Sales Force Compensation Essay - 832 Words

Sales Force Compensation Adam Goode Dr. Ed Sherbert HRM533: Total Rewards November 4, 2012 Sales Force Compensation In order for a company to acquire the highest number of clients, that company must be able to fully motivate their employees. One of the primary factors to motivate the sales force is compensation. Employees that are in the sales force do want to get commissions for the sales that are made, but they do also want to get a base salary as well. A commission only structure can greatly motivate employees to make sales, yet if they only receive pay for making a sale, an employee might not feel that they need to come to work if they can’t†¦show more content†¦That is where a company can do a good job with the total rewards program that they do have set in place. The company can show employees that great work will be rewarded, yet they need to make it known upfront what that will be. Employees don’t need to be thinking that one person is getting better rewards because of a good connection that they have, but that employee should understand what rewards will be produced by what sort of results. The total rewards program should also help employees understand that the lack of results would end up having adverse consequences. This would help show employees that they should stay motivated to produce great results. The total rewards program should be able to be understood by all employees. Employees need to be able to see what type of compensation structure that they can expect for producing more clients for the company. Employees should be able to see if they will get a base salary as well as commission, and what kind of commission they can receive. Having that information visible can make the company seem very attractive for future employees. If someone can’t know what they will get for their job, they would not really be motivated for that job. Bonuses are also a great thing to help motivate employees in the sales force. A higher bonus might be delivered to an employee for the higher clients that employee is able to pull in. Employees can end up seeing that, which can then help motivate them toShow MoreRelatedSales Force Compensations Essay1306 Words   |  6 PagesSales Force Compensation HRM 533: Total Rewards January 30, 2013 Abstract Keeping the moral of sales force in high level is critical in recent economy. One of the factors that enhance the attitudes and the productivity of sales force is a rewards program that recognize and addresses their needs. To assists in understanding the influence and role played by rewards program, Starbucks’s compensation plan will be used as a guide in creating an effective workforceRead MoreNon Financial Compensation Reward For Motivating Sales Force2446 Words   |  10 Pagesimportant to stimulate the sales force for better sales performance and stronger commitment to their organizations. Firstly, I will define the generic term of motivation and the purpose of motivating sales force from individual and organizational aspects. The key concepts of intrinsic and extrinsic motivation will be explained and relevant theories will be analysed. Then, I will examine the advantages and disadvantages and for different types of financial compensation reward systems. Evaluate theRead MoreA Interview On My Sales Manager Interview1766 Words   |  8 Pagesknowledge I gained throughout the interview. For my sales manager interview I was fortunate enough to interview Chad Keaton, a wealth management advisor and a managing director of Northwestern Mutual. Mr. Keaton graduated from East Tennessee State University in 1989 with Bachelor of Business Administration in Marketing. Moreover, he joined Northwestern Mutual in 1993 and now it has been almost 20+ years since he has been in sales and sales force management with Northwestern Mutual here in KnoxvilleRead MoreAn Effective Total Rewards Program For Increase Profitability1723 Words   |  7 PagesOrganizations that use a salesforce to help promote its business for increase profitability are challenged to develop a compensation plan that aligns the company’s overall goals. A sales compensation plan is more than a tactical focus, but it is a strategic focus for an organization to that enables the company to remain competitive in the business industry (Thoreson, 2014). State Farm was founded in 1922 by G.J. Merchele, as an aut o insurance company. Today, it is one of the leading providers ofRead MoreBausch and Lomb Case Study Essay1640 Words   |  7 Pages      Question   1:   What   do   you   think   of   the   way   that   management   team    handled   the   reorganization   of   the   sales   organization?       The   reorganization   was   intended   to   merge   the   region’s   four   sales   forces   into   one.      I    believe   that   Bausch      Lomb   should   have   handled   this   reorganization   with   an   open   book    policyRead MoreFinancial Returns And Tangible Services845 Words   |  4 PagesCompensation is all forms of financial returns and tangible services and benefits employees receive as part of an employment relationship (Milkovich, G., Newman, J., Gerhart, B. (2014)). There are three sales force compensation plans: straight salary, straight commission, and salary plus commission and bonus. In addition to these sales force plans, many sales people receive expense allowance, cars, and other noncash bonuses (The SHRM learning system (2014 ed., Vol. 4)). Straight salary is theRead MoreIncentive as a Component of Salesman Compensation Structure1210 Words   |  5 PagesIncentives as a Component of Salesman Compensation Structure By Mohit Pandey 11DM-187 Sales Management-Section D What are Incentives? It is defined as a type of additional remuneration either in cash or kind given to an employee as a means of increasing output or as a motivational influence. Why do we need to give incentives? Firstly incentives work as psychological stimulant for a person to perform better. Incentives act like the pot of gold at the end of the rainbow. Secondly, theRead MoreJefferson Pilot: Growing the Sales Force Essay1634 Words   |  7 Pagesï » ¿Jefferson Pilot: Growing the Sales Force Discussion Questions 1. What are the advantages and disadvantages of using a career sales force versus an independent sales force? A career sales force that the company hires, trains, supervises, and compensates likely will be more loyal than an independent sales force. As the case notes, these career salespeople sell only JPF policies. They also learn and contribute to establishing and maintaining the organization’s â€Å"culture.† They learn how things workRead MoreSale Force Target Essay975 Words   |  4 PagesK-mart, but the atmosphere is a lot more toned and you can actually focus on shopping without being over crowded. Targets first symbol 1962 In order to motivate the sales force to produce the highest number of clients, describe six (6) features of an effective total rewards program Compensation – what is the company willing to pay for this position? Benefits – health, dental, vision, long-term care, retirement. Are these incentives reasonably priced for employees? Every employeeRead MoreProgreso Financiero1278 Words   |  6 Pagesfalling significantly short of its sales forecasts (Exhibit 4), causing concern for investors and employees of the company. Second, Progreso has not yet identified a clear path to profitability. There are four key drivers to underperformance at Progreso Financiero: poor sales analytics systems, improper human resource management, poor managerial decision making and ineffective compensation incentives. The collective result of these shortcomings is that Progreso’s sales employees are highly unmotivated

Personal Narrative Managing The People - 793 Words

