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2012

Castrol India Ltd. (BP p.l.c)

Pratyush Raj XLRI BM 2011-13 3/25/2012


Under the esteemed guidance of Prof. R. K. Premarajan

1. What is the name of the Organization? What goods and/or services does it produce/provide? Describe the companys organizational mission. Describe the way it has grown and developed.
Name of the Organization: Castrol India Ltd. (British Petroleum p.l.c) Goods Produced: Castrol offers lubricants for virtually all domestic, commercial and industrial applications. For automotive lubrication (including motorcycles 2-stroke and 4-stroke engines, car petrol and diesel engines), their products include an extensive range of manual and automatic transmission fluids, chain lubricants and waxes, coolants, suspension fluids, brake fluids, greases, cleaners and maintenance products. Castrol also produces products for agricultural machinery, plant, general industry and marine engineering uses. Castrol products/services include: For passenger cars: Edge, Magnatec, Syntec and GTX; less commonly, XL, GTD, Formula RS, Synt and SLX For motorcycles: Power1, PowerRS and Act>evo; less commonly, TT, TTS, GP, GPS and Go! For heavy duty vehicles: Elixion, Enduron, Hypuron, Tection, CRB and Agri For ships: Cyltech and TLX Plus For industrial applications: Hyspin (hydraulic), Aircol (compressors) and Alpha (industrial gears) Castrol Pit stop Castrol Bike Point Organizations Mission: Castrol India Ltd. Being a part of BP p.l.c confirms to the Mission of BP p.l.c. Although not specifically labeled a "mission statement," BP has a published statement of "What We Stand For": "BP wants to be recognized as a great company competitively successful and a force for progress. We have a fundamental belief that we can make a difference in the world. We help the world meet its growing need for heat, light and mobility. We strive to do that by producing energy that is affordable, secure and doesnt damage the environment. BP is progressive, responsible, innovative and performance driven."

Under the esteemed guidance of Prof. R. K. Premarajan

BP further defines its mission to be "progressive, responsible, innovative, and performance driven with these explanations: 1. "Progressive - We believe in the principle of mutual advantage and build productive relationships with each other, our partners and our customers." 2. "Responsible - We are committed to the safety and development of our people and the communities and societies in which we operate. We aim for no accidents, no harm to people and no damage to the environment." 3. "Innovative - We push boundaries today and create tomorrows breakthroughs through our people and technology." 4. "Performance Driven - We deliver on our promises through continuous improvement and safe, reliable operations." History of Growth: The history of Castrol in India dates back to 1910 when certain automotive lubricants from C C Wakefield & Company made an entry in the Indian market. In 1919, C C Wakefield & Company set up its first overseas branch office in India and commenced operations as a trading unit. Today, Castrol India Limited is the second largest player in the Indian lubricant industry and is the market leader in the retail automotive lubricant segment. Castrol India is part of the BP Group worldwide. Castrol India Limited is a Public Limited Company with 70.92% of the equity held by Castrol Limited UK (part of BP Group). In 2010 the company's turnover was Rs.3138.73 crores and Profit after Tax was Rs. 490.31 crores. From a minor oil company, with a share of about 6% in 1991, Castrol India has grown to become the second largest lubricant company in India with a market share of around 22%. Castrol India manufactures and markets a range of automotive and industrial lubricants. It markets its automotive lubricants under two brands - Castrol and BP. The company has leadership positions in most of the segments in which it operates including passenger car engine oils, premium 2-stroke and 4-stroke oils and multigrade diesel engine oils. Castrol India has the largest manufacturing and marketing network amongst the lubricant companies in India. The company has 5 manufacturing Plants across the country, including a state-of-the-art plant in Silvassa. The company reaches its consumers through a distribution network of 270 distributors, servicing over 70,000.retail outlets.

