INNOVATIVE MARKETING STRATEGIES A PANACEA FOR ECONOMIC DOWNTURN Essay Example

restaurant and introducing a loyalty card program to improve service. The loyalty card would prioritize commuters and reduce wait times. Drive-in restaurants cater to customers who prefer not stopping at multiple locations for meals. Furthermore, the paper explores strategies targeted specifically at helping Indian public sector undertakings (PSUs) recover from losses and tackle India's economic downturn as a whole. Shifting focus to the petroleum sector in India, historically, the country has relied on foreign markets to meet its crude oil demands. In 1948 and 1956, the government declared their intentions and future plans for key industries like crude oil, reserving all future developments in this industry for public sector projects while still seeking foreign aid during initial stages of development. To further develop the industry, various options were considered such as seeking assistance from powerful nations like the Soviet Union, collaborating with smaller countries like Romania or exploring cooperation with experienced countries like Austria.In the 1980s, private Indian companies were allowed to enter the refining sector through joint ventures with public sector refineries. Reliance Industries Ltd., (RIL) was granted permission to construct the largest refinery in the country. Government sector refineries relied heavily on M/s Universal Oil Products (UOP), an American company, for engineering support. However, UOP leased its technology to multiple Indian refineries simultaneously, causing difficulties in fully absorbing it. This led to a strong dependence on petroleum products due to the marketing strategy implemented by public sector companies, which had significant implications for both the economy and society. To address this issue, the government transformed the Oil and Natural Gas Commission (ONGC) into a corporation with increased autonomy in the early 1990s.The transformation

led to the establishment of Oil and Natural Gas Corporation Ltd (ONGCL), which is now regulated by Indian Company Acts instead of parliamentary acts. In order to involve the private sector more in exploration and production, the government created an independent regulatory body called the Directorate General of Hydrocarbon (DGH) in April 1993. This led to increased privatization of exploration and production activities.

Initially, there were policy changes allowing private and foreign companies to participate in developing existing fields, but these measures had limited impact. To address this issue, the government implemented various incentives such as exempting import duties for crude oil operations, eliminating minimum expenditure commitments during exploration, removing mandatory state engagement requirements, and excluding National Oil Companies from involvement. They also allowed for the sale of crude oil and natural gas at market prices within domestic markets and enabled up to 100% cost recovery.

However, these liberalization policies did not produce positive results in the exploration and production sector. As a result, the government is now expediting reform efforts and closely monitoring how national oil companies adapt to the rapidly changing situation.The government has announced that companies investing approximately US $400 million (Rs20 billion) in exploration and production or other specified areas will be granted marketing rights for crude oil products in India, with the aim of attracting private investment in this sector. This move has resulted in competition between international players entering the oil industry and other energy sources such as coal. As a result, there has been a shift towards using low-cost kerosene for lighting lamps and cooking, subsidized LPG as household fuel, affordable diesel for long distance trucks, and subsidized naphtha for

fertilizer production instead of vegetable oil and coal.

The reliance on crude oil products throughout the entire economy is due to a well-established distribution system. The retention concept ensures profitability of public sector enterprises and safeguards investments from international funding organizations. However, private parties now desire higher returns, leading to the phasing out of the administrative price mechanism (APM). While privatization of the Indian midstream sector has been successful, state-owned enterprises (PSUs) with older refineries and a history of retention culture may struggle without APM. ONGCL and OIL must quickly adapt or they risk losing competitiveness. Research indicates that these companies have increasingly relied on foreign companies for operational activities rather than making significant discoveries in oil or gas fields over the past 30 years due to reservations favoring national oil companies.With the NELP revoking these privileges, national oil companies will face a decrease in their chances of success, resulting in higher expenses and stagnant or declining production. Moreover, private sector refineries have the freedom to select their crude oil suppliers and may choose higher quality petroleum at lower costs from alternative sources. ONGCL and OIL will encounter difficulties when competing in the market. If the government mandates that public sector oil refineries must purchase ONGCL/OIL petroleum at inflated prices, they will be at a disadvantage compared to private sector refineries. Additionally, public sector refineries will also face obstacles in a deregulated economy. The refinery industry will struggle due to economies of scale and competition over petroleum prices for older refineries. Out of the 14 public sector refineries, all except one located in Koyali, Gujarat are small-scale facilities with capacities ranging from 0.65 MMTPA at Digboi,