Managing the People In reading your post, I found some similarities in my own analysis regarding the people that I believe that Shania should enlist in launching her new business. I did make some distinction of having the prospective person participate in launching and operating the business, and if the person should necessarily become a business partner, who has a stake in the company. I will discuss briefly below my positions, specifically, how I would advise Shania differently, and how I supported my decisions. Picking the Right Recruits Shania has an important decision to make as she determines who she will bring into her new business, and what roles that they will be responsible for in her Christian coffeehouse. Each of the prospects, as you also pointed out, have pros and cons in whether or not they should participate, and to what extent they should be depended on within the business. First, I am not certain that I would include most of the prospects as partners in the business from an official owner standpoint. I would advise Shania to partner with her husband only, who is interested in backing the business financially, and then identify roles in the business that each of her friends and family can participate. The Bible says in Ephesians 5:25, â€Å"Husbands, love your wives, just as Christ also loved the church and gave Himself up for her†, and I believe that Shania’s husband should partner and support his wife (Barker, 1999). The arrangement might be such thatShow M oreRelatedThe Y Greene : A Quiet, But Not Silent Hero1269 Words   |  6 Pagesthat have transpired, it is about those events that have been recorded. The first people who author history are reporters, who’s job it is to keep the masses informed of current events. The second authors of history are the historians, who weave together threads of information in order to produce a tapestry of narratives used to illustrate what has occurred. However, as recent events pass into history there are people who are at these watersheds. Such individuals provide a priceless window into theseRead MoreShame Is A Powerful Emotion Which Has Great Influence On Social Behavior1504 Words   |  7 Pagesmanagement, also emphasizes the importance of this particular social emotion as it is able to alter interpersonal bonds, it can be destructive and may to lead to farther violent behaviour (Baumeister Bushman 2014). Additional important reason of managing shame is that it may develop to pathologi cal consequence of major depression or suicide due to the absence of a single concept as a solution of repairing the entire self which is damaged by experiencing shame on a long term (Tangney, Burggraf WagnerRead MoreStorytelling And Knowledge Management ( Km )1141 Words   |  5 Pages(KM) has attracted much attention of both professionals and scholars of business organizations. While storytelling, or narrative is increasingly used as one of the ways to deliver and exchange knowledge in KM process in organizations. The main objective of this essay is to explain what KM should be and to share suggestions provided by Denning (2004) about the critical role of narrative in KM and a set of storytelling catalog designed for different purposes in knowledge sharing. The definition of KMRead MoreThe Revolution Is Us By David C. Stone1500 Words   |  6 Pagestunnel vision into Cuban society; yet this is an advantage in that one sees citizen- deputies actively managing the local power of the state,’ (323). Guerra is taking the structure of the film and using it to analysis the truth that may be behind the everyday functions of these staged people. In this instance Guerra is asking the question, what is the real world applicability to what these staged people are saying compared to how they are living. This all contributes to this larger goal that Guerra isRead MoreThe Marketing Of Marketing Mix Essay1145 Words   |  5 PagesAdvertising, PR, Sales Promotion, Personal Selling and, in later times, Social Media are all key specialized instruments for an association. These instruments ought to be utilized to put over the association s message to the right groups of onlookers in the way they might most want to listen, whether it be educational or speaking to their feelings. †¢People – All organizations are dependent on the general population who run them from cutting edge Sales staff to the Managing Director. Having the rightRead MoreClical Reasoning as Described by Neistdadt1819 Words   |  7 Pagesin relation to our case study of which the protagonist is Hugh, a 70 year old widower and retired baker, who was managing well an episode of depression but has recently been found apathetic, unwashed and in soiled clothes by the public mental health nurse, and referred to see an occupational therapist. 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Henry to communicateRead MoreAnalysis Of Mike Rose s I Just Wan Na 952 Words   |  4 PagesMike Rose’s â€Å"I Just Wanna Be Average,† he argues that the unfortunate and underprivileged students will not be able to become successful due to the corruption of the American education system. Rose uses Aristotelian Appeals, comparisons and personal narratives, to prove that students who are placed at the bottom level of the school education system can become successful in live if given the correct guidance and opportunities to advance in life. Everyone wants to get through life like anybody elseRead MoreLeadership Development Plan994 Words   |  4 PagesLeadership Development Plan In creating my personal leadership development plan, I will first provide an overview of what I have found to be my strengths and weaknesses and in doing so will make a distinction as to my leadership style. I will then discuss recent activities I have undertaken which have served to underscore these strengths and weaknesses. Finally, I will lay out my plans for future growth and development as a leader. There are several activities assignments that have beenRead MoreExpository Writing - Writing And Writing1560 Words   |  7 Pagesknowledge I should have, coming into this course with a poor knowledge about expository and narrative writing. Once I entered this course, the information that was received about expository and narrative writing helped me tremendously. I became accustomed to the new writing style of the class and what was required of me to succeed. Literacy Narrative: The first writing of the year was the Literacy Narrative. The topic of this writing was to talk about an event that helped you improve in the

Balanced Scorecard Organizational Performance †MyAssignmenthelp

Question: Discuss about the Balanced Scorecard Organizational Performance. Answer: Introduction This report provides a clear understanding on balance score card approach which is used by Brotherhood of St Laurence in order to establish effective value chain activities. This balance score card approach will be consisted of four important dimensions which will reflects how organization could meet its set objectives and goals in easy and determined approach. Brotherhood of St Laurence is not for profit organizations which has business toward a vision of an Australia free of poverty. In addition to this, Brotherhood of St Laurence has international brand image and headquarter of company is in Melbourne. This report provides deep understanding on balance score card and its four dimensions which could be used to achieve its set objectives and goals in determined approach. Brotherhood of St Laurence has several goals and objective to achieve with the help of its set business functioning. Goals of Brotherhood of St Laurence could be classified into two parts general and specific objectives. The general objective of Brotherhood of St Laurence is to help young people to achieve their certain goals and objective in effective manner. The specific long term objective of company is to make Australia poverty free place. This objective is very wide and accompanied with several facts and sub objectives. There are several programs which have been implemented by Brotherhood of St Laurence in its business functioning such as Refuge child outreach, Refugee actions program and implementing poverty eradications plans. In addition to this, there is other several plans have been implemented by Brotherhood of St Laurence for mitigating the poverty problems (Ahmad, 2015). There are several stakeholders and clients for Brotherhood of St Laurence People living in Australia- These are the people who are having Australian residency. However, the main focus of Brotherhood of St Laurence is to provide best quality of services and assistance to people who are living their lives below poverty line. Ambassadors- The Ambassadors for Brotherhood of St Laurence is RT Revd Dr Peter and Ms Joanna who are providing best assistance to Brotherhood of St Laurence. Donors- These persons provide financial assistance to Brotherhood of St Laurence so that it could achieve its determined goals and objectives. However, company has to meet all donors wants and needs in effective manner. Volunteers- These are the pillars for the organization who provide their services and work for Brotherhood of St Laurence at free of cost. Therefore, Brotherhood of St Laurence has to prepare organizational culture in such a way so that it could motivate all the volunteers to make best efforts for servicing people. Partner organization- These