Under the esteemed guidance of Prof. R. K. Premarajan

2. Draw an organizational chart of the top management in your organization. Write down the names of the top managers and the positions they occupy. What is the span of control of the CEO? Do you have any comments on its appropriateness? How many levels are there in the organizations hierarchy? Does the organization experience any of the problems associated with tall hierarchies? Which ones?
British Petroleum p.l.c Organizational Structure:

Robert Dudley CEO, BP p.l.c

lain conn Chief Executive, Refining and Marketing

Rupert Bondy, Group General counsel

Brian Gilvary Chief Financial Officer

Lumar McCay, Chairman and President, BP America

Helmut Schuster, Group HR Director

Dev Sanyal, Executive VP & Group chief of Staff

Mike Daly, Executive VP Exploration

Bob Fryar, Executive VP, E&P Production

Byron Gyote, Executive VP, Corporate Business.

Andy Hopwood, Executive VP, E&Y Strategy & Integration

Bernard Looney, Executive VP, Developeme nt

Castrol India Ltd. is under the direct control of the Executive Board of BP p.l.c whose members are all the above mentioned members. Even though BP has full control over Castrol India Ltd still it gives it directors great power and authority, which is one of the major reasons behind the success of Castrol as a brand within India.

Under the esteemed guidance of Prof. R. K. Premarajan

Within India the structure is like:

S M Datta, Chairman

N.K.Kshatriy, ViceChairman

R. Kirpalani, Chief Operating Officer & Marketing Head

S Malekar, Director, Supply Chain

S Vaidya, Director Finance

The Organization in general has a very flat hierarchy even though its a very large company. So externally it seems the company is not facing any tall organizational structure at the moment. Also the company comes out with innovations both in new product development and marketing at a great pace supporting the benefits of flat hierarchy. Although a better comment can only be made after working in the company itself.

3. How many employees does the organization employ? Who are the organizations major stakeholders? Do the goals of various groups conflict? Which stakeholder groups goals receive priority in your organization? Does the organization do a good job in managing its stakeholders? How do you know?
The Organization employs employee strength in the range of 500-1000 people and has 270 distributors that serve through 27000 retail outlets. The major stakeholders are: 1. Employees 2. Shareholders 3. Bankers 4. Distributors 5. Retailers 6. Customers The company strongly believes in treating its employees as the main stake holder as the company is dependent on innovation for both innovation and creating brand in such a generic industry like lubricants.

Under the esteemed guidance of Prof. R. K. Premarajan

This comes out very clearly from the statement written below which has been taken from Castrols site. Moreover even when the company has gone through bad faces it has given bonuses to its employees. Our commitment to our employees is a key factor in our success as a business. And for this we provide a wide range of opportunities. This means a modern place of work, good teamwork, effective opportunities for development and performance-related pay. We believe in hiring the best talent and ensure that once hired, we partner the employees in their development efforts. We believe that the success of our business depends on each of our employees contributing to full potential. Continuous improvisation and updating our skills is imperative to our organization. Castrol offers an enriching environment for professional and personal growth for every employee. An open, participative culture permeates each level of the organization. The Company empowers its employees to take decisions on their own and provides the necessary resources, helping build a culture of empowerment for employees to prove their potential. At Castrol, people are their most valuable asset and hence employee care is given importance.

In such an industry its very natural to have conflict in the priorities and goals of the various stakeholders. To manage such a problem, the company spends a lot of money and asset in building the brand Castrol as it helps everyone in the chain to get the most value out of the organization leading to a great growth of the company which is shown by its market share and Profits which has gone up by 29% in 2011.

4. How differentiated is your organization? Is it simple or complex? List the major roles, functions, or departments in your organization. Does your organization have many divisions? If your organization engages in many businesses, list the major divisions in the company.
There is a functional structure where the company is basically headed under three directors: 1. Chief Operating Officer and Marketing 2. Supply Chain 3. Finance The organization although have its major divisions within the company based on product and services are: 1. Passenger Car Oil 2. Motorbike Oil

Under the esteemed guidance of Prof. R. K. Premarajan

3. 4. 5. 6. 7. 8.

