Strategies to Increase Petroleum Product Market Share of PV Oil in Vietnam for Years 2011 - 2020: Masters thesis of Business Administration

MEIHO UNIVERSITY

Graduate Institute of Business and Management

MASTERS THESIS

Strategies to Increase Petroleum Product

Market Share of PV Oil in Vietnam for Years

2011 - 2020

In partial fulfillment of the requirements for the degree of

Masters of Business Administration

Advisor: Dr. Chien-Chung Lin

Co-advisor: Dr. Nguyen Minh Tuan

Graduate Student: Le Ngoc

December, 2010

I

ACKNOWLEDGMENTS

The fact is that, this thesis could not be done without the donations and

contributions of many people. First of all, I would like to express my truly appreciation to

the Principal Office of The HCMC Industrial University and University of MEIHO. The

cooperation between the two Universities has provided us an EMBA program that is very

practical, effective and useful not only for myself but also for Vietnamese business

community. The program gives us an opportunity to approach the modern management

technology and skills which are very useful for our contribution to our country

development.

In addition, I would like to thank all professors and classmates who not only share

their knowledge and experience but also provides the greatest help and encouragement

during the program. Specially, I greatly appreciated the help from the following people

who have helped me a lot to complete my graduation thesis:

- Professor/Doctor Lin, Chien Chung – University of MEIHO. He is the advisor

and the mentor of mine for instructing, reviewing and completing my thesis.

- Professor/Doctor Nguyen Minh Tuan – Dean of Business Administration

Department of HCMC Industrial University. He is the Co-advisor for the valuable

suggestion and advice throughout the research process

With the limited time and knowledge, I am sure that there would be many areas

for improvement in this thesis. Therefore, I truly appreciate and open for all comments

from all professors and classmates. Your inputs are very valuable to make my thesis

practical and help my career development in the future.

Once again, best wishes to all.

II

Strategies to Increase Petroleum Product Market

Share of PV Oil in Vietnam for Years 2011 - 2020

ABSTRACT

Energy resources become more and more important in the World in general and in

Viet Nam in particular. In Viet Nam petroleum industry has had an important role and

contributed significantly to national budget. In order to manage and ensure partly the

national energy resources, Viet Nam Oil and Gas group (PVN) has assigned PV OIL a

very important duty in import- export of crude oil and petroleum products and contribute

all petroleum products from Dung Quoc refinery.

In the recent time, the situation of international economy and inside Viet Nam has

dramatically changed with complicated happenings, the price of petroleum products with

unexpected change affected directly to the business operation of PV OIL in particular and

Vietnamese enterprises in general.

Since Viet Nam has become a member of the World Trade Organization in 2007, it

could be said that all Vietnamese have to operate in compliance with market mechanism

with diversified ownerships. This resulted in all Vietnamese enterprises generally and PV

OIL particularly in facing a lot of challenges and opportunities in the active environment

of business.

The aim of this study is to propose the appropriate strategies to increase the sales of

petroleum products of PV Oil, with the following objectives:

1. To assess and improve quality of sales service and petroleum products of PV OIL

2. To analyze the competitive ability in sales in order to increase market share

3. To plan the possible strategies to increase the sales of petroleum products

Keywords: Price, Product, Place, Promotion and Corporate Social Responsibility

III

Strategies to Increase Petroleum Product Market

Share of PV Oil in Vietnam for Years 2011 - 2020

Contents

ACKNOWLEDGMENTS .........................................................................................................I

ABSTRACT..............................................................................................................................II

Contents .................................................................................................................................. III

Tables....................................................................................................................................... V

Figures.................................................................................................................................. VIII

Chapter1 Introduction ............................................................................................................... 1

1.1 Background and Motivation ........................................................................................... 1

1.2 Research Purpose and Questions .................................................................................... 4

1.3 Research Scope and Limitation ...................................................................................... 4

Chapter 2 Literature Review..................................................................................................... 6

2.1 Petroleum Market Environment in Viet Nam................................................................. 6

2.1.1 The international petroleum market......................................................................... 6

2.1.2 Vietnam domestic petrol industry............................................................................ 9

2.1.3 Summary................................................................................................................ 16

