IOC’s

Internationalization
Strategy
Section C - Group 7

Amit Boradia – 7C
Harshit Srivastava – 17C
Phani Teja Vellumapalli – 27C
Sanjay Singh – 37C
Varad Raiwani – 47C
Question 1. Identify the main reasons behind IOC’s entry into international markets.
Answer 1.

(i) Threat of new competition in domestic market

Phased de-regulation of domestic markets resulted in entry of new players thus increasing the
competition at home.

(ii) Excess refining capacity Prepared By-

There were a heavy underutilization of IOCL’s refining capacities in India due to higher capacity than Varad Raiwani
the consumption. In order the fully utilize the capacity, the company started exporting to 47C
neighbouring markets.

(iii) Mitigation of business risks domestically

Being a state owned company, there was a limit to how much IOCL could profit since they were also
socially accountable. Thus entering international markets provided better opportunities and profits.

(iv) Expansion into downstream business

In India, ONGC was already a state established firm for downstream oil exploration. Entry into
international markets provided IOCL with the opportunity to enter downstream business and expand
its influence in the oil industry.
Question 2. IOC has adopted a mix of entry modes for approaching international
markets. Critically evaluate the factors affecting IOC’s selection of these entry modes.
Answer 2

The mix was selection with specific purpose and according to the situation in the target country:

(i) Production in home country: IOC exported to neighbour Bangladesh because of the excess
capacity domestically Prepared By-
Amit Boradia
(ii) Trade Relations: Good trade relations with Mauritius and Sri Lanka in trade, allowed fully owned 7C
subsidiaries to be started in these countries

(iii) Type of business (upstream/downstream): Since downstream business was relatively new to
IOC, they invested in existing companies in places where it decided to enter as a downstream
player. Elsewhere it started its wholly owned greenfield projects.

(iv) Demand for IOC’s products: In markets with heavy existing competition, Indian oil started with
selling its better known aviation fuel and Servo lubricants to establish itself in the markets.
Question 3. Find out the reasons for IOC’s entry into Mauritius and UAE by forming
wholly owned subsidiaries. Identify similarities and differences in the marketing
objectives and strategies of the company in the two countries.
Answer

Reasons for IOCL to form wholly owned subsidiaries:

Prepared By-
i) Strong foothold in technical aspects and years of rich experience in operations in Indian market
Sanjay Singh
ii) Well established trade relation with Mauritius and UAE. India was the first and the second largest 37C
exporter of all the goods imported by UAE and Mauritius respectively

iii) Being a state owned PSU, IOCL had immense amount of resources available, strong balance sheet
and high risk taking capability for expansion in international markets

iv) As a wholly owned subsidiary, IOCL had greater control to expand its market further into Africa,
Oman, Bahrain, Qatar, Yemen, Nepal.

v) Limited number of filling stations were available in Mauritius resulting in huge space for expansion
Similarities:
i) Both Mauritius & UAE markets have provided IOC an opportunity to enter into Africa
and neighbouring countries

ii) Both the countries had well established trade relations with India which had helped
IOC to form wholly owned subsidiary over there
Prepared By-
Differences: Sanjay Singh
iii) There was stark difference in presence of Indian diaspora in both the markets. 70% of 37C
Mauritius population were of Indian origin.

iv) Lube oils like Servo was primarily exported to the UAE. The Mauritius market was
served primarily with aviation fuel and marine fuels besides Servo lubricants.

v) Internationalisation into Mauritius helped IOC to get tax breaks for operating from
Mauritius ports to Africa.
Question 4. In the view of Emerging economic-political scenario, evaluate IOC’s Entry
into the Silence as a wholly owned Subsidiary
Answer

I. Tripartite Agreement reduces the competition for LIOC and it also gives LIOC a good chance
to expand in Sri Lanka
Prepared By-
II. Income Tax Exception for next 10 years and 15% concessional tax as against 35% helped in
establishment of the company Phani Teja Vellumapalli
27C
III. Government of both the nations have extended the support for LIOC entry strengthening the
political ties of both nations

IV. Duty free import of project raw materials, machinery and equipment's as well as a free
transfer of dividend/Income to India Helps in GDP growth of country

V. Apart from benefit to Sri Lanka It also helps in risk mitigation for Indian Oil by venturing into
different markets and it’s a win-win situation when benefits are given by the host nation
Question 5. Critically evaluate IOC’s entry strategy in Sweden and USA as wholly
owned subsidiaries.
Answer

IOC’s Entry Strategy in Sweden

I. Wholly owned subsidiaries IOC Sweden AB – 100% in 2010.

Prepared By-
II. Strategic investment to promote and facilitate overseas E&P investments. Harshit Srivastava
17C
III. Venezuela - Restrictions on foreign ownership and Risky Country. With a consortium of five
other companies, ICO Sweden AB has holds a 3.5 per cent. stake in Carabobo Heavy Oil
project.

IV. The Carabobo Project is expected to produce and upgrade3 billion barrels over the project life
of 25 years.

V. Turnover NIL with profit of 17.01 Cr in 2011-12

IOC’s Entry Strategy in USA

I. Wholly Owned Subsidiary IOCL (USA) Inc 100%

II. The subsidiary was opened in 2012 to invest in shale gas projects in USA.

III. At present, IOCL USA Inc. has acquired 10% of Carrizo's interest in approximately 60,000 net Prepared By-
acres and OIL will buy remaining 20 per cent Harshit Srivastava
17C
IV. Huge reserves- Daily production of 1,850 barrels of oil equivalent

V. Joint Venture Indo Cat Pvt Ltd with Intercat USA for manufacturing 15000 tones per annum
of FCC catalysts and additives.

Thank You!