Introduction
The ConocoPhillips Company is an international energy corporation having headquarters in USA Texas. It is the second largest refiner in the US oil industry and world wide its position is fourth among the largest nongovernmental refiners. They own a high quality portfolio of assets and have wide range of business operations globally. They are entering into emerging new business. Their major asset is skilled and loyal employees which provides them with the competitive capability for assuring potential future for the Conoco Phillips. (About ConocoPhillips, n.d.).
Define and map the market
Oil refining is a complex process, involving various stages. Companies engaged in transportation and storage of the refined products are the key players in the market. Companies in the oil and gas industry are facing challenges with increasing complexity in the geopolitical environment. In the refinery market, product quality is an essential factor that determines the marketing mix. “Marketing is the wholesale and retail distribution of refined petroleum products to business, industry, government and public consumers. The price paid by consumers is intricately linked to the fact that oil is the major commodity of international trade.” (Marketing and Distribution 2009).
In order to ensure cost effectiveness, companies have to focus on cost reduction in the production, processing as well as distribution process. For this greater level investment is needed in the research and development field. Customers always prefer high quality products at competitive prices. The reduction in distribution cost necessitates effective supply chain management. Value chain is an essential element for assuring the cost effectiveness in the energy market. For this effective value chain solution is needed by involving all the parties in the distribution in the most cost effective manner.
Identify the customer
ConocoPhillips offers plenty of products and services to its customers which are designed specifically by focusing on customer satisfaction. Major product group of the company is oil fuels and their business is located mainly in US and Europe. They own wide range of product brands in the branded oil market. Their core brand includes Philips 66, Conoco, 76 and JET. Along with branded fuels, Conoco Phillips also offers high quality lubricants under different brands. (Products and services for consumers n.d.).
Identify the key players in the value chain
ConocoPhillips offers superior and reliable products and services globally. Product category includes fuels, lubricants, other specialty products and chemicals targeting commercial, industrial and retail field. For optimising the business, customer firms are supported with speciality products offered by Conoco. They are the market leaders in the industry, a position earned by them through possessing advanced technology for drag reduction and maximisation of pipeline flow potential. “As one of the company’s many services, ConocoPhillips’ Pipe Line Company operates more than 11,000 pipelines and 60 storage terminals in the United States and transports both raw and finished petroleum products.” (Products and services for businesses n.d.).
The transportation services of ConocoPhillips is highly standardised for ensuring safe transportation of the refined oil products on time. Timely delivery and storage is assured by well designed transportation strategy. Thousands of miles of pipeline system is a major source of the company for carrying the distribution process. They possess environmental friendly marine vessels together with versatile fleet of rail cars.
All these contribute to the effective value chain in the business. For dealing with the shipments which are not urgent and weighing upto 150 pounds, United Parcel Service is engaged by the company. For domestic shipments weighing more than 150 pounds international air shipment facility is arranged. ConocoPhillips lays great importance on keeping better vendor relations. They are always committed to the suppliers and other business partners for providing prompt and accurate service.
For procurement to payment processes, company has adopted automated and streamlined procedure, eliminating difficulties and leading to better and improved operational performance. Cost efficiency is achieved through this system. Company has the facility to receive invoices and data in multiple ways. Electronic options are also accessible for them. Their vendors are facilitated through convenient vendor invoice status website. From this they have the opportunity of accessing the accounts payable invoice of the company together with purchase order payment information. In this specific site for invoice, additional details on invoicing and payment options are available. This facilitates creating better vendor relations in an up to date manner. (Vendor relations n.d.).
Vendor selection process in ConocoPhillips
Customer value is achieved through leveraging the web of expert solutions for overcoming the business challenges. To increase the productivity and value chain performance the suppliers are selected with the criteria of lower cost of ownership and higher level interoperability standards.
Due to the nature of the product, ConocoPhillips has limited vendors. The selection of vendor is done on the basis of evaluation of bids submitted by the subcontractors. The decisions are taken mainly by the operating officers and corporate staff. When a vendor is selected, the company’s accounts payable invoice and purchase order payment are accessed though Vendor Invoice Status Web site. The vendors can obtain details about the invoice and payment procedures of the company. Procure to Pay (P2P) strategy is used to eliminate the difficulties in the payment procedure, thus improving the supplier relationship.
Identification and validation of segments
All the business activities are grouped into six main segments. They are as follows:
- Exploration and Production segment: produces oil, natural gas and natural gas liquids throughout the world
- Midstream: Purchase of raw natural gas from the producers is done by the midstream business through the pipe line systems. It is marketed in US and Trinidad.
- Refining, marketing and transportation: This segment does the refining, marketing and transportation of petroleum products in various parts of the world. Marketing is done through retail and whole sale outlets. A joint venture was formed during 2007 between ConocoPhillips and EnCana Corp. There are about 8750 outlets in the US.
- Chemicals: It produces wide range of petrochemicals and plastics and markets it. During 2007, the total revenue was about $13 billion with consumer and industrial products.
- Emerging Businesses: New technologies and businesses are developed which are outside the normal operations of the company. “Activities within this segment are focused on power generation and innovation of new technologies, such as those related to conventional and nonconventional hydrocarbon recovery (including heavy oil), refining, alternative energy, bio fuels and the environment. The focus of its power business is on developing integrated projects to support the Company’s E&P and R&M strategies.” (Full description 2009).