2.2 Marketing Strategies for Petroleum Products............................................................... 16

2.2.1 Marketing models in petroleum industry/products................................................ 16

2.2.2 Marketing strategies of related case studies. ......................................................... 21

2.2.3 Hypothesis and supporting evidence. .................................................................... 26

2.3 The SWOT Analysis..................................................................................................... 28

2.3.1 Vision, mission and objectives. ............................................................................. 28

2.3.2 External and internal environment......................................................................... 29

2.3.3 Analysis summary – SWOT. ................................................................................. 42

2.4 Summary and Discussions............................................................................................ 44

2.4.1 Petroleum market environment.............................................................................. 44

2.4.2 Competitive landscape........................................................................................... 45

2.4.3 Petroleum marketing model................................................................................... 45

2.4.4 Petroleum marketing strategies – case study. ........................................................ 45

2.4.5 Conclusion. ............................................................................................................ 47

Chapter 3 Research Methodology........................................................................................... 48

IV

3.1 Research Framework .................................................................................................... 48

3.2 Research Methodology ................................................................................................. 49

3.3 Population and Sampling.............................................................................................. 50

3.3.1 Population. ............................................................................................................. 50

3.3.2 Sampling. ............................................................................................................... 50

3.4 Instrument Development............................................................................................... 51

3.4.1 Customer’s questionaire. ....................................................................................... 51

3.4.2 Dealer’s questionnaire. .......................................................................................... 56

3.5 Research Procedure....................................................................................................... 60

3.6 Data Collection ............................................................................................................. 62

Chapter 4 Data Analysis and Findings.................................................................................... 63

4.1 Data Analysis for End Users......................................................................................... 63

4.1.1 Descriptive statistics. ............................................................................................. 63

4.1.2 Comparisons analysis. ........................................................................................... 68

4.2 Data Analysis for Dealers............................................................................................. 91

4.2.1 Descriptive statistics. ............................................................................................. 91

4.2.2 Comparisons analysis. ........................................................................................... 96

4.3 Inferential Statistics .................................................................................................... 104

4.3.1 Multiple regression. ............................................................................................. 104

4.3.2 Single regression for examining the relationship between the monthly sale and

the lowest price (sub-variable)...................................................................................... 106

Chapter 5 Conclusion, Suggestion and Implication.............................................................. 107

5.1 Conclusion .................................................................................................................. 107

5.1.1 Price of petroleum product has a positive and significant effect on market share.

............................................................................................................................. 107

5.1.2 Product of petroleum product has a positive and significant effect on market

share.................................................................................................................... 108

5.1.3 Place of petroleum product has a positive and significant effect on market

share.................................................................................................................... 109

5.1.4 Promotion of petroleum product has a positive and significant effect on market

share.................................................................................................................... 109

5.1.5 CSR has a positive and significant effect on market share in petroleum product

trading. ................................................................................................................ 110

5.2 Discussion and Suggestion ......................................................................................... 111

V

5.2.1 Discussion............................................................................................................ 111

5.2.2 Suggestion............................................................................................................ 113

5.2.3 Strategy for PV Oil. ............................................................................................. 114

References............................................................................................................................. 116

APPENDIX I ........................................................................................................................ 121

APPENDIX II ....................................................................................................................... 125

V

Tables

Table 2-1 Top 10 Largest World Oil Companies by Reserves and Production...................7

Table 2-2 Forecast of the Demand of Petroleum Products in Viet Nam from 2010 to 2020

..............................................................................................................................15

Table 2-3 The Existing Competitors..................................................................................36

Table 2-4 SWOT Analysis Model .....................................................................................43

Table 3-1 Measure of Research Variables for Designing Questionnaire ..........................49

Table 3-2 Type of Participants...........................................................................................51

Table 3-3 Variables of the Study .......................................................................................52

Table 3-4 The Sub-instrument of Product .........................................................................52

Table 3-5 The Sub-instrument of Price..............................................................................53

Table 3-6 The Sub-instrument of Place .............................................................................53

Table 3-7 The Sub-instrument of Promotion.....................................................................54