are the other organizations who have entered into strategic planning with Brotherhood of St Laurence. These partners sponsor the events and business of the companies for the better understanding of the organizational purpose. These above given stakeholders are important to consider by Brotherhood of St Laurence before implementing any policies and framework (Dudin and Frolova, 2015). Brotherhood of St Laurence has been comprised of several set of activities in which various functions are performed with a view to achieve certain goals and objectives. There are several suitable perspectives which could be used in Brotherhood of St Laurence balance scorecard approach of organization. The balance scorecard approach is consisted of several dimensions such as financial requirement, internal business functioning, customers and business stakeholders and organizational capacity. The financial perspective- In this dimension, Brotherhood of St Laurence would need to evaluate its financial performance. The financial perspective is concerned with cost and budget analysis of company. It is evaluated that Brotherhood of St Laurence has total net profit of $ 2969000 from its business functioning, in addition to this, company has been planning to make expansion in its business functioning. Specific objective- The main objective of this financial perspective is to identify the cost involved in the business and other factors which make bifurcations in cost and budget involved in the process system (Khatoon and Farooq, 2014). Customers- Ideally poor and young people are the main customers who have been provided assistance by the Brotherhood of St Laurence. It has planned to support young people to achieve their goals and objectives. However, in this perspective of balance score card, Brotherhood of St Laurence would include performance indicators, business process goals, achievement of set targets and goals and capacity utilization scores. Specific objective- The main objective of this customers focused dimension of balance score card approach of Brotherhood of St Laurence is to identify how it could make its services customized with a view to increase overall satisfaction of clients. Internal business functioning- All the people working in Brotherhood of St Laurence are volunteers and they focus on achieving internal goals and objectives. Specific objective -This perspective would include performance measurement, KPI functioning, process improvement, quality optimization and capacity utilization. Learning and growth perspective- In this dimension, Brotherhood of St Laurence will focus on its intangible drivers and often broken down into following components. Specific objective- This main objective of learning and growth perspective is related with making expansion in its non profit business organization and providing best quality of services to stakeholders. of volunteer engaged Information capital requirement Organization capital The main idea of preparing this strategic map is to outline each and every dimension of balance score card prepared Brotherhood of St Laurence in its business functioning. It is evaluated that company would make effective level of surveillance in its four dimensions through its balance score card approach. Objective of these four dimensions of balance score card approach is interrelated with each other (Bhattacharya, et al. 2014). If company fails to achieve one objective of organization then it would also result into failure to achieve other objectives as well. The whole process of strategic map in the balance score card approach could be defined with the below given chart which have been prepared by including all these four dimensions (Heginbotham, et al. 2015). Balance score card approach of Brotherhood of St Laurence is consisted of four parts named financial perspective, customer, internal process and learning and growth of the organizations. The main issues which would be faced by Brotherhood of St Laurence in implementing balance score card approach in its value chain activities would be consisted of collection of data and improvement plans. Brotherhood of St Laurence is a not profit earning organization which provides its services at break even points. The main problem in implementation of balance score card would be related with availability of finance and experts who could gauge the effectiveness of balance score card. Moreover, this BSC approach is only useful to evaluate four above given dimension and avoid other associated factors. Brotherhood of St Laurence would also need to hire other employees if it wants to adopt BSC approach in its value chain activities (Heginbotham, et al. 2015). It will not only increase the overall cost of productions and services but also increase the complexity of business functioning. However, by implementing BSC approach in its business functions, Brotherhood of St Laurence could evaluate the business performance and areas which could be improved. It is also observed that BSC approach could give idea and actions plan for making improvisation in its existing business process but it cannot provide accurate certain data. Therefore, it could be inferred that BSC approach could help organization to improve its existing performance but it is limited to the extent. However, it should be implemented under the effective supervision of experts who have good knowledge of BSC approach. These types of activities are essential for managing the business functioning of Brotherhood of St Laurence in effective manner. However, by using BSC approach, company could only take estimation of action plan for its business (Shafiee, et al. 2014). Conclusion Now in the end, it would be inferred that Brotherhood of St Laurence needs to implement effective balance score card approach for the smooth supervision of business. Moreover, Brotherhood of St Laurence could follow BSC approach for implementing Kaplan and Norton for classification its operational activities in four dimensions (Dudin and Frolova, 2015). References Ahmad, S., 2015. A balanced scorecard approach to recruitment in higher education institutions.Journal of Strategy and Performance Management,3(1), p.17. Bhattacharya, A., Mohapatra, P., Kumar, V., Dey, P.K., Brady, M., Tiwari, M.K. and Nudurupati, S.S., 2014. Green supply chain performance measurement using fuzzy ANP-based balanced scorecard: a collaborative decision-making approach.Production Planning Control,25(8), pp.698-714. Dudin, M.N. and Frolova, E., 2015. The balanced scorecard as a basis for strategic company management in the context of the world economy transformation. Heginbotham, E., Nixon, M., Morgan, F.E., Hagen, J., Heim, J.L., Engstrom, J., Li, S., DeLuca, P., Libicki, M.C., Frelinger, D.R. and Brady, K., 2015.The US-China military scorecard: Forces, geography, and the evolving balance of power, 19962017. Rand Corporation. Khatoon, S. and Farooq, A., 2014. Balanced Scorecard to Measure Organizational Performance: A Case Based Study.The International Journal of Business Management,2(9), p.106. Shafiee, M., Lotfi, F.H. and Saleh, H., 2014. Supply chain performance evaluation with data envelopment analysis and balanced scorecard approach.Applied Mathematical Modelling,38(21), pp.5092-5112.

Petroleum free essay sample

Names and events happened in this publication has been disguised and any similarity found is mere coincidence. Information found in this publication must be treated as HIGHL Y CONFIDENTIAL and shall be for the purpose of fulfillment of this MBA program. No references and reproduction of any parts of this publication shall be made without prior knowledge and approval from the author. Views expressed in this publication are solely those of the authors opinion and not to be construed as the views of PETRONAS, nor PETRONAS in any way responsible for the content thereof. AHMAD HUSSAIN No Matrik : OS01390 16 September, 1999 ACKNOWLEDGEMENT I t is both my pleasure and obligation to acknowledge generous people who have provided me with the guidance and inspired me to make this happen. Special thanks to the lecturers who have thought me during the night classes and member of my family for their continuos support. Without their support and courage, completing this MBA program would have been difficult, if not impossible. We will write a custom essay sample on Petroleum or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page I wish to express my gratitude to the following people for their kind assistance in this MBA p rogram and the case dissertation. Although much of my appreciation has been