TABLE OF CONTENTS

COMPANY PROFILE..................................................................................................................2
INDUSTRY PROFILE..................................................................................................................3
MARKET SEGMENTATION...................................................................................................................3
PORTER INDUSTRY ANALYSIS..............................................................................................................4
PSO MARKETING OPERATIONS............................................................................................4
SALES IN BILLIONS (PAK. RS.)...........................................................................................................5
PSO VS SHELL..............................................................................................................................5
PROFITABILITY OF PSO IN MILLION (PAK. RS.)....................................................................................6
RELATIONSHIP BETWEEN SALES AND PROFITABILITY GROWTH/ DECLINE TRENDS (%)...............................6
PRODUCT MIX MANAGEMENT............................................................................................................7
BCG MATRIX APPROACH FOR PSO...................................................................................................8
BRAND MANAGEMENT & COMMUNICATION..................................................................8
PSO CARDS...................................................................................................................................9
ADVERTISEMENT AND PROMOTIONAL EXPENDITURES PSO VS SHELL...................................................10
DISTRIBUTION & FLEET MANAGEMENT........................................................................10
RETAIL MANAGEMENT..........................................................................................................11
RETAIL FUEL OUTLETS....................................................................................................................11
NON-FUEL RETAIL OUTLETS...........................................................................................................12
THE INDUSTRIAL CONSUMERS...........................................................................................13
VALUE CHAIN – PSO................................................................................................................14
SWOT ANALYSIS.......................................................................................................................14
STRENGTHS....................................................................................................................................14
WEAKNESSES.................................................................................................................................15
OPPORTUNITIES..............................................................................................................................16
THREATS.......................................................................................................................................16
FINANCIAL PROFILE..............................................................................................................17
Company Profile
Pakistan State Oil Company (PSO), is the largest Oil Marketing Company (OMC)
operating in Pakistan and engaged in the storage, distribution and marketing of POL
products and is among the country’s largest corporate entities with highest earnings and
capitalization. Supported by well-established infrastructure built at par with international
standards, comprising around 877,000 million tons storage facilities representing almost
81% of the total storage capacity in the country. PSO has an edge over its competitors
in terms of economies of scale and cost effective operations.

PSO has always been considered as a blue chip company with market capitalization of
around Rs. 50 billion (USD 860 million). The company is the winner of “Karachi Stock
Exchange Top Companies Award” and a member of World Economic Forum.

The PSO’s retail coverage of over 3,800 outlets which representing 80% participation in
total industry network. The rapidly expended international standard New Vision outlets
are more than 800. These new outlets accommodate the end user’s needs but also add
beauty to the landscape. These outlets are equipped with convenience stores, business
centers, Internet facility and CNG facility, etc. To ensure the quality of the products being
sold to customers, 16 mobile quality-testing units have been deployed in all major cities
to carry on-the-spot checks for quality and quantity.

Alongside its retail business, PSO also caters to the fuel demand of the industrial
consumers that includes power generation, railways, sugar, textile and steel mills, etc.
The company has also been meeting the fuel needs of defense of the nation and
maintains on time supplies to armed forces.

PSO operates at 8 airports and serves 4 domestic and 18 international airlines under its
technical/ commercial license agreement with Air Total International. PSO enjoys over
70% market participation in aviation fuel. PSO participation in Allama Iqbal Airport,
Lahore is 100%.

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PSO’s LPG business unit, supported by 4 plants with combined capacity of 750 MT/day,
is delivering cheap fuel to low-income households and rural areas where natural gas is
not available. The trade unit is fully alive of its responsibilities of delivering Kerosene,
Light Diesel Oil and Lubricants to end-user via 580 distributors appointed all over
Pakistan.

Industry Profile
There are four main OMCs in Pakistan that includes PSO, Shell, Caltex and Total. PSO
is the market leader by holding overall 67% of market share and with 22% share Shell
Pakistan hold second position.

Market Share
Others
11%

Shell
22%

PSO
67%

Market Segmentation

Petroleum industry is categorized into two main markets according to the nature of the
products and their usage. The Whit Oil segment includes MOGAS, Kerosene, Diesel
and Jet Oil that are purified fuel. The Black Oil segment represents the products, which
are less purified and used in mostly industrial sectors.

