularly hospitals and other
medical establishments, remained steadfast. On the other hand, LPG volume dropped by 6.40% as
establishments were closed or limited operating capacity.

Industry – 8.62% of total petroleum demand

The industry sector is comprised of manufacturing, mining, and construction activities. Despite
the overall energy decline in this sector, oil demand increased by 6.28% as fuel oil and diesel registered
growth rates of 17.60% and 10.10%. This is driven by mining activities that were unaffected by the
pandemic. Large-scale metallic mining is recognized as an export, and it was allowed to operate by
the government’s Inter-Agency Task Force (IATF).

Household – 6.91% of total petroleum demand

Oil products such as LPG and kerosene accounted for 12.3% of household energy consumption,
as figure 38 reflects. However, utilization of LPG slightly declined by 4.3%, while kerosene by 29.4%.

Figure 38– Household Energy Demand (2020)

Agriculture – 1.33% of total petroleum demand

The country's agriculture sector continued to face challenges in 2020. Some of which were supply
chain disruptions, low demand, mobility concerns, natural calamities, and an outbreak of African

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 Swine Fever. The sector is heavily reliant on oil products, particularly diesel, for its activities. The said
product posed a reduction of 8.80% versus 2019.

Forecast

Table 18– Market Sector Forecast (2021 – 2025)

The overall sector generated a CAGR of 5.38% from 2015 to 2019. The Philippine economy may
have experienced a decline in its activities due to the pandemic. Still, as the country heads for
recovery, the oil industry will follow the same trend. Based on the data analyzed, there will be a ~51%
growth forecasted in 2025 relative to its 2020 performance.

5.6.2 Product Category and Forecast

Table 19– Product Demand (2015 –2020)

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Diesel Oil – 42.4% of total petroleum demand

Diesel is obtained from crude fractions that are less volatile than the fractions used in gasoline.
According to Britannica (n.d.), diesel fuel releases more energy combustion than equal volumes of
gasoline, hence, providing better fuel economy than gasoline. Cetane instead of RON measures it. As
the number goes up, the more efficient the fuel burns within the car's engine (the University of
Calgary, n.d.). Diesel contains sulfur which is critical in polluting the environment. Hence, the usage
of diesel is heavily regulated. Internationally, the price of diesel is higher to discourage its use.
However, in the Philippines, its prices are lower than gasoline since the government subsidizes and
regulates its price. It is noted that most of the vehicles in the country use diesel for their fuel.

Phoenix offers only one variant of diesel –Biodiesel. It is also Euro 4 compliant and infused with
Phoenix Pulse Technology.

Gasoline – 25.2% of total petroleum demand

Gasoline is a refined by-product consisting of complex hydrocarbons. It became an automobile

fuel because of its high combustion energy and the capacity to mix with an air carburetor (Britannica,
n.d.). Research octane number (RON) is the standard of measurement for gasoline. Octane ratings
then measure fuel stability. It is then noted that the higher the RON, the more stable the fuel.

Phoenix offers three gasoline variants differing from the RON grade: flagship high-performance
Premium 98, Premium 95, and Super Regular 91. All of which are Euro 4 compliant and manufactured
with Phoenix Pulse Technology. The said additive improves the vehicle’s journey with its cleaning and
protection properties.

LPG – 12.7% of total petroleum demand

Liquified petroleum gas (LPG) is a mixture of volatile hydrocarbons of propene, propane, butene,
and butane. It is commonly used in households for cooking, heating appliances, and vehicles.

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 11kg cylinder and other more minor variants are used in households, while the 50kg variant is
used for commercials in fast food chains and malls. Industrial requirements would then be served via
bullet truck deliveries to the tank farms of the accounts.

Phoenix has been growing its share since 2017, leading to its current market share of 6.92%. This
is brought by the acquisition of the LPG line of Petronas Energy Philippines Incorporated. The purchase
is further boosted by its aggressive acquisition of accounts and expansion across the country.
Furthermore, Phoenix’s LPG continued to grow during the pandemic, bringing profitable returns for
the company.

Table 20– Phoenix 's LPG

Market Share (2017 – 2020)

Kerosene / Aviation turbo – 8.8% of total petroleum demand

Kerosene is a colorless, flammable petroleum product. It is commonly used in kerosene lamps,

domestic heaters, and as a fuel component for aviation fuel. However, its production declined with
the introduction of electric lamps and the rise of the automobile, which is dependent on gasoline or
diesel. Currently, Phoenix does not offer kerosene in the market.

On the other hand, Jet A-1 is a kerosene grade fuel suitable for commercial flight. This fuel type
burns cleanly and is free from wax particles at the low temperatures experienced during flights
(Britannica, n.d.). Phoenix offers this variant and provides storage, handling, bridging, and into-plane
services to its accounts. Despite the pandemic, it has maintained supply agreements with two of the
country’s biggest airlines, Philippine Airlines and Cebu Pacific.

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Fuel Oil – 5.2% of total petroleum demand

Fuel oil or heating oil is commonly used in broilers and furnaces for heating homes and buildings,
industrial use (e.g., marine engines), and power plants (U.S. Energy Information Administration, n.d.).
It is also classified as “black fuel” due to its properties. Examples include IFO (bunker oil), special fuel
oil (60, 200, 400, 1100), and low sulfur fuel oil. These fuel types are high in carbon and sulfur and
harmful to the environment. Phoenix also carries the mentioned petroleum variants.

Others (i.e., naptha, asphalts, petchem, petcoke) – 5.7% of total petroleum demand

According to Britannica, asphalt, a highly viscous and dense substance, is obtained as a residue
from the distillation of petroleum or natural deposits. Asphalt or bitumen consists of compounds of
hydrogen and carbon. Commonly, asphalt is used for road pavements, but it is also used for roofs,
coatings, floor tiling, soundproofing, etc.

In 2018, Phoenix partnered with Thailand-based company Tipco Asphalt. This is to strengthen the
Phoenix's customer reach and take advantage of the government's aggressive stance regarding
infrastructure (i.e., build-build-build). The partnership also resulted in innovative products (e.g.,
Phoenix asphalt cold patch), now marketed and distributed in the country.

Forecast

Table 21– Demand Forecast (2021 – 2025)

Diesel has the highest volume contribution to the total demand of the oil industry. It is set to grow
by 52% by 2025 as the economy recovers from the pandemic. The same is true for kerosene / avturbo,
with a promising 2015 to 2019 CAGR of 10%. Despite being hampered by the pandemic, it is still set

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to grow in 2025 due to the demand for travel and air cargo on domestic and international routes. LPG
and gasoline are also set to grow as the purchasing power increases, driven by the progressing
economy, the rise of delivery (i.e., food delivery, shipment, e-commerce), and vehicle sales.

Phoenix’s portfolio is aligned to accommodate the growing demand of these emerging markets
and trends. This is again coupled with the organization’s thrust to grow as it further strengthens its
market share aggressively.

Figure 39– Phoenix Product Mix (2021)

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 5.6.3 Distribution Channels

Figure 40– Distribution Channel Map

Retail station

2021 ended with 10,802 retail stations across the country. 39.20% is attributed to major players
– Petron, Shell, and Phoenix. Since 2017, the retail segment has increased with a growth rate of 6.87%.
Hence, it is notable that several people want to establish or franchise their retail stations. In the
Philippines, there are three arrangements to open a retail station – company-owned-company-
operated (COCO), company-owned-dealer-operated (CODO), or dealer-owned-dealer-operated
(DODO). In a CODO setup, the company buys or leases the land and owns the retail station’s structures
and equipment but is operated by a third-party dealer. For DODO, the dealer buys or rents the land,
builds the station adhering to company standards, leases the company equipment (e.g., underground

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 tanks, dispensing pumps), and operates the station. The opposite is valid for a COCO, where the
company manages everything.

Based on Phoenix’s December 2021 station breakdown per type, the majority are CODO at 50%,
followed by DODO at 49%, and 1% for COCO stations48.

Table 22 – Station Type Count per Oil Company

COCO stations are usually found in expressways and major thoroughfares. A significant amount
of capital is poured into this kind of station. The cost usually ranges from Php 20 to 90 million,
depending on its size.

Phoenix offers a CODO and DODO package while providing the necessary equipment and supply
of petroleum products. The standard CODO dealership has a five-year term and is renewable for
another five years. The DODO has a five-to-ten-year dealership agreement. Phoenix’s CODO stations
approximate Php 20 million while the dealer shares a minimum of around Php 3.5 million for the
franchise fees and others, excluding the daily operations. As for a DODO setup, the cost starts at a
minimum of Php 5 million. Cost includes the construction, equipment, and initial stock. The dealer
also must pay a brand reimbursement fee of Php 550,000 for the first five years of the dealership for
the first station while waived for the DODO. A yearly participation fee is also paid, amounting to Php
50,000 for CODO and Php 35,000 for DODO, starting in its first year.

The table below shows the breakdown of cost per franchise type, excluding the permits and other
costs of doing business49.

48 https://www.pds.com.ph/wp-content/uploads/2020/08/21-PNX-CP-SERIES-D-Final-Prospectus-F-rev.pdf
49
https://www.phoenixfuels.ph/dealers/

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 Table 23– Phoenix Estimate Dealership Cost

Phoenix then requires an 800 to 1,000 square meters operating area, depending on the economic
scale, inclusive of a 30-meter frontage. The company also ensures that the stations to be established
are on highways or main thoroughfares to maximize foot traffic and generate healthy revenues.

Dealer appointments for CODO and DODO setup are strictly screened based on criteria, putting
significant weight on the dealer’s financial position to cover the operations and secure the brand
image. Dealers are given company support for operating a Phoenix station. This includes professional
management through a retail territory manager, marketing and operational support, training, and
networking with other dealers through the Business Partners Appreciation Night.

Commercial and Industrial

The commercial and industrial segment consists of bulk petroleum demand. This is where B2B
transactions occur, supplying large accounts' oil requirements (e.g., diesel, gasoline, LPG, jet A-1, fuel
oil, kerosene, asphalt, lubricants, and petrochemicals).

As of March 2020 data50, Phoenix is considered the second-largest fuel supplier in this segment.
Phoenix either directly serves the accounts by delivering them to their facilities or the pump and tank
of high-volume accounts. It has more than 471 direct industrial accounts. It mainly supplies the fuel
requirements of the transport sector, banana and pineapple plantation, mining companies, power
sector, manufacturing sector, and the construction and property sectors. These accounts are JAC
Liner, Cebu Pacific, Del Monte Philippines, Aboitiz Power, Steel Asia, and Robinsons Land.

50 https://www.pds.com.ph/wp-content/uploads/2020/08/21-PNX-CP-SERIES-D-Final-Prospectus-F-rev.pdf

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 Competitive Profile

The two competitors of Phoenix are Petron Corporation and Pilipinas Shell. These three
companies are considered the three major players in the Philippines, comprising 41.58% of the oil
industry as of DOE’s publication for 2021.

Figure 41– Oil Industry Market Share (2021)

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 5.6.4 Key Competitors of Phoenix Petroleum Philippines Inc.

Petron Corporation (“Petron”)

Revenue for 2021 (in Million Pesos): Php 439,330
Market Share for FY 2021: 19.17%

Figure 42– Petron Corporation Logo

Petron Corporation (“Petron”) is the largest oil and manufacturing company in the Philippines,
capturing 19.17% of the market share. While the company has expanded its operations to Malaysia
through the acquisition of Esso Malaysia, its Philippine operations supply 30% of the country’s total
fuel requirements in its Bataan refinery, with a capacity of 180,000 barrel-per-day refinery.
Considered one of the most advanced facilities in the region, the Petron refinery processes crude oil
imported from the Middle East to a full range of petroleum products, including gasoline, diesel, jet/
aviation fuel, LPG, Kerosene, and other petrochemicals. Its other manufacturing assets include its fuel
additive blending plant in Subic and lube oil manufacturing plant in Tondo, Manila.

From Bataan, the products are transported via sea freight to nearly 30 terminals located across
the archipelago. Through its strategically located distribution network nationwide, Petron caters to
power generation, semiconductors, manufacturing, mining, agribusiness, and others. Petron also
supplies jet fuel at airports to international and domestic carriers.

Petron also has the most extensive retail network, with 2,424 service stations nationwide. Its full
array of products of Blaze 100 Euro 6, XCS, Xtra Advance, Turbo Diesel, and Diesel Max is available to
motorists and the public transport sector. In addition, its LPG brands, Gasul and Fiesta Gas, are made
available through an extensive retail network of dealers to households and commercial accounts.

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 As part of one of the country's largest and most diversified conglomerates, Petron partnered with
San Miguel Food Ave. and Treats Convenience stores in selected stations to offer a one-stop-shop for
all motorists on the go.

Pilipinas Shell Petroleum Corporation (“Shell”)

Revenue for 2021 (in Million Pesos): Php 179,137
Market Share for FY 2021: 14.96%

Figure 43– Pilipinas Shell Petroleum Corp. Logo

Pilipinas Shell Petroleum Corp. (“PSPC”) solely operates under the downstream oil and gas
segment. It is primarily engaged in marketing petroleum products, including gasoline, diesel, fuel oil,
aviation fuel, marine fuel, lubricants, and bitumen, to its customers. The company was founded on
January 9, 1959, headquartered in Taguig, Philippines.

PSPC is one of the leading fuel retail players in the country, boasting a solid network of around
1,100 Shell-branded retail stations nationwide. Its primary grade products are FuelSave Gasoline and
FuelSave Diesel. The company also markets Shell V-Power Racing, Shell V-Power Gasoline, and Shell
V-Power Diesel as its premium offering through its retail arm. Recognizing that its customers’ needs
go beyond fuel, the company has non-fuel offerings through Shell Select convenience stores and
Deli2go. It also offers complete vehicle servicing such as oil change and other car maintenance
through Shell Helix Oil Change and Helix Service Centers. PSPC’s commercial product portfolio
includes wholesale commercial fuels, jet fuels, lubricants, and bitumen. Wholesale commercial fuel
premium products include, among others, Shell FuelSave Diesel and Shell Fuel Oil Plus.

PSPC is a key supplier of wholesale commercial fuels to the manufacturing, mining, marine, power,
transport, and other sectors and counts many major conglomerates operating in the Philippines as its
loyal customers.

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Table 24– Key Comparison of Competitors

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 5.6.5 Critical Success Factors (CSF)

To determine the competitiveness and the superiority of the selected petroleum companies, the
following are the success factors identified:

CSF# 1: Strategically located and strong distribution network

Importance weight: 19%

The distribution channel pertains to the path or route the product moves from the supply point
or producer to the customer (Commercemates,n.d.). The oil industry's strategic and robust
distribution network refers to the supply points represented by the depots, terminals, service stations,
and outlets. An efficient strategic distribution network lowers transportation costs (e.g., freight,
transshipment) and the effort of the people involved.

Service stations are considered a direct representative of a brand or oil company in an area. Aside
from marketing considerations (i.e., price and promotions), consumers often buy according to the
proximity and availability of service stations. Likewise, storage locations are critical in expanding the
service stations since it provides logistics support to the demand in an area. This will prevent supply
run-outs; hence the sale of products will be seamless and continuous. Storage also plays a significant
role in maintaining the quality of products, keeping the products free from contamination. Hence, it
is also essential that these facilities hold and maintain the necessary certifications (e.g., International
Organization for Standardization, Occupational Health and Safety Management Standard) to operate
within the international standards.

An oil company's strategic and strong positioning would mean efficiency in management cost and
quality products being delivered to the customers. This allows for a shorter turnaround time, resulting
in lower costs if optimized efficiently and effectively. Furthermore, it provides an avenue for selling,
thus helping to increase the market share of a brand.

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CSF# 2: Operational efficiency of manufacturing assets, depots, and logistical services
Importance weight: 16%

As an oil company expands and becomes more competitive, operational efficiency holds a
significant role as these practices eliminate waste and propagate effective resource utilization. Hence,
an organization can produce more at a lower cost.

For oil companies, this pertains to optimizing their current resources such as depots, terminals,
service stations, and other logistics and manufacturing assets. It should be noted that operational
efficiency starts with procuring raw materials or finished products. Importers should have a fully
integrated, efficient, and mobile process to ensure that risks are mitigated and managed, given the
fluctuations and volatility in the world market. For those with refineries, operational efficiency should
range from 86% to 94% (Forman, Divita, Han, Cai, Elgowainy & Wang, 2004). The key outcome of this
efficiency is none other than lowered cost, to provide a better-operating margin for the company, and
allot those savings for expansion, promotions, and competitive pricing. This would also allow the
company to cushion itself in unfavorable economic conditions (i.e., pandemic, volatility of prices,
fluctuating foreign exchange rates).

Furthermore, these efficiencies are also gauged through the different ratios that can be derived
from an oil company’s financial statements. For example, inventory turnover is the number of times
a company has sold and replenished its inventory. Asset turnover also measures the total sales
generated from the company’s assets.

CSF# 3: Steady supply of petroleum products

Importance weight: 15%

As opined by Saad, Elgashier, and Ezaga (2018), the supply and demand for crude oil and
petroleum products are crucial in determining the success of the world economy. The Organization of
Petroleum Exporting Countries (OPEC) is mainly influential in crude oil's global supply and price,
dubbed an international Oil Cartel. The organization's primary purpose is to coordinate and unify
petroleum policies among its member countries and ensure stable oil markets and a regular supply of
petroleum products to its consumers. OPEC has 13 member countries and collectively supplies 41.9%

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of global crude oil production (OPEC, n.d.). According to CNN Editorial Research (2021), approximately
79.4 percent of the world's proven oil reserves are under OPEC's control. Furthermore, member
countries are ultimately controlling their production in compliance with the agreed policies of OPEC.
Hence, the significant market share of OPEC influences oil prices.

The Philippines, being a non-OPEC country, is heavily dependent on imports for its supply.
Volatility threats continue to threaten the oil supply since it does not have its supply. Hence, oil players
should ensure a steady supply or buffer inventory to align with the government mandate.

For this factor, refining and importation play a major role in an oil company's supply. Through
refining, a company can cushion itself from the threats of importations which include availability,
quality, costs, and susceptibility to external factors (e.g., geopolitical tension, volatility in prices, OPEC
productions, and cuts). On the flip side, owning a refinery could also threaten an oil company since it
would take years to fully achieve the ROI from such a significant CAPEX, especially during unfavorable
economic conditions such as the middle of the pandemic.

Having a steady and reliable supply of products is critical as this is the bread and butter of oil
companies. Any shortfall in supply would translate into the disruption of operations and affects the
company's financial condition. In addition, supply bought at a different time, supplier, and
circumstance could pose a higher price than its current supplier. With this, this CSF is given a weight
of 15%.

CSF# 4: Financial flexibility and resilient capital structure

Importance weight: 14%

Financial flexibility and resiliency are essential in the petroleum industry since this market
requires a significant investment in fixed assets such as plants, terminals, refineries, and tank trucks.
Furthermore, it is noted that it takes some time to recover a company’s investment and gain profit;
hence, financial management is a core to its profitability.

In this industry, it is common to incur debts, and this can be managed through strategic planning,
effective decision making, and controlling. Properly managing the three pillars of working capital:

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accounts receivable, accounts payable, and inventories, are essential factors that oil companies
achieve sustainable growth and profitably. These are raising free cash, raising equity via strategic
partnerships, and shortening the cash cycle. Thus, knowing what type of strategy to deleverage is key
to the company’s profitability.

The leverage ratio can measure financial flexibility. Such ratio assesses the ability of the company
to meet its obligations. It furthermore determines whether the company relies on equity or debt to
finance its operations.