expressed, I wish to express my sincere thanks to Tuan Hj. Yaakob Ibrahim, the MBA coordinator for making this a reality to me. I want to acknowledge my special appreciation to Associate Professor Dr. Zainal Abidin Mohamed, who is my project case supervisor, for his continuos support in completing this case dissertation. It is truly impossible to express my feeling of gratitude in mere words. My friends and fellow colleagues in the MBA program, thank you for being a good teammates and shared my problems throughout this study. Your assistance, ideas and criticism are treasured in my heart. Never can I forget my family for being instrumental, cherish, motivating and more importantly for their patience throughout this course. To them I remain grateful and nor can I ignore them from my memory. I would never have been able to complete this MBA program and the case dissertation when I did if ever at all. II DEDICATED TO My Wife Norfishah bt Ab Wahab My Children Mohammad Fakhri Mohammad Fakhrullah Mohammad Fakhrusysyakirin Fathin My Parent Tuan Hj. Hussain Tamysa Hajjah Rokiah Bt Harun III Abstract PETRONAS vision was To be A Leading Oil and Gas Multinational Company of Choice and it stated the globalization effort in 1994. PETRONAS global operation had extended to Africa countries, Confederate Independence of Soviet Union (CIS), Middle East and Asia Pacific countries. Some of the Africa countries included Sudan, South Africa (downstream Engen), Libya and Algeria. The investments in CIS were Turkmenistan and Kazarkstan. The investment in Middle East countries included Iran, Syria and Iraq. In the Asia Pacific, the oversea portfolios extended to Vietnam, Mynmar, China and Australia (both Upstream and downstream). The oversea upstream activities were undertaken by its subsidiary PETRONAS Carigali Sdn Bhd (PCSB) through its oversea subsidiary companies. When PETRONAS started its globalization efforts, the environmental factors were very much favorable. However, in 1 997 and 1998 there were adverse changed in these environmental factors and had affected PETRONAS globalization efforts. Some of these factors were the regional and world economic turmoil, regional financial and currency devaluation, slower economic growth, low demand of oil and gas, lower oil and gas price and lower prospectivity and commerciality of the oil and gas projects. This case study evaluated PETRONAS strategic position and the impact on the international portfolios and made recommendation relating to these strategic issues. This case study analyzed the environmental factors influencing the company future direction through the used of the SWOT analysis and determined the strategic thrust to comprehend the SWOT analysis. This study assessed analytically, through the used of SPACE, the future company direction and evaluated the oversea portfolios to determine the portfolios growth opportunities and provide the decision as to whether these portfolios should be retained, partnered or divested. IV Abstrak Visi PETRONAS adalah Menjadi Syarikat Minyak dan Gas Antarabangsa Yang Terulung dan Terpilih dan ia telah memulakan usaha globalisasi pada tahun 1994. Usahanya ke arah globalisasi telah menjangkau ke negara-negara di Afrika, Confederate Independence of Soviet Union (CIS), Asia Tengah dan Asia Pasifik. Negara-negara di Afrika adalah termasuk Sudan, Afrika Selatan (operasi hiliran Engen), Libya and Algeria. merangkumi negara-negara seperti Turkmenistan and Kazarkstan. Pelaburan di CIS Manakala pelaburan di Asia Tengah menjangkau ke negara-negara Iran, Syria and Irak. Oi Asia Pasifik, pelaburan antarabangsanya termasuk Vietnam, Mynmar, China dan Australia (huluan dan hiliran) Operasi huluan dikendalikan oleh anak syarikatnya iaitu PETRONAS Carigali Sdn Bhd (PCSB) melalui anak-anak syarikatnya yang lain. Pada ketika PETRONAS memulakan usaha globalisasi, faktor-faktor sekeliling adalah begitu mengalakan. Walau bagaimanapun, dalam tahun 1997 dan 1998, terdapat perubahan ketara pada faktor-faktor sekeliling ini sehingga mencengkam usaha globalisasi PETRONAS. Antara faktor-faktor yang mengalami perubahan ketara adalah kejatuhan ecomomi serantau dan dunia. istem kewangan yang lemah, susut nilai matawang serantau, pertumbuhan ekonomi yang lembab, penurunan kadar permintaan minyak dan gas, kejatuhan harga minyak dan gas dan tahap prospek dan keupayaan niaga projek yang rendah. Kes in; menganalisa strategi PETRONAS dan implikasi keatas potfolio antarabangsanya dan seterusnya memberi cadangan untuk menyelesaikan isu-isu tersebut. faktor-faktor sekeliling ya ng mempengaruhi arah tuju masa Kes ini menganalisa depan syarikat dengan menggunakan analisa SWOT dan SPACE bagi menetapkan tunjak strategik dan membuat analisa potfolio antarabangsanya semaada untuk enjualnya. v terus memegangnya, berkongsi atau TABLE OF CONTENT PAGE I PENGESAHAN KEASLIAN LAPORAN II ACKNOWLEDGEMENTS III DEDICATIONS IV ABSTRACT 1. 0 PETRONAS GLOBALISATION AND THE DILEMMA . . . . . . . . . . . . . .. 1 2. 0 COMPANY BACKGROUND .. .. . .. .. . 2 3. 0 PETRONAS VISION, MISSION AND OBJECTIVES . 6 3. 1 ViSiON .. 6 3. 2 MiSSiON .. 7 3. 3 OBJECTiVES .. 8 3. 4 PETRONAS VALUES SYSTEM . 9 . . . . .. . 10 PCSB ORGANIZATION STRUCTURE . . 11 4. 2 FINANCIAL .. . 13 4. 3 MARKETING 15 4. 4 OPERATION MANAGEMENT .. . .. . . 17 4. 5 5. 0 PETRONAS ORGANIZATION ENVIRONMENT .. . 4. 1 4. 0 MANAGEMENT 19 . .. . . . .. . 20 5. 1 LEGAL POLITICAL .. . .. .. 20 5. 2 ECONOMiCAL 20 5 . 3 SOCIAL CULTURAL . .. . . .. 21 5. 4 TECHNOLOGiCAL . 22 5. 5 SUPPLIER .. .. . .. . 22 5. 6 SUBSTITUTE . 22 . . . . ENVIRONMENTAL FACTORS . . . . . . . . . . . . . . . .. .. .. . .. . . .. VI . . .. . .. .. .. . . .. .. . .. 5. 7 23 PETRONAS UPSTREAM GLOBAL VENTURES .. . . . .. . . .. 24 ViETNAM .. 4 6 . 2 SyRIA 25 6. 3 SUDAN . . .. . .. 26 6. 4 IRAN .. .. .. . .. .. 27 6. 5 TURMENISTAN . .. .. . .. . 29 6. 6 ALGERIA .. 30 COUNTRY ANALYSIS . . .. 31 7. 1 VIETNAM . . . .. .. . . . .. . .. 31 7. 2 SYRIA . .. .. . .. .. ,. 32 7. 3 S UDAN .. . .. . 33 7. 4 IRAN . .. .. .. . .. .. .. . . 33 7. 5 TURMENISTAN .. . .. . . .. . 34 7. 6 8. 0 CUSTOMER . .. .. .. .. .. .. .. . .. .. 6. 1 7. 0 23 5. 8 6. 0 COMPETITOR .. .. . .. .. .. .. .. .. ALGERIA .. .. . . .. . . .. 35 THE PETRONAS EP DILEMMA . . .. . 36 . . . . . . .. . . . . . . . .. . . .. . .. . . . . . . . . . . . .. . . .. . . . . . . PART II: CASE ANALYSIS . .. 38 . . .. .. .. 40 . .. .. .. .. 42 ORGANIZATIONAL ANALYSIS . .. .. .. .. .. 42 12. 1 ORGANIZATION STRUCTURE .. 42 12. 2 FINANCIAL STATUS .. .. . .. .. .. .. 43 12. 3 MARKETING 9. 0 INTRODUCTION 10. 0 SITUATION ANALYSIS 11. 0 PROBLEM STATEMENT 12. 0 . . . . . . . . . . . . . . . . . . 44 VII 12. 4 OPERATION MANAGEMENT . 45 12. 5 MANAGEMENT . 45 ENVIRONMENTAL ANALYSIS . .. 47 13. 1 LEGAL POLITICAL ENVIRONMENT .. . 47 13. 2 ECONOMICAL ENVIRONMENT .. .. . .. . 48 13. 3 SOCIAL CULTURAL ENVIRONMENT . .. . 49 13. 4 TECHNOLOGICAL ENVIRONMENT .. . . 49 13. 5 SUPPLIER . . . . 49 13. 6 SUBSTITUTE . 50 13. 7 C OMPETITOR 50 13. 8 CUSTOMER .. . .. 51 14. 0 SWOT ANALYSIS . . .. . 53 15. 0 SPACE ANALYSIS .. . .. .. 55 16. 0 PORTFOLIO ANALYSIS . 58 16. 1 BCG GROWTH SHARE MATRIX . . .. 58 16. 2 PORTFOLIO ATTRACTIVENESS .. .. . . 59 13. 0 . . .. . .. . . .. .. . . . . . . . . . . . . . . . . 17. 0 DECISION AND PLANNING . .. .. .. . .. 62 18. 0 IMPLEMENTATION . .. .. .. 64 18. 1 WORK PROGRAM AND SCHEDULE .. 64 18. 2 BUSINESS PROCESS REENGINEERING 66 18. 3 VALUE CHAIN . 68 . . . .. . List o f Table List of Figures List o f Appendices VIII .. . LIST OF TABLE PAGE TABLE1 : ORGANIZATIONAL ANALYSIS . 46 TABLE 2 : ENVIRONMENTAL ANALYSIS . 51 TABLE3 : SWOT SUMMARY 53 . . .. . .. . . TABLE4 : SWOT MATRIX . 54 TABLE 5 : SPACE MATRIX COMPONENTS .. 56 TABLE6 : SPACE MATRIX CALCULATION TABLE .. 57 TABLE7 : PETRONAS BCG-GROWTH SHARE MATRIX 59 TABLE 8 : PETRONAS OVERSEA PORTFOLIO ANALYSIS .. 61 IX PAGE LIST OF FIGURES FIGURE 1 : PETRONAS EVOLUTION .. . FIGURE 2 : ORGANIZATION STRUCTURE OF PETRONAS . .. FIGURE 3 : PETRONAS CARIGALI ORGANIZATION STRUCTURE . FIGURE 4 : PETRONAS TURNOVER . .. . . .. . . . FIGURE 5 : PETRONAS PROFIT AFTER TAX FIGURE 6 : PETRONAS TOTAL ASSET . .. .. FIGURE 7 : SPACE MATRIX ANALYSIS . .. . .. . FIGURE 8 : PETRONAS BCG GROWTH SHARE MATRIX .. . 5 12 1 4 1 4 15 57 58 . 61 . . . 65 . FIGURE 1 0 : WORK PROGRAM AND SCHEDULE .. . .. . .. .. . FIGURE9 : PETRONAS OVERSEA PORTFOLIO ANALYSIS . . 4 FIGURE 1 1 : PETRONAS REENGINEERING : NEW BUSINESS DEVELOPMENT DIVISION .. . . . . .. . . .. . . . . . . .. x . ,. 67 LIST OF APPENDICES PAGE .. 68 APPENDIX 2 : COUNTRY PERFORMANCE: SYRIA .. 