The White Oil Markets has registered the 2.6% growth while the Black Oil Market faced
15% decline due to low demand in power sector especially by HUBCO.

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PSO holds market leadership in White Oil Market with 59 % and Black Oil Market with
79% participation.

White Oil Market Black Oil Market

Others
41% Others PSO
21% 79%
PSO
59%

Porter Industry Analysis

PSO Marketing Operations

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The following are five main competitive edges for PSO over its key competitor Shell
Pakistan.

1. PSO’s vast storage capacity means ensured supplies.

2. PSO’s vast logistics support meeting huge demands in shorter time.
3. PSO’s widespread depots and divisions to serve the customer better.
4. Quality and Quantity assured through PSO Fleet of Quality Vans.
5. Prepaid, Loyalty, Fleet and Corporate cards add value to customers.

Sales in billions (Pak. Rs.)

206

195
182

135
121 116
110

81
64 66

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

PSO VS Shell

206.4
182.3

78.8 88.9

2002 2003

PSO Shell

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 Profitability of PSO in million (Pak. Rs.)

4030

3188

2671
2251
2231
2046
1846
1498

1041
696

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Relationship Between Sales and Profitability Growth/ Decline Trends

(%)

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003

Profit Sales

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Product Mix Management

The total width of PSO product mix consists of 7-product line, which includes the Castrol
series that is the market alliance of PSO in Pakistan. As for concern the length of
product mix is contains 87 products by making difference due to size or other verities.

Product Mix for Pakistan State Oil

PSO PSO Castrol Castrol Industrial Fuel Oils
Automotive Industrial Automotive Industrial Chemicals
Oils Oils Oils Oils

Passenger Car Gas Engine Passenger Car Marine Engine Solvent Oil HOBC
Motor Oils Oils Motor Oils Oil
Mineral Premium
Diesel Engine Hydraulic Oils Diesel Engine Circulating Oils Turpentine
Oils Oils High Speed
Turbine Oils Hydraulic Oils Hexane Diesel
Motor Cycles Motor Cycles
Oils Gear Oils Oils Turbine Oils Toluene Xylene Kerosene

Gear Fluids Refrigeration Gear Fluids Gears Oils Isopropyl Light Diesel
Oils Alcohol
Break Fluids Break Fluids Refrigeration Furnace Oil
Cylinder Oils Oils MEK
Automotive Automotive
Greases Asphaltic Oils Cylinder Oils VAM
Greases
Heat Transfer Asphaltic Oils NBA
Oils
Heat Transfer
Metal Working Oils
Fluid
Metal Working
Slide Way Oils Fluids

Process Oils Slide Way Oils

Transformer Industrial
Oils Grease

Industrial
Greases

6 Product 13 Products 6 Products 12 Products 8 Products 6 Products

Product Line Depth

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 BCG Matrix Approach for PSO

Brand Management & Communication

Brand Management & Communication at PSO stands at the connection of the company
and its customers to integrate the totally different dynamics of the two worlds. It is
essentially a balancing act between the external market and the internal capabilities of
the company. The department processes, develops and ensures the strength of PSO’s
corporate image as well as of products and services. The company has been
advertising in the most creative and unique manner.

Promotional Campaigns
This includes presenting interesting fuel and lubricants promotion campaigns to indulge
customers.

Mega hoardings
Mega hoardings constructed at retail outlets are another classic example, which is not
only an extremely cost-effective initiative but also provides the company with an ideal
location to advertise and also enhances the outlook of the outlet.

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Zoom Signs
Another image-building tool and a one-of-its-kind mode of advertising is Zoom Sign.
These are 110 feet tall towers, with PSO logo on the top, built at the stations in major
cities of Pakistan. These signs that can be seem from a distance are providing PSO
with tremendous mileage.

Encouraging sports
PSO is also keen on encouraging sports in the country and is a major sponsor of SAF
Games, various cricket series, golf tournaments and squash championships.

PSO Light & Visual Park

PSO has also adopted a park now called “PSO Light & Visual Park” in Islamabad where
new plantation and lights have been put up along with other beautification activities.

Directional and safety signs

Activities like putting up of directional and safety signs and overhead gantries in
Karachi, Lahore, Islamabad, Saiwal, Peshawar and Faisalabad is the classic example of
PSO as a socially ethical organization.