Gearless Scooter Oil Commercial Vehicle Oil Specialty Range Castrol Professional Castrol Pitstop Castrol Bike Point

Here the company is differentiated as there are three directors at the top addressing three functions and 8 product divisions are also there. Even in the case of vertical differentiation there are various levels but still the company promotes decision taking ability by employees at every level. On the whole it can be said that Castrol India Ltd is differentiated. While BP p.l.c is highly differentiated as seen in the organizational structure, it should however never be forgotten that it is a much larger company. On the issue of Complexity: 1. Differentiation and Integration: The company has been differentiated in three functions and seven divisions for the success of the company and proper division of labor. To integrate these properly, the two works operations and marketing which could have the greatest amount of conflict has been merged under one director. Also when new product is launched to insure its success task forces are made. And in name of learning new experiences officers and managers from one department are sent to other departments for some time too. 2. Centralization and Decentralization: The company allows its employees to take decisions on their own rather than imposing it on them. The environment is very helpful for the proper growth of leaders in the company. 3. Standardization and Mutual Adjustment: The company although believes in standardization for specific issues as in finance and supply chain but in case of new innovation and marketing initiatives it is highly biased on the side of Mutual Adjustment. On the whole there is high complexity & integration in the organization.

Under the esteemed guidance of Prof. R. K. Premarajan

5. How do the organizations managers judge its effectiveness? -external resource approach? Internal process? Technical? Or how well is the organization doing when judged by the criteria of control, innovation, and efficiency? Is there a balanced scorecard measure? MBO? What goals, standards, or targets are they using to evaluate performance?
From the companys website and details available in public, the company focusses on the following things: 1. Increase Coordination and motivation between the employees. 2. Greater decision making power in the hands of the employees. 3. High Rate of Product Innovation which is clear from the extremely high number of products the company launches and also the new service side innovations of the company. 4. Reduction in taking time to market is clear from the single director approach for both Operations and Marketing. Based on the learning in Organizational Behavior course in this semester it is clear the managers in the company are following an Internal systems Approach. Whereas in its annual report, The company has discussed its success based on its performance in the various sectors compared to previous years and the market in general. It has discussed about 1. 2. 3. 4. The lower cost of raw materials and other inputs it could manage. The increase in its market share over the year. The increase in its PAT and stock price. It has tried to show its care for all the shareholders through bonuses and dividends.

These four factors in the annual report indicate that External Resource Approach is being used by the company. Also the companys innovativeness and its speediness in supply chain and the recent advancements like Castrol Bike Point and Castrol Pitstop clearly indicates a Technical Approach. All this clearly indicates that the company is giving equal importance to all three parameters: Innovation, Control, and Efficiency. No such Balanced Score Card Measure has been used by the company, though the company has certain goals within its internal domain on which they are constantly working.

Under the esteemed guidance of Prof. R. K. Premarajan

6. How has your organization responded to the design challenges? (a) Is it centralized or decentralized? How do you know? (b) What about complexity? Can you identify any integrating mechanisms used by your organization? What is the match between the complexity of differentiation and the complexity of the integrating mechanisms that are used? (c) Is behavior in the organization very standardized, or does mutual adjustment play an important role in coordinating people and activities? What can you tell about the level of formalization by looking at the number and kinds of rules the organization use?
The organization has responded to design changes in the particular manner: 1. Differentiation and Integration: The company has been differentiated in three functions and seven divisions for the success of the company and proper division of labor. To integrate these properly, the two works operations and marketing which could have the greatest amount of conflict has been merged under one director. Also when new product is launched to insure its success task forces are made. And in name of learning new experiences officers and managers from one department are sent to other departments for some time too. 2. Centralization and Decentralization: The company allows its employees to take decisions on their own rather than imposing it on them. The environment is very helpful for the proper growth of leaders in the company. Even at the BP level, BP after taking over the company has left the leadership in the hands of the chairman of Castrol itself and has not interfered much in it except a few measures to keep control over the company. 3. Standardization and Mutual Adjustment: The company although believes in standardization for specific issues as in finance and supply chain but in case of new innovation and marketing initiatives it is highly biased on the side of Mutual Adjustment. All this clearly indicates a complex organizational structure in the organization. From the annual report and company websites it looks like the company follows a very minimal amount of formalization. But BP on the other hand uses a detailed formalization, which is necessary for it as it functions in varied global locations and in different sectors too.