CSF# 5: Outstanding total customer service

Importance weight: 12%

Products in the petroleum industry can be hard to differentiate from one brand to another. Fuel
is considered a commodity, and customers can easily switch brands significantly since the industry is
deregulated in the country. Aside from marketing activities, customer service and experience are a
key differentiator. An outstanding customer experience can help establish an emotional relationship
with the customer, resulting in repeated sales. In a study developed by McKinsey & Company, there
are three factors for excellent customer service: customer-journey consistency, emotional
consistency, and communication consistency. In the oil industry, customer-journey consistency
pertains to how pump attendants (i.e., forecourt crew) deliver their spiels and services, speed, and
accuracy when addressing the customer's needs. Emotional consistency happens when customers
develop a sense of trust in the product or services that they are getting. Reliability is the quality of
fuel that plays a crucial role in attaining customers' trust. Lastly, communication consistency is best
exemplified when companies keep their promises. To illustrate, Petron adheres to the tagline
"Kasabay sa Lakbay," which is reflected in its number of stations nationwide.

To further elucidate, outstanding customer service in the retail segment occurs in the service
stations. Oil companies make sure that the service station environment (e.g., canopy lights, space in
the forecourts, completeness of services – air and water, and mode of payment) is aligned with the
customer's needs. For the commercial side, technical and consultancy services are the differentiating
factor that can increase repeated sales from the customers.

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CSF# 6: Wide range of products and market reach
Importance weight: 9%

The oil industry is marked with little differentiation of products; hence it is often difficult for
companies to market. One way to add differentiation to a brand is through the variety and
completeness of the products offered. Oil base, grades, and additives are often the differentiating
factor (e.g., RON 95, RON 100, Regular Diesel, Premium Diesel). This gives customers the liberty to
choose depending on their fuel requirements. On the other hand, this gives the company a reflection
that they are ready to cater to a broader market regarding purchasing power, capacity, fuel
requirements, and services needed.

To attain the said variety of products, companies usually invest in research and development to
develop new and innovative products and solutions. This is also a way for them to capture more
market share and increase margin.

CSF# 7: Price Competitiveness

Importance weight: 8%

With the enactment of RA 8479 or the Oil Deregulation Act of 1998, the oil and petroleum industry
is highly competitive. Furthermore, the government gives all players the freedom on the prices they
will implement, as long as it is within the weekly MOPS movement and the companies are not
implementing predatory pricing (i.e., prices lower than the company’s cost). Hence, oil players are in
the industry marked with competitiveness, with very undifferentiated products. Thus, pricing is a
critical factor for players to compete with one another. Price sensitivity is one of the factors that
makes a consumer switch from one brand to another; hence, this factor can erode brand loyalty.
Pricing is also a factor that independent players use to attract more motorists. Thus, this factor is given
a weight of 8%.

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CSF# 8: Effective advertising and promotion
Importance weight: 7%

The deregulation of the oil industry allowed several players to enter the industry. Hence, this
results in a more competitive environment. Each is playing to gain market share in terms of volume.
Given that the product is a commodity and hard to be differentiated, oil companies must have an
effective marketing strategy, mainly focusing on place, price, product, and promotion.

Companies would want to establish brand loyalty among their customers; hence they create
periodic campaigns, promotions, and partnerships for their different customers (e.g., public or private
motorists, four-wheel or two-wheel). Some would also resort to getting brand endorsers, creative
crafting of taglines, and amplifying their social media sites. The pandemic also shifted the marketing
strategies of companies to the digital platform (i.e., the creation of apps, social media accounts, and
having influencers). However, these marketing strategies affect the company’s bottom line; hence,
extra caution and prudence are needed when implementing such.

To fully gauge this success factor, advertising and promotion expense versus sales revenue
generated will be used. The lowest ratio is the best indicator that advertising expenses were able to
contribute and yield to the company’s revenue.

5.6.6 CSF Benchmarking versus Key Competitors

CSF# 1: Strategically located and strong distribution network

Table 25– Distribution Network of Oil Players

Table 26– Geographical Distribution Network of Oil Players

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Phoenix: 2

Phoenix lags behind Petron and Shell with 690 stations as of December 31, 2021. The newest third
player and the largest independent company has ten depots and terminals, one asphalt facility, a lube
warehouse, and a CME manufacturing plant. In addition, the company has terminalling and hauling
services that involve the lease of storage space in its depots and into-plane services across 17 airports
in the country. It also has three airport installations in Visayas and Mindanao. Last 2019, Cebu Pacific
renewed its partnership with Phoenix, strengthening its 15-year partnership.

It continuously strengthens the Phoenix brand by creating Phoenix block, a one-stop place for
Udenna-led companies such as Wendy’s, FamilyMart, and Autoworx. Its flagship store is located in
Sucat Skyway. However, Phoenix still has to make its presence on more major expressways.

Petron: 4

Petron has the highest number of stations across the country at 2,424. It is considered the most
extensive in the country, representing 22% of the total stations in the country in 2021. The
geographical distribution of its service stations is almost evenly distributed across the country and has
a presence in significant expressways (e.g., NLEX, SLEX, TPLEX). Moreover, it has the most number in
terms of supply points with 28 terminals and depots, four airport installations, one lube, and an
asphalt facility. It is the only oil company with a refinery of 180,000 barrels per day.

The company also leverages its vast network when soliciting fleet accounts (i.e., companies
enrolling their vehicles under a gas-up scheme). The service stations also serve as the point of sales
for LPG and lubricants, aside from stand-alone outlets and shops nationwide.

Shell Rating: 3

Shell is the second in terms of distribution network with 1,120 stations. The multinational
company also has 27 terminals and depots, three airport installations, ten lube warehouses, and two
bitumen storage facilities. Shell also has three import facilities with a medium-range capacity – North
Mindanao Import Facility, Shell Import Facility Tabangao, and the new Subic Import Terminal Facility.

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 In addition, there is also an ongoing construction for its other import facility in Darong, South
Mindanao, with a storage capacity of 67 million liters. The new import terminal is a joint venture of
Shell, DMCI, and Northern Star Energy Corporation51.

The company also has a strong presence in aviation with airport installations in Ninoy
International Airport, Clark International Airport, and Mactan-Cebu International Airport. It also
supplies the fuel and bitumen requirements of commercial accounts.

CSF# 2: Operational efficiency of manufacturing assets, depots, and logistical services

Table 27– Activity Ratios

51
https://www.shell.com.ph/media/media-releases/2022-media-releases/pilipinas-shell-breaks-ground-its-largest-import-
facility.html

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Phoenix: 3

Phoenix fully imports its finished products and has an integrated supply chain supported by its
sister companies. This allows the organization to ensure the availability of its products nationwide.
On a three-year average, its inventory turnover is better at 15 times having 29 days compared with
its competitors. It is behind Shell but better than Petron for fixed and total assets turnover. However,
Phoenix has a lot to work on when it comes to its accounts receivable turnover of only 5.92,
considered to be three times below the industry performance of 15.40. It also has a collection period
of ~64 days.

Overall, Phoenix has an activity ratio score of 12, a better position than Petron; hence, a rating of
3 is given.

Petron: 2

Petron’s days in inventory are ~59, which adheres to the government’s minimum inventory
requirement (MIR) of 30 days for refiners. This is considered the highest among the oil players and
with the industry average of 47.69. The same is true for the fixed and total assets turnover, indicating
that Petron has a high inventory but is inefficient in converting it into sales. Petron is the major player
in the industry because of its refining capacity and the number of storage facilities; however, it needs
to improve its supply chain efficiency. Taking this into consideration, a rating of 2 is given.

Shell Rating: 4

Shell used to be a refiner with a 110,000 MBCD capacity until 2020. Then, the multinational
decided to divest its operations and convert it into an import facility due to the pandemic. As a result,
in July 2021, it opened its newly transformed Tabangao Import Facility with a storage capacity of 263
ML.

Its inventory turnover is behind Phoenix on a three-year average, considering Phoenix is an

importer; hence, it has a lower MIR at 15 days. However, an improvement from 2020 to 2021 is
observed as its inventory turnover hits 9.74 with ~36 days. Shell’s fixed and total assets are better

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than Petron's despite having fewer storage locations. Furthermore, it takes the lead when managing
its accounts receivable. Its overall activity ratio is 8, the highest among the three oil players. Hence, it
receives the highest rating of 4 for operational efficiency.

CSF# 3: Steady supply of petroleum products

Phoenix: 2

According to the annual report of Phoenix, it sources its petroleum requirements from a small
number of suppliers from Thailand and Korea. Should Phoenix’s supply be disrupted, the company
must meet the shortfall via other suppliers or spot market purchases. At times, buying from suppliers
in different circumstances would translate to higher costs. To mitigate such risks, Phoenix established
its trading arm in 2017. Armed with an inventory management system based on historical sales and
forecast demand, PNX Petroleum Singapore Pte Ltd. (PNX SG) allows the company to make its
purchases timelier from more suppliers. In September 2019, PNX SG entered a partnership agreement
with Hengyi Industries International Pte. Ltd. (HYII) to procure supply from HYII’s refinery in Brunei.

Phoenix furthermore expanded in 2019 as it acquired Origin LPG Vietnam Limited Liability, a
Vietnamese-based LPG business. It was bought by PNX (Vietnam), a subsidiary of PNX Energy
International Holdings Pte. Ltd. In January 2022, Phoenix Gas Vietnam was granted its ISO Certificate
9001:2015, proving the company’s thrust in delivering quality products.

Despite Phoenix’s development, it still lags behind Petron and Shell when it comes to the reliability
of petroleum products.

Petron: 4

Petron was previously owned by Saudi Aramco, the largest petroleum company in the Middle
East. Its business was fully divested when Petron was acquired by San Miguel Corporation (SMC) in
2012. Since then, both companies have maintained a healthy business relationship as Petron sources
most of its fuel requirements with Aramco. It was also able to secure a long-term contract for its
petroleum needs. In 2008, Petron acquired Exxon Mobil Malaysia, including its Port Dickson refinery,

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with a capacity of 88,000 barrels per day (Morales, 2012). Petron also established its trading arm,
Petron Singapore Trading Pte. Ltd., to further strengthen its supply chain to source its requirements
internationally. More than this, Petron has a refinery in Limay, Bataan, which has a production
capacity of 180,000 barrels per day. This allows the company to be more independent of possible
supply shortages in the world market.

Given the strong relations of Petron with its Middle East suppliers and its capacity to refine crude
oil, Shell is given a rating of 4.

Shell Rating: 3

Shell's supply is anchored in its mother company, Shell Overseas Investments B.V., a direct affiliate
of Royal Dutch Shell. Shell's reliability and good reputation in the global market resonate in its
subsidiaries, including the Philippines.

In August 2020, Shell decided to close its Tabangao, Batangas refinery and convert it to a world-
class import facility. Shell has three operating import facilities, one in Mindanao and two in Luzon.
There is ongoing construction for its fourth terminal facility in Darong, Mindanao. To date, Shell
imports petroleum requirements from Thailand, Singapore, and the Middle East. Hence, Shell is given
a rating of 3.

CSF# 4: Financial flexibility and resilient capital structure

Table 28– Leverage Ratios

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Phoenix: 2

Phoenix is part of a rising conglomerate, Udenna Corporation. Its mother company funds its
projects and gives the support that the oil company needs to expand. It became publicly listed in 2017,
allowing the company to gain the funds to finance its expansion projects. In 2019, the company listed
Php 7 billion preferred shares in PSE to fund its programs.

Phoenix performed poorly based on the leverage ratios as it has the highest rating of 8. In
addition, its debt-to-equity ratio and debt-to-total assets ratio is the highest among Petron and Shell.
As a result, Phoenix receives a rating of 2 for this CSF.

Petron: 3

SMC owns Petron by 68.26% as of December 31, 2021. SMC is one of the country’s biggest
conglomerates, with a net income of Php 48.2 billion in 2021. The oil company benefits from its parent
company in terms of funding for its capital-intensive projects and expands the reach of its market.
Some SMC projects require oil and petroleum product sources from Petron. An example is when
Petron supplied the asphalt requirements of SMC’s expressway projects like the TPLEX. Petron has
also been publicly listed since 1994; hence, it can raise funds for its expansion or projects. In January
2022, Petron announced that it intends to release $500-M notes for its plant projects (BusinessWorld,
2022).

In the previous years, Petron was exposed to debt due to the refinery master plan, which takes
time to recover the investment fully. The leverage ratios above would then reflect that Petron is
behind Shell, receiving a rating of 7. With this, it gets a rating of 3.

Shell Rating: 4

Pilipinas Shell is an affiliate of Royal Dutch Shell, and its major shareholder is Shell Overseas
Investment B.V. at 68.12% as of December 31, 2021. Its affiliation with the global company and its
regional counterparts is an advantage when it comes to funding its projects and operations.
Moreover, in 2016, it decided to be a publicly listed company on the Philippine Stock Exchange with

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 a ticker symbol of SHLPH. Hence, if the company needs to raise more funds, it can easily hold a selling
of preferred shares.

Furthermore, Shell has the best leverage ratios in all aspects. This translates that Shell is very
solvent and can pay its liabilities. Shell has no-issuance of preferred shares to fund its projects.

CSF# 5: Outstanding total customer service

Phoenix: 2

In 2014, Phoenix launched its customer service unit (CSU), dedicated to handling customer orders,
requests, and other information and queries via email, landline, or mobile. The CSU also operates
sales support functions, helping and enabling the company's sales team to focus on selling and
account management. In the same year, the organization also established and implemented
enterprise resource planning, SAP A1. Since then, it has led Phoenix to be more efficient and improved
documentation and processes.

Moreover, Phoenix has a refurbishing program for its service stations to upgrade and improve its
facilities to cater to better customer service. As of 2019, it was able to refurbish 275 sites. Phoenix
also took the initiative in 2018 to improve its customer service by establishing a Mystery Motorist
Program. The program gauges customer experience where specific individuals are employed to
portray actual customers to shop and gas up in Phoenix service stations. It aims to improve rating,
adhering to delivering the BEST customer experience, which stands for: B-right and Clean, E-asy and
Fast, S-ervice Ready, and T-ouches the Heart. Phoenix's Mystery Program evaluates three areas: fuels,
FamilyMart, and LPG. In 2021, the oil company had a satisfaction rating of 79%, still far from the
passing score pegged at 85%52. Figure 44 reflects its yearly performance since its inception in 2018.

52
Phoenix Annual Report 2021 https://drive.google.com/file/d/1oVIQeDXrn3tK-FrVMjI_CEY9BDl2CLaq/view

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 Figure 44– Mystery Motorist Program

On the other hand, it continues to improve its customer service by adding FamilyMart, Action.able,
and Autoworx Plus to its portfolio. Such additions improved its service by adding a convenience store
with a digitally enabled payment platform. In addition, while Autoworx Plus is still only five shops to
date, it is helping motorists, especially in the time of the pandemic, by offering sanitation services
together with other selected 19 Phoenix stations.

Phoenix has been improving throughout the years; however, it still has a long way to catch up
with its competitors – Petron and Shell. It is given the lowest rating of 2.

Petron: 4

With its vast network of retail stations nationwide, Petron is well-capable of putting a premium
on customer service. As of 2020, there are more than 400 stores for ancillary business to complement
the primary fuel business -- comprising Treats convenience stores, San Miguel Food Avenue stores,
payment facilities, and other retailers in strategically located retail stations. This makes the largest
network of non-fuel businesses in service stations among all the fuel players in the country. In service
stations, Petron employs its usual six-step procedure that includes the service master attending to the
needs of motorists, such as asking for the preferred payment method, checking oil, water, and
windshield, tire inflation, cross-selling of other complementary products such as engine oils and
lubricants. In addition, customers with Petron Value Card are entitled to free road assistance and to
tow subject to some requirements. Petron also provides top-notch customer experience to its

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commercial accounts by providing technical services such as periodic equipment checkups and after-
sales support.

Internally, Petron has put up a dedicated group, the Petron Customer Interaction Center, to
attend to the needs of its service stations and accounts when it comes to orders, deliveries, and
concerns for all Petron products. On the other hand, Petron also has a Talk2Us feedback program for
customers and motorists where they can send inquiries and feedback through different modes of
communication – SMS, call, and email.

Considering all of these, Petron receives a rating of 4.

Shell Rating: 3

To give customers a one-stop, full-service experience, Shell has put up an integrated retail offering
in its service stations. Aside from the usual facilities, it also has 187 Shell Select stores, 75 Deli2go, 225
Select Express, and 455 Shell Helix Oil Service Centers. As with other fuel companies, Shell offers
services to its customers once it arrives at the station, including oil, tire, water check, and windshield
cleaning. In addition, Shell has a dedicated team of engineers for after-sales support for commercial
accounts. It also has a hotline to attend to the inquiries and concerns of customers.

According to a study by Nielsen, the company maintained its “most preferred fuels brand” in the
Philippines with a brand share preference rating of 37%.

Shell receives a rating of 3 since their overall customer experience can be further enhanced by
adding more channels of communication such as SMS and email to solicit faster response time.

CSF# 6: Wide range of products and market reach

Phoenix: 3

With Phoenix's objective of serving the Philippine market effectively, it offers a wide range of
petroleum products enhanced by the proprietary Phoenix PULSE Technology, a specially formulated
blend with advanced cleaning and protection properties for enhanced power and acceleration.

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Included in the portfolio of fuel products are Super Regular (RON 91), Premium 95 Gasoline (RON 95),
and the flagship Premium 98 (RON 98) for the gasoline variants, and Biodiesel as the sole diesel
variant. In addition, Phoenix entered the LPG business in 2017, acquiring Petronas Energy Philippines
Inc. with its Phoenix Super LPG brand. It also has several lubricant products for automotive and
industrial use, sold to businesses and available in all Phoenix fuel stations nationwide. Moreover,
Phoenix is in the asphalt business, bannered by its asphalt plant in Calaca, Batangas. Its asphalt
business line is even making its name in the segment of cold asphalt mix, which can be used in do-it-
yourself projects. Lastly, Phoenix is the only major player that manufactures CME, a critical fuel
additive mandated by the government. Given this, Phoenix tallies a rating of 3.

Petron: 4

Petron carries a wide array of products to cater to both retail and industrial sectors. Its portfolio
includes retail gasoline variants such as Blaze 100 Euro 6 (RON 100), XCS (RON 95), and Xtra Unleaded
(RON 91), while diesel variants comprise Turbo Diesel and Diesel Max. Commercial products include
LPG, lubricants, aviation fuel, asphalt, fuel additives, and other aftermarket specialties. Lubricants,
greases, and its LPG brand, Gasul, are sold in different channels such as distributors, service stations,
and tertiary outlets in varying SKUs. Bitumen asphalt and aviation fuel are delivered bulk to various
distributors and direct accounts. Petron is the only player capable of locally producing mixed xylene,
toluene, polypropylene, and benzene. Most of these refinery byproducts are used for plastics and
paint manufacturing locally and regionally. Petron is the only oil company in the Philippines that offers
Euro VI-compliant retail fuels. Despite the emergence of new competitors, it manages to maintain its
strong foothold in LPG and asphalt businesses. Aside from domestic distribution, the company has
also successfully developed its lubes and fuel market, extending up to Malaysia, Vietnam, Cambodia,
China, and other neighboring Asian countries. Considering all of these, Petron receives a rating of 4.

Shell: 2

For fuel in the retail sector, Shell has Shell V-Power Racing (RON 98), Shell V- Power Gasoline (RON
95), and Shell FuelSave Gasoline (RON 91) for gasoline variants, and Shell FuelSave Diesel and Shell V-
Power Diesel for diesel variants. Its service stations also carry various lubricants, greases, and
aftermarket specialties. Its retail sales capture 26% of its total product mix, which is rare for industry

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 players since petroleum products are homogenous by nature. In 2011, Shell divested its LPG business
to Isla Petroleum and Gas Corporation, an affiliate of Itochu Corporation53. Like LPG, Shell also
divested its assets in the fuel oil business. However, it manages to expand its bitumen asphalt business
and is currently the market leader in the sector. As such, Shell merits a rating of 2.

