Pennzoil’s Major Business Units

P e n n z o il H Q

O il & G a s M o t o r O il F ilt e r s O th e r

B o t t le d O il D r u m O il In s t a lle d O il
Portfolio by Revenue
Oil & Gas
Motor Oil
Filters
Other

 Motor oil dominates

Portfolio by Profit Volume
Oil & Gas
Motor Oil
Filters
Other

 Other dominates (?)

 Portfolio by Profit Ratio
Oil & Gas
10
9 Motor Oil
8 Filters
7
6
5
4
3
2
1
0
Portfolio by Capital Outlay
Oil & Gas
Motor Oil
Filters
Other

 Most spent on Oil & Gas

Portfolio by Asset Efficiency Ratios

0.8
0.7
Oil & Gas
Motor Oil
0.6
Filters
0.5
0.4
0.3
0.2
0.1
0
 Quick Lube Industry
OPPORTUNITIES THREATS
 Need for convenience  Extended drain intervals
 Vehicle complexity  Leasing cars
 Trend toward DIFM  Escalating land costs
 Increase in miles driven  Increased competition
 Industry consolidating
 Vertical integration
 5-Forces Model of Quick Lube Industry
Potential
(?)
Entrants
• Low capital cost
• Brand name oil

Suppliers (+) (-) Buyers (-)

•Commodity Rivalry •Low switching
market costs
• Price sensitive

• Marketing
Substitutes (-) • Price Cutting
• Do-it-yourself
Vertical Integration via Acquisition
Related Horizontal Diversification

Q-Lube
Bottled Oil Costs (Data from Case)
Oil
Package
Labor
Freight
Marketing

Oil & Marketing dominate

Installed Oil Costs (Data estimated)
Oil
Labor
Overhead
Marketing

Labor and Overhead significant

 Industry Value Chain
Oil Co. Value Chain Buyer Value Chain

 Motivations ?
 Strategic alternatives ?
 Better off ?
 Cost of entry ?
Pennzoil Strategic Alternatives
Pennzoil Strategic Alternatives
Pennzoil Strategic Alternatives
Electric, Fuel Cell, or Hybrid Engines?
Honda Insight Toyota Prius
 Ashland Oil’s Major Business Units
A s h la n d O il

R e f in in g V a lv o lin e C h e m ic a l A s p h a lt D is tr ib u t io n

B o t t le d O il In s t a lle d O il
Valvoline VIOC - DIFM

Bottled - DIY
 Quick Lube Industry
OPPORTUNITIES THREATS
 Need for convenience  Extended drain intervals
 Vehicle complexity  Leasing cars
 Trend toward DIFM  Escalating land costs
 Increase in miles driven  Increased competition
 Industry consolidating
 Vertical integration
 5-Forces Model of Quick Lube Industry
Potential
(?)
Entrants
• Low capital cost
• Brand name oil

Suppliers (+) (-) Buyers (-)

•Commodity Rivalry •Low switching
market • Marketing costs
• Price sensitive
• Price Cutting

(-)
Substitutes
• Do-it-yourself
Bottled Oil Costs (Data from Case)
Oil
Package
Labor
Freight
Marketing

Oil & Marketing dominate

Installed Oil Costs (Data estimated)
Oil
Labor
Overhead
Marketing

Labor and Overhead significant

Valvoline Strategic Alternatives?
Valvoline Strategic Alternatives
Valvoline Strategic Alternatives
Electric, Fuel Cell, or Hybrid Engines?
Honda Insight Toyota Prius