70 APPENDIX 3 : COUNTRY PERFORMANCE: SUDAN 72 APPENDIX 4 : COUNTRY PERFORMANCE: IRAN .. 74 APPENDIX 1 : COUNTRY PERFORMANCE : VIETNAM .. .. . . . . 75 . .. . . 78 APPENDIX 5 : COUNTRY PERFORMANCE : TURKMENISTAN APPENDIX 6 : COUNTRY PERFORMANCE : ALGERIA . . . . . APPE NDIX7 : PETRONAS ORGANIZATIONAL ENVIRONMENTAL FACTOR 80 †¢ .. 81 APPENDIX9 : PORTFOLIO ANALYSIS : VIETNAM .. . 82 APPENDIX 10 : PORTFOLIO ANALYSIS : SYRIA .. . 83 APPENDIX 1 1 : PORTFOLIO ANALYSIS: SUDAN 84 APPENDIX 8 : PETRONAS EXTERNAL ENVIRONMENTAL FACTOR APPENDIX 1 2 : PORTFOLIO ANALYSIS : IRAN .. .. . . .. . .. . APPENDIX 13 : PORTFOLIO ANALYSIS : TURKMENISTAN . .. . APPENDIX 1 4 : PORTFOLIO ANALYSIS : ALGERIA XI 85 86 87 1. 0 PETRONAS GLOBALISATION AND THE DILEMMA Tan Sri Hassan Marican, president of PETRONAS, the national oil company of Malaysia, was on his way back after a week long business meeting with his new partners in Sudan, China National Petroleum Corporation (CNPC), State Petroleum and Sudapet, the Sudan National oil company. Accompanying him on his privately hired jet plane, were other vice presidents, they were Dato Mohamad Idris Mansor, senior vice president of Exploration and Production Business Unit and Mr. Muri Mohammad, the vice president of Gas Business Unit. They were having serious discussions on the prospectivity of the new joint venture and the resources invested in Sudan. There were about 23 8 PETRONAS employees working in Sudan, and PETRONAS has invested US$1 30 million to date. At one juncture, Tan Sri Hassan posed a question to Dato Idris, Dato Idris, PETRONAS has interest in many different countries around the world, with a total investment of US$6 billion. So far, we have been receiving revenues from Sirri projects in Iran, Dai Hung and Ruby projects in Vietnam. Dai Hung has been a disastrous venture to us, millions of dollars were lost due to lower oil reserves than expected. We may have to relinquish the field and return back to the Vietnamese Government. I wonder how are our other project stands? With the adverse changed in the environmental factors and current uncertainties in the global economy, how are our oversea portfolios doing and do we need to strategies our future direction? . There was a long sighed and Dato Idris later replied with cautious, We have been able to grab the oversea projects because we made a thorough analysis and feasibility study. However, in the exploration and production business, the risk is very high. Base on our limited data and information then, it was the best decision. However, I agreed that there is a need to reassess our projects and to decide whether to retain the projects or divest in some. We will reevaluate the project feasibility and carry out the portfolio analyses to determine which are the portfolios that can be retained and those that need to be divested. We will advise the board for the next course of action. The tense and dilemma were immensed on Dato Mohd Idris Mansor. He needed to know what were the situations, what adverse environmental changed occurred and the surrounding forces governing these assets. Was the political in the country, in which PETRONAS had invested, permitted a good investment climate? What impact did the global economy have on the projects prospectivity. What would the future scenarios be? Could the vision, mission and objective of the company be met? Should PETRONAS continue to aggressively expand the international operations, what should be done to the existing international portfolios and what should PETRONAS future direction be? His contract with PETRONAS valid for another three months. He knew that he needed to impress and make the Management Committee convince based on solid factual data and analyses, what are best for these international portfolios. He needed provide with proper recommendations and direction for PETRONAS to adopt. to His contract extension could be in jeopardy if he failed to provide the right decision and direction. 2. 0 COMPANY BACKGROUND PETRONAS was a Malaysian national oil and gas company, which was incorporated on August 17, 1974 under the Malaysian Company Act 1965. The Malaysian Petroleum Development Act (PDA), 1974 was passed by the Parliament on October 1, 1974. It placed petroleum development under the portfolio of the Prime Minister. Under the PDA, PETRONAS was vested with the ownership of petroleum resources, and had exclusive rights, power, liberties and privileges of exploring and developing petroleum resources. 2 In return for the ownership and rights, PETRONAS paid royalties to the Federal and State Governments. PETRONAS was given the right to carry out? processing, refining of petroleum and manufacturing of petrochemicals. This act had given PETRONAS the sole right to regulate the petroleum resources in Malaysia and was entrusted to manage the resources for the benefit of the nation. Towards the end of 1976, the first production sharing contracts were signed with three different major oil companies i. e. Sabah Shell, Sarawak Shell and Esso. During the initial years, PETRONAS roles mainly focus on managing and regulating the exploration activities of their contractors to ensure the upstream activities were being well administered and properly managed. Since PETRONAS emergent in 1974, it had developed itself from merely management of petroleum resources to project management and later established itself as the operator in the upstream activities before diversifying its activities and went international. PETRONAS evolution is shown in Figure 1. I n 1984, with the establishment of PETRONAS CARIGALI Sdn Bhd, it became the operating arm in the upstream activities. Later, several strategic studies were carried out by PETRONAS that led to diversification of its activities into oil refining, gas processing and utilization and petrochemical manufacturing and international marketing. To optimize the value and maximize synergy of the natural resources, it had integrated the upstream and downstream activities and transformed PETRONAS into an integrated oil and gas company. In 1994, PETRONAS started to diversify its activities oversea through its operating arm PETRONAS Carigali Sdn Bhd. In 1998, it had expanded the global activities into 15 different countries in the upstream and downstream. PETRONAS global operation had extended to Africa countries, Confederate Independence of Soviet Union (CIS), Middle East and Asia Pacific countries. Some of the Africa countries included Sudan, South Africa (downstream Engen), Libya and Algeria. The investments in CIS were Turkmenistan and Kazakhstan. The investment in Middle East countries included Iran, Syria and Iraq (still in negotiation). In the Asia Pacific, 3 the oversea portfolios included Vietnam, Myanmar, China and Australia (both Upstream and downstream). In line with the globalization, PETRONAS had developed a new vision and mission in accordance to its core activities and the company aspiration of becoming a global company of choice. FIGURE 1: PETRONAS EVOLUTION †¢ Project Manager / . Operator + lt; lt; Project Manager I I + I Operator I I I I I I + Integrated Oil Cpmpany _ Petroleum was PETRONAS core business right from finding hydrocarbon up to processing and refining, petrochemical industries, manufacturing and transportation. The organization structure of PETRONAS is shown in Figure 2. Exploration and Production activities encompassed 4 exploration, development and production of petroleum refining resources. Refining activity focussed on the crude oil. Marketing was responsible in marketing, trading and retailing of petroleum products. Gas business was responsible in gas processing and transmission, gas liquefaction and gas utilization such as gas district cooling. The Petrochemical business was responsible for the petrochemical manufacturing and marketing the product. Maritime and logistic business included marine transportation, port management and terminaling and finally the logistic activities. FIGURE 2 ORGANISATIONAL STRUCTURE OF PETRONAS . .. BOARD AUDIT r. ()MMITT .. . M ANAGEMENT r. ()MMITT MARKETING BUSINESS CORPORATE PLANNING DEVELOPMENT nlVI? lnN EDUCATION DIVISION FINANCE DIVISION 5 PETROCHEMICAL BUSINESS HUMAN RESOURCE DIVISION TECHNOLOGY MANAGEMENT nlVI? lnN 3. 0 PETRONASs VISION, MISSION AND OBJECTIVES Mission and vision statement is very important to illustrate the organization reason for existence and the direction towards achieving the objectives and goals in the short and long term. PETRONAS had long developed the mission and vision statement. However, in 1995, after its globalization effort, PETRONAS changed its vision statement to incorporate the vision of being a multinational company of choice. Below are discussion on the three elements of PETRONAS undamental principle of its existence and the values system that it adored. 