CSF# 7: Price Competitiveness

Table 29– Average NCR Pump Prices

(June 2021 to December 2021)

Phoenix: 4

Based on the table above, Phoenix offers the lowest prices of Php 44.57/liter to Php 52.76/ liter
in the market. Hence, the oil player is given a rating of 4.

Petron: 3

With Petron’s marketing and sales strategy of keeping brand equity, the company has second to
the highest prices compared to the other players. Petron usually implements a pump price reduction
once major players Phoenix or other players lower its price. This still happens on a case-to-case basis.
Due to Petron’s high prices reflected in the table above, a rating of 3 is given.

Shell: 2

Shell’s prices are highest among all players at Php 46.15/ liter to Php 58.15/ liter. Thus, a rating of
2 is given.

53 https://www.fuelsandlubes.com/knowledge-base/shell-sells-lpg-business-in-philippines-to-itochu-and-local-firm/

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CSF# 8: Effective advertising and promotion compute ratios first include price

Table 30– Marketing to Revenue Ratio

Phoenix: 2

Phoenix, the smallest player relative to Petron and Shell, also invests in advertising and promotion
to be known by the public. Ads agencies usually do Phoenix’s advertising programs on a per-project
basis. In 2018, Phoenix launched its advertisements on Phoenix Pulse Technology, with Ms. Rhian
Ramos as its endorser. In March 2019, the organization launched its “Sarap Pala Magluto” campaign
with Ms. Sarah Geronimo, building brand confidence in Phoenix Super LPG. This was an advertising
project done by Phoenix with Havas Ortega Group. Such campaigns paid off as Phoenix was hailed as
the Marketing Company of the Year in the 40th Agora Awards held in January 2020 (Philippine
Marketing Association, 2020). To give thanks to the public, Phoenix launched its “Twenty on Twenty”
campaign on February 20, 2020. The company offered a discounted price of P20 on all its fuel variants.
The promo was availed from 10 am to 12 noon for ten service stations across the country.

Along with these campaigns, Phoenix has actively partnered with other brands to strengthen the
Phoenix brand. To illustrate, in the last quarter of 2019, Phoenix partnered with RCBC to create RCBC
Phoenix Mastercard. Card users can get rebates upon using this in fueling in Phoenix stations. They
also launched Pinyo Tsuper Card in the same year, a loyalty program for public utility vehicles.
Currently, Phoenix is investing in its mobile app, Limitless.

In the three-year average versus its competitors, it is observed that it spends the lowest on
advertising and promotion, with its lowest in 2021 at Php 253 million. A downtrend has been observed

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 since 2019 as the oil industry was heavily affected by the pandemic. Its marketing to revenue ratio is
0.36%, considered to be the highest compared to other players. Thus, a rating of 2 is given for Phoenix.

Petron: 4

Having started its operations in the Philippines in 1933, Petron has been a known brand already
for so many years. It has been able to establish itself since then. In the past years, Petron has been
reducing its advertising and promotions costs. Back in 2019, it launched its “Kasabay sa Lakbay”
commercial, featuring a nostalgic approach that Petron has been touching the lives of Filipinos across
all generations. Annually, Petron has launched its “Lakbay Alalay” program as Filipinos observe the
Holy Week. This is held in service stations on the expressways. It also partnered with big brands for
promotions such as Toyota for the “Toyota Racing Festival” and Jollibee for freebies. Promotions of
Petron also include selling merchandise and collectible items such as toy cars and tumblers. The
company is also consistent in advertising its lubes. In October 2020, the company launched its
“Kalmakina” advertisement, which garnered 53K likes and 5.2K shares on Facebook.

In 2019, its loyalty card, the Petron Value Card, was transformed into the new platform of P-Miles.
As a result, consumers can get points and freebies in fueling from Petron stations and its partner
merchants across the country.

Regarding the marketing to revenue ratio, Petron grabs the top spot, with the lowest figure of
0.12%. Hence, it receives a rating of 4 under this critical success factor.

Shell Rating: 3

In 2017, Shell launched its Dynaflex Technology, the new technology for its V-Power line (i.e., for
its premium diesel and gasoline54). Two years later, Shell introduced its ambassadors, namely, Ms.
Maine Mendoza, Mr. Drew Arellano, and Nico Bolzico. The launch highlights that Shell is formulated
for efficiency at a reasonable price; hence, the tagline "I choose Shell Fuel Save. So lit sa sulit"55.

54
https://www.philstar.com/business/motoring/2017/07/11/1718627/shell-launches-new-v-power-fuels-dynaflex
55
https://www.shell.com.ph/motorists/shell-fuels/maine-mendoza-drew-arellano-nico-bolzico-recommend-shell-fuels.html

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 Aside from this, Shell still retains its long-time partnership with SM Advantage for its loyalty
program. Shell is also implementing campaigns in their service stations such as free drinks, a kilo of
rice, and more when motorists fuel up in their stations.

Shell, on average, spends Php 537 million annually on its advertising and campaigns. It's marketing
to revenue ratio is at 0.28%, behind Petron. It's rating for this factor is 3.

5.6.7 Competitive Profile Matrix (CPM)

Table 31– Competitive Profile Matrix

Petron has the highest score at 3.46, Shell with 3.13, and Phoenix with 2.41. The rankings are
aligned with DOE’s market share report, with Petron being the market leader with 19.17% as of 2021.
The critical success factors support Petron’s leadership identified. It has the most extensive network
in terms of supply points and service stations, providing the utmost customer service and a wide range
of products and market reach. Shell and Phoenix are ranked behind the market leader. However, the
critical success factors (CSF) that they scored 2-3 should not be discredited as this can be further
improved to be the company’s next competitive advantage.

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 Being relatively new in the industry, Phoenix has to catch up with its competitors in almost all
CSFs, except for its competitive prices. To illustrate, its service station only accounts for 28% of Petron
and 7% of the total service station count in the country as of 2021. As Phoenix works on these factors,
it should also continue to build its brand where it is thriving, which is on its pricing and operational
efficiency.

5.7 External Factor Evaluation (EFE) Matrix

5.7.1 List of Opportunities – Importance Weights and Firm’s Responsiveness

Table 32– List of Opportunities and Importance Weights

Opportunity #1: Philippine's positive GDP outlook

Importance Weight: 14%

A strong economy equates to more opportunities for the country. The business climate reflects
that the country has. A good economy means that people are more willing to invest and grow their
money. The same is true for the oil and gas industry. A positive outlook in the economy translates to
more mobility of goods, people, and innovation; hence, more sales for the oil players.

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Firm’s Responsiveness: 4

Phoenix has been preparing for the anticipated growth brought by the progressing economy. This
is evident as it adds more of its service stations, builds new markets outside the country, invests in
growing its supply points, and expands its non-fuel business (i.e., FamilyMart, bills payment) to add
foot traffic into its stations.

Opportunity #2: ‘Build Build Build’ program continues and further pushes into completion amid
pandemic

Importance Weight: 13%

Build-build-build program is the primary program of the Duterte administration that aims to usher
in the golden age of infrastructure in the Philippines. Furthermore, it seeks to bolster the public
infrastructure from an average of 2.9% to 7.3% by the end of President Duterte (Subic-Clark Alliance
for Development Projects, n.d.). In 2020, the infrastructure disbursements totaled Php 869 billion or
4.8% of the GDP, despite the height of the pandemic (Philippine News Agency, 2021). 2021 until the
first half of 2022 is considered the final year of the program, and projects are still continuous. Last
May 2021, the Philippines' National Economic Development Authority (NEDA) approved a revised list
of 112 infrastructure flagship programs. Examples of such programs include airports, seaports,
bridges, and highways

Firm’s Responsiveness: 3

In preparation for the anticipated demand, Phoenix established 185 service stations from 2016 to
2021. Moreover, it started to accelerate its asphalt business in 2018, partnering with Thailand-based
TIPCO Asphalt Public Co. Ltd. It was able to supply contractors directly involved with the Build-Build-
Build program of the government. Moreover, its sister company, Chelsea Logistics, was awarded for
being the proponent of constructing Davao and Panglao airports which are critical programs under
President Duterte’s program. The Uy-led infrastructure company was also able to bag Davao's Php
19.9 billion Sasa Port project (BusinessWorld, 2021).

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Opportunity #3: Automotive industry growth

Importance Weight: 10%

The automotive industry is mainly composed of vehicles and motorbikes. The vehicle segment is
composed of passenger and commercial vehicles. While the industry declined during the pandemic,
automotive sales have been recovering. Such developments directly impact the oil industry as it is one
of the primary consumers of petroleum products. In the figure below, the transportation sector
accounts for ~65% of consumption in 2021

Table 33– Oil Consumption by Sector (2015 –2020)

On the other hand, the transportation sector’s CAGR is 4.66%. Hence, translating to more sales
for the petroleum industry.

Firm’s Responsiveness: 3

Phoenix tries to capture the automotive industry with its marketing campaigns, focusing on its
loyalty program. It is implementing its loyalty program entitled Pinoy Tsuper Hero, catering specifically
to PUV drivers. This aims to capture the passenger vehicle segment by rewarding points for every fuel
purchase. The loyalty and rewards program also gives drivers a Tsuper Advantage, a special inclusion
that recognizes outstanding contributions made by the drivers. In addition, it is ramping up its loyalty
campaign via the Limitless App for private drivers. Phoenix is also co-presenting events with carmakers
such as Toyota, Honda, Ford, and more to highlight its brand. Since 2016, Phoenix has held the “Auto
Focus Pre Christmas-Multi-Brand Test Drive Festival” event. This gives the buyers an opportunity to
test drive their car of choice, fueled by Phoenix.

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 Opportunity #4: Emergence of ride-hailing, online delivery, e-commerce, and digital wallet

Importance Weight: 8%

The pandemic sparked a new business opportunity in the Philippine landscape, giving rise to
digital platforms and the e-commerce industry. In addition, the pandemic ushered people to resort to
more goods and food delivery services. Moreover, ride-hailing services are also fast-growing,
especially since the Philippine government allowed more transport network companies such as
Joyride, TokTokGo, and more to operate in the country. The spur of this industry leads to a great
demand not only for vehicles but also for petroleum products.

Firm’s Responsiveness: 4

Phoenix has partnered with transport network companies such as JGO, Lalamove, Grab, and more
to give riders exclusive benefits and rewards, following the Pinoy Tsuper Club program56. Riders can
earn points while purchasing Phoenix products. This can be enjoyed in selected Phoenix service
stations across the country.

Phoenix leverages its multi-format network of retail offers to expand its digital footprint to drive
synergies and add value across its portfolio. Through the Company’s digital initiatives, such as the
introduction of contactless payments and the Company’s digital mobile application, Limitless. In June
2020, Phoenix launched LIMITLESS, a lifestyle rewards program with its mobile application. LIMITLESS
allows users to earn and redeem points from participating merchants, such as Phoenix and
FamilyMart, and gain access to exclusive promotions and privileges. The Company aims to
complement its existing retail offering to expand its operations in this segment as the country, and
the economy begins to recover from the impact of the pandemic.

56 https://www.phoenixfuels.ph/phoenix-extends-fuel-discount-to-grab/

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 Opportunity #5: Implementation of the Biofuels Act of 2006

Importance Weight: 6%

The Republic Act 9637 or the Biofuels Act of 2006 mandates all oil companies to include biofuels
as a component in their products. A 5% ethanol blend is required for gasoline in 2009 and 10% in
2011. As for diesel products, oil companies must include 1% of biodiesel or CME in 2007 and 2% in
2009.

In January 2022, biofuel market players want to increase the 2% CME component to 5% to curb
greenhouse gases in the country and give coconut farmers more sources of income (Gines, 2022). The
Philippine Biodiesel Association stated that the local industry could serve the projected 5% (B5)
demand of 650 million liters per year. If ever implemented, the implementation will be phased via
yearly upshift. The house committee on energy chairman, Mikey Arroyo, has then expressed his
support for the said move.

Firm’s Responsiveness: 4

Phoenix has been undertaking steps to prepare for future demand in terms of green fuel. Five
years after fully implementing the biodiesel blending, Phoenix decided to establish its own CME
manufacturing plant, the first petroleum company in the country to have such a facility. The plant is
equipped with state-of-the-art equipment and a laboratory for quality assurance and control. It is
located in Villanueva, Misamis Oriental, and can produce 1-million liters to 2-million liters per
month57.

Moreover, the Udenna Group also bought 90% controlling shares of the Malampaya oil field from
Shell and Chevron. As a result, the said oil field has been the sole fuel source for gas-fired power plants
in Luzon.

57
Phoenix Annual Report 2014 https://www.phoenixfuels.ph/pdf/2014_Annual_Report_1.pdf

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 5.7.2 List of Threats – Importance Weights and Firm’s Responsiveness

Table 34– List of Threats and Importance Weights

Threat #1: Proliferation of illegal fuel trade

Importance Weight: 11%

The proliferation of illegal trade is one of the effects of RA 8479 or the Oil Deregulation Act of
1998. The Department of Finance estimates that $750 million is lost annually due to oil smuggling. It
threatens the profitability of those companies that rightfully settle their obligations to the
government. Businesses that adhere to illegal fuel trade can sell their products lower than other oil
companies; hence, more sales are generated.

Firm’s Responsiveness: 1

In January 2020, Phoenix started its fuel marking on all its petroleum products to support the
government’s mandate to curb oil smuggling in the country. The company ensured that everything
would be marked once its products reached its import terminals.

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 Threat #2: Deregulation of the oil industry

Importance Weight: 10%

With the Oil Deregulation Law implementation, competition is increasing in the industry. As a
result, the growth of white and independent players in the country is growing significantly. Based on
2021 DOE data, their combined market share is already at 53.11%, equivalent to a 13.63% CAGR since
2016. Likewise, this affects the number of brand alternatives. Hence, it not only eats up the market
share of big players but makes it difficult for these players to stand out and establish strong brand
loyalty.

Firm’s Responsiveness: 3

Phoenix is given a rating of 3 since the company could gain market share, allowing them to be the
third major player in the country since 2019. Moreover, it grew its stations by more than 35% since
2016 to catch up with the other prominent players in the market. It is also investing in innovative
products like the Phoenix Pulse Technology and its introduction of cold patch asphalt mix. Phoenix as
a brand is also gaining popularity. It forges partnerships with different companies, gets endorsers such
as Sarah Geronimo, and joins the Philippine Basketball Association with its team, Phoenix Fuel
Masters.

Threat #3: Rising international and domestic geopolitical events

Importance Weight: 9%

The financials of oil companies are primarily affected by the prices of crude or finished petroleum
products. International and domestic geopolitical events such as war and natural calamities are a few
factors that affect the volatility of prices. In the last quarter of 2018, Dubai crude oil crashed from
$79.39/bbl to $57.32/bbl58. It was a result of many factors, but mainly when US President Trump
decided to restore the sanctions to Iran that prompted other OPEC to increase oil supply, given the

58
https://www.cnbc.com/2018/12/31/oil-prices-are-set-for-their-worst-year-since-
2015.html#:~:text=U.S.%20crude%20settled%20on%20Monday,fell%20more%20than%2030%20percent

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anticipated loss of production from Iran. With the slumped prices in the oil market, oil companies are
forced to implement consecutive price rollbacks, resulting in inventory losses.

On a local landscape, when areas are hit by typhoons or any natural calamity and the local
government declares a state of calamity, a price freeze is implemented on essential commodities such
as fuel. Oil companies will then suspend the price increase to these areas, and such an inability to pass
on prices affects the company's profitability.

While oil companies may be armed with risk mitigation activities and contingency plans, they are
still exposed to oil price fluctuations brought by international and local events. Considering this, an
importance weight of 9% is given.

Firm’s Responsiveness: 1

Phoenix is an importer of petroleum products and is highly susceptible to the volatility of prices
caused by rising international geopolitical events. It maintains an inventory between 30 to 40 days
and uses the average method to account for its inventory. Therefore, any events that affect the global
oil prices directly affect the inventory of the company. It may be favorable when price increases are
consecutive, which causes an inventory gain. Otherwise, events will pose a loss for the company.
Hence, as a response, Phoenix created a group that will mitigate the impact of such events. This group
is also in charge of developing initiatives that will reduce the working capital requirements, effective
inventory management, and optimize volume for sales and profitability.

Threat #3: Depreciation of the Philippine Peso

Importance Weight: 7%

For an industry that is mainly reliant on importation for its products, the depreciation of the
Philippine Peso is a concern. As the Peso depreciates, its purchasing power weakens. This factor
translates into a decline in the material or product to be acquired, affecting the goods sold and losses
in foreign exchange. Hence, this could significantly affect the profitability of a company.

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Firm’s Responsiveness: 2

As a firm that imports almost all its products, Phoenix has increased exposure to foreign exchange.
In 2021, the foreign currency exchange losses made up 8.38% of the company’s total finance cost of
Php 3.6 billion.

Given this, a dedicated team in Phoenix led by the Governance, Risk and Assurance group and
PNX SG oversee risk mitigation brought by the fluctuating foreign exchange rate and importation
prices. This is mainly done by using hedging instruments. Furthermore, the said groups evaluate the
company’s performance concerning the country’s economic climate, thus, maximizing the leverage
power via strategic timing of importation and settlements.

Threat #4: Fluctuating interest and inflation rate

Importance Weight: 7%

This factor significantly affects the investment appetite of oil companies and other potential
partners to facilitate new projects, especially those that would require significant financing. It is noted
that technology, innovation, and expansion are fundamental game-changers in any business;
however, such requires a serious amount of capital. The oil and petroleum industry are no exception
since it is a capital-intensive industry, as reflected in its facilities and service stations. These programs
can be financed best through loans to prevent overexposure to equity.

Moreover, the inflation rate affects the spending behavior and priorities of the consumers. Given
this condition, households may allocate more funds to support basic needs. A shift can also be seen
as inflation spikes. To illustrate, a family who buys fuel monthly for their vehicle may opt-in to riding
public utility vehicles. Hence, this affects the fuel type sold and upselling the consumers.

With this, the fluctuating interest and inflation rates are given an importance weight of 7%.

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Firm’s Responsiveness: 2

Phoenix continues to expand by obtaining long and short-term loans. In 2020, Phoenix issued its
fourth series of short-term commercial papers (STCP). The Philippine National Bank and the
Investment Corporation stood as the sole issue manager and lead underwriters. The proceeds from
the STCP are used to refinance Phoenix’s existing short-term loans, which are then used to finance
the company's working capital.

When it comes to rising inflation, Phoenix keeps its prices competitive versus other players in the
market.

Threat #6: Implementation of the TRAIN Law

Importance Weight: 3%

The implementation of the TRAIN Law caused an increase in the selling price of oil companies. In
the light of increasing oil prices in the world market (i.e., brought by the Ukraine-Russia War), the
TRAIN Law furthermore adds to the price consumers must pay. The public consumers have already
expressed to suspend the implementation of TRAIN Law due to the ongoing consecutive increase in
oil prices brought by the geopolitical tension. While oil companies are just passing on the excise tax,
it causes a movement of demand brought by cost-cutting measures of the consumers.

Moreover, the law's implementation affects the automotive industry, causing its prices to
increase. Since oil and vehicles are complementary goods, a potential decline in demand is posed for
petroleum products.

Firm’s Responsiveness: 1

Phoenix's operations are subject to such government mandates. To mitigate the risks brought by
TRAIN, Phoenix's corporate affairs department is dedicated to monitoring compliance with such
regulations. Phoenix's responsiveness to the market was rated 1 since events like this are already
beyond the firm's control.

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 Threat #7: Emergence of renewable energy

Importance Weight: 2%

The increase in global and local oil prices and environmental concerns make it more attractive for
consumers, companies, and potential investors to focus on finding innovative solutions through
alternative fuels. Examples of alternative or renewable energy include natural gas, ethanol, palm oil,
and others. However, if this renewable energy becomes available and more affordable, oil companies
are at risk of declining demand.