Under the esteemed guidance of Prof. R. K. Premarajan

7. Does your analysis lead you to think that your organization conforms more to the organic or to the mechanistic model of organizational structure? Why?
As per my analysis, Castrol India Ltd conforms more to an Organic Structure model of Organizational structure. This is because of the below mentioned reasons: 1. Joint Specialization: This is clear from the working environment within the company as per the companys website where it says that employees work together and try to find the best way of performing the task. 2. Mutual Adjustment: It is clearly mentioned again that decision making on their own is supported by the company within the employees. Also, since the company is involved in lot of innovative products and marketing them to ensure Castrol remains one of the best brands, it can be easily said that there is lot of Mutual adjustments rather than standardization. 3. Decentralization: At the BP level, the chairman of the Castrol India Ltd is given most of the powers to insure a good performance. This power giving attitude percolates down in the company and every employee is expected to take decisions on their own, thus inculcating decentralization within the organization to some extent. 4. Complex Integrating Mechanism: In Castrol two of the functions, Operations and Marketing if independent could have resulted in lot of friction and conflicts. To avoid all that these two functions were merged and was given under the control span of one director. Thus showing the high level of Integration mechanism.

8. What type of structure (for example, functional, product division, multidivisional) does your organization have? Draw a diagram showing is structure, and identify the major subunits or divisions in the organization. Why does the company use this kind of structure? Provide a brief account of the advantages and disadvantages associated with this structure for your organization. Can you suggest a more appropriate structure that your company might adopt?
Castrol India Ltd. Uses a multidivisional structure where first of all it has an Executive board room of BP p.l.c to take very critical decisions, then it has corporate and functional level units of Castrol India Ltd followed by the eight product lines/service channels it has at the moment. The whole organizational structure is drawn below in details.

Under the esteemed guidance of Prof. R. K. Premarajan

British Petroleum Executive Board Structure

Corporate structure of Castrol India Ltd

Product Division of Castrol India Ltd Passenger Motorbike Oil Car Oil Gearless Scooter Oil Commercial Specialty Castrol Vehicle Oil Range Professional Castrol Pitstop Castrol Bike Point

Under the esteemed guidance of Prof. R. K. Premarajan

Castrol uses this type of organizational structure since although its product divisions are different but from its operations to finance and even marketing has to be done in similar way so deciding such things at the top is a better idea. Also Castrol is a very successful unit in itself with a strong brand image and work culture. Even after BP p.l.c acquired it, rather than imposing its systems and culture on Castrol, it wishes the company to continue working like a unit before and want to take advantage from it in developing its core petroleum business in India. The advantages are as said above. Coming to disadvantage: 1. The new services introduced have not been given any extra head or division. But as we all know service and products are different by all means, there should be an extra head for that even in corporate level. 2. BP p.l.c has given Castrol keep nearly all powers as before it acquired it, this could lead to critical troubles at times and can be a disadvantage. YES, I would like to make a few changes to make the organizational structure better. In the organization, 1. I would like to give more power of control in Castrol to BP corporate heads like making the financial head a person from BP itself. 2. Introduce two heads within each of the three functional units in the corporate structure to ensure that proper care is taken of both its product line and newly introduced services line. References:
1. 2. 3. 4. 5. 6. 7. 8. 9. Annual Report 2010-2011, Castrol India Ltd http://www.castrol.com/liveassets/bp_internet/castrol/castrol_india/STAGING/local_assets/downloads/f/Annual_Report_2010.pdf http://www.castrol.com/castrol/sectiongenericarticle.do?categoryId=9029359&contentId=7053649 http://www.castrol.com/castrol/sectiongenericarticle.do?categoryId=9029358&contentId=7053648 http://www.castrol.com/castrol/genericsection.do?categoryId=8274012&contentId=6007309 http://en.wikipedia.org/wiki/Castrol http://en.wikipedia.org/wiki/BP http://www.bp.com/managedlistingsection.do?categoryId=9021627&contentId=7040960 http://retailindustry.about.com/od/retailbestpractices/ig/Company-Mission-Statements/BP-Values-and-Mission-Statement.htm http://www.bp.com/extendedsectiongenericarticle.do?categoryId=9039352&contentId=7072114

Under the esteemed guidance of Prof. R. K. Premarajan