3 . 1 VISION PETRONAS vision was To be A Leading Oil and Gas Multinational Company of Choice. This defined that oil and gas as the core business and emphasized on significance of integrated upstream and downstream activities in adding values to the primary resource. In line with the industry trend in the downstrea m and the relevancy in the value chain, PETRONAS wanted to increase weighting towards gas and petrochemical. It expressed desired to leverage on the core businesses and out-sourced the non-strategic activities and units. PETRONAS has developed strategies where it emphasized on certain business segments, focused on certain geographical locations and leveraged its competitiveness in a certain market segment. In 1994, PETRONAS started its globalization effort to become a global multinational company. Thus a significant proportion of its operations were outside Malaysia and across several countries. Like other multinational company, PETRONAS had to deal and manage with multinationals and multicultural not only in Malaysia but other countries that it was operating. The vision stated that it wanted to be a world class organization, as 6 uch in 1996, the management has undertook business process reengineering to make PETRONAS more competitive internationally. The vision also stressed on being a company of choice and keenly preferred by all stakeholders, consumers and partners. 3. 2 MISSION The PETRONAS mission statement was developed to explain the reasons for its existence, strengthen the vision and articu late the corporate direction in achieving the vision. PETRONAS described its mission statements as follows; WE ARE A BUSINESS ENTITY PETROLEUM IS OUR CORE BUSINESS OUR PRIMARY RESPONSIBILITY IS TO DEVELOP AND ADD VALUE TO THIS NATIONAL RESOURCE OUR OBJECTIVE IS TO CONTRIBUTE TO THE WELL-BEING OF THE PEOPLE AND THE NATION The mission statement stated that petroleum, which constitute of oil and gas, as being the core business. Petroleum as a natural resource, had to be explored, developed, produced, processed and transformed to consumer products, e. g. gasoline, ethane as feedstock to petrochemical plant and gas for power plant. In this way, PETRONAS could maximized the value chain of this natural resource through synchronizing the upstream activities with the downstream activities. The upstream activities involved exploring and roducing the petroleum whereas the downstream activities involved processing and transformation of the natural resource into other utilities and feedstock to the petrochemical plants. The mission also mentioned that the objective was to contribute 7 toward the well being of the people and the nation. PETRONAS believed that since it was entrusted with the responsibility to develop the natural resources and given the exclusive rights under the PDA, it has the responsibility to protect the well being of the people and the nation whom, it believed, owned the wealth of the natural resources of the country. 3. 3 OBJECTIVES Taking the vision and mission as the foundation of the company direction, PETRONAS Exploration and Production (EP) business unit has developed their specific objectives in order to achieve the Corporates vision and mission. The specific objectives are discussed below. 1. Increase the share or revenues from international operation by 3 0% in year 2005. 2. Creating value to the company at RM 58 billion by year 2005. 3. To acquire 1billion of oil equivalent b y year 2000. 4. Be a leading upstream gas company in South Asia. S. Overall Total Corporate Return (TCR) of top quartile in International EP industry. In achieving the PETRONAS EP objectives some of these strategies were integrated across businesses to synergies and create value chain to the company. In its effort to maximize value creation to the company, PETRONAS had acquired service company alliance to minimize cost of development and strategic partnerships with other companies in its oversea ventures to share the risk. 8 3. 4 PETRONASs VALVES SYSTEM PETRONAS value system was developed to explain the values that the organization advocated and the expectation that the organization has on its employee. There were four values system adopted by PETRONAS. LOYALTY PROFESSIONALISM INTEGRITY COHESIVENESS The word loyalty referred to the staff loyalty to the nation and corporation. A loyal staff maintained high corporate image and would not make derogatory comments about the company and country. The staff would at all time provide constructive criticism within in-house forum, support and participate in ensuring the companys mission, role s, objectives in his or her activities either in-house, outside seminar, talks and social activities. Professionalism in PETRONAS terminology means committed, innovative and proactive an d always striving f or excellence. The staff would maintain correctness and high dignity of behavior in delivering his duty and firm in decision making based on objective assessment of situations in conducting affairs of the company. Integrity means honest and upright. It referred to staff trustworthiness in maintaining all confidentiality of companys affairs and business and put companys interest above personal interest and gains. 9 Cohesiveness means united in purpose and fellowship. Able to work in a team and contribute positively towards a common goal in conducting companys affairs and business with genuine concerns and respect to the people. . 0 PETRONAS ORGANIZATIONAL ENVIRONMENT Some of the factors that impact the development of an organization include the financial, marketing, operation and management factors. Based on Fortune 500, August 98, in the Petroleum Industry category, PETRONAS has been listed has number 1 in term of return on revenues and return on assets with 28. 4 % and 1 3 . 9% respectively. Its h ad investment in 53 wholly owned companies with 2 1 located overseas and 32 locally, 27 partly owned with one in oversea and 30 associated companies with 1 1 located oversea. The mode of decision making was made centralized with specific business units had their own business committee chaired by the respective vise president. The organization decision-makings and guiding policies were made through Management Committee meeting and Board meeting. Members represented the Management Committee were mainly from the various heads of business units. The Board Members comprised of member from the senior management and Government representatives. The Exploration and Production (E P) business unit was responsible of the upstream activities. Petroleum Management Unit, which was part of the holding company, was responsible of managing the domestic petroleum operation and supervising the implementation of Production Sharing Contracts signed between PETRONAS and the contractors. 10 PETRONAS Carigali Sdn. Bhd. (PCSB) under the EP business units was the subsidiary of PETRONAS and was the operating arm of PETRONAS in the upstream sector. It has domestic assets as well as international assets. The international assets were being managed by wholly owned international subsidiaries headed by the country managers. Petroleum free essay sample Names and events happened in this publication has been disguised and any similarity found is mere coincidence. Information found in this publication must be treated as HIGHL Y CONFIDENTIAL and shall be for the purpose of fulfillment of this MBA program. No references and reproduction of any parts of this publication shall be made without prior knowledge and approval from the author. Views expressed in this publication are solely those of the authors opinion and not to be construed as the views of PETRONAS, nor PETRONAS in any way responsible for the content thereof. AHMAD HUSSAIN No Matrik : OS01390 16 September, 1999 ACKNOWLEDGEMENT I t is both my pleasure and obligation to acknowledge generous people who have provided me with the guidance and inspired me to make this happen. Special thanks to the lecturers who have thought me during the night classes and member of my family for their continuos support. Without their support and courage, completing this MBA program would have been difficult, if not impossible. We will write a custom essay sample on Petroleum or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page I wish to express my gratitude to the following people for their kind assistance in this MBA p rogram and the