Firm’s Responsiveness: 3

Phoenix continues to explore potential investments to adapt to changes in demand quickly to

cushion itself from the possible shift to renewable energy. Currently, Phoenix bought 90% of the
Malampaya gas field, which contains natural gas. Moreover, Phoenix has a CME facility that produces
CME as an additive for diesel. Talks about increasing the biofuel component are active in Congress59.

59
https://www.sunstar.com.ph/article/1926520/pampanga/local-news/mikey-arroyo-promotes-renewable-energy-use

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 5.7.3 External Factor Evaluation (EFE) Matrix

Table 35– Eternal Factor Evaluation Matrix

Based on the EFE matrix above, Phoenix has a total weighted score of 2.68, which indicates that
the company’s responsiveness to both opportunities and threats is adequate. It also reflects that
Phoenix was able to take advantage of the opportunities that it faced. Phoenix has to be more prudent
regarding strategies that will fully maximize the opportunities bought by the changing times. The
company addressed some of them when it comes to threats, while some factors are already beyond
its control. It was able to adapt to two of the threats mentioned.

Phoenix should continue addressing and strengthening its activities in the threats that it was able
to get a high score. Currently, the table shows that it can compete with the other players in the
market. But on the other hand, it should continue to strategize and mitigate the risks bought by
geopolitical tensions, fluctuating pesos, and interest rates.

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 5.8 McKinsey’s 7s Framework

5.8.1 Strategy

Enhance Brand Awareness

Phoenix’s thrust is to build a brand recall among its consumers continuously. Over the past years,
Phoenix built its brand through marketing activities, including mass and digital placements,
endorsements, and participation in various trade expositions and sporting events.

Its award-winning campaigns includes: “Sarap Pala Magluto” highlighting the LPG segment and
“Kwentong Phoenix” supporting the country’s SMEs. The company was also able to bag the Marketing
Company Award for the Year in 2020 at the Agora Awards60.

Increase Market Share

Phoenix is currently the third oil player in the country, and the organization is geared toward
strengthening its market share. Now, it is focusing on increasing its position in retail (i.e., service
stations) and B2B (i.e., industrial or commercial) markets. Likewise, its roadmap is leaning towards
tapping the underserved and unpenetrated markets. It is also strengthening its aviation trading and
service segment. Furthermore, since Phoenix is in the digital space, it is also expanding its Limitless
App and growing its Possible platform transactions for its online payments.

Improve Operational Efficiency

Phoenix pursues a strategic partnership model to reduce the capital commitment for its
operations. Phoenix has ongoing partnerships for its petroleum and hauling business, such as Galaxi
Petroleum Fuel Inc., CJI Fuels Corp., and JV Hauling and Trucking Corp61. More than that, collaboration
and building synergies with its parent company are also being done to further strengthen its hold in
the oil and petroleum industry.

60
https://www.phoenixfuels.ph/phoenix-wins-top-award-at-40th-agora-
awards/#:~:text=The%20Agora%20Awards%20cited%20Phoenix,Agora%20with%20this%20prestigious%20award.
61Phoenix Annual Report 2021 https://drive.google.com/file/d/1oVIQeDXrn3tK-FrVMjI_CEY9BDl2CLaq/view

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Conclusion:

Phoenix's current strategies are aligned with its goal of building a higher market share in the
Philippine oil industry. The company can efficiently use its strong relationship with its parent
company. This is one of Phoenix's strong points in strengthening its overall performance. However, it
should note that its costs or debt should be effectively managed as it further expands. The company
should extend its utmost prudence in choosing where to invest, especially since a significant amount
of investment is at stake.

5.8.2 Structure

Ownership Structure

Figure 45– Phoenix’s Ownership Structure

The parent company of Phoenix is the Udenna Corporation, a conglomerate led by Mr. Dennis Uy.
Phoenix as a company (PPPI) was incorporated in the country on May 8, 2002. As of December 31,
2021, based on Phoenix’s Ownership Report, the principal shareholders of PPPI include Phoenix
Petroleum Holdings Inc. (PPHI) at 40.84%, followed by ES Consultancy Group Inc (ESGI) and Udenna

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 Corporation62. PPPI’s shares are listed on the Philippine Stock Exchange, and the public owns 14.99%.
The affiliates and privately owned hold the remainder.

One of its principal shareholders is PPHI. It was incorporated on May 31, 2006, to provide PPPI
with management and investment guidance and technical advice for its retail, commercial, industrial,
and manufacturing business units. ESGI, on the other hand, is a consulting firm that gives direction in
financial strategy, capital mergers, acquisitions, and joint ventures.

As of December 31, 2021, Phoenix has 12 subsidiaries:

1. P-F-L Petroleum Management Inc. (PPMI) – Organizes and supervises the operations and
marketing of different kinds of service – oriented companies (i.e., service stations).

2. P-H-O-E-N-I-X Global Mercantile (PGMI) – Engages in the production of lubricants, fluids, and
additives of petroleum products for motor vehicles and other transportation. PGMI also manages
the selling of CME by-products such as acid oil and fatty acid distillates.

3. Subic Petroleum Trading and Transport Phils., Inc. (SPTT) – Carries out the buying and selling,
distribution, importation, and exportation, storage, and delivery of petroleum products to
industrial, marine, and aviation accounts.

4. PNX Petroleum Singapore Pte. Ltd. (PNX SG) – The regional trading arm based in Singapore. The
group directly buys from refineries in the region and sells to local and regional buyers.

5. Phoenix LPG Philippines, Inc. (PLPI) – Manages the LPG business and other petroleum products
including marketing and sales.

6. Duta Inc – The land arm of Phoenix who is engaged in buying, investing, exchanging, and selling
of securities.

62
Phoenix Ownership Report December 2021 https://www.phoenixfuels.ph/wp-content/uploads/2022/01/1-17-PNX-POR-as-
of-12.31.2021_compressed.pdf

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7. Philippine FamilyMart CVS, Inc (PFM) – Oversees the operations of FamilyMart convenience
stores including import, export, and marketing activities.

8. PNX Energy International Holdings Pte. Ltd. (PNX Energy) – Engages in upstream and downstream
activities, and businesses that has not yet started its operations as of December 31, 2021.

9. Phoenix Pilipinas Gas and Power, Inc. – Conducts and carries the business of selling, trading of
natural gas and liquified natural gas.

10. Phoenix Road Transport Pilipinas Inc. (PNXRT) – Carries out and strengthens business operations
of service-oriented companies (e.g., service stations, hauling companies), except fund
management.

11. Action.Able, Inc. (AAI) – Sells, leases or distributes electronic devices to distributors or merchants
for digital marketing and/ or e-commerce. It also provides a digital outline that can be used for
electronic device.

12. Think.Able Limited (TAL) – A Hong Kong based company that oversees the trademark of AAI.

Organizational Structure

Phoenix follows a hierarchical and functional structure, led by the chairman and chief strategy
officer, Mr. Dennis A. Uy. He is then assisted by Mr. Henry Albert R. Fadullon, the company's president
and chief executive officer. Mr. Fadullon oversees the organization's other functions: internal audit,
operations, finance, legal and external affairs, and security.

The operations department, which Mr. Fadullon concurrently holds, is responsible for activities
such as producing, distributing, marketing, and selling petroleum products in all service stations and
distribution outlets across the country. It also ensures that the critical activities in depots and
terminals are carried out daily.

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 Figure 46– Phoenix’s Organizational Structure

The finance team, which the CFO leads, is responsible for Phoenix's overall financial health and
resources. The internal audit then oversees that proper controls, governance, and risk management
processes are established and working. The legal team ensures that Phoenix’s actions are legal and
compliant with Philippine laws, rules, and regulations. The external affairs and security are in charge
of external communications and security. Lastly, the IT team led by the chief digital officer oversees
the company's adoption and management of technology.

Conclusion:

Phoenix’s company structure is adequate in providing the organization with groups and divisions
that would support coordination to maintain systems and processes, manage profitability, and
mitigate risks that the company will encounter. However, the organization can still improve by
consolidating groups into one department or division. For example, the LPG Luzon and LPG Vismin can
directly report to one LPG head. Hence, there will be consistency and more precise direction in terms
of the growth and profitability of the business segment.

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 5.8.3 System

The rapid growth in Phoenix's trading, terminalling, and hauling operations places additional
pressure on its management team, marketing team, in-house project management division,
forecasting tools, data modeling, financial reporting, and information systems. In addition, three vital
areas need constant updating and maintenance: the enterprise resource system, inventory
management, and customer service.

Enterprise Resource system

The company-wide enterprise platform is SAP A163, used across all functional channels –
finance, procurement, sales, inventory management, and logistics, to ensure the supply chain is
documented and adequately monitored.

Inventory Management

Phoenix has adopted an inventory management system based on historical sales and
forecast demands, which allows the company to meet the supply needs of its clients promptly. In
addition, it established Phoenix Singapore, which acts as a regional hub handling the purchase of
the company's various petroleum requirements and provides access to refineries.

Since the company's cost for finished petroleum products is denominated in US dollars
while financial reporting is in Philippine peso, its exchange rate exposure is vulnerable to the
volatility of the market. To mitigate risks, Phoenix's treasury engages in plain vanilla hedging
instruments, such as options and currency forwards

With the inventory value comprising about 20% of total assets, on average, Phoenix
continuously improves and manages its existing and incoming list of finished petroleum products
to ensure it is enough to meet the required customer demands in a timely fashion.

63
Phoenix Annual Report 2012: https://www.phoenixfuels.ph/pdf/Phoenix_AR_2012.pdf

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 Customer Service

Phoenix continues to install the point of sale ("POS") system across its retail network
throughout the Philippines. POS systems are used to gain efficiencies through automating retail
transactions and properly monitoring actual sales in service stations. As of the year-ending 2021,
the company has installed POS terminals in most of its retail service stations in the Philippines.

An added support for customer services such as technical services and after-sales support
ensures the quality of products and the productivity of customers' fleet and equipment. This
technical assistance and initiatives come in the form of industry and in-house training, technical
visits, lubricant surveys, product matching and application, issue resolution, and after-sales
services such as emission tests and engine analysis. In addition, the company's quality assurance
and product development services include product testing, formulation issuance, quality control,
development of new products, and formulation optimization.

It continuously builds infrastructure, such as partnering with Globe business to provide

free mobile calls to #78737 LPG delivery service.

Conclusion:

The company's thrust of putting system importance into three areas is effective. First, the
company's supply chain is vital as it manufactures and distributes its products; hence, it is essential to
fully support it via the information systems mentioned. This integrative approach coordinates product
order creation, customer delivery, and customer feedback.

5.8.4 Style

Phoenix Petroleum is led by an experienced team of professionals from the oil and gas industry,
formerly from companies such as Shell, Petron, Total, Chevron, and Unioil. The company currently
operates with a lean and dynamic organization, enabling faster decision-making and response time
and allowing the company to act quickly on acquisition opportunities and dynamic pricing
adjustments. The company believes that its management team's strong management and execution

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capability will enable it to continue improving its operations' efficiency, customer satisfaction across
the respective industries, and the quality of its product and service offerings.

Figure 47– Phoenix’s Senior Management from Different Oil Companies

The organization also encourages its employees to try new initiatives and methods in their work,
allowing everyone to discover new insights. This work environment in the company will enable them
to learn new things. The management accepts the fact that lessons are learned from committing
mistakes. A reflection that the company truly upholds the 5H (i.e., hungry, hardworking, honest,
humble, and holy).

Conclusion:

Phoenix's management style is adequate and effective in bolstering the company's growth in
terms of profitability and market share. Senior management comprises non-family, professional
managers with ~20 years of average experience in their respective fields of expertise from
multinationals and the Philippines' largest companies. Phoenix prides itself on having the best of the
multinationals and the independent players. Overall, management and culture employ a participative
and delegative style of leadership. Hence, a sense of initiative and responsibility is built in every
employee.

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 6. COMPANY ANALYSIS

6.1.1 Staff

Demographics

As of December 31, 2021, Phoenix has a total of 654 employees. A reduction of 13% was observed
as the company restructured due the Covid-19 pandemic, this is mostly from the rank-and-file posts.

Table 36– Employee Count (2019 – 2021)

In 2021, the majority of the organization holds a supervisory position at ~38%. Most of its senior
employees are seasoned professionals from the oil and gas industry. They are employees from
companies such as Shell, Petron, Total, and Chevron.

On the other hand, Phoenix has more male employees at 61% or 399 headcounts. Male
employees are mostly doing fieldwork and are designated in the country's depots, terminals, and
plants.

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 Figure 48–Employee Gender Composition (2021)

Benefit and Support

Aside from the statutory benefits that the company provides, Phoenix grants the following
benefits:
• Group term life insurance and hospitalization
• Free uniforms and meals
• Paid leaves (e.g., vacation, sick, and emergency)
• Stock ownership options
• Retirement plan (via Philippine National Bank)

Phoenix furthermore believes in investing in its people. Hence, trainings and development are
also given (e.g., coaching, formal training, leadership, and on-the-job development).

During the pandemic, employees are given additional support such as the early release of the
13th-month pay and Christmas bonus, pandemic care package, and internet subsidy. Employees from
those who work in the terminals and depots are still under work-from-home (WFH) arrangement.
Employees who report onsite are fully supported with transportation allowance and protective gear.
Its employees will continue to have this WFH arrangement until July 2022. A reassessment will be
done by the third quarter of this year. The company is also aligned with DOE’s encouragement to
support WFH amid soaring gas prices (Velasco, 2022).

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 Figure 49– Phoenix’s Employees Attend Online Town Hall Meeting

Senior Vice President Raymond Zorilla also stated that aside from safety, allowing employees in a
WFH setup is fueled by employee preference, which the management backed by research and focus
group discussions.

Quarterly townhalls are also held for management to update employees on important
information. It also serves as an avenue for employees to raise their concerns and for everyone to
understand the goals and values of the organization.

Phoenix also strengthened its employee engagement and health programs amid the pandemic,
providing mental health webinars to mitigate the adverse effects of stress and for employees to avoid
burnout.

These efforts and support received positive employee feedback, which is reflected in the
company’s internal survey with a participation rate of 99.46%. In addition, it garnered a 4.36 mark on
the five-point (with 5 being the highest) overall satisfaction among its employees. Moreover,
motivation and loyalty are at 4.53, higher than the previous years. It is also noted that the average
tenure of employees is at 4.4 years.

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Recruitment

When it comes to the recruitment and selection of Phoenix, it has its human resources (HR)
department, which sources and screens its internal and external candidates for vacant positions. In
searching for its applicants, Phoenix posts job advertisements on social media platforms such as
LinkedIn, Jobstreet, and Facebook. The company also joins job fairs in various universities to gather
applicants. It also has an internship program where undergraduates get a glimpse of working in an oil
company. At times, the Phoenix hires these students. In hiring, the recruitment team considers the
following general qualifications:

• Graduate of bachelor’s degree

• At least 2 years of work experience
• Oral and communication skills

For a technical position, the organization requires specific qualifications such as six-sigma
certification, project management certification, background in SAP A1 (enterprise resource planning
software), knowing how to drive, etc.

For the process, the applicant goes through a series of interviews. The first screening is with the
HR recruiter, then with the hiring manager, after which the applicant is called for an interview with
the business unit head. In some positions, it requires a discussion with the human resource head. New
hires also undergo mandatory training such as occupational safety and health standards, data privacy
knowledge, and Phoenix 101. Employees also receive regular performance and career development
reviews. To continuously facilitate learning, the management sees that employees are exposed to the
different facets of the company through job rotation.

There are no labor unions in the organization and its subsidiaries. There are also no reported labor
cases filed against the company.

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Conclusion:

The manpower of Phoenix fully covers the function of each department and group despite the
reorganization that happened in 2020. Phoenix continuously builds its workforce as it screens
applicants for its new structure.

Most of the employees in Phoenix are technically adept. Moreover, several people hold
supervisory positions. However, these employees need to grasp a larger view of the Phoenix as a
whole business. Hence, more training and development should be given to hone their technical and
leadership skills.

6.1.2 Skills

Hard and soft skills are the two things that are needed in Phoenix. While these are required in the
recruitment process, the organization sees that they continuously hone the employees' skills. In 2021,
Phoenix provided total training hours of ~5,000 with an average of 9 per employee. An in-house
learning management system and bite-sized learning materials are being used to facilitate this.

Training for soft skills is geared towards cultivating the entrepreneurial spirit, which is essential
to continuously foster the organization's success. Employees must be analytical, customer-centered,
proactive, creative, and innovative. Employees are given regular workshops, webinars, mentorship,
or coaching programs to concretize such.

On the other hand, training for hard skills is conducted to keep employees up to date regarding
the industry's technical aspects. Key employees are regularly sent to these training in the Philippines
and abroad.

146
 Conclusion:

Phoenix's skill development programs are found to be adequate and effective. The organization
is investing in building and strengthening its people's capabilities and talent to ensure that the next
set of leaders is fully equipped with soft and technical skills. On the other hand, Phoenix can still
improve its current talent by focusing on leadership and management.

6.1.3 Shared Value

Phoenix as an organization is guided by TESSI (i.e., teamwork, excellence, service, stewardship,

innovation, and integrity) and the core values and culture of 5H (i.e., hungry, hardworking, honest,
humble, and holy). Such values are demonstrated especially in the light of the pandemic. The
company’s president then believes that “kayang-kaya, basta’t sama-sama”. Moreover, as reflected in
the figure below, it aspires to be the best among multinationals and independents.

Figure 50– Phoenix’s Shared Values

Despite the pandemic, the company exemplified such values as Phoenix Philippines Foundation Inc.,
which continuously extends a helping hand to make a difference in five key areas: education,
environment, health drive, outreach, and safety. Some of its notable activities in 2020 include:

• Phoenix implemented the “Tulong Para sa Taal” project in coordination with Red Cross Cavite,
Grab Philippines, TV5, and ABSCBN. The program uplifted 10,000 individuals as they received in-
kind donations. Tipco Asphalt, one of Phoenix’s business partners, extended financial support.

147
• The company also values health as the company partnered with Operation Smile Philippines,
which provided free surgery for children with cleft palate, cleft lip, and other oral deformities.

• The organization also ensures that it participates in preserving the country’s endangered species.
Since 2012, Phoenix has partnered with the Philippine Eagle Foundation in Davao. Phoenix has
been supporting one eagle per year.

Conclusion:

Phoenix’s shared values are effective and consistently echo inside or outside the company. The
employees from the beginning are recruited based on the company’s shared values and those already
instilled with everyone. Aside from doing countless outreach programs, Phoenix continues to provide
livelihood programs and jobs that help people alleviate their living conditions.

6.2 Company Internal Audit Questionnaire

To further identify and evaluate Phoenix’s strengths and weaknesses, the following internal audit
questions are answered.

6.2.1 Management Audit

Question Assessment Evidence

1 Does the firm use strategic Yes Phoenix conducts a yearly strategic planning
management concepts? for the company’s short- and long-term goals.
The company ensures that strategies planned
are executed, properly monitored, and
measured through various KPIs. Phoenix also
use strategic concepts such as SWOT-TOWS.
2 Are company objectives and goals Yes Phoenix sets KPIs (e.g., overall profit, volume,
measurable and well retail station count) for its objectives. The
communicated? company's plans and current status are well-
communicated via townhall meetings and
convention (i.e., national sales convention).