PSO Cards

PSO is also offering plastic cards for the retail and industrial consumers according to
their requirements.
1. Loyalty Card
2. Prepaid Cards (available in Rs. 500, 1500, 2500 & 5000)
3. Fleet Card for Corporate Vehicles
4. Corporate Card for Corporate employees

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Advertisement and Promotional Expenditures PSO VS Shell
(Rs. 100,00,000- crore)

20 22
16 16

2002 2003

PSO Shell

Distribution & Fleet Management

PSO Logistics Department, the most vital link in the company’s supply chain, supported
by;
• 8,500 Strong Tank Lorry Fleet along with 7000 trained drivers
• 3,800 Railway Wagons
• 480 Lubricant Distributors
• Pipe Lines

With the introduction of satellite tracking system Logistics Department now constantly
monitors the road movement of its fleet. Continuous review of the logistics mechanism
has enabled the company to further fine-tune and bring in more efficiency in the modes
of production transportation at its disposal.

In line with the management’s belief of “Business Partner Concept”, the logistics
department has upgraded priority areas at installations and depots, so as to provide
basic facilities and amenities to cartage contractors and their crew.

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Imports
PSO imports 4 million tones of Fuel Oil & Gas Oil to meet the deficiency due to
production constraints in Pakistan.

Storage
PSO have 877,000 MT Storage capacities, which is representing the 81% of total
storage in the Pakistan

Inventory Turnover Rate (PSO VS Shell)

28
23 23 24
21 21 20 20
19 18 18 19
17 16
15 14

1996 1997 1998 1999 2000 2001 2002 2003

PSO Shell

Retail Management

The retail management activities at PSO are divided into two sub areas. The
department who is engaged in fuel retail activities represents the Fuel Retail Outlets and
department engaged in non-fuel activities like car wash represents the Non Fuel Retail
Outlets.

Retail Fuel Outlets

Retail Fuel is the core and most vital business segment in PSO, which is responsible for
generating 90% of the company’s revenue through sale of PSO products at more than
3,800 Retail Outlets.

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New Vision Retail Outlets
PSO began it New Vision Retail Outlets (NVRO) in the year 1999 and has 833 NVROs
at the end 2003. The NVROs has become the backbone of the company operations and
the highest level of significance is given to all matters related to them. PSO has
developed its NVRO development policy. This policy is to bringing old retail outlets
within the parameters of NVRO.

CNG Facilities
Today there are more than 400 CNG stations throughout the country. Shell Pakistan is
providing the CNG facility at only 68 outlets.

Non-Fuel Retail Outlets

The Non-Fuel Retail Department is responsible for all the non-fuel facilities at the retail
outlets. PSO, being an organization committed to providing value added services to its
customers, has facilities at its stations. These includes,

Convenience Stores (C-Stores)

PSO currently has about 64 operational C-Stores all over Pakistan. These are stocked
with a wide range of products such as food items and basic consumer goods. There is
special distribution system is developed for C-Stores and finally a number of promotions
are also run at regular intervals in conjunction with reputable consumer goods
companies.

Business Centers
Business Centers have been developed at 16 different outlets within various divisions in
efforts to provide round-the-clock services to customers. The centers are equipped with
all basics such as a fax machine, photocopier, and e-mail facility.

Internet facilities
PSO has developed Internet facilities at 600 retail outlets. A comprehensive web based
e-mail system has also been put into place to allow dealers and divisions offices to
communicate with Head Office.

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Auto Car Washes
Recently, as part of the ongoing value addition activities, automatic car washes were
introduced at the outlets. Currently, there is one car wash each in the three major cities
in Pakistan.
• Karachi
• Lahore
• Islamabad

ATM Machines
PSO has further installed MCB ATM machines at two of its outlets in an effort to make
these outlets a one-stop complete service provider.

Easy Payment Machines

Easy Payment centers are established with Citibank at 17 outlets. These allow the
people to easily pay their bills without the hassle of having to stand in long queues. The
facility is currently being offered for KESC, SSGC, PTCL, Citibank Credit Cards, Paktel
and Instaphone.

