Figure 4.

1A: Value Chain of the HMO Industry

The business management concept of the value chain was introduced and described by
Michael Porter in his popular book Competitive Advantage: Creating and Sustaining
Superior Performance in 1985. A value chain is a series of activities or processes that
aims at creating and adding value to an article (product) at every step during the
production process.

Businesses aim at enhancing their margins and thus work to change input into an
output which is of a greater value (the difference between the two being the
company’s profit margin). The logic behind it is simple: The more value a company
creates, the more profitable it is. The enhanced value is passed on to the customers
and thus further helps in consolidating a company's competitive edge.

Value-chain business activities are divided into primary activities and secondary
activities. The primary activities are directly related to the creation of a good or service,
while the support activities help in enhancing the efficiency and work to obtain
a competitive advantage among peers. (For related reading, see "Industry Handbook:
Porter's 5 Forces Analysis.")

Inbound Logistics

The Philippines’ leading oil refining and marketing company Petron Corporation reported a
consolidated net income of P14.1 billion in 2017, 30% higher than the previous year’s earnings
of P10.8 billion. Consolidated sales revenues grew by 26% to P434.6 billion in 2017 from
P343.8 billion the previous year. Operating income increased by 16% to P27.6 billion during the
period. This was fueled by strong sales volumes and continued focus on high-value segments in
its Philippines and Malaysia operations. Coming from a record-breaking 105.7 million barrels
sold in 2016, consolidated sales volumes grew to 107.8 million in 2017.

Operations

Despite the industry-wide decline in fuel demand due to high pump prices, the country’s leading
oil company Petron Corporation (PCOR) reported a consolidated net income of P12.1 billion in
the first nine months of 2018, up 3% from the P11.8 billion reported in the same period last year.
The modest growth was supported by the robust performance of its Malaysian operations,
sustained volumes growth in its home country, and contributions from its petrochemical
business. Total consolidated volumes in Malaysia and the Philippines reached another record
with combined sales of 81.4 million barrels over the period, nearly 1.2 million higher than last
year

Outbound Logistics
Industry leader Petron Corporation opened the year strong posting consolidated revenues of
P129 billion for the first quarter 2018, 21 percent higher than the previous year’s P106 billion.
Consolidated net income reached P5.8 billion for the same period, its highest quarterly income
in history. This is up 4 percent from the P5.6 billion income over the same period in 2017.
The Company said stable and improved operating efficiencies at its Bataan refinery significantly
contributed to its positive performance during the first quarter. Despite higher international oil
prices and softer demand, Petron also sustained strong sales with combined volumes of 26.6
million barrels. This was driven by a 5% increase in consolidated domestic sales equivalent to
over 1 million barrels. This is at par with last year’s volumes which reached all-time highs. The
benchmark Dubai crude in the first quarter of this year surged by 20% to nearly US$64/barrel
compared to the same period in 2017.

Marketing and Sales

The Philippines’ leading oil refining and marketing company Petron Corporation reported a
consolidated net income of P11.8 billion in the first nine months of 2017, 58% higher than the
previous year’s earnings of P7.4 billion. The impressive result was driven by its continued focus
on high-value segments and sustained sales volumes from its Philippines and Malaysian
operations. Combined sales volumes hit 80.2 million barrels in the first three quarters of the
year, slightly higher than the 79.3 million sold in the same period in 2016. The company said
that sales volumes would have been higher if not for scheduled maintenance. Petron’s Bataan
refinery was running on maintenance mode below optimum capacity for 35 days in the second
quarter and 18 days in the third quarter. Malaysia grew volumes by 9% in the period under
review.

Service

Providing excellent service for over a decade since its launch in 2007, Petron’s automotive car
care brand, CAR CARE CENTER (CCC) continues to expand its reach nationwide. On
February 5, 2019, the newest PETRON CCC was inaugurated in Bgy. Habay, Tirona Highway,
Bacoor, Cavite. This new CCC is Petron’s 33rdbranch nationwide. With Petron’s complete line
of technologically advanced Petron Engine Oils and Specialty Products, the company aims to
provide motorists with great value through a ‘casa-like’ experience on professional and quality
automotive services at affordable cost. Our CCC outlets also ensure that they employ only
highly skilled technicians that use state of the art tools and equipment. The PETRON
CCC also offers a wide range of Change Oil Value Packages (COVP) for budget conscious
motorists, for their oil change requirements. PETRON CCC has 33 branches nationwide (Luzon-
21, Visayas-4, Mindanao-8) with 15 more branches to follow within the year. With the recent
addition of the scaled down CCC version; the Petron CCC Express is a 2-car bay shop
focused more on quick services, customers will soon enjoy better accessibility among Petron
CCC and CCC Express branches nationwide.

Support Activities (Infrastructure)

The Blaze Spikers Petron eliminated the Sta. Lucia Realtors from the Philippine Super Liga
Grand Prix Quarterfinals in just 66 minutes, taking all three sets with 25-17, 25-11, 25-19. PSL
fandom expects the Blaze Spikers to reclaim their crown easily. However, Coach Shaq del
Rosario says it’s going to be a challenging road to tread and the team continues to undergo
intensive physical training to improve their game further. Nonetheless, we can expect the team
to intensify their play further and prepare mentally to win with their daily practices. The team
possesses more than just a spotless record. They have also broken records year on year and
one would have to ponder just how else they can improve. With a can-do attitude that only aims
to perform better each time, this is precisely what makes a championship team.

Human Resources Management

Petron Corporation and its subsidiaries (“PETRON,” “We,” “us” or “our”) respect your privacy
and will keep secure and confidential all personal and sensitive information that you may
provide to PETRON, and/or those that PETRON may collect from you (“Personal Data”).This
privacy statement (“Statement”) provides for the Personal Data we obtain, or which you may
provide through this website, www.petron.com (“Website“), and the standards we observe in
using, processing, keeping, securing, and disclosing said Personal Data.

Technology Development

PETRON FLEET CARD A credit or charged card that enables Petron customers,
primarily corporate accounts with a number of vehicles, to enjoy a specific period of
interest-free credit. The program will provide the customers with an efficient, secured,
convenient and economical way of managing their fleet of vehicles.

https://www.petron.com/
Figure 4.1B: Waterfall Chart

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