Table 3-8 The Sub-instrument of CSR ..............................................................................55

Table 3-9 Variables of the Study .......................................................................................56

Table 3-10 The Sub-instrument of Product .......................................................................57

Table 3-11 The Sub-instrument of Price............................................................................58

Table 3-12 The Sub-instrument of Place ...........................................................................58

Table 3-13 The Sub-instrument of Promotion...................................................................59

Table 3-14 The Sub-instrument of CSR ............................................................................59

Table 4-1 Respondents’ Demographics.............................................................................64

Table 4-2 Descriptive Statistics of End Users Measured Items under The 5 Factors........65

Table 4-3 Cronbach’s Alpha of the End User’s Questionaire Items .................................67

Table 4-4 Cronbach’s Alpha of the End User’s Scales......................................................67

Table 4-5 ONE – WAY ANOVA for Users –Descriptive of the 5 factors among the Areas

..............................................................................................................................68

Table 4-6 Test of Homogeneity of Variances – among Areas for Each Factor.................69

Table 4-7 ANOVA – Difference between Group among Areas for Each Factor..............69

Table 4-8 Multiple Comparisons (Product) .......................................................................70

Table 4-9 Multiple Comparisons (Place)...........................................................................70

Table 4-10 Multiple Comparisons (CSR)..........................................................................71

Table 4-11 CSR..................................................................................................................71

VI

Table 4–12 ONE–WAY ANOVA for Users–Descriptive of the 5 Factors among the Age

..............................................................................................................................74

Table 4-13 Test of Homogeneity of Variances - among Age Groups for Each Factor .....75

Table 4-14 ANOVA – Difference between Group among Ages for Each Factor.............75

Table 4-15 Multiple Comparisons .....................................................................................76

Table 4-16 Price.................................................................................................................77

Table 4-17 Multiple Comparisons .....................................................................................78

Table 4-18 Multiple Comparisons .....................................................................................79

Table 4-19 Place ................................................................................................................80

Table 4-20 ONE – WAY ANOVA for Users – Descriptive of 5 Factors among Profession

..............................................................................................................................82

Table 4-21 Test of Homogeneity of Variances – among Professions for Each Factor......84

Table 4-22 ANOVA – Difference between Groups among Profession for Each Factor...84

Table 4-23 Multiple Comparisons .....................................................................................85

Table 4-24 Product.............................................................................................................87

Table 4-25 Multiple Comparisons .....................................................................................87

Table 4-26 CSR..................................................................................................................89

Table 4-27 Respondents’ Demographics...........................................................................92

Table 4-28 Descriptive Statistics of Dealers Measured Items under the 5 Factors ...........93

Table 4-29 Cronbach’s Alpha of Dealer’s Questionaire Item ..........................................95

Table 4-30 Cronbach’s Alpha of Dealer’s Scale ...............................................................95

Table 4-31 ONE – WAY ANOVA for Dealers - Descriptive of 5 Factors among the

Areas ....................................................................................................................96

Table 4-32 Test of Homogeneity of Variances - among Areas for Each Factor ...............97

Table 4-33 ANOVA – Difference between Group among Location for Each Factor.......97

Table 4-34 ONE – WAY ANOVA for Dealers - Descriptive of 5 Factors among Monthly

Sales .....................................................................................................................99

Table 4-35 Test of Homogeneity of Variances - among Monthly Sales for Each Factor100

Table 4-36 ANOVA – Difference between Group Among Monthly Sale for Each Factor

............................................................................................................................100

Table 4-37 Multiple Comparisons ...................................................................................101

Table 4-38 Price...............................................................................................................101

Table 4-39 Correlations Matrix of the Predictors and Predicted Variable ......................104

Table 4-40 Model Summary for Monthly Sale Regression.............................................104

VII

Table 4-41 ANOVA (b) of the Monthly Sale Model.......................................................105

Table 4-42 Coefficients(a) of Predictors for Monthly Sale .............................................105

Table 4-43 Coefficients(a) of Price Factor to Monthly Sale............................................105

Table 4-44 Regression Analysis for Variable (The Lowest Price) Predicting the Monthly