148

3 Do managers at all hierarchical
levels plan effectively?
4 Do managers delegate authority
well?
5 Is the organization's structure
appropriate?
6 Are job descriptions and job
specifications clear?
7 Is employee morale high?
During the pandemic, townhall meetings are
held via Zoom calls.
Yes Each department or business functions has a
planning season, wherein people brainstorm
for activities they must do for the business
year.
Yes Phoenix implements a participative and
delegative style. The business units are given
the authority to decide for its daily
operations.
Employees are informed of the changes in
authority or delegation of work via memos
and email.
Yes Businesses and functions are segmented well.
But as the company expands, it might be
better to add subfunctions to the existent
group (i.e., retail having an arm
geographically)
Yes Job descriptions and specifications are clearly
posted in the company's website under
"careers", LinkedIn, and Job Street. Please
see figure 51 for the actual job posting in
LinkedIn.
Yes Due to the pandemic, employee morale was
quite low. The company implemented cost-
cutting measures which resulted to
employee reduction. To boost employee
morale, Phoenix extended employee support
(e.g., transportation, connectivity, early 13th
month pay bonus).
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8 Are employee turnover and
absenteeism low?
9 Are organizational reward and
control mechanism effective?
No As of December 31, 2021, the company
incurred an attrition rate of 15%. The
company started to make its operations
leaner, thus a restructuring took place.
Yes The management and the HR of Phoenix sees
to it that a yearly salary review takes place.
Along with this is an annual increase based
on the employee’s performance.
For employees with KPI set for the year (i.e.,
the Sales Team), a corresponding incentive is
given for hitting the said KPI.
Different recreation activities are being held
in the organization such as an annual sports
fest, Christmas party, etc.
150
Figure 51– Sample LinkedIn Job Posting

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 6.2.2 Marketing Audit

Question Assessment Evidence

1 Are markets segmented Yes Markets are segmented to cover the
effectively? customer's petroleum needs. There is a
business unit catering to the retail and
commercial markets. Segmentation is also
based on products.

To maximize a product segment, it is further

2 Is the organization positioned well
among competitors?
3 Has the firm's market share been
increasing?
4 Are present channels of
distribution reliable and cost
effective?
divided based on geographical territories. For
example, there is a group assigned to the
retail business in NCR, LPG Visayas, etc.
Yes Phoenix is now the third major oil company,
outpacing Chevron. The company has a lower
price comparing with Petron and Shell. This is
one of the company’s competitive
advantages along with the effective synergy
created with the parent and sister companies
of Phoenix.
Yes Based on DOE’s study, Phoenix’s market
share has been increasing since 2019. On the
other hand, Petron, Shell, and Chevron has
been declining.
No Based on Phoenix’s three-year average ratio
for total and fixed assets turnover, it is below
the industry average and comes second after
Shell as reflected in table 37. Further
improvements can still be made especially
when it comes to its presence in North Luzon.
Phoenix has two terminals in Luzon, and both
are situated in the southern portion.

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5 Does the firm have an effective
sales organization?
6 Does the firm conduct
market research?
7 Are product quality and
customer service good?
8 Are the firm's product and
services priced appropriately?
Yes The sales team is organized per product
segment. Under each segment, they are
further structured according to geographical
distribution.
Yes Phoenix has an internal team that conducts
market research, coupled with third-party
studies. This is mostly done on a per project
basis.
Yes Phoenix’s fuels are equipped with Pulse
Technology and is aligned with government
mandates such as the addition of biofuels
and its products has a rating of Euro 4. To
further ensure the quality, Phoenix has a
Technical Service and Quality Product
Assurance Department.
For the consumers safety and assurance,
Phoenix ensures that all service stations
operated by a dealer will only be supplied by
the company. Phoenix dealers are not
allowed to procure supply from other oil
companies. Dealers are liable to pay Php 1
million for breaching this.
For its services, the company has a
satisfaction score of 71% based on the BEST
Mystery Audit done by third-party
consultant. This is still far from the company
target of 85%.
Yes Phoenix offers a lower price compared
Petron and Shell. Phoenix has a Pricing and
Demand team which plans, strategizes, and
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9 Does the firm have an
effective promotion, advertising,
and publicity strategy?
10 Are marketing, planning,
and budgeting effective?
11 Do the firm's marketing
managers have adequate
experience and training?
12 Is the firm's internet
presence excellent as compared to
rivals?
implements prices for all accounts, service
stations, and products.
In general, prices in the commercial business
units are lower than those sold in retail.
Yes The Phoenix brand has an effective
advertising strategy in terms of traditional
and social media materials. It is also active
when it comes to nationalistic actives (i.e.,
CSR). The company hires an agency to
spearhead its advertising moves. For
example, it hired Havas Ortega group for its
“Sarap Pala Magluto” campaign.
Yes Currently the company's thrust is to spend on
free to low-cost marketing --social media. It is
currently stepping up its advertising via
commercials, brand endorser, and
partnership which furthermore strengthens
the Phoenix brand.
Yes Managers are from ex-advertising agencies
and media firm. They also have adequate
experience.
No While Phoenix is active on the social media
by having an account on Facebook,
Instagram, Twitter, YouTube, and LinkedIn,
its followers, likes, and subscribers are far
from Petron and Shell.
Phoenix:
Facebook Likes – 170K
Instagram Followers – 2.9K
YouTube – 3.5K
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Table 37– Activity Ratio (2019 – 2021)
6.2.3 Production / Operations Audit
Question
1 Are supplies of raw
materials, parts, and
subassemblies reliable and
reasonable?
Petron:
Facebook Likes – 692K
Instagram Followers –16.9K
YouTube –21.9K
Shell Worldwide:
Facebook Likes – 9.5 million
Instagram Followers –370K
YouTube –505K
Assessment Evidence
Yes The Purchasing and Supply and PNX SG
ensures that the imports and other raw
materials and parts are sourced through
term-contract with foreign refineries. This
enables the company to get competitive
prices.
Transportation by sea (i.e., barge) is done by
the Phoenix’s sister company, Chelsea
Shipping Corporation. Once it arrives in the
various depots and terminals, it will now be
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2 Are facilities,
equipment, machinery, and offices
in good condition?
transported to the stations via a fleet of tank
trucks.
To date, Phoenix has 9 terminals and depots
across the country.
Yes Facilities owned by Phoenix are regularly
monitored and maintained by the company.
In cases of fortuitous events, Phoenix has
also purchased insurance policies covering
majority of foreseeable risks such as property
damage, marine cargo, third party liability,
personal injury, accidental death and
dismemberment, sabotage and terrorism,
machinery breakdown and business
interruption to mitigate the potential impact
of calamities and unforeseen events.
Its headquarters in Davao is also well-
maintained. In 2019, Udenna Corporation
opened its building in BCG, Udenna Tower.
This now serves as the office of Phoenix in
Metro Manila.
Phoenix has three International Organization
for Standardization (ISO) certification which
are the following:
1. Occupational Health and Safety
Management System (ISO
45001:2018) – covers Phoenix’s
receiving, storage, and the
distribution of petroleum products. It
also covers support functions to the
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3 Are inventory-control policies and
procedures effective?
4 Are quality-control policies
and procedures effective?
5 Are facilities, resources,
and markets strategically located?
6 Does the firm
technological competencies?
terminals and depots. The ISO
certification was granted las October
2020 and will be valid for three years.
2. ISO certifications on Quality
Management System (ISO
9001:2015)
3. Environmental Management System
(ISO 14001:2015)
Yes Phoenix adopted an inventory management
system based on historical sales and
forecast demands which allows the Company
to timely meet the supply needs of its clients.
In addition, the Company established PNX SG
which acts as a regional hub handling the
purchase of the Company’s various
petroleum requirements and provides access
to refineries.
Yes All products are subject to quality assurance
testing during receiving process, as part of
the standard operating procedure of the
firm.
No Compared to the other players, Phoenix still
lacks distribution facilities in North Luzon.
The distribution channel's strength lies in
Visayas, and Mindanao as reflected in table
38.
Phoenix also lacks corporate office in Visayas.
Yes The company employs SAP A1 as its main end
to end enterprise resource platform.
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 Table 38– Phoenix’s Depot and Terminal Capacity

6.2.4 Research and Development Audit

Question Assessment Evidence

1 Does the firm have R&D facilities?
Are they adequate?
2 If outside R&D firms are used, are
they cost effective?
Yes Its end-to-end customer service covers 24-
hour delivery, high-quality fuels and
lubricants, in-house laboratory testing
facility, technical services, quality assurance,
and product development. The main in-house
R&D/ laboratory is in Davao where the
company was first established. There are also
satellite laboratories specifically for quality
assurance and control in their depots,
Asphalt facility to ensure that all products are
at par with Phoenix Petroleum. All products
are tested upon arrival for end-to-end quality
assurance.
Yes There are times wherein the company
employs the use of third-party laboratory

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3 Are the organization's R&D
Personnel well qualified?
4 Are the R&D resources allocated
effectively?
5 Are management information and
computer systems adequate?
6 Is there communication between
R&D and other organizational units
effective?
7 Are present products
technologically competitive?
testing, such as SGS and TUV SUD, for further
analysis and during the qualification stages of
new products. These cases include Engine
performance, ASTM and compositional
analysis that may be needed to comply with
necessary documentation required by the
government or the end-user. Its more cost
efficient for Phoenix as they need not
purchase equipment for the testing.
Yes To qualify for a technical position in Phoenix,
one must have a license in Chemistry or
engineering upon hiring.
Yes R&D resources and costs are under the
intangible assets. Currently, Phoenix
continues to expand its portfolio in line with
changing consumer preferences and with the
demand for cleaner alternative fuel (e.g.,
propane, LNG, LPG).
Yes Management sees to it that the MIS
department fully supports other functions.
Yes R&D is constantly in communication with
Marketing, Sales, and Procurement team to
further serve the customers' needs.
Yes Products are based on technology and
innovation. Primarily fuels are technologically
engineered. It also recently launched its app
for its loyalty programs.
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 6.2.5 Management Information Systems Audit
Question
1 Do all managers in the firm use the
information system to make
decisions?
2 If there a chief information officer
or information system positions in
the firm?
3 Are the data in the information
system updated regularly?
4 Do managers from the functional
areas of the firm contribute to
input to the information system?
5 Are there effective passwords for
entry into the firm's information
systems?
Assessment Evidence
Yes Obtaining information includes sending and
receiving of confirmation electronically,
obtaining calculation in electronic form to
check mathematical accuracy, scanning of
hard-copy items for review and using real-
time inspection technology such as video and
screen-sharing are employed.
Managers are also equipped to use SAP A1,
its enterprise resource planning.
Yes Charlie R. Valerio is the firm's chief digital
officer. Mr. Valerio is in charge of the overall
IT team and key decision maker when it
comes to systems concerns.
Yes The company's data is updated real-time,
except for payment posting since the banks'
system.
No Functional managers do not contribute to the
information system. The closest thing that
managers air their insights about
the information system is if it already deals
with the data they need for their analysis.
Yes Passwords in all company wide access points
(e.g., emails, SAP A1, laptop) are mandated
to be changed regularly. A notice
shall prompt the user to change.
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6 Are strategists of the firm familiar
with the information systems of
the rival firms?
7 Is the information system user-
friendly?
8 Do all users of the information
system understand the
competitive advantages that
information can provide firms?
9 Are computer training
workshops provided for the users
of the information systems
10 Is the firm's information
system continually being improved
in content and user friendliness?
Yes Given most of the management used to be
part of competitive firms, they are familiar
with the information systems employed in
other players.
Yes Relatively, all access points such as Outlook
for email, SAP A1 for its Enterprise resource
platform, and others are also used in various
industries. Most users even new hires are
almost always familiar with these tools.
No Not all users fully utilize and understand the
information. The company data are usually of
high value to employees who holds analytics
role.
Yes Onboarding training for new hires include a
module on the ERP/ email suites. Regular
refresher sessions are also conducted to the
pool of employees when needed.
Furthermore, the company also has pocket
trainings for excel and other
common programs to ensure maximization of
the intangible asset.
Yes Phoenix continues to invest in technology
through data analytics and digital consumer
programs, through its 75%
acquisition of Action.able., which operates
Posible.net, a digital payments platform.
Through Posible’s ~3,400 retailers, Phoenix’s
retail touchpoints reach close to 10,000
nationwide. This results to increased Costs
that are directly attributable to
the development phase of new customized
software for information technology and
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6.2.6 Financial / Accounting Audit
The financial and accounting audit is further supported by key financial ratio analysis. It is further
discussed on the succeeding section.
Question
1 Where is the firm financially strong
and weak as indicated by financial
ratio analyses?
2 Can the firm raise needed short-
term capital?
3 Can the firm raise long-term
capital through debt and/or
equity?
4 Does the firm have sufficient
working capital?
5 Are capital budgeting
procedures effective?
6 Are dividend pay-out policies
reasonable?
telecommunications systems are recognized
as one of the firm's main advantages in this
traditional commodity industry.
Assessment Evidence
N/A by Relative to its competitors:
answering Strong: Quick ratio, inventory turnover, days’
yes and no sales inventory, and gross profit ratio
(See Weak: accounts receivable ratio and average
evidence) collection period
Yes The company has the capacity to raise capital
through the issuance of preferred shares.
No Currently, its CEO is open to sell minority
shares of Phoenix so the company can
further expand. It is open for partnerships
and joint ventures.
No Phoenix is below the industry average and
has the lowest current ratio among the
competitors.
Yes Phoenix strategies are in line with its capital
structure. It is issuing preferred shares to
raise money. The company has a lot of joint
venture that it uses to further fund its
expansions and operational efficiency.
Yes The company's dividend payout is
reasonable, it was also able to disburse to its
shareholders despite the pandemic.
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7 Does the firm have good relations
with its investors and
stockholders?
8 Are the firm’s financial
managers experienced and well
trained?
9 Is the firm’s debt situation
excellent?
Yes Phoenix yielded an impressive EPS and
dividend per share despite the pandemic.
Some of its competitors were not able to do a
payout and its EPS is negative.
Yes It's lead financial manager, the CFO has a 30-
year experience in finance, coupled with
years of experience working in the oil
industry. Managers and supervisors are also
given trainings every now and then.
No While the company's debt is within the
industry, and it was able to declare cash
dividends to all of its preferred share
issuance, debt management can still be
improved to a more sustainable way.
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6.3 ANALYSIS OF HISTORICAL FINANCIAL STATEMENTS

6.3.1 Statement of Financial Position (Balance Sheet)

Table 39– Balance Sheet (2018 – 2021)

164
Horizontal Analysis

Phoenix’s financial standing has increased from 2018 until the pandemic hit it in 2020. Likewise,
its total assets follow the same trend, dipping in 2020 then rebounding in 2021. This can be attributed to
the increase in deferred tax assets by 217% in 2020 and 106% in 2021. Such growth is driven by
implementing the Corporate Recovery and Tax Incentives for Enterprises (CREATE) Act in July 2020.
Moreover, an increasing trend is also observed for investment properties. As a result, it gained
momentum starting in 2020 by 122% as Phoenix’s rental income from investment properties amounted
to Php 11.30 million in 2020 and Php 38.90 million in 2021.

Phoenix’s liabilities were also observed with the same trend as its assets. It has increased since
2018, then dived in 2020 to weather the pandemic, then slightly increased by 6% in 2021. This is primarily
driven by the increase in trade and other payables, which surged by 70% in 2021. Trade payables are non-
interest bearing and generally settled within 30 to 90 days. The growth is anchored chiefly on accrued
expenses of payables to contractors for the construction of retail stations.

As for Phoenix, equity declined by 5% in 2020, then minimally increased by 4% in 2021. Such a
trend can be attributed to revaluation reserves which increased by 19% in 2021.

Vertical Analysis

Phoenix’s total assets are mostly comprised of non-current assets at 59%. The non-current assets
are mainly on property, plant, and equipment, with about 40%. The trade and other receivables follow
this at 22%, which is at Php 18 million in 2021. Its other non-current assets also registered an increase of
9%. Assets are funded mainly by 76% liabilities and 24% equity. It is noted that Phoenix’s liabilities are
anchored on current liabilities such as letters of credits and trust receipts for its inventory purchase, short-
term loans, and under short-term commercial papers as it issued preferred shares.

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 6.3.2 Statement of Comprehensive Income (Income Statement)

Table 40– Income Statement (2018 – 2021)

Horizontal Analysis

In 2020, the fuel products that greatly contribute to the company’s revenue were significantly
affected due to the decline in fuel prices, further heightened by various external factors. Hence, it resulted
in a significant drop of 96% in the company’s income. The average peso per liter price of petroleum
products was 36% lower in 2020 compared to previous years, with a notable drop in Dubai crude of 35.5%
sometime around Q1 2020. In addition, the decrease in volume for 2020 was driven by the eruption of
the Taal Volcano in January 2020, which disrupted the operations of Phoenix’s major commercial
customers, as well as travel restrictions, brought about by the government, mandated enhanced
community quarantine (ECQ) beginning March 16, 2021.

However, the company’s financial condition was cushioned by the 31.6% volume growth sold by
PNX Singapore and PNX Vietnam, which partially arrested the domestic decline of 42% in local operations

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as the pandemic took a toll on the Philippine Economy. The cost of sales decreased by 17.92% due to the
decline in volume. As a result, the Gross margin fell by 72% due to the volatile petroleum market prices
and lower Philippine volume.

In 2021, Phoenix’s operating income increased by 87% as the company delivered revenues of 69%.
As a result, the company was able to hurdle health risks brought by the pandemic and emerging
geopolitical risks that drove the prices. In addition, Phoenix benefitted from a solid domestic volume from
its retail and LPG businesses. However, such remarkable figures were swept away as its finance cost
surged by 82%, or Php 3.69 billion.

Vertical Analysis

Phoenix’s gross profit in 2021 is 1.76% which is down compared to its previous
performance in 2018. This resulted from its cost of sales and service at 94%, while the remainder
comprised selling and administrative expenses.

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6.3.3 Cash Flow Statement

Table 41– Statement of Cashflows (2018 – 2021)

168
Net Cash Provided by Operating Activities

Net cash provided by operating activities (i.e., mostly from service stations) increased by 41% to
Php 34.7 billion in 2021. This results from the company’s effective inventory handling and debt
management.

Net Cash Used by Investing Activities

In the previous two years, the company used a high level of cash in investing activities such as
property, plant, and equipment and strategic business investments in joint ventures. However, due to the
COVID-19 pandemic and to keep the company afloat, Phoenix reduced its spending on investing activities.
Hence, it improved to Php 529 million versus Php 3.3 billion in 2020.

Net Cash Used in Financing Activities

Net cash in financing activities stood at Php 34.6 billion in 2021, higher than the 2020 Php 25.2
billion. This is mainly due to high repayments of interest-bearing loans, borrowings, and lease liabilities. It
is also observed that paid interest shoots up 38% versus 2020.

Total Cash Provided

The movements in the cash flow statement resulted in Php 4.9 billion in 2021, a decline of 15%
versus 2020 and the lowest since 2018.

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 6.3.4 Key Financial Ratios

Last October 2019, Phoenix is regarded as the third oil player in the country, outpacing Chevron.
The market share of Phoenix in the LPG segment also increased in the said period. Moreover, based
on independent brand health of fuels in 2019, Phoenix was considered the third in terms of brand
awareness and brand used most often (Lectura, 2020). While Phoenix is growing, it is imperative to
compare it with its competitors – Petron and Shell, for further evaluation. The financial ratios
presented in this part of the paper are based on the 2019 - 2021 audited financial statements of
Phoenix in comparison with the key ratios of its competitors.

Table 42– Phoenix’s Financial Ratios (2019 – 2021)

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 Table 43– Oil Major Players Financial Ratios (2019 – 2021)

6.3.4.1 Liquidity Ratio

The liquidity ratios are financial metrics that determine the company’s ability to pay off its current
debt obligations without raising external capital.

Table 44– Liquidity Ratios of Industry Players (2019 – 2021)

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 Among its competitors, Shell had the highest current ratio of 1.07. This translates that for every
Php 1 debt that will mature, Shell has an available Php 1.07 current assets to settle. Shell's current
liabilities increased in 2020 by 17.9% due to the general increase in crude oil prices and lease liabilities.
Short-term loans increased 199% due to higher short-term borrowings for working capital
requirements. The mandated minimum inventory requirement penalized Shell as one of the refiners,
which palpably sparked the decision to finally shut down its refinery in mid-2020. In addition, Shell's
decision to convert its Tabangao refinery into a full-fledged import terminal needed financing; hence,
more borrowings were needed to sustain its short-term liabilities.