Assam to 12.50 MMTPA at Koyali. Most of these refineries were constructed prior to the 1980s. In contrast, Reliance refinery was established using advanced technology in 1999 and has a capacity of 27 MMTPA.A new refinery, which has a capacity of 6.0 MMTPA, is projected to have a net margin of approximately US $5.8/bbl through its primary secondary treatment units like hydrocracker and delayed coker, as well as self-sufficient power and hydrogen production capabilities. If the capacity is increased to 9.0 MMTPA, the net margin could rise to about US $6.3/bbl. These figures may vary depending on crude oil and petroleum product prices.

In September 2006, IOCL refineries had refining margins of only 30 cents per barrel while RPL had a margin of US $1 per barrel.In fiscal year 2005-06, IOCL faced a loss exceeding US $700 million due to lower refining margins compared to previous years.The deregulation of the market has significantly impacted refineries in terms of crude oil selection based on market demands.Refined products' import prices must now be paid rather than relying on the "oil pool account" for absorbing fluctuations in crude oil prices.

This emphasizes the importance of choosing suitable crude oil for each refinery.However, with sweet crude becoming scarcer, refineries are increasingly reliant on heavy and sour crude oil.This poses challenges in meeting environmental regulations and international quality standards while optimizing production.

Company Background

IOCL, an Indian integrated energy company, operates in all sectors of the petroleum industry - upstream (exploration), midstream (refineries), and downstream (retail). Companies in the retailing sector often face low profit margins. However, IOCL's vertical integration across all three sectors provides advantages. The upstream section focuses on extracting natural gas

or crude oil at its source and maintaining wells for transportation and processing. Some MLPs also operate in this space. The midstream sector involves the processing, storage, marketing, and transportation of crude oil, natural gas, and various natural gas liquids such as C2H6, butane, and propane. This helps stabilize volatility associated with commodity price changes through a comprehensive infrastructure supported by commodity marketing. IOCL's midstream assets include a heavy oil upgrader near a producing region with expansion opportunities, reliable pipeline infrastructure with potential for expansion, crude oil and natural gas storage facilities, as well as commodity marketing of their own and third-party production. In terms of the downstream sector in the context of the oil industry, "downstream" refers to delivering crude oil to retail or wholesale end users such as refineries.The text describes the oil and petrochemical industry, which includes refineries, petrochemical plants, and the distribution of crude oil products through retail establishments and natural gas distribution companies. This sector markets various products such as gasoline, diesel fuel, jet fuel, asphalt, lubricants, plastics, fertilizers, antifreeze, and pharmaceuticals. It also supplies natural gas and propane. The company's supply chain is divided into primary distribution and secondary distribution. Primary distribution involves extracting oil or gas from fields and transporting it to the refinery through gathering units and terminals. Secondary distribution focuses on moving refined products from the refinery to terminals before reaching retail establishments. Refineries send different crude oil products to specific terminals like LPG bottling terminals for traders to sell to end customers. Other products like Naphtha are directed towards power plants. Commonly used products such as Motor Spirit (gasoline), Diesel, Kerosene, and ATF are transported

to terminals and gas stations primarily serving industrial consumers who use Naphtha, LSHS (Low Sulphur Heavy Stock), HSD (High-Speed Diesel), LABFS (Linear Alkyl Benzene Feedstock).In terms of transportation and operations in the oil & gas industry, various vehicles can be utilized in the supply chain. These include marine vessels, pipelines, railways, and road tankers.