Sale (Dealers).....................................................................................................106

VIII

Figures

Figure 2-1 Distribution of Petroleum Products..................................................................18

Figure 2-2 Five Competitive Forces Model.......................................................................31

Figure 3-1 The Research Framework and Hypotheses......................................................49

Figure 3-2 The Flowchart of Research Process .................................................................61

1

Strategies to Increase Petroleum Product

Market Share of PV Oil in Vietnam for

Years 2011 - 2020

Chapter1 Introduction

Energy resources become more and more important part in the word in general and

in Viet Nam in particular. In Viet Nam petroleum industry has had an important role and

contributed significantly to National budget. In order to manage and ensure partly the

national energy resources, Viet Nam Oil and Gas Group (PVN) has assigned PV Oil a

very important duty in import – export of crude oil and petroleum products and distribute

all petroleum products from Dung Quoc Refinery. Research on strategies to increase

petroleum product market share of Petro Vietnam Oil Corporation (PV Oil) is the

important to obtain the above mentioned mission.

1.1 Background and Motivation

In the recent time, the situation of international economy and inside Viet Nam has

dramatically changed with complicated happenings, the price of petroleum products with

unexpected change affected directly to the business operation of PV Oil in particular and

Vietnamese enterprises in general.

Since Viet Nam has become a member of the Word Trade Organization in 2007, it

could be said that all Vietnamese enterprises have to operate in compliance with market

mechanism with diversified ownerships. This resulted in all Vietnamese enterprises

generally and PV Oil particularly in facing a lot of challenges and opportunities in the

active environment of business.

While PV Oil is so young, was officially incorporated on 6th July 2008 upon the

merge of Petro Vietnam Trading Corporation (Petechim) and Petro Vietnam Oil

Processing and Distribution Co. Ltd (PDC). PV Oil is committed to developing and

perfecting the comprehensive downstream operations of Vietnam’s oil industry. As well

as being amongst Vietnam’s leading oil company, PV Oil aims to be on a par with

national oil firms in the region and beyond.

2

PV Oil has 50 companies, branches and representative offices throughout Viet Nam

and abroad. It has workforce of more than 2000 people. PV Oil has inherited and is taking

full advantage of the collective strengths and business synergies of the former Petechim

and PDC in the fields of exporting, importing and trading crude oil; processing and

distributing petroleum products; and trading and importing oil – related equipment and

materials for oil-related works.

Recently PV Oil has achieved rapidly development throughout Viet Nam and

abroad in it is operation. However, it seems that the success of PV Oil does not show a

stable development and is not corresponding to its potential and expectation. It could be

said that, the reasons for that is: PV Oil has quickly developed, the development of

distribution system and oil terminal could not meet the business operations, lack of

application of modern know – how in management, being short of affectivity in supply

chain management, inadequacy of qualified staff, deficiency business processing

reengineering, without appropriate devolution of management and research on long term

strategy of stable development (Party committee report of PV Oil, Dec 2010).

At present, the petroleum trading market becomes more and more competitive

because the Government has allowed a lot of State owned enterprises to participate in

doing business in petroleum market. By January 2010, there were 8 other State owned

enterprises joining in Vietnamese petroleum market, with diversified functions such as

exporting, re-exporting, importing, refinery and trading such as Petrolimex, Petimex,

Saigon Petro, Vinapco, Petro Mekong, Petec, Thanh Lê, Military region No 4. Some of

them are very huge with a lot of experience in this field such as Petrolimex which is a

large scale enterprise with over 50 years of operation and development in trading of

petroleum products. It has a lot of Oil storage Terminals and very good distribution

system with about 2000 gas stations throughout Viet Nam. With a workforce of about

23.000 people and It takes over 60 percent of petroleum market share in Viet Nam

(Petrolimex website).

Furthermore, According to WTO provision for integration, after the year of 2012,

the Viet Nam government will consider the open – door policy for the entrance of

petroleum trading market. At that time, there will be a lot of word leading petroleum

group joining in Viet Nam petroleum trading market. These are grant competitors with a

lot of experience and strong financial resource. It means that the petroleum market will be

very competitive and more and more serious than ever before.