Similarly, Petron's liabilities arising from its trade and borrowings, such as loans payable, accounts
payable, accrued expenses, and lease liabilities, contributed to the increase in both long- and short-
term debts. In addition, to arrest the continuing decline in sales brought about by the pandemic, the
refining segment was shifted to 100% importation to optimize the supply chain partially. However,
huge expenses continued to incur despite the refinery shutdown, which led to increased borrowings
to ensure sufficient working capital.

Phoenix had to adjust its cash flows to ensure that the company efficiently managed its working
capital, debt servicing, and overhead / operational expenses in 2020. In compliance with the
Bayanihan Act and to support its dealers, Phoenix extended its credit terms by up to 7 days for
retailers, 60 days for its joint venture partners, and 90 days for their commercial/ industrial accounts,
which increased trade receivables. In addition, the company is actively managing its short-term debt
to match changes in its receivables by engaging with creditors and retail and corporate accounts.
Phoenix also introduced inventory optimization measures to "just in time" levels to match the bearish
market demand and mitigate inventory losses. Sadly, these efforts also increased expenses, leading
to increased short-term loans to replenish working capital. Hence, Phoenix had an average current
ratio of 0.85, which is weaker than its competitor's average of 1.04 and industry average of 0.97.

On the other hand, Phoenix has the highest quick ratio among Petron and Shell. Phoenix has an
available Php 0.56 cash assets available to settle every Php 1 debt.

6.3.4.2 Leverage Ratio

Solvency or leverage ratios give insight to investors to get a snapshot of how well a company
deals with its long-term obligations.

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 Table 45– Leverage Ratios of Industry Players (2019 – 2021)

The Petroleum industry is undoubtedly capital-intensive and heavily dependent on debt and
borrowings from financial institutions. A higher debt to equity and total assets ratio is expected in
petroleum firms since they require significant capital expenditures (CAPEX) in their manufacturing
assets; companies secure more long-term loans to fund their growth and operations.

Phoenix's debt to total ratio in 2021 is at 76%, which is higher than its three-year average of 75%.
This means a Php 1.00 asset is used as collateral for a Php 0.76 debt. Moreover, Phoenix has the
highest debt to equity ratio, implying that for every Php 1.00, equity is being used as collateral for a
debt of Php 3.18. Given this, Phoenix has a higher risk of insolvency. Phoenix incurred such ratios
since, amidst the pandemic, the company invested in network expansion and added 20 new stations
bringing its total to 690 stations nationwide. These stations required capital expenditures, which were
heavily financed by loans. Furthermore, Phoenix's pre-pandemic investments, such as the
construction of the new asphalt manufacturing plant and ownership of the Malampaya LNG reserves,
require heavy financing as well.

Petron's long-term debt to equity ratio is the highest among the three oil players, which translates
to having more leverage and higher financial risk for investors as the company had to finance its
ongoing major expansion in its Bataan Refinery (e.g., new steam generator power plants), fuel additive
plant, and its newly built Lube Oil blending plant.

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 The lower solvency ratio among the three is with Shell, meaning the company is less dependent
on borrowings and long-term payables to finance its operations. The Corporation made the difficult
but necessary decision to cease refinery operations in Tabangao in August 2020, after an in-depth,
comprehensive study. Hence, the company was able to transform its former refinery into a world-
class, entire import terminal. This decision will optimize its asset portfolio, lower its financing
requirements and enhance its cost and supply chain competitiveness. In addition, this will strengthen
Shell's financial resilience amidst the challenges faced by the global refining industry and reduce the
variability arising from crude inventory gains/losses.

6.3.4.3 Activity Ratio

Activity ratios gauge the efficiency of the company’s operations or leverage its assets.

Table 46– Activity Ratios of Industry Players (2019 – 2021)

The prolonged lockdown period in the second quarter of 2020 and a 40% drop in domestic volume
accounted for severe inventory losses across the entire petroleum industry in the country. For
refiners, the 30-day inventory of crude oil and 15-days for finished products continued to be enforced
throughout the lockdown period, ultimately forcing all oil players to reconsider their supply chain
strategies and financial optimization plans. Additionally, international crude oil prices have been
volatile and are likely to become volatile in the future. As the oil market and prices in March 2020
crashed overnight and gradually declined, oil companies are constrained to sell their petroleum
products at a price below the acquisition cost of their existing inventory. Furthermore, due to
government intervention/ regulation, oil companies generally have to absorb these losses in their
inability to pass on to end-users the price increases promptly or at all. The entire industry echoed
these stories considering the current public health crises.

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 Petron's inventory turnover was kept at a minimum, replenishing its crude oil inventory at only
~6x during the entire fiscal year. The Petron Bataan Refinery in Limay is the Philippines' only remaining
refining facility capable of supplying 40% of the country's demand. However, with the thinning of
refining margins and contraction demand due to the pandemic, the market leader was forced to scale
back production and undergo the complete shutdown of the refinery for several months to cut losses.
As a result, Petron's supply shifted to 100% imports, allowing the company to react to the volatile oil
market in a shorter time, thus cutting its inventory turnover to ~6x. However, its days' sales in
inventory were at an all-time high, compared to the industry average of ~41 days. Despite shifting its
strategy to fully importing its products, Petron continues to manage a high level of inventory, which
is only liquidated every 59 days, indicating an ineffective supply chain. On the other hand, its days'
sales in receivables and accounts receivable turnover ratios manifest Petron's persistent collection
efforts to its retailers and corporate accounts.

Shell’s inventory turnover of ~10x is slightly at par with the industry average of ~11, which is
attributed to the company’s decision to fully shift to importation at the height of the pandemic.
Regional refining margins weakened due to the supply and demand imbalance of petroleum products
and worsened during the pandemic. As such, it was no longer economically viable for Shell to sustain
its Tabangao refinery and was able to convert it into a world-class import facility similar to the one
the company constructed in northern Mindanao. The shift to full imports–based supply strategy
would not affect its supply strategy but preserve and improve its cash position and arrest the decline
in refining margins. Its transition from being a refiner to an importer, around mid-2020, increased its
inventory as it needed to refine all remaining crude oil reserves and co-mingle this with the imported
finished products arriving simultaneously.

The efficiency of Shell's operations during this transitionary period was evident in the way the
company managed its day's sales in inventory which was kept at a minimum of ~36 days, and its
determination to ensure its stable cash position through its collection efforts as seen in their accounts
receivable turnover and days sales in receivables, lower than its biggest competitor, Petron. Shell was
able to clear out all remaining marketable crude oil stock inventories by 2020.

175
 Meanwhile, Phoenix has been a long-time importer of finished petroleum products. The
company's inventory turnover is above the industry average of ~11, which means they were able to
optimize somehow and keep their inventory in "just in time" levels as an initiative to reduce working
capital outflow. With demand at an all-time low, inventory levels were down to 50% to match the
bearish market demand, as evidenced by their days' sales in inventory. They were able to manage and
liquidate their inventory in about 30 days. However, the company should improve its collection efforts
on its aging trade accounts receivables. Its receivables turnover and days sales in receivables ratios
are far from the industry average of 12x and 37 days. In efforts to support its business partners during
this time, Phoenix extended credit terms to up to seven days for dealers with credit lines, up to 60
days for retail joint venture partners (from 30 to 45 days), and up to 60 to 90 days for select
commercial clients (from 30 days), which has resulted in an increase in the company's receivables and
the aging of its receivables balance.

6.3.4.4 Profitability Ratio

Profitability is key to investor confidence, as it analyzes business productivity from multiple

angles. It provides insight into the actual income and assesses a company’s ability to generate earnings
relative to revenue, operating costs, balance sheet assets, and shareholders’ equity over the fiscal
year.

Table 47– Profitability Ratios of Industry Players (2019 – 2021)

The international energy industry, particularly the oil & gas sectors, was sent into a tailspin in
2020. The pandemic coincided with a historic demand shock, falling commodity prices, evaporating
profits, unprecedented write-downs, and thousands of job cuts. But, in general, 2021 was a period of
recovery.

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 In 2020, energy companies were trying to keep their financials afloat; the ongoing international
health crisis impacted their performance in the near term while seeking to reassure their investors
about future profitability. Oil importing countries, like the Philippines, were in a vulnerable position
before the current pandemic, and further deterioration exacerbated existing fragilities. This happened
as crude prices reached record low due to the breakdown of production cut discussions between OPEC
and Russia, and product prices in the global and regional market declined, resulting in pre-tax
inventory holding losses. With COVID-19, an already volatile market has reached a flashpoint,
accentuating the drawbacks of high dependence on non-renewable resources while driving prices to
a low. The Philippine government-imposed containment measures, which led the Philippine oil
industry to a slow start. It even reached an imbalance as their acquisition costs were higher than the
market selling price. These caused huge inventory losses during the first half of 2020. Still, all three oil
majors regained their profitability in the second half of the year when community quarantine
restrictions were eased. This continued to 2021, where a net income was registered for all major
players, except for Phoenix, recording a loss of Php 466 million.

In comparing the three oil players, Shell’s profitability suffered the most with a negative net profit
margin of -1.85%. The company’s marketing volumes posted a 6% growth before the announcement
of the enhanced community quarantine (ECQ) in 2020, then dropped by 34% in the second half of
March. As market conditions improved due to the relaxation of mobility restrictions and the
government attempted to reopen the economy, marketing volumes increased 30% compared to the
earlier quarters of 2020. However, despite all efforts, Shell ended 2020 with 13% below 2019’s pre-
pandemic levels. In addition to the uncertain market conditions, Shell ceased operations of its
Tabangao refinery, which incurred higher current and non-current liabilities to expend for its
decommissioning facility and restoration to a 100% import terminal. As a result, Shell recovered in
2021 with a net profit of Php 3.85 billion.

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 Petron, likewise, experienced the same scenario in the oil industry but was cushioned by income
from their overseas business, Petron Malaysia. Its consolidated sales volume for the full year 2020 for
the Philippines and Malaysia stood at a 27% decrease from 2019’s 107 million barrels. The Company
continued to implement cost reduction and cash preservation measures, partly alleviating the losses.
In addition, financing costs improved as interest rates were reduced. Consolidated revenues declined
44% to Php 286 billion from Php 514.4 billion in 2019, reflecting the severe impact of the pandemic.
However, moderate improvements were seen in the second semester as sales volume gradually
recovered and prices started to pick up. These improvements reduced the losses incurred in the first
semester ending the year with a consolidated net loss of Php 11.4 billion, a reversal of the P2.3 billion
net income in 2019.

Consequently, earnings before interest, depreciation, and amortization (EBITDA) declined by 86%.
Overall, Petron incurred a net loss of Php 11.4 billion for 2020 from the 2019 net income of Php 2.3
billion. However, it made a strong return in 2021 with a net gain of Php 6.13 billion.

The only player able to go against the trend is Phoenix, with an average net profit margin of 0.40%.
Its financial standing was buoyed by improved liquidity. It lengthened its maturity profile, while the
company's Php 158 million net income for Q4 2020 allowed it to regain from previous losses, resulting
in a Php 63 million net income for 2020. The company charted a 32% year-on-year growth delivered
by an overseas business and domestic recovery in the fourth quarter as business activities began to
reopen. By rationalizing its Operational Expense (with OPEX per liter reduced at 32%) and CAPEX, total
savings from these cost-reduction measures registered at Php 2 billion, consistent with 2020 targets
adjusted for COVID-19. However, Phoenix's 2021 was different as other charges ballooned to Php 3.5
billion, more than double in 2020. This resulted in a net loss of Php 462 million.

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 6.4 INTERNAL FACTOR EVALUATION MATRIX

6.4.1 List of Strengths and Importance Weights

Table 48– List of Strengths and Importance Weight

Strength #1: Price competitiveness

Importance Weight: 18%

In an industry of undifferentiated products, pricing is one of the critical factors that can set one
oil player from another. Hence, this strength is given the highest weight of 18%. Lower prices are seen
to be attractive, especially among the public transport motorists and during the time of surging fuel
prices brought by geopolitical tensions.

Phoenix Rating: 4

Phoenix is rated 4 since its products are not only made of high quality but they are priced
competitively – lower than the other major players. Part of its pricing strategy is to implement
occasional price-off promos for all motorist types, special discounts on public utility vehicles, and
exclusive village promos.

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Strength #2: Wide product range anchored on innovation and technology

Importance Weight: 13%

A wide product range is given a weight of 13% since it serves as a differentiating factor. The DOE
mandates a set of base grades for fuel (i.e., RON 92, RON 92); hence, almost all oil players carry the
same variants. To serve a broader range of markets, oil players must be able to accommodate the
customer’s needs in terms of quality, specifications, and others. This not only applies to the fuel
products but all petroleum products. A more comprehensive product range portfolio gives the
customers the liberty to avail based on what they want and need. Hence, enhancing customer
experience and optimizing their vehicles, machines, or equipment.

Phoenix Rating: 3

Phoenix is given a rating of 3 since it improved its product portfolio throughout the years. Phoenix
has two gasoline variants: regular and premium and one regular diesel. All of which are compliant
with Euro 4 standards. Moreover, a selection of lubricants and LPG is also available. On the
commercial business side, Phoenix caters to bulk purchases of diesel, gasoline, Jet A-1, lubricants,
LPG, and asphalt.

Phoenix is competing with Petron for a more product offerings. But, on the other hand, it outpaces
Shell as the multinational divested its LPG market. Phoenix also has potential should the CME segment
further grow in the country owing to its manufacturing facility.

Strength #3: High level of support from the parent company

Importance Weight: 12%

This factor is given an importance weight of 12% since the oil industry is CAPEX-driven. Hence,
financial support and stability are greatly needed. In addition, creating synergies with different sister
companies is a critical tool for success.

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Phoenix Rating: 3

Phoenix continues to build synergy with its parent and sister companies. For example, its barge
requirements are taken care of by Chelsea Shipping Corp. It is also creating more Phoenix Block, a
one-stop-shop for a wide range of products and services, featuring Wendy’s, FamilyMart, and other
companies under the Udenna Corporation. This creates a more diverse ecosystem around Phoenix as
it adds foot traffic.

Strength #4: Strong partnerships and joint ventures formed

Importance Weight: 9%

The creation of strong partnerships and joint ventures allows one brand to be identified. It also
creates a better brand image as trust and reputation are at stake. More than this, forging partnerships
signifies expansion, growth, and avenue for more income. In some cases, this also lessens the liabilities
as it is distributed among the parties involved. With this, an importance weight of 9% is given.

Phoenix Rating: 3

Phoenix currently has forged several joint ventures to expand further. For example, in January
2018, it partnered with TIPCO Asphalt and PhilAsphalt Development Corporation to establish Phoenix
Asphalt Philippines Inc (PAPI) in a 40%-40%-20% share structure. As of December 2020, Phoenix still
holds a 40% stake in PAPI. Phoenix also used joint ventures to grow its LPG business in Vietnam
further.

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 6.4.2 List of Weakness and Importance Weights

Table 49– List of Weakness and Importance Weight

Weakness #1: Limited number of distribution network

Importance Weight: 12%

This factor receives the highest rating of 15% since distribution networks, including service
stations, terminals, depots, and other outlets (e.g., LPG and lubricants), are the main driver of growth.
An extensive network of service stations will help oil players increase their brand presence and sales.
On the other hand, strategically placed terminals and depots will support the growth brought by the
service stations.

Phoenix Rating: 1

In terms of service station count, Phoenix has 690 and is behind by 430 stations compared with
Shell and 1,734 with Petron. Currently, Phoenix’s station distribution across the country is as follows:

Table 50– Major Oil Players' Service Station Distribution (2021)

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 It also has an inferior count of 13 terminals, depots, and airport installation from Shell’s 32 and
Petron’s 33.
Table 51– Oil Major Players' Supply Points Distribution

Given Phoenix’s distribution network, Phoenix is given a rating of 1.

Weakness #2: Ineffective optimization of marketing platforms and campaigns

Importance Weight: 10%

Since the oil industry is marked with little to no product differentiation, a company must invest in
marketing campaigns and optimize every resource it has. This will further push what the company can
do and offer to its customers since the brand itself can be an identifying factor. Furthermore, creating
good marketing campaigns via different platforms (i.e., traditional media, social media, app-based)
can lead to better sales, translating into a better bottom line and better activity ratios (e.g., inventory
turnover, days’ sales in inventory). Considering such, this factor is given an importance weight of 10%.

Phoenix Rating: 2

Phoenix is rated 2 since it is improving its campaigns but still has a long way to go to catch up with
the other major players. In 2020, Phoenix won the Marketing Company of the Year in the 40th Agora
Awards for its Phoenix Pulse Technology and Phoenix Super LPG campaigns. In addition, the company
has been engaging in public events such as the Philippine Basketball Association with its team, Phoenix
Super LPG Fuel Masters. In 2020, together with the Tuason Racing, the company launched its Phoenix
Pulse Formula V1 Virtual Cup.

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 It is currently using its Limitless App to further strengthen the Phoenix brand by creating a loyalty
synergy, connecting the different products of the Udenna Corporation. In addition, to enhance its
brand among public utility drivers, Phoenix has its Pinoy Tsuper Hero program.

Weakness #3: Weak operational efficiency of manufacturing assets, depots, and logistical services

Importance Weight: 8%

An importance weight of 8% since manufacturing assets serve as a critical factor in supporting the
company’s thrust of expanding its sales across the country. Its terminals, depots, and other supply
points also eat a good chunk of the company’s costs. Therefore, maintaining it at an acceptable level
will unlock more savings for the company, which can be allocated for other essential activities such as
marketing and service station expansion.

Phoenix Rating: 2

Phoenix is rated 2 since some of its activity ratios are doing well (i.e., inventory turnover and day’s
sales inventory); however, its total assets and accounts receivable turnover have a lot to improve. In
addition, it has to create more programs to increase the throughputs of its terminals, plants, and even
its stations.

Weakness #4: High exposure on debt

Importance Weight: 7%

A weakness weight of 7% is given to this factor since it impacts the firm’s leverage level. High
leverage may lead to financial instability. Likewise, exposure to debtors can lessen the company’s
equity. This can diminish a stockholder’s confidence in the company, posing a lower value to the
company. Hence, expansion activities that can potentially expose the company to debt should be
carefully managed so that its standing remains sound and attractive to both the company and its
debtors.

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Phoenix Rating: 1

Phoenix is rated 1 since its expansion programs are heavily anchored on short and long-term
loans. This is reflected in the average leverage ratios as reflected in the table. Phoenix spends on its
service stations and leases vessels that can help its supply chain.

Table 52– Leverage Ratio

The company’s thrust to address this is to deleverage by raising free cash and / or raising equity
via strategic partnerships.

Weakness #5: Weak customer service

Importance Weight: 6%

It is imperative for oil players to differentiate themselves from others in a highly competitive
market. Primarily wherein ~10,000 service stations across the country compete for the customer’s
sales volume. Thus, a competitive price may not be enough for customers to choose a certain oil
company continuously. That is why this factor is given an importance weight of 6%.

Good customer service increases the frequency of the customer’s visits, the amount that the
customer spends, and ultimately, the loyalty to the brand. With this, it is also critical to get the
customers’ feedback to improve further the services that an oil player renders. An efficient platform
should also be in place.

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Phoenix Rating: 2

Phoenix is rated 2 since it is already doing something to improve its overall customer service by
implementing a Mystery Motorist Program. This way, the company will have a benchmark and easier
identification of what to address. However, their latest rating of 72% is still far from their target of
85%.