Marine vessels ensure the transportation of large quantities to desired locations. However, this method can result in delays in oil delivery. There are different types of marine vessels such as crude carriers, black oil carriers, heavy product carriers, clean product carriers, gasoline carriers, kerosene carriers, and LNG carriers.

Pipelines are an advanced technique that requires a one-time cash investment. They provide cost-effective bulk transportation but different pipelines are used for different products like petroleum, gas, and other goods. Transportation through pipelines can be classified into onshore and offshore methods.

Railways use rail tankers called wagons which are faster than marine vessels. These wagons are known as profligates when hauled together and can have either 4-wheel or 8-wheel tanks with airtight containers to prevent leakage.

Road tankers are used for inland movement and vary depending on the product being transported such as gas or liquid goods. They also utilize airtight containers to prevent pilferage.

The challenges faced by our company are common among crude oil companies and revolve around establishing a unique and sustainable competitive advantage.
To overcome challenges and gain a competitive edge, it is crucial to understand consumer habits and develop strategies to improve the customer base. By addressing consumer needs and providing solutions, our company can attract new customers and tailor offerings to target consumers. Clearly defining the target clients is essential in this process.

Building a strong brand is vital for increasing market share and fostering loyalty among customers in an industry centered around crude oil. It's important to note that these challenges extend beyond just the downstream sector of the oil industry. Indian companies in the upstream sector face various hurdles, such as government regulations and significant investments required due to economies of scale. When competing for contracts, smaller investments are preferred over larger ones due to constraints. We can categorize potential investment opportunities into four major countries: Gulf States, Caspian Sea, Central Africa, and South America. However, each country offers different job prospects. In the Caspian Sea region, Chinese, Russian, and American companies dominate the industry while China benefits from its extensive pipeline network.
On the other hand, Central African regions heavily depend on imports due to their small size and high trade sensitivity, lacking significant industrial activity. However, China offers trade incentives in exchange for opportunities in oil exploration and sales, while India does not provide such incentives. Similarly, South America and the Gulf face similar challenges as major companies like Exxon Mobil and Shell dominate these areas. To overcome these challenges, it is crucial to build a portfolio that establishes a stronger presence in the region.

The upstream selling strategy focuses on oil exploration in the crude oil sector. Companies participating in auctions for oil blocks must have a portfolio of these blocks or leverage government support to stand out among others. Strategic investment planning is crucial for ensuring interests in specific regions. Risk management and asset diversification play important roles in effectively marketing portfolios globally and gaining better access to funds at lower interest

rates. The implementation of technology can help reduce carbon footprint, creating an environmentally friendly image for petroleum companies. This is essential for countering negative perceptions associated with them and accessing global carbon credit markets to improve revenues.Indian companies in the midstream sector of crude oil rely on factors like capacity and margins of gasoline refineries to differentiate themselves. It is crucial for these refineries to have a strategic location with good road and sea connectivity for effective marketing. In India, where refinery capacity is already fully utilized, efficient marketing strategies become even more essential. Therefore, new refineries should prioritize both strategic location and efficient marketing techniques to succeed in their refining operations and product branding.

A key focus for our petroleum retail shops is increasing market share and ensuring customer loyalty. We achieve this by targeting both fleet companies and regular clients. To tackle the issue of pilferage, we have developed innovative solutions such as fleet solutions that enable cashless refuelling at gasoline stations. One solution involves installing a Vehicle Identification Unit (VIU) in the vehicle, which serves as a payment device and mandate. This option proves cost-effective and low-maintenance for fleets since fleet managers can easily access advanced reports. The data collection process is automatic, wireless, and effortless. To ensure durability, the Vehicle Tag is securely housed in a rainproof enclosure within the vehicle's mountings.
The text describes a fueling system that includes an aerial around the fuel recess. This allows distant aerials in buildings to access information stored on it. When a fleet vehicle arrives at the gas station, its tag is detected by our system. The driver then selects a fuel nozzle and inserts

it into the fuel tank. Our system verifies if the vehicle tag is valid by cross-referencing it with a negative or "hot" list. It also checks if the selected fuel type matches what is stored on the tag, along with other controls such as time since last fuelling. If all conditions are met satisfactorily, the site accountant authorizes fuelling through POS instructions so that fuelling can commence.