The Industrial Consumers

The following are major industrial consumers segments for PSO,

General Trade
For the General Trade segment includes the major customers like, NLC, POF Wah,
Police, KMC, KWSB, Gairon, Ruplai Group, Engro Chemicals and Pakistan Steel Mill
(Ex-Shell Customer)

Defence
PSO enjoys a long-standing and deep-rooted relationship with Pakistan Army especially
in the Fleet Management Training for senior arm force officers.

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Power Industry
In 1994, PSO was the only OMC that made huge investment of around 2.2 billion and
aggressively entered the power sector and captured a market share of approximately
88% by supplying products to all power plants.

Value Chain – PSO

SWOT Analysis

Strengths

1. Market Share of 70% is one the main strength of PSO.

2. Company reputation in the industrial sectors adds the strengths for PSO.
3. Product quality is also strength especially in industrial sector.
4. Service quality like plastic cards and non-fuel activities adds the value.

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 5. Distribution & Fleet network, which covers 81% country retail network, is the key
edge on PSO its competitors.
6. Promotional activities add value in brand awareness and attraction of new
customers.
7. Innovation like Auto Car Wash helps PSO to differentiate with its main
competitors.
8. Storage capacity, which holds 80% of total storage capacity of the country, is also
key advantage over its competitors.
9. Technical skills in Fleet management are another strength for PSO.
10. Visionary, capable leadership adds value to PSO strength like their NVRO
operations.
11. Financial Stability with strong reserves, paid-up capital adds the trust of
stakeholders.
12. Product line width adds long range of products for more revenue opportunities.
13. Castrol brand affiliation with PSO adds strength in terms of brand awareness.
14. Relations with Government one of the key strength of PSO in order to get legal
protections.

Weaknesses

1. Lost & Dissatisfied customers are major weakness of PSO as they are causing
the perception of inefficient PSO.
2. Old retail outlets are major weakness for PSO as they are not enough capable to
compete the Shell, Caltex or Total outlets.
3. Untrained staff at outlets is causing inefficient services.
4. Quality assurance is not so effective to build the image of “Quality & Quantity”.

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Opportunities

1. Afghanistan's Market is the biggest opportunity for OMCs in Pakistan.

2. De-regularities of Oil industry in Pakistan add the opportunity to fill the deficiency
in few sectors of petrochemicals markets.
3. Export Opportunities of Black Oil Products is also adding the opportunities by
exporting Black Oil products, which is facing downfall due to the introduction Gas
Oil.
4. Industrial & Trade growth in Pakistan is also the opportunity for PSO as they are
adding revenues in Power sector that is the major customer of PSO.

Threats

1. Risk of forward integration of Supplier is the key threat for PSO and other OMCs
in Pakistan. As the example, the PARCO who is one of the main POL product
suppliers to OMCs adopt the forward integration strategy by introducing its own
OMC with its new business alliance TOTAL and named its OMC as TOTAL-
PARCO.

2. Risk of Diversification in technology is also a key threat for PSO as due to new
technology used in industrial sector are causing decline in particular POL
products.

3. Availability of
4. Substitutes in Black Oil Market are causing a solid reason for the declining trend
in Black Oil Products, which is major threat for PSO.

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 Financial Profile
(In Millions of Pak. Rs.)

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Sales 64333 66012 80563 109508 121345 115636 135040 195039 182323 206376
Marketing & Administrative
616 565 1000 1143 1155 1153 1452 1640 1411 1982
Expenses
Profit 696 1041 1498 2046 1846 2671 2231 2251 3188 4030
Capital Expenditures 322 462 921 821 408 397 967 1254 1430 1643
Shareholder's Equity 2255 3052 4149 5533 6586 8184 8986 9808 11253 13063

(Pak Rupee ‘000’)

2003 2002
PSO Shell PSO Shell
Sales Related
Net Sales 172445775 77822817 153110993 69042054
Cost of Products Sold 163490577 72049466 146333600 64164232
Transportation Charges 138955 1108712 180251 1150285
Storage 62968 41615 68734 53609
Financial Stability
Cash & cash equivalents at the end of the year 1228220 1075698 1831693 478764
Reserves 11348212 2233026 9823176 2233026
Marketing
Sales Promotion & Advertisement 200760 223284 159094 161897
Communication 46935 99618 30510 98674

Thank you

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