Figure 52– Phoenix’s Mystery Motorist Program

Furthermore, the forecourt crew (i.e., pump attendants) are undergoing comprehensive training
since they are considered the primary frontlines of Phoenix. The Retail Business Team currently trains
them.

Phoenix can also strengthen its feedback platform for its customers. It currently has hotlines, and
email addresses flashed on the service station’s premises. This can also be found in its Limitless App.

Figure 53– Phoenix’s Customer Feedback 186

Platform via Limitless App
Weakness #6: Low accounts receivable turnover

Importance Weight: 5%

Accounts receivable turnover quantifies the company’s effectiveness in collecting its receivables
(Murphy, 2021). It also measures how well a firm uses and manages the credit it extends to its
accounts. Likewise, it also gauges how quickly a short-term debt is collected or paid. It is also critical
as a company manages its cash flow. Hence, this is given an importance weight of 5%.

Generally, a high accounts receivable (AR) is favorable. However, this can also indicate that the
company is conservative in giving credit to its accounts. It could also mean that it is efficient and
aggressive. Consequently, it may also translate that the company’s accounts are of high quality and
runs on a cash basis.

Phoenix Rating: 1

Phoenix is rated 1 since its accounts AR turnover is very far from competitors of 15.40. Likewise,
its average collection is at ~64 days compared to the ~24 days of Petron and Shell. Last 2020, Phoenix
implemented its Early Payment Discount programs to encourage accounts to pay ahead. However,
minimal results were observed from the new cash flow scheme.

Table 53– Activity Ratio

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6.4.3 Internal Factor Evaluation Matrix

Table 54– Internal Factor Evaluation Matrix

As reflected in the IFE matrix, Phoenix garnered a total rating of 2.46, implying that the
company still has to maximize the strengths identified and keep on addressing its weaknesses.
The data also attests that Phoenix is still behind other major players. Defending and strengthening
its current market share is key to its success.

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7. STRATEGY FORMULATION

7.1 Strengths, Weakness, Opportunities, Threats (SWOT) Matrix

7.1.1 Strength-Opportunity (SO) Strategies

Table 55– Strengths and Opportunities

Table 56– Strength-Opportunity (SO) Strategies

189
7.1.2 Strength-Threat (ST) Strategies

Table 57– Strengths and Threats

Table 58– Strength-Threat (ST) Strategies

190
7.1.3 Weakness-Opportunity (WO) Strategies

Table 59– Weaknesses and Opportunities

Table 60– Weakness-Opportunity (WO) Strategies

191
7.1.4 Weakness-Threat Strategies

Table 61– Weaknesses and Threats

Table 62– Weakness-Threat (WT) Strategies

192
7.1.5 Grouping of SWOT Strategies

Table 63– Market Penetration Strategies

Table 64– Market Development Strategies

Table 65– Product Development Strategies

193
Table 66– Strategic Alliances or Joint Venture Strategies

Table 67– Backward Integration Strategies

Table 68– Horizontal Integration Strategies

Table 69– Related Diversification Strategies

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 Table 70– Unrelated Diversification Strategies

Table 71– Functional Strategies

7.2 Strategic Position and Action Evaluation (SPACE) Matrix

The SPACE matrix is used to determine what kind of methodology an organization should use.
Presented below is the SPACE matrix for Phoenix.

Table 72– SPACE Matrix Computation

Conclusion:
X - Axis (CA average + IS average): 0.40
Y- Axis (ES average + FS average): 1.00

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 Figure 54– SPACE Matrix for Phoenix

Following the results of the SPACE matrix, Phoenix lies in the aggressive quadrant. Appropriate
strategies include backward, forward, and horizontal integration, market penetration, market
development, product development, and diversification. This aligns with Phoenix's current programs
to further grow the company in terms of financial position and market share.

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 7.3 Boston Consulting Group (BCG) Matrix

Petron, Shell, and Phoenix are the top three oil companies in the industry. Petron is currently the
market leader, with a 19.17% market share based on DOE's 2021 study.

For the BCG matrix, a CAGR of 11% based on 2015-2019 shows the industry's growth before the
pandemic in 2020. It reflects that Petron has a relative market share (RMSP) of 100%, based on its
revenue in 2019 of Php 514 billion. Shell follows it with an RMSP of 42% and Phoenix at 19%.

Table 73– BCG Table

Based on the BCG matrix, Phoenix is considered a question mark. Hence, the company must
pursue intensive strategies such as market penetration, market development, and product
development. In a grave scenario, being in the question mark quadrant also means selling the
business.

Figure 55– BCG Matrix

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 7.4 Grand Strategy Matrix

The grand strategy matrix (GSM) allows the creation of alternative and various strategies for any
organization. It is based on two factors, competitive position, and market growth64.

Figure 56– Grand Strategy Matrix for Phoenix

The Philippine downstream industry will grow at a 6.50% CAGR from 2022 to 202565. On the other
hand, Phoenix has a 7.45% market share, which is still considered weak compared with Petron and
Shell. Hence, Phoenix is positioned in quadrant two, wherein strategies such as market development,
market penetration, product development, horizontal integration, divesture, and liquidation can be
done.

64
https://www.mbaknol.com/strategic-management/grand-strategy-matrix/
65 MarketLine Research (2021) via EMIS

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 7.5 Internal – External (IE) Matrix

Figure 57– Internal-External Matrix for Phoenix

Based on the IE Matrix, Phoenix should ‘hold and maintain’ its strategies. In line with this, the
recommended strategies are market penetration and product development.

Possible market penetration approach is as follow:

• Aggressive account acquisition of transport network vehicles (S1, O1, O4)
• Offer promos, and services through digitization (e.g., via Limitless App, social media
platforms) (S2, O1, O3, O4)
• Expand Autoworx Plus by adding it in the franchise package of CODO and DODO stations (S4,
O1, O2, O4)
• Enhance loyalty programs for public utility vehicles under the Pinoy Tsuper Hero Campaign
(S1, T1, T2, T4, T5, T6)
• Network expansion via service stations especially in emerging areas outside Metro Manila and
major highways (i.e., NLEX, SLEX) (W1, O1, O2, O3, O4)

Possible product development approach is as follow:

• Hold new product launches, targeting niche markets (i.e., premium LPG, eco-friendly asphalt,
transformer oil, banana spray) (S2, O1, O2, O3, O4)

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 7.6 Summary of Strategies

Table 74– Summary of Strategies for Phoenix

Based on the summary table of strategies, it was found that most of the recommended and
applicable strategies belong to the intensive category which includes market penetration, market
development, product development, and product diversification.

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 7.7 Quantitative Strategic Planning (QSP) Matrix

Table 75– Quantitative Strategic Planning Matrix

The quantitative strategic planning matrix (QSPM) is used to evaluate the relative attractiveness
of the different strategies crafted66. Furthermore, it determines which strategies can be prioritized.

Based on the above QSPM, the most attractive for Phoenix is market penetration, with a score of
4.84. This is followed by market development at 4.66, while the least attractive is product
development at 2.78.

66
https://www.mbaknol.com/strategic-management/quantitative-strategic-planning-matrix-qspm/

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Summary Scores:
• Market Penetration -4.84
• Market Development -4.66
• Product Development -2.78

8. STRATEGIC CORPORATE AND FUNCTIONAL OBJECTIVES AND RECOMMENDED

STRATEGIES

8.1 Key Strategic Challenge and Recommended Corporate Strategic Objective

The strategic tools discussed suggest that Phoenix should follow strategies focusing on market
penetration, market development, and product development. This is also aligned with the internal
and external factors indicating that the industry is promising and could pose an opportunity loss.
However, being a new oil major player in the country, Phoenix has yet to strengthen and defend its
current market share, penetrate new markets, and improve its profitability. Hence, it is recommended
that the company identify its strategic challenges or objectives.

8.1.1 Key Strategic Challenge

How can Phoenix Petroleum Philippines defend being the third market leader and further grow to
outperform other players considering the changing market trend, its few distribution networks, high
debt exposure, and the proliferation of oil smuggling in the country?

Table 76– Key Strategic Challenge Parameters

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 8.1.2 Reference Calculations and Assumptions for Strategic and Financial Objectives

CAGR Assumptions

Table 77– Forecasted CAGR Computation (2022 – 2025)

According to the MarketLine Report, the Philippine oil industry is set to grow by 6.50%, following
its projected CAGR from 2022 to 2025. This is driven by the transportation, industry, services, and
household market segments.

Reference Calculation

Table 78– Reference Calculation (2019 Actual to 2025 Forecasted)

Following the CAGR of 6.50%, projections are made for the revenue, relative market share (i.e.,
only basing it with Petron and Shell), and growth rate for 2022 to 2025. By the end of 2025, Phoenix's
revenue will be at Php 212 billion with a 20% market share.

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 The resulting CAGR from 2022 to 2025 is as follows:

Table 79– Oil Major Players’ Resulting CAGR (2022 to 2025)

8.1.3 Recommended Corporate Strategic Objective

Objective #1- Strategically expand the distribution network by adding 132 service stations and two
depots or terminals to bolster growth and support expansion

Phoenix currently lacks an extensive network of service stations, import terminals, and depots to
support its growth. Hence, Phoenix must improve its distribution network to attain good revenue and
further strengthen its market share. Phoenix has the least service station count and supply points
compared to Petron and Shell.

Objective #2- Defend being the third market leader, achieving a 20% relative market share by 2025

Market share growth will support the financial and supply chain objectives of Phoenix. An
attainment of which will allow the company to defend its current market position and adds potential
of moving up to be the second player in the country. A combination of an effective supply chain and
well-crafted marketing tactics will help in growing Phoenix’s market share. The company must
effectively pursue profitable opportunities through expansion of its service station and finding
sustainable marketing activities.

Acquiring an additional ~2.70% of the relative market share within the next three years is
consistent with forecasted market growth in the transport and industry sectors, which is expected at
an average CAGR of 6.50%. Further, this target is also consistent with current marketing strategies of
Phoenix and its expansion programs in distribution and logistics.

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Objective #3- Attain projected revenue of Php 212 billion revenue by 2025

The annual sales of the petroleum industry have been marked by volatility considering the
changing market condition and the various changes in supply and demand. However, since Phoenix
grew more than double its sales revenue from 2015 to 2020, capturing 7.45% of the entire petroleum
industry in 2021, it must keep its current momentum and increase its sales by 13% annually.
Furthermore, the recovering market conditions and the projected growth from the new government
administration will help bolster the growth of Phoenix. Hence, Php 212 billion revenue is projected
for Phoenix to achieve by 2025.

Table 80 – Annual Revenue Growth Objective (2022 to 2025)

8.2 Recommended Strategies

Strategy #1: Market Penetration - Expansion of the retail channel and ancillary business through
conversion of white stations and franchise opening

The demand for oil and other petroleum products is set to increase with a 6.50% CAGR covering
2022 to 2024. Considering this, Phoenix should take advantage of the industry growth by investing in
service stations. The said channel will not only sell fuel, but it will also a key place to sell its LPG and
lubricant products. In some key stations, an establishment of Autoworx Plus and FamilyMart is
advisable to generate more revenue. The challenge for the company is to find the most viable place
to expand its stations. Phoenix can leverage on Udenna Corporation’s real estate arm, Udenna Land
in searching for the said parcels of land. Best lease cost should also be a priority for this.

Phoenix is currently the third market player, only accounting to 7% of the total service stations in
the Philippines as of 2021. Its 690 stations has 6% located in Luzon, 4% in Visayas, and 13% in
Mindanao. Accompanied by the aggressive increase of second tier players (i.e., independent and
generic), Phoenix’s market position in Luzon and Visayas are continually challenged as reflected in
table 80.

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 Table 81– Total Station Count in the Philippines (2021)

Based on 2021 data, Phoenix has a station mix of 1% which are company-owned, company
operated (COCO), 50% for company-owned, dealer operated (CODO), and 49% dealer-owned, dealer
operated (DODO). Phoenix usually builds a station with two islands and four pumps. The cost varies
depending on the franchise type. A CODO station is estimated to be at Php 20 million while the third-
party dealer covers its operations. While for a DODO, the company cost is around Php 14 million to
cover for the equipment such as tanks, signage, and others. The dealer must cover the operations and
for the lot leasing or ownership. For this strategy, conversion of white stations to Phoenix is most
ideal.

Table 82– Phoenix Station Type Distribution (2021)

It should be noted places such as Pampanga, Batangas, Bicol, and Iloilo are emerging metropolises
and have high potential for growth (Villegas, 2022). Hence, table 82 reflects the key areas for
expansion.

As reflected in the table, the priority is still for Luzon, primarily in the NCR. This is followed by
Visayas and Mindanao. Furthermore, the distribution is also in reference to DOE’s product demand
report for 2021. According to the report, the demand is still in NCR with 1,701 ML, followed by Region
4A with 1,386 ML, then Region 3 with 987 ML67. Total stations to be established by 2025 is set at 132,
bringing to a total station count of 822 across the country.

67
DOE-OIMB Report 2021 https://www.doe.gov.ph/downstream-oil/oil-supply-demand-2021

206
 Table 83– Recommended Service Station Distribution (2021)

It should be noted that the assumption for the computation is anchored on the common station
type, which is two islands with four pumps. This is illustrated in figure 58.

Figure 58– Service Station Visualization: Two Islands, with Four Pumps

Moreover, it is also recommended for Phoenix to build its Phoenix Block (i.e., one stop shop
service station with Autoworx Plus, other Udenna businesses) in North and South Luzon Expressways.
Two stations are set to be built, one in NLEX and the other in SLEX. For this station type, it is
considerably bigger with eight islands and 16 pumps.

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 With the increase in the number of stations, an expansion of Autoworx Plus is also recommended
to be done. From five shops, an addition of 10 more is expected by 2025. Hence, total count is around
15 Autoworx Plus.

Strategy #2: Market Penetration – Addition of import terminals to support growth and improve
operational efficiency

To fully support the growth of the service stations, it is imperative that Phoenix to add import
terminals and storage depots in key areas. Based on Phoenix’s facilities portfolio as reflected in table
83, it lacks support in North Luzon and Eastern Visayas.

Table 84– Phoenix’s Terminals and Depots

Phoenix can have a lease agreement with Poro Point Management Corporation (PPMC) for it to
use its facilities. Poro Point is considered to be a freeport zone and can be used for oil storage
activities. To date, Petron, Shell, and Chevron have an agreement with PPMC.

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 Figure 59– Poro Point Freeport Zone

Moreover, Phoenix has also a weak supply point in Eastern Visayas. All its storage depots in
Visayas are in Central and Western parts. Phoenix can opt to have a sharing agreement with the
current oil companies in the areas or establish its own facilities. Currently, Petron has its own storage
facilities in Ormoc and Tacloban. Shell, on the other hand, has its Anibong Depot also in Tacloban,
Leyte.

Strategy #3: Market Penetration– Enhancement of the total customer experience through the
creation of an ecosystem founded on the Limitless App and improvement in feedback mechanism

Currently, Phoenix only offers loyalty programs for public motorists in the likes of jeepney,
tricycle, and transportation network company drivers. Hence, there is still a consumer gap in terms of
the private motorists.

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 Recognizing that customers’ needs go beyond fuel, Phoenix launched its Limitless App in June
2020. It is currently using its app as it tries to build loyalty among the users. The app is available to all
and every purchase of Php 200 from participating groups (e.g., Phoenix Petroleum, FamilyMart,
Wendy’s, Conti’s), the user gets 1 point or equivalent to Php 1. While the Limitless App advocates in
building a lifestyle around Udenna-led businesses, Phoenix’s products are not heightened. Phoenix
should create a more enticing program for its consumers to really patronage the fuel line. A creation
of higher bonus points can be done. The company can benchmark on its key competitors – Petron and
Shell. Phoenix’s point conversion rate is somehow far from what consumers can have via the Petron
Value Card and SM Advantage Card of Shell.

Figure 60– Limitless App

For the public motorists, Phoenix has its Pinoy Tsuper Hero program. The program is intended to
boost the morale of drivers and develop cooperative leaders through recognition of an individual’s
exemplary service. This is done by submitting an individual’s name, contribution, and details via
Phoenix stations and government offices (i.e., DOT, LTGRB). PUV drivers also have the chance to win
up to Php 1 million if they are chosen to be the national winner. The mechanics and rewards are fully
discussed in figure 61. This program has been running for seven years this 2022.

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 Figure 61– Pinoy Tsuper Hero Mechanics (2019 – Year 4)

Aside from this, drivers also have their own point earning cards via Phoenix Tsuper Card. They can
earn points from using Phoenix’s petroleum products. Currently, the program is seen to be effective
among the public motorists. But the card type can be migrated via the Limitless App. Phoenix must
find a way to be inclusive of the drivers since some might not have a smartphone or mobile data
credits; hence, QR printed codes can be used.

Figure 62– Phoenix Tsuper Club Card

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 Moreover, Phoenix should also create more channels in terms of customer experience. Currently,
the company has customer experience feedback platform via the Limitless App and hotlines. It can
further use various social media platforms to get consumer insights.

Strategy# 4: Market Penetration– Aggressive use of social media and e-commerce platforms for
promos and advertising

Figure 63– Social Media Users in the Philippines

As of 2020 data, there are around 78.5 million users of social media in the country and it is
expected to grow up to ~91 million by 2026 (Statista, n.d.). The most popular platform among this is
Facebook with 80% users in 2021. This is then followed by YouTube, Tiktok, and Instagram. Hence,
Phoenix should give importance on this form of advertising.

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 Figure 64– Social Media Market Share (September 2021)

Currently, Phoenix has the lowest social media presence in comparison with the other major
players. Its reach is only limited, only in Facebook, YouTube, Instagram, Twitter, and LinkedIn. The
company can create a sub team under the marketing team which will handle social media platforms,
contents, and online solutions (i.e, app advertisements, e-commerce).

Furthermore, it can also enhance its e-commerce platforms. Based on its Shopee store, it has a
low number of sales and followers; while on Lazada, it has no official shop yet. Lubricants can be
mostly sold under the e-commerce platforms; hence, this can be added into the monthly KPIs of the
account managers.

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 Figure 65– E-commerce Platforms

Strategy# 5: Market and Product Development – Increase market share by targeting niche markets
(e.g., LPG, Asphalt, Lubricants, and CME)

Innovating or buying a new product line can significantly impact to a company’s bottom line. This
is evident when Phoenix started its business line in the LPG market. Aside from fuel, LPG is the primary
driver for growth and margin. Hence, more aggressive account acquisition must be done. Creating a
premium line for LPG might help in targeting the upper markets.

Its asphalt business can further grow as they innovate products and as they hold joint ventures
with other companies. Phoenix can create more products, targeting the retail side of asphalt (i.e., DIY
cold patch).

CME which is used as the biofuel component of each fuel sold can be taken into mass production,
especially that this is a government mandate. Given that Phoenix is the only local oil company who
has a CME facility, it can sell to other competitors, adding to its profit and volume.

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 According to DOE, years 2020-2021 registered an average demand of 175 ML across the country.
Phoenix, as reflected in table 85 was able to produce an average of 6.75 ML which is only 3.84% of
the total Philippine demand. Hence, this can be a lucrative business line for Phoenix. Currently, the
company only supplies to its stations internally. Upgrading its facilities can also improve its
production.