case dissertation. Although much of my appreciation has been expressed, I wish to express my sincere thanks to Tuan Hj. Yaakob Ibrahim, the MBA coordinator for making this a reality to me. I want to acknowledge my special appreciation to Associate Professor Dr. Zainal Abidin Mohamed, who is my project case supervisor, for his continuos support in completing this case dissertation. It is truly impossible to express my feeling of gratitude in mere words. My friends and fellow colleagues in the MBA program, thank you for being a good teammates and shared my problems throughout this study. Your assistance, ideas and criticism are treasured in my heart. Never can I forget my family for being instrumental, cherish, motivating and more importantly for their patience throughout this course. To them I remain grateful and nor can I ignore them from my memory. I would never have been able to complete this MBA program and the case dissertation when I did if ever at all. II DEDICATED TO My Wife Norfishah bt Ab Wahab My Children Mohammad Fakhri Mohammad Fakhrullah Mohammad Fakhrusysyakirin Fathin My Parent Tuan Hj. Hussain Tamysa Hajjah Rokiah Bt Harun III Abstract PETRONAS vision was To be A Leading Oil and Gas Multinational Company of Choice and it stated the globalization effort in 1994. PETRONAS global operation had extended to Africa countries, Confederate Independence of Soviet Union (CIS), Middle East and Asia Pacific countries. Some of the Africa countries included Sudan, South Africa (downstream Engen), Libya and Algeria. The investments in CIS were Turkmenistan and Kazarkstan. The investment in Middle East countries included Iran, Syria and Iraq. In the Asia Pacific, the oversea portfolios extended to Vietnam, Mynmar, China and Australia (both Upstream and downstream). The oversea upstream activities were undertaken by its subsidiary PETRONAS Carigali Sdn Bhd (PCSB) through its oversea subsidiary companies. When PETRONAS started its globalization efforts, the environmental factors were very much favorable. However, in 1 997 and 1998 there were adverse changed in these environmental factors and had affected PETRONAS globalization efforts. Some of these factors were the regional and world economic turmoil, regional financial and currency devaluation, slower economic growth, low demand of oil and gas, lower oil and gas price and lower prospectivity and commerciality of the oil and gas projects. This case study evaluated PETRONAS strategic position and the impact on the international portfolios and made recommendation relating to these strategic issues. This case study analyzed the environmental factors influencing the company future direction through the used of the SWOT analysis and determined the strategic thrust to comprehend the SWOT analysis. This study assessed analytically, through the used of SPACE, the future company direction and evaluated the oversea portfolios to determine the portfolios growth opportunities and provide the decision as to whether these portfolios should be retained, partnered or divested. IV Abstrak Visi PETRONAS adalah Menjadi Syarikat Minyak dan Gas Antarabangsa Yang Terulung dan Terpilih dan ia telah memulakan usaha globalisasi pada tahun 1994. Usahanya ke arah globalisasi telah menjangkau ke negara-negara di Afrika, Confederate Independence of Soviet Union (CIS), Asia Tengah dan Asia Pasifik. Negara-negara di Afrika adalah termasuk Sudan, Afrika Selatan (operasi hiliran Engen), Libya and Algeria. merangkumi negara-negara seperti Turkmenistan and Kazarkstan. Pelaburan di CIS Manakala pelaburan di Asia Tengah menjangkau ke negara-negara Iran, Syria and Irak. However, in the exploration and production business, the risk is very high. Base on our limited data and information then, it was the best decision. However, I agreed that there is a need to reassess our projects and to decide whether to retain the projects or divest in some. We will reevaluate the project feasibility and carry out the portfolio analyses to determine which are the portfolios that can be retained and those that need to be divested. We will advise the board for the next course of action. The tense and dilemma were immensed on Dato Mohd Idris Mansor. He needed to know what were the situations, what adverse environmental changed occurred and the surrounding forces governing these assets. Was the political in the country, in which PETRONAS had invested, permitted a good investment climate? What impact did the global economy have on the projects prospectivity. What would the future scenarios be? Could the vision, mission and objective of the company be met? Should PETRONAS continue to aggressively expand the international operations, what should be done to the existing international portfolios and what should PETRONAS future direction be? His contract with PETRONAS valid for another three months. He knew that he needed to impress and make the Management Committee convince based on solid factual data and analyses, what are best for these international portfolios. He needed provide with proper recommendations and direction for PETRONAS to adopt. to His contract extension could be in jeopardy if he failed to provide the right decision and direction. 2. 0 COMPANY BACKGROUND PETRONAS was a Malaysian national oil and gas company, which was incorporated on August 17, 1974 under the Malaysian Company Act 1965. The Malaysian Petroleum Development Act (PDA), 1974 was passed by the Parliament on October 1, 1974. It placed petroleum development under the portfolio of the Prime Minister. Under the PDA, PETRONAS was vested with the ownership of petroleum resources, and had exclusive rights, power, liberties and privileges of exploring and developing petroleum resources. 2 In return for the ownership and rights, PETRONAS paid royalties to the Federal and State Governments. PETRONAS was given the right to carry out? processing, refining of petroleum and manufacturing of petrochemicals. This act had given PETRONAS the sole right to regulate the petroleum resources in Malaysia and was entrusted to manage the resources for the benefit of the nation. Towards the end of 1976, the first production sharing contracts were signed with three different major oil companies i. e. Sabah Shell, Sarawak Shell and Esso. During the initial years, PETRONAS roles mainly focus on managing and regulating the exploration activities of their contractors to ensure the upstream activities were being well administered and properly managed. Since PETRONAS emergent in 1974, it had developed itself from merely management of petroleum resources to project management and later established itself as the operator in the upstream activities before diversifying its activities and went international. PETRONAS evolution is shown in Figure 1. I n 1984, with the establishment of PETRONAS CARIGALI Sdn Bhd, it became the operating arm in the upstream activities. Later, several strategic studies were carried out by PETRONAS that led to diversification of its activities into oil refining, gas processing and utilization and petrochemical manufacturing and international marketing. To optimize the value and maximize synergy of the natural resources, it had integrated the upstream and downstream activities and transformed PETRONAS into an integrated oil and gas company. In 1994, PETRONAS started to diversify its activities oversea through its operating arm PETRONAS Carigali Sdn Bhd. In 1998, it had expanded the global activities into 15 different countries in the upstream and downstream. PETRONAS global operation had extended to Africa countries, Confederate Independence of Soviet Union (CIS), Middle East and Asia Pacific countries. Some of the Africa countries included Sudan, South Africa (downstream Engen), Libya and Algeria. The investments in CIS were Turkmenistan and Kazakhstan. The investment in Middle East countries included Iran, Syria and Iraq (still in negotiation). In the Asia Pacific, 3 the oversea portfolios included Vietnam, Myanmar, China and Australia (both Upstream and downstream). In line with the globalization, PETRONAS had developed a new vision and mission in accordance to its core activities and the company aspiration of becoming a global company of choice. FIGURE 1: PETRONAS EVOLUTION †¢ Project Manager / . Operator + lt; lt; Project Manager I I + I Operator I I I I I I + Integrated Oil Cpmpany _ Petroleum was PETRONAS core business right from finding hydrocarbon up to processing and refining, petrochemical industries, manufacturing and transportation. The organization structure of PETRONAS is shown in Figure 2. Exploration and Production activities encompassed 4 exploration, development and production of petroleum refining resources. Refining activity focussed on the crude oil. Marketing was responsible in marketing, trading and retailing of petroleum products. Gas business was responsible in gas processing and transmission, gas liquefaction and gas utilization such as gas district cooling. The Petrochemical business was responsible for the petrochemical manufacturing and marketing the product. Maritime and logistic business included marine transportation, port management and terminaling and finally the logistic activities. FIGURE 2 ORGANISATIONAL STRUCTURE OF PETRONAS . .. BOARD AUDIT r. ()MMITT .. . M ANAGEMENT r. ()MMITT MARKETING BUSINESS CORPORATE PLANNING DEVELOPMENT nlVI? lnN EDUCATION DIVISION FINANCE DIVISION 5 PETROCHEMICAL BUSINESS HUMAN RESOURCE DIVISION TECHNOLOGY MANAGEMENT nlVI? lnN 3. 