Building a Joint Venture in an

Emerging Market
-A Burmah Castrol case study

Presented By:
Md. Rashedul Islam
Shaibal Halder

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History of Castrol
• In 1899 Charles ‘Cheers’ Wakefield
left his job at Vacuum Oil to start a
new business at Cheapside in London
under the name of ‘CC Wakefield &
Company’, selling lubricants for trains
and heavy machinery.
• Wakefield researchers found that
adding a measure of castor oil, a
vegetable oil made from castor
beans, did the trick nicely. They
called the new product ‘Castrol’.
• By 1960, the name of the motor oil
had all but eclipsed that of the
company’s founder, and so ‘CC
Wakefield & Company’ became
simply Castrol Ltd. The Burmah Oil
Company bought Castrol in 1966.
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 History of Burmah
• The company was founded as the
Rangoon Oil Company in Glasgow in
1886 by David Sime Cargill to develop
oil fields in the Indian subcontinent.
• In the first decade of the 20th century,
Burmah Oil became an early and major
shareholder in Anglo-Persian Oil
Company (APOC) – later Anglo-Iranian
Oil Company, then British Petroleum
and eventually BP.
• In 1966, Castrol was acquired by
Burmah, which was renamed Burmah-
Castrol.
• In 2000, Burmah-Castrol was acquired
by the then BP Amoco (now renamed
BP).

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 Joint Venture - JV
• A joint venture (JV) is a business arrangement in which
two or more parties agree to pool their resources for
the purpose of accomplishing a specific task.
• Although they are a partnership in the colloquial sense
of the word, JVs can take on any legal structure.
Corporations, partnerships, limited liability companies
and other business entities can all be used to form a JV.

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Enter in Emerging Market

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 New Markets Searching….
Many companies in mature markets assume
that the only reason to enter emerging
countries is to pursue new customers. They fail
to perceive the potential for innovation in
those countries or to notice that a few
visionary multinationals are successfully
tapping that potential for much-needed ideas
in products and services.
Opportunity for foreign companies-
• Centre of the fastest growing economic
zone
• Allows foreign companies to invest at 100%
equity
• The preferred investment route of the State
Investment authority is through a joint
venture with a local partner.

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 Market research- Why?
Market research is the process of assessing
the viability of a new good or service through
research conducted directly with the
consumer which allows a company to
discover the target market and record
opinions and other input from consumers
regarding interest in the product.
• The automotive market (consumer and
commercial) and the general industrial
market at approximately 37 million liters
each.
• Potential market of 75 million liters of
lubricants.
• Market growth is estimated to be about
6% per year.

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Find the appropriate market
Automotive Lubricants Market :
• Product Analysis
Engine oil, Gear oil, Transmission fluid
• Base oil Analysis
Mineral oil, Synthetic oil,Bio-based fluid
• Vehicle type Analysis
Passenger car (PC), Light-weight
Commercial Vehicle (LCV),
Heavy-weight Commercial Vehicle (HCV)
• Distribution channel Analysis
Original Equipment Manufacturer (OEM),
Aftermarket
• Regional Analysis
Asia Pacific, Rest of Asia Pacific

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 Opportunity for Castrol
• Market research and test marketing show that a key requirement for
success in the automotive market is a regular supply of quality
lubricants.
• A large increase in motorcycle ownership.
• Increasing numbers of operators are turning to higher quality
lubricants.
• Poor performance by USSR (Union of Soviet Socialist Republics).

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 Castrol’s Involvement in Vietnam
• Began in the early 1980s through a link with
Vosco Shipping.
• Castrol developed a dominant share (90%) of
the Vietnamese marine market.
• Introduced to Saigon Petroleum in 1988.

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 Established the Joint Venture
Castrol owns 60% Saigon Petroleum owns 40%
Vietnamese law allows the setting up of joint ventures
providing they can meet one of three success criteria:
• Bringing about considerable improvement in the
appearance and quality of the products and an increase in
output.
• Creating products which Vietnam urgently needs or
producing import substitutes.
• Achieving considerable savings in terms of raw materials
and energy.
• Castrol Vietnam clearly met all three of these criteria.

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 Benefits of working in Joint Venture
• Stepping more safely into the field of
sustainable development
• Delivering higher quality project outcomes
• Promoting long-term sustainability of
projects
• Facilitating development and growth of
projects
• Improving stakeholder engagement
• Creating open communication channels
with local communities
• Contributing to local economic
development of host communities
• Contributing to wider regional or global
sustainable development efforts

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 Stakeholders of Castrol Vietnam
• Works with 7,000
retailers.
• Employs about 160
people in Ho Chi Minh
City, Hanoi and Da
Nang.
• Strong relationships
with local retailers and
distributors.

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• Changing customers’ perceptions about lubrication.
• Changing consumers’ buying habits, from low quality and
regenerated lubricants, to oil blended to international standards.
• Vietnam’s first transformer oil processing plant was opened by
Castrol in Ho Chi Minh City in March 1998.
• 3,000 tons per year transformer oil plant utilizes modern
technology and equipment from the UK.
• Use of transformer oil produced by Castrol 10% lower than
imported oil.

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Running a Successful Joint Venture
is a Matter of Give and Take!!!
• Castrol does not have
100% of the ownership
and takes only a part
share of profits and
dividends.
• Castrol Vietnam is
almost exclusively run
by local Vietnamese
people.
• Decision-making basis
has a strong local flavor.

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