Table 85– Local CME Supply and Demand

(202-2021)

Table 86– Phoenix’s CME Supply and Demand

(202-2021)

8.3 Recommended Departmental Programs & Action Plans

Strategy #1: Market Penetration - Expansion of the retail channel and ancillary business through
conversion of white stations and franchise opening

ACTION TIMETABLE EXPECTED OUTPUT RESPONSIBLE TEAM

Conduct studies on the 4Q 2022 Identification of potential -Business
proposed location sites sites Development (i.e.,
network expansion
group)
-Retail

215
-Shortlist sites that are much 4Q 2022 -Locations for the new -Business
feasible and ideal stations Development (i.e.,
-Identify which stations to -Preparation of initial network expansion
have Autoworx Plus (vehicle cost-benefit analysis/ group)
service facility) projections -Retail

On-site visitation and 4Q 2022 -Ocular inspection of sites -Business

observation with other and creation of the initial Development (i.e.,
stakeholders involved in blueprint network expansion
project expansion and group)
construction of stations to -Retail
determine the project -Purchasing
timeline and cost per site -Engineering

Review of CAPEX allocations 1Q 2023 -Finalize the cost-benefit -Pricing and Demand
of the project to -CFO
determine profitability
and sources of funds

Secure approval for the 1Q 2023 Support from the -Business

proposed expansion plan management committee Development (i.e.,
network expansion
group)
-Retail
-Management
Committee

216
Plan the supply chain and 2Q 2023 Supply points -Business
operations (i.e., dealer Development (i.e.,
operated or company) network expansion
group)
-Retail
-Supply
-Terminal and Depot
Operations
Construction of new stations 2Q 2023 New retail stations -Retail
onwards -Purchasing
Review and selection of 3Q 2023 Finalize contracts with -Business
contractors for point of sale onwards suppliers, contractors, Development (i.e.,
(POS) systems and other IT and POS providers network expansion
installations group)
-Retail
-Purchasing
-IT
Establish pricing and other After stations Pricing and applicable -Retail
applicable support for the are built and programs for the new -Pricing and Demand
new stations ready for stations
operations

Opening of new retail After stations Inauguration and launch -Business

stations are built of new stations Development (i.e.,
network expansion
group)
-Retail

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 Regular visits for equipment After stations Monthly reports -Retail
maintenance, excellent are in -Engineering
service, and overall operations
operations

Oversee station operations After stations Monthly operations -Retail

and sales performance are in review and marketing -Pricing and Demand
operations programs -Marketing

Strategy #2: Market Penetration – Addition of import terminals to support growth and improve
operational efficiency

ACTION TIMETABLE EXPECTED OUTPUT RESPONSIBLE TEAM

Review for the best location 4Q 2022 Location for the new -Business
in Luzon and Visayas, medium-range import Development: Depots
including the budget proposal terminals and Terminals
and impact on sales -Supply
-Pricing and Demand
-Sales
-Legal

Look for potential partners 4Q 2022 Tie-up program with -Marketing

for a joint venture: close the another company -Legal
deal and review potential -Supply
new implications -Pricing and Demand
-Sales

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Prepare for the approval of 1Q 2023 Approved master plan -Supply
the master plan for the two -Business
terminals or storage depots: Development: Depots
-presentation to the and Terminals
management committee -Management
Committee

Construction of the two 1Q 2023 Operational terminals or -Supply

medium-range import onwards storage depots -Business
terminals Development: Depots
and Terminals
-Purchasing

Strategy #3: Market Penetration– Enhancement of the total customer experience through the
creation of an ecosystem founded on the Limitless App and improvement in the feedback
mechanism

ACTION TIMETABLE EXPECTED OUTPUT RESPONSIBLE TEAM

Review of current loyalty 4Q 2022 Review of current -Marketing
programs – Limitless App and offerings -Pricing and Demand
for public motorists (i.e., -Retail
discount cards)

Creation of new loyalty 4Q 2022 Program mechanics -Marketing

programs with proposed -Pricing and Demand
budget and impact on sales -Retail
-IT

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Secure approval for the 1Q 2023 Support from the -Marketing
proposed loyalty program management committee -Pricing and Demand
-Management
Committee

IT to re-configure Limitless 1Q 2023 Re-configured app and -Marketing

App settings or card setting card settings -Retail
-IT
Do a user acceptance testing 2Q 2023 Correct configuration -Marketing
(UAT) to check if the -Retail
configured settings work -IT

Create decks on how to 3Q 2023 Cascade materials (e.g., -Marketing

implement the new loyalty posters, documents) for
program standard operating the dealers
procedures (SOP)

Hold a cascade with the 3Q 2023 Informed stakeholders -Marketing

critical stakeholders in the about the new loyalty -Pricing and Demand
company programs -Retail
-IT

Roll out the new SOP in the
stations
3Q 2023 -Informed dealers about -Marketing
the new loyalty programs -Retail
-Dealers to have the -Dealers of the
posters and other stations
materials for the program

220
Monitor loyalty program 3Q 2023 Monthly operations -Marketing
operations, station volume, onwards review, evaluation, and -Retail
and sales program revisions -Pricing and Demand
-IT

Strategy# 4: Market Penetration– Aggressive use of social media platforms for promos and
advertising

ACTION TIMETABLE EXPECTED OUTPUT RESPONSIBLE TEAM

Review and evaluate current 3Q 2022 Assessment of current -Marketing
marketing ads and promotion programs on sales and the
company's revenue

Prepare new marketing ads 3Q 2022 -Selection of social media -Marketing

and promotions for platform to be used -Ads agency hired
conventional and non- -Ratio of marketing
conventional media platform (i.e., 70%
conventional- 30% non-
conventional)

Identify talents and social 3Q 2022 Talents and media -Marketing

media influencers personalities -Ads agency hired

Review of the impact of the 4Q 2022 Study on marketing and -Marketing

new marketing program on sales -Sales Team
sales – with the proposed -Pricing and Demand
budget
Secure approval for the 4Q 2022 Approved marketing -Marketing
proposed marketing program programs -Management
Committee

221
Marketing ads and promotion
implementation (e.g., inform
key stakeholders about the
new social media account,
posters)
1Q 2023 Informed stakeholders -Marketing
-Sales Team (e.g.,
Retail, LPG, etc.)
-Dealers of the
stations, LPG outlets,
etc.

Monitor impact on sales 1Q 2023 Monthly review, -Marketing

onwards evaluation, and program
revisions, if necessary
-Sales Team (e.g.,
Retail, LPG, etc.)
-Dealers of the
stations, LPG outlets,
etc.
-Pricing and Demand

Strategy# 5: Market and Product Development – Increase market share by targeting niche markets
(e.g., LPG, Asphalt, Lubricants, and CME)

The example below will be about the possible sale of CME with the other oil players.

ACTION TIMETABLE EXPECTED OUTPUT RESPONSIBLE TEAM

Review current CME 4Q 2022 Industry review and -CME
performance -production, benchmarking -Pricing and Demand
demand, facility capacity. -Supply

To make the review more

comprehensive, check the
CAGR, competitors, cost
versus importation, identify
the customers and

222
approximate the possible
demand
Review and visit the CME 4Q 2022 -Ocular visit that is well- -Engineering
facility. Have this checked by documented -Third-party surveyors
in-house Phoenix engineers -Facility review -Terminal and Depot
and checked by a third party. -Cost estimation of the Operations
upgrade, repairs, etc.
Check if it can expand its
production. Have an estimate
on the cost if it needs
upgrading.
-Align with the stakeholders 1Q 2023 A comprehensive report -CME
involved and discuss the about for the -Sales
possible next steps management committee -Pricing and Demand
-Finance
-Decide how to finance the -Terminal and Depot
program effectively: joint Operations
venture or entirely
shouldered by Phoenix

-Decide how to
operationalize the
implementation (i.e., pricing,
KPIs, delivery, logistics)
Seek approval from the 1Q 2023 Management feedback - -Management
management for program approval, comments, -CME
launching decline -Sales
-Pricing and Demand
-Finance

Roll-out product launch: 2Q 2023 Accounts with estimated - CME

-solicit accounts monthly volume -Sales

223
 -Pricing and Demand
Monitor and evaluate sales 2Q 2023 Sales performance analysis -CME
performance -Sales
-Pricing and Demand
Report the product 2Q 2023 Sales performance -CME
performance presentation with possible -Sales
next steps -Pricing and Demand

8.4 Financial Projections

8.4.1 List of Assumptions

Accounts Assumptions
1 Financial Statements (a) based on the actual 2019 to 2021 of
Phoenix, Petron, and Shell
(b) The 3-year projection is based on the
2022-2025 CAGR sourced
(c) competitors are based on the same
CAGR
2 Revenue Based on its strategic and financial objectives,
increasing its service stations through
acquisitions and opening franchising
arrangements, increasing bundling, and
intensifying marketing efforts.

3 Cost of Sales Mainly driven by:

(a) volume growth

(b) additional depreciation for its new
investments depreciating from 5-15 years
(c) Additional lease as new branch openings
4 Selling and administrative expenses Mainly driven by an increase of:

(a) marketing expenses to intensify its

promotional and marketing activities
(b) Additional workforce to support the
increased volume of transactions and new
roles such as Franchise managers, Business
Development, and finance

224
 (c) Additional training costs to be allocated for
HR
(d) Payment of yearly maintenance of
company website
(e)Taxes and licenses
(f) Consumption of office supplies and utilities
5 Finance Cost Based on the 7.8% interest rate applied to the
principal loan
6 Finance Cost Component: Finance income No change
7 Finance Cost Component: Equity share in No change
net income of joint ventures
8 Finance Cost Component: Others-net No change
9 Tax Income No change
10 Trade and other receivables Based on 37 day's average collections period
11 Inventories Based on the 15-day average inventory
holding period
12 Due to related parties -net No change
13 Restricted deposits No change
14 Import value-added tax net Based on the cost of sales trend
15 Prepayments and other current assets It is mainly driven by additional security
deposits to be made as with the increase of
the number of service stations
16 Property, plant, and equipment Additional capital expenditure related to the
acquisition of smaller players, augmentation
of logistics, and other service stations are Php
1.2 billion in 2022, Php 2.5 billion in 2023, and
Php 3 billion in 2024 and 2025.

Spending for strategies is as follow:

1. Import terminal or storage depots -
Php Php 4.5 billion
2. Service stations and Autoworx Plus -
Php 2.8 billion
3. Advertising-Php 1.1 billion
4. Product development -Php 1.25 billion

17 right-of-use assets Will increase by 12% year on year with the

new opening of stations, outlets, etc.
18 Investment properties No change
19 Intangible assets and goodwill No change
20 Investment in joint ventures No change
21 Goodwill No change
22 Deferred tax assets No change
23 Other non-current assets Mainly driven by additional security deposits
to be made as with the increase of the
number of service stations, outlets, etc

225
24 Current liability: Interest-bearing loans and Will repay 2 billion yearly
borrowings
25 Current liability: Trade and other payables Based on a 50-day average payment period
26 Current liability: Derivative financial No change
liabilities
27 Current liability: lease liabilities Will increase by 12% yearly with the new
opening of service stations
28 Non-current liability: Interest-bearing loans Will repay 2 billion yearly
and borrowings
29 Non-current liability: lease liabilities No change
30 Other non-current liabilities Increase mainly related to additional deposits
that will be collected for franchise issuance
31 Capital stock No change
32 Additional paid-in capital No change
33 Revaluation reserves No change
34 Retained earnings Will close net income for the year and declare
500 million dividends yearly.

226
8.4.2 Statement of Financial Position (Balance Sheet) – Projection

Table 87– Balance Sheet Projected (2022-2025)

227
228
8.4.3 Statement Comprehensive Income (Income Statement)– Projection

Table 88– Income Statement Projected (2022-2025)

229
8.4.4 Statement of Cash Flow – Projection

Table 89– Statement of Cashflows Projected (2022-2025)

230
231
 8.4.5 Financial Ratios – Projections

Table 90–Financial Ratios (2022-2025) Projected

9. STRATEGY EVALUATION, MONITORING, AND CONTROL

9.1 Balanced Scorecard Strategy Map

232
9.2 Balanced Scorecard Strategy Objectives and Initiatives Matrix

Objective Measure / Metric (KPI) Target by 2025 Initiative

Php 212 billion gross
Increase gross
sales revenue by -Increase sales
sales revenue
Increase in Peso sales 2025 volume/goods
sold
Financial
Increase -Improve cost
Php 7.9 billion net savings
profitability (net Increase in profit
income by 2025
income)

20% relative market

Increase sales volume of Increase
Further increase share from 18% in
fuels, LPG, and lubricants account
market share 2021 (against Petron
sold acquisition
and Shell)

Additional 132
Improve retail stations stations (2 of which
Increase through are Phoenix Blocks in Retail station
Customer availability and aggressive station conversion major expressways). conversion /
presence and franchising (i.e., CODO Closing to total establishment
and DODO) Phoenix stations at
822

Expand services Grow the number of Additional 10

and products Autoworx Plus (service Autoworx Plus. Total Autoworx Plus
offered to centers) of 15 by 2025 expansion
consumers
-Two additional -Establish or
import terminals or lease import
storage depots: 1 in terminals or
-Number of import terminals
Luzon and 1 in storage depots
or storage depots.
Visayas. Closing to 12
Supply chain supply point. -Search for
-Improve efficiency and
enhancement joint venture
utilization rate of
-To be at par with partners for the
manufacturing and
Business the industry average new import
logistics assets
Processes for fixed assets terminals or
turnover and total storage depots
assets turnover
-Adoption: 500K -Heighten the
Increase adoption rate in total members Phoenix brand
Loyalty program terms of public and private in the Limitless
enhancement loyalty programs (i.e., -Utilization: App by creating
Limitless App) 600K transactions new and
profitable

233
 -Churnouts (inactive loyalty
users): 5% or below programs (e.g.,
tie up with
Reference is based fintech
on 2020’s data of companies,
110K members, 216K create bonus
transactions points scheme
for every
purchase or
visit)
-Improve
training among
forecourt crew

-Offer more
services in the
Improve service Mystery motorist rating to 90% from 72%
Business service station
in the retail gauge service in retail mystery motorist
Processes (e.g., establish
stations stations score
FamilyMart,
Autoworx Plus)

-Add two
Phoenix Block
service stations
-Clearly defined
career
pathways

Low attrition Length of stay of employees below 5% attrition -Creation of

rate rate employee pulse
check or
satisfaction
survey

-Have higher
Learning and
number of
Development
trainings, to be
Enhancement of at par with the
technical and industry
Employees to
soft skills Number of training hours per
achieve the target
through employee - Develop new
training hours per
attendance in programs that
year
required will enhance
training employees'
skills, making
sure that it is
updated and in

234
 line with the
industry

9.3 Balanced Scorecard Performance Monitoring Dashboard

Financial Perspective

Goals -Dashboard Responsible

Meet Target D-Driver
Objectives Warning Target A-Accountable When
Below Target C-Consulted
I-Informed
Increase gross sales >=Php 212 billion Php 212 billion D-Sales 2025
revenue >Php 106 billion, A-Sales
<Php 212 billion C-Management,
<Php 106 billion Finance,
Marketing,
Operations
I-Management,
Finance,
Operations
Increase net >=Php 7.9 billion Php 7.9 billion D-Sales 2025
income >Php 3.95 billion, A-Finance
<Php 7.9 billion C-Management,
<Php 3.95 billion Marketing,
Operations
I-Management,
Operations

Customer Perspective

Goals -Dashboard Responsible

Meet Target D-Driver
Objectives Warning Target A-Accountable When
Below Target C-Consulted
I-Informed
Improve relative >20% 20% relative D-Sales 2025
market share >10%, <20% market share A-Marketing
<10% against Petron and C-Management
Shell I- Finance,
Operations

235
 Increase service >132 stations 132 new service D-Business 2025
station growth >66, <132 stations Development (i.e.,
<66 Expansion group)
(2 Phoenix Block A- Business
Stations in major Development (i.e.,
expressways) Expansion group)
C-Management,
Operations,
Engineering
I- Finance,
Marketing
Expand services >=10 Autoworx 10 Autoworx Plus D-Business 2025
through Autoworx Plus Development (i.e.,
Plus >5, <10 Expansion group)
<5 A- Business
Development (i.e.,
Expansion group)
C-Management,
Operations,
Engineering
I- Finance,
Marketing

Business Processes Perspective

Goals -Dashboard Responsible

Meet Target D-Driver
Objectives Warning Target A-Accountable When
Below Target C-Consulted
I-Informed
Supply chain >2 terminals Two new import D-Operations 2025
enhancement – >1, <2 terminals A-Operations
new storage <1 C-Management,
depots and import Finance,
terminals Engineering
I-Sales
Improve loyalty App Adoption: App Adoption: D-Marketing 2023
program – Limitless >500K members 500K members A- Marketing
App usage and >250K, <500K C-Management,
Pinoy Tsuper Hero <250K App Utilization: Sales, Finance
600K transactions I-All employees
Transactions:
>600K Churn out (inactive
>300K, <600K members): keep it
<300K at 5% (25K or
below)

236
 Churn out:
<=25K
<50K, >25K
>50K

Improve service in >90% rating Mystery motorist D-Marketing 2023

stations >72%, <90% rating of 90% A- Marketing
<72% C-Management,
Sales, Finance
I-Operations

Learning and Development Perspective

Goals -Dashboard Responsible

Meet Target D-Driver
Objectives Warning Target A-Accountable When
Below Target C-Consulted
I-Informed
Enhancement of 15 hours 15 hours per D-Human Resource 2022 to 2025
technical and soft >7.5, <15 employee Department
skills by compliance <7.5 A- Human
to required Resource
trainings hours Department
C-Management
I-Finance, All
employees

Attain low attrition <=5% 5% attrition rate D-Human Resource 2022 to 2025
rate <10%, >5% Department
>10% A- Human
Resource
Department
C-Management
I- Finance, All
employees

237
 10. CONTINGENCY PLAN

Upside Factor

No. Upside Factor Proposed Action Plan

1 Good economic performance
2 Stricter performance of importation
rules and regulations
The recovering and good economic performance will
provide an opportunity for Phoenix to pursue
distribution network expansion and grow its volume.
The proliferation of oil smuggling heavily hampers the
sales and revenue of companies that pays taxes
rightfully. Oil smugglers can sell their oil products
lower than those rightfully paying taxes. Hence, if the
government implements more stringent activities (i.e.,
oil marking) to stop oil smuggling, better and fair
competition will occur.

With this, Phoenix can save its funds for discount

3 The steady foreign exchange rate
against the USD
4 Government to mandate higher
biofuels content
extension, allocated to its other projects such as
network expansion.
Since the oil industry is heavily reliant on the
importation, any fluctuations in the foreign exchange
can affect the supply that the company can buy.
Therefore, Phoenix can hedge oil prices when the
Philippine Peso is strong against the US Dollar.
The biofuel content of a fuel is currently at a
minimum. Phoenix can implement a supply sales
agreement with other oil players to supply their
biofuel requirements if the government mandates
higher content. Phoenix's CME manufacturing plant
backs this up.

Downside Factor

No. Downside Factor Proposed Action Plan

1 Oil-producing countries (OPEC and
non-OPEC members) influence oil
prices by cutting down production
2 Increase of government taxes on oil
and petroleum products
3 Increase in the usage of renewable
energy
Phoenix should continue to look for suppliers with the
best prices. The company can also do hedging to
secure its prices.
Since petroleum products are usually taxed,
depending on the economic climate in the country,
Phoenix should diversify its business and focus on
revenue-generating business lines (i.e., LPG and fuels)
so that it can cushion itself from additional higher
taxes.
Mr. Dennis Uy bought 90% shares of the Malampaya
gas field. Should there be an increasing trend for

238
renewable energy, Phoenix can ram up the
exploration of LNG.

Furthermore, Phoenix to study the feasibility of

setting up electric vehicle charging stations.

239
 APPENDICES

Phoenix Petroleum Philippines Inc.

Balance Sheet

240
Phoenix Petroleum Philippines Inc.
Income Statement

241
Phoenix Petroleum Philippines Inc.
Statement of Cash Flows

242
Petron Corporation
Balance Sheet

243
Petron Corporation
Income Statement

244
Petron Corporation
Statement of Cash Flows

245
Pilipinas Shell Petroleum Company
Balance Sheet

246
Pilipinas Shell Petroleum Company
Income Statement

247
Pilipinas Shell Petroleum Company
Statement of Cashflows

248
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