0 PETRONASs VISION, MISSION AND OBJECTIVES Mission and vision statement is very important to illustrate the organization reason for existence and the direction towards achieving the objectives and goals in the short and long term. PETRONAS had long developed the mission and vision statement. However, in 1995, after its globalization effort, PETRONAS changed its vision statement to incorporate the vision of being a multinational company of choice. Below are discussion on the three elements of PETRONAS undamental principle of its existence and the values system that it adored. 3 . 1 VISION PETRONAS vision was To be A Leading Oil and Gas Multinational Company of Choice. This defined that oil and gas as the core business and emphasized on significance of integrated upstream and downstream activities in adding values to the primary resource. In line with the industry trend in the downstrea m and the relevancy in the value chain, PETRONAS wanted to increase weighting towards gas and petrochemical. It expressed desired to leverage on the core businesses and out-sourced the non-strategic activities and units. PETRONAS has developed strategies where it emphasized on certain business segments, focused on certain geographical locations and leveraged its competitiveness in a certain market segment. In 1994, PETRONAS started its globalization effort to become a global multinational company. Thus a significant proportion of its operations were outside Malaysia and across several countries. Like other multinational company, PETRONAS had to deal and manage with multinationals and multicultural not only in Malaysia but other countries that it was operating. The vision stated that it wanted to be a world class organization, as 6 uch in 1996, the management has undertook business process reengineering to make PETRONAS more competitive internationally. The vision also stressed on being a company of choice and keenly preferred by all stakeholders, consumers and partners. 3. 2 MISSION The PETRONAS mission statement was developed to explain the reasons for its existence, strengthen the vision and articu late the corporate direction in achieving the vision. PETRONAS described its mission statements as follows; WE ARE A BUSINESS ENTITY PETROLEUM IS OUR CORE BUSINESS OUR PRIMARY RESPONSIBILITY IS TO DEVELOP AND ADD VALUE TO THIS NATIONAL RESOURCE OUR OBJECTIVE IS TO CONTRIBUTE TO THE WELL-BEING OF THE PEOPLE AND THE NATION The mission statement stated that petroleum, which constitute of oil and gas, as being the core business. Petroleum as a natural resource, had to be explored, developed, produced, processed and transformed to consumer products, e. g. gasoline, ethane as feedstock to petrochemical plant and gas for power plant. In this way, PETRONAS could maximized the value chain of this natural resource through synchronizing the upstream activities with the downstream activities. The upstream activities involved exploring and roducing the petroleum whereas the downstream activities involved processing and transformation of the natural resource into other utilities and feedstock to the petrochemical plants. The mission also mentioned that the objective was to contribute 7 toward the well being of the people and the nation. PETRONAS believed that since it was entrusted with the responsibility to develop the natural resources and given the exclusive rights under the PDA, it has the responsibility to protect the well being of the people and the nation whom, it believed, owned the wealth of the natural resources of the country. 3. 3 OBJECTIVES Taking the vision and mission as the foundation of the company direction, PETRONAS Exploration and Production (EP) business unit has developed their specific objectives in order to achieve the Corporates vision and mission. The specific objectives are discussed below. 1. Increase the share or revenues from international operation by 3 0% in year 2005. 2. Creating value to the company at RM 58 billion by year 2005. 3. To acquire 1billion of oil equivalent b y year 2000. 4. Be a leading upstream gas company in South Asia. S. Overall Total Corporate Return (TCR) of top quartile in International EP industry. In achieving the PETRONAS EP objectives some of these strategies were integrated across businesses to synergies and create value chain to the company. In its effort to maximize value creation to the company, PETRONAS had acquired service company alliance to minimize cost of development and strategic partnerships with other companies in its oversea ventures to share the risk. 8 3. 4 PETRONASs VALVES SYSTEM PETRONAS value system was developed to explain the values that the organization advocated and the expectation that the organization has on its employee. There were four values system adopted by PETRONAS. LOYALTY PROFESSIONALISM INTEGRITY COHESIVENESS The word loyalty referred to the staff loyalty to the nation and corporation. A loyal staff maintained high corporate image and would not make derogatory comments about the company and country. The staff would at all time provide constructive criticism within in-house forum, support and participate in ensuring the companys mission, role s, objectives in his or her activities either in-house, outside seminar, talks and social activities. Professionalism in PETRONAS terminology means committed, innovative and proactive an d always striving f or excellence. The staff would maintain correctness and high dignity of behavior in delivering his duty and firm in decision making based on objective assessment of situations in conducting affairs of the company. Integrity means honest and upright. It referred to staff trustworthiness in maintaining all confidentiality of companys affairs and business and put companys interest above personal interest and gains. 9 Cohesiveness means united in purpose and fellowship. Able to work in a team and contribute positively towards a common goal in conducting companys affairs and business with genuine concerns and respect to the people. . 0 PETRONAS ORGANIZATIONAL ENVIRONMENT Some of the factors that impact the development of an organization include the financial, marketing, operation and management factors. Based on Fortune 500, August 98, in the Petroleum Industry category, PETRONAS has been listed has number 1 in term of return on revenues and return on assets with 28. 4 % and 1 3 . 9% respectively. Its h ad investment in 53 wholly owned companies with 2 1 located overseas and 32 locally, 27 partly owned with one in oversea and 30 associated companies with 1 1 located oversea. The mode of decision making was made centralized with specific business units had their own business committee chaired by the respective vise president. The organization decision-makings and guiding policies were made through Management Committee meeting and Board meeting. Members represented the Management Committee were mainly from the various heads of business units. The Board Members comprised of member from the senior management and Government representatives. The Exploration and Production (E P) business unit was responsible of the upstream activities. Petroleum Management Unit, which was part of the holding company, was responsible of managing the domestic petroleum operation and supervising the implementation of Production Sharing Contracts signed between PETRONAS and the contractors. 10 PETRONAS Carigali Sdn. Bhd. (PCSB) under the EP business units was the subsidiary of PETRONAS and was the operating arm of PETRONAS in the upstream sector. It has domestic assets as well as international assets. The international assets were being managed by wholly owned international subsidiaries headed by the country managers.