In collaboration with Archer Daniels Midland, several researches are conducted to commercialise the production of biomass.
Market segmentation of ConocoPhillips
The whole activities of ConocoPhillips could be categorized into the above six segments. The major products and services of ConocoPhillips include fuels, lubricants, chemicals, natural gas, specialty products, gasoline, coke etc. Currently the company use geographic and behavioural variable for market segmentation. In the geographic variable, region of the world or country is used for segmentation. The company has its customers both at domestic and international level. In the domestic level, company markets its products under the brands Philips 66, Conoco and 76. In the international level, the company use the brand name JET in the European outlets. Due to the nature of products i.e. natural gas, lubricants etc the behavioural variable segmentation is another type used by the company. The major customers are different states in US and other nations.
The present market segmentation has helped the company to become the third largest US oil company. The exploration and production segment has contributed towards the company entering into the international segment. Dell point of sale technology has been selected by ConocoPhillips for the TankBank customer loyalty program. The company mainly focuses on television commercials and print advertisements.
Marketing Mix
Marketing mix is an important tool used by marketing managers to design the process of marketing in an organisation. It is the policy adopted by the marketing management to achieve success in marketing. Marketing mix refers to a combination of all marketing resources and marketing efforts of an enterprise through which predetermined objectives may be achieved. Marketing mix refers to a combination of various elements namely product, price, place and promotion which are the controllable elements that should be properly shaped by every organisation in order to achieve the marketing goals.
“The concept is simple. Think about another common mix – a cake mix. All cakes contain eggs, milk, flour, and sugar. However, you can alter the final cake by altering the amounts of mix elements contained in it. So for a sweet cake add more sugar.” (Marketing mix, 2009).
ConocoPhillips is the third-largest integrated energy company in the United States, based on market capitalization and oil and natural gas reserves. They can rapid up their marketing process using marketing mix effectively as every other organisation used to do. Company is supposed to be keen on each element of the marketing mix and must be able to find the exact elements to be altered or decide as to which elements they have to work with in order to rapid the marketing process. Following are the 4 elements of marketing mix.
Product Mix: Decisions associated with the products include aspects such as function, appearance, packaging, service, warranty etc. The company should be very specific about how their products differ from their competitors and what benefits they provide.
Price: Pricing decisions depend upon profit margins and the probable pricing response of competitors. Pricing must be competitive but must allow the company to make good profit.
Place: Channels of distribution play an important role in bringing the product to the targeted customers which is associated with place decisions. Transactional, logistical and facilitating functions are carried out through distribution channels. Market coverage, channel member selection, logistics, levels of services are the major components of distribution decisions.
Promotion: Methods used to communicate the features and benefits of products to the target customers is called promotion. In their promotion decisions, company can include components like advertising, public relations, media type etc. (Duermyer 2009).
Customer value proposition
In an organization, a customer value proposition deals with the sum total of profit which a vendor promises that a customer will accept in return for the customer’s connected compensation. “A statement by an organization of the way in which it can provide value for a prospective customer. A value proposition is a marketing tool that explains why customers can benefit from a company’s products or services. It can also be created for recruitment purposes, to show applicants the value of becoming an employee of the company.” (Business definition for: value proposition 2009).
ConocoPhillips Company is the largest leading petroleum company. Recently they have introduced a new company which will promote the motor oils to artificial blends. The family brands of this company are Kendall, Philips 66, 76 and Conoco motor oil brands. This company will permit the installer to provide quality oils at usual motor oil prices. These values to their customers can facilitate installers raise their car counts. Company provides customer satisfaction through important gain in the market place. Through the adoption of value proposition, the company achieves market leadership position.
The important specialty of company is that the company has a record of establishing innovative progress and offering quality products. Thus customers are provided with good value in the market place. ConocoPhillips also introduced the exchange of conventional oils to synthetic blends. It will facilitate the marketers to achieve market share. One of the products like conventional GF- 4 would offer its marketers a competitive frame that would assist to promote the business successfully. Their new product such as 5W-20 and 5W-30 oils will benefit from better presentation at a good value. All performance of this company is related with ILSAC GF-4 together with Fuel Company, emission system protection, deposit and oxidation control.
Conclusion
In the US oil refinery product market, there exists keen competition. The market positioning is greatly influenced by the optimal supply chain decisions. Thus ConocoPhillips Company strategically approaches its vendor management by selecting cost effective and efficient vendors. Multiple vendor strategy adopted by the company facilitates getting raw materials at reduced rate. Adoption of advanced technology in controlling supply chain logistics also ensures cost reduction in the entire distribution process.
References
About ConocoPhillips n.d., Concophillips: Energy for Tomorrow. Web.
Business definition for: value proposition 2009, BNET Business Dictionary. Web.
Duermyer, R 2009, Marketing mix, About.com: Home Business. Web.
Full description: ConocoPhillips (New York stock exchange): emerging business 2009. Web.
Marketing and distribution: overview 2009, Business Reference Services. Web.
Marketing mix: what is the marketing mix? 2009, Marketing teacher. Web.
Products and services for consumers n.d., Concophillips: Energy for Tomorrow. Web.
Products and services for businesses n.d., Concophillips: Energy for Tomorrow. Web.
Vendor relations n.d., Concophillips: Energy for Tomorrow. Web.