By implementing this fueling system with the nozzle inside the fuel tank recess, uninterrupted fuelling is possible. This prevents drivers from transferring gasoline to another vehicle and results in cost savings for fleet owners ranging from 10% to 25%. The advantages of this system extend to oil companies, fuel station operators, and fleet owners alike.

For oil companies, this system increases loyalty among individual customers and fleets while boosting market share and promoting dealer loyalty. It also enables long-term fuel agreements with fleets and provides secure refueling options for customers while enhancing the company's high-tech image.Fleet owners can benefit from gaining control over fuel consumption and reducing unauthorized usage by offering new services such as authorized vehicle fueling and fraud prevention. This allows them to efficiently manage their time and workforce while accurate accounting is made possible with comprehensive reporting on vehicle use and consumption. Odometer readings are provided along with engine hour readings, which aid in effective maintenance planning.

Fuel station operators also experience benefits from these services, as they see increased fuel sales by attracting competitive customers and operating loyalty programs. Faster service is provided, including self-service options that decrease the need for attendants while maintaining improved efficiency levels. The system's optimization of management and control eliminates the need

for credit cards or checks.

In India, petroleum retailing occurs through seller pumps owned by companies or franchised to sellers. The main focus when selling gasoline is customer loyalty and increasing sales volumes. Due to the lack of product differentiation among pumps, attracting customers becomes challenging. Companies can address this challenge by poaching customers from competitors or retaining existing ones.

Increasing sales involves understanding the timing and motivation behind customer visits to gasoline pumps, which market research shows are highest during morning and evening rush hours. By ensuring regular visits from these individuals, our sales will increase.Market research has shown that people are interested in food. To meet their needs for both food and gasoline, our company intends to merge a restaurant with a gas station. Customers will have the convenience of ordering food at a window while filling up their gas tanks, enabling them to leave with both items prepared simultaneously. This approach not only boosts sales but also generates extra revenue from non-core business activities. To encourage customer loyalty, we propose implementing a loyalty card program where customers earn points every time they refuel at our gas stations. These points can be exchanged for gifts based on the value displayed on their cards. Moreover, cardholders will receive priority access in the queue as dedicated pumps will be available for them at most locations. In busy periods, the company can divide the line at an unoccupied pump while still maintaining priority for cardholders, ensuring prompt service and appealing to frustrated customers who dislike waiting in line. Additionally, since finding parking is difficult in congested areas, the canopy above our gas stations can double as parking space.

Limited availability allows cardholders to park their cars there on a first-come-first-served basis, serving as an incentive to obtain a loyalty card.In addition to marketing our quality-focused gasoline station, we also see opportunities in India's oil industry. This is due to the increasing demand for oil, declining petroleum production, and low reserve accumulation. Despite being one of the least-explored countries globally, India has a substantial demand of 100 million metric tons and ranks as Asia's fourth-largest oil consumer. Since gaining independence, the Indian oil industry has seen significant growth in both upstream and downstream sectors. This includes exploration activities, expanded refining capacity, and the development of a strong sales infrastructure and skilled workforce. However, foreign investments and technology have entered India's oil sector, leading to intense competition among existing players and potential market share decrease.

To attract customers – particularly fleet owners with multiple vehicles requiring regular refueling – we can employ various strategies at our company. These include implementing loyalty plans and offering prioritized service at gas stations - similar to tactics used in restaurants that are highly sought-after by customers. Typically, individuals who work visit gas stations either in the morning or evening after leaving their offices. Therefore offering priority service in lines would always be appealing to customers. Additionally, providing a drive-through option at our facilities would entice commuters seeking quick access to their desired items.By effectively implementing these schemes, we can potentially enhance customer attraction and expand our market share, while also serving as a solution during economic downturns.