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Petronas Group’s Products and Performance

Company history

Petroliam Nasional Berhad is a multinational oil and gas firm that is publicly owned. It is located in Malaysian with its headquarters at Kuala Lumpur. The company was established in 1974 within the major integrated oil and gas industry. The company has a total of 29,236 employees worldwide. The firm operates as Petronas Group in 31 countries which are located in different continents such as Asia, Latin America and Africa. By the end of 2005, the company had 101 subsidiary firms that were wholly owned by the group. In addition, the group had 19 firms that were partly owned while 57 others were associated companies (Mohammad, 2009, 2).

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The firm’s marketing activities are supported by the fact that the firm has established a network of depots and oil and gas refilling stations. In all its stations, a 24-hour system of operation is involved to ensure that the firm provides sufficient services to its customers.

Company products and services

The firm undertakes a number of activities which are categorized into three segments. These include international operations, upstream and downstream activities. The upstream activity involves the exploration of gas and oil and its production. On the other hand, the downstream activities include refining, marketing, and the distribution of oil products, trading, liquefaction of natural gas and its distribution through the pipeline network system. The firm is also involved in the production of various petrochemical products. Other operations of the firm include shipping services and investment in property.

Some of the petroleum products that the firm offers include motor and aviation fuels, diesel, gasoline, lubricants, kerosene, and asphalt. It also supplies home based products specifically the Liquefied Petroleum Gas (LPG).

Company franchises

The management of the firm has established franchises with other firms in various industries. These include banks, transportation firms, and food and beverage firms. This enables the firm to provide maximum customer satisfaction thus promoting its products and services. Examples of firms that Petronas National Berhad Company has formed a business partnership through franchising include Maybank, Kentucky Transnational Berhad, Dankin Donut, Kentucky Fried Chicken and McDonald’s.

Company’s value and mission statement

The company’s value and mission statement are developed to incorporate comprehensive business and ethical concepts. The firm’s core values relate to professionalism integrity, loyalty, and cohesiveness. The management of the firm is determined at ensuring that the firm operates in a rational manner so as to maximize the shareholders’ wealth. The management ensures that the employees are satisfied within the organization and that they progress. The management also incorporates the concept of corporate social responsibility in its operation. This is through forming a partnership with various non-governmental organizations that have a drive towards the society (‘Sustaining progress: annual report’, 2009, p.13).

In its operation, the management of the firm is committed to ensuring that it delivers quality products and services to the customers. This is through the integration of the concept of maximum customer service and value addition. The objective of adopting this value statement is that the management of the firm views the customers as long-term business associates. This enables the management of the firm to establish a good mutual relationship with its commercial customers.

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The management of the firm has integrated a comprehensive branding strategy to enable the effective marketing of its products. Amongst its branding strategy is continuous re-imaging of its stations.

Financial information

During the firm’s fiscal year that ended March 2008, the firm’s total revenue was $66,460 million. This represents a 21.2% increase in comparison with the 2007 financial year. The firm’s operating profits during the year were $28,985 million. This was also an increase of 25.2% compared to the 2007 financial year. In addition, the firm’s net profit was $18,171 million which represents a 31.5% increase compared with 2007 (‘Petronas, 2009, p. 2).

During 2009, the firm has had a good performance in comparison with 2008. For instance, the firm’s share capital increased from 12% during 2008 to 15% in 2009. Due to effective management, the firm’s level of trade payables reduced from 55% in 2008 to 33% in 2009. In addition, the firm’s financial reserves increased from 34% in 2008 to 48% in 2009.

With regard to assets, the firm’s receivables reduced from 39% in 2008 to 26% in 2009 while property and equipment increased from 34% t0 47% during the same period. On the other hand, the cash equivalents increase from 6% to 8%. In total firm’s assets increased with a margin of 14.4% to stand at RM 388.1 billion (‘Sustaining progress: annual report’, 2009, p.23).

Strategic plan

The management of the firm has integrated a strategy of continuously scanning the environment so as to identify feasible business opportunities. On 3 July 2009, the management of the firm signed a Product Sharing Contract (PSC) with Exxon Mobil. This will enable the firm to expand its oil fields to the offshore of Peninsula Malaysia. In addition, the firm also signed a joint venture agreement with MISC Bhd and Mustang Engineering limited which are UK firms that would enable the firm to supply Liquefied Natural Gas (LNG) globally (‘Sustaining progress: annual report’, 2009, p.4).

Company performance during the recession

During the financial recession that started in mid-2007 through 2009, the operations of firms in the oil and gas industry were negatively affected. This is due to the reduction in the demand for oil in the global market. The global market demand reduced from 86.2 barrels per day to 85.6 barrels. The swing in oil demand resulted in increased oil price speculation which affected the performance of many firms.

Despite the global economic turndown, the management of Petronas Group was able to mitigate the negative effects of the crisis. This is due to the fact that the management continued to integrate the concept of global expansion and value addition. This has resulted in an increase in the Group’s operational efficiency and competitiveness. For example, the firm’s revenue as a result of international operations increased from RM 100 billion to RM 111.3 billion (‘Petronas, 2009, p. 4).

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International operations contribute the largest percentage of the firm’s total revenue. However, there was a slight reduction in the firm’s profitability as a result of the increase in price and cost of production during the second phase of the fiscal year. The group experienced a 6.7% reduction in its profit before tax (‘Petronas group results for the financial year ended 31st March 2009’, 2009, pp. 1-2). However, the firm’s market share was relatively high during this period as 42.5%.

Comparison with Exxon Mobil

Exxon Mobil operates within the major integrated oil and gas industry as Petronas and operates internationally. Its products and services are traded with brand names Esso and Mobil in the international market. The firm offers a variety of products and services that are similar to Petronas. These products and services are categorized into lubricants, marine and aviation products and different chemicals. The firm has also incorporated the franchising strategy which enables its products and services to be recognized in the global market (‘Exxon Mobil franchise details’, 2009, 3).

Unlike Petronas, Exxon Mobil is involved in the production of other forms of energy specifically electricity.

Conclusion and recommendation

Petronas Group has had superior performance over the years. Despite the global economic recession, the company has managed to mitigate the effects on its financial performance. This is due to the adoption of good management strategies. To continue experiencing financial growth, the management of the firm should continuously review its strategies with regard to globalization, integration and value addition.

Reference

Business franchise world. (2009). Exxon Mobil franchise details. Web.

Mohammad, J. (2009). Petroliam Nasional Berhad: Petronas. Web.

Petronas Dagangan. (2009).Sustaining progress: annual report. Web. 

Petronas. (2009). Web. 

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StudyCorgi. (2021, October 31). Petronas Group’s Products and Performance. Retrieved from https://studycorgi.com/petronas-groups-products-and-performance/

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StudyCorgi. (2021, October 31). Petronas Group’s Products and Performance. https://studycorgi.com/petronas-groups-products-and-performance/

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"Petronas Group’s Products and Performance." StudyCorgi, 31 Oct. 2021, studycorgi.com/petronas-groups-products-and-performance/.

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StudyCorgi. (2021) 'Petronas Group’s Products and Performance'. 31 October.

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