COLLEGE OF BUSINESS MANAGEMENT & ACCOUNTING

SULTAN HAJI AHMAD SHAH CAMPUS

STRATEGIC MANAGEMENT FOR

ACCOUNTING
(MMTB 343)

GROUP ASSIGNMENT (20 MARKS)

SECTION 1M

PREPARED BY:

NAME ID
AMIR HAKIM BIN MOHD AJHI AC0105183

PREPARED FOR:

PRASHALINI NAIDU A/P RAVENTHRAN

DATE SUBMISSION : 11th DECEMBER 2020

The company that we have selected is PETRONAS which is the petroleum and gas business
sector. The objective of this assignment was carried out is to investigate the types of
strategies management in the PETRONAS sector. In this assignment, the information that
were used and analyzed is the background information of the organization of PETRONAS.
From a point of view of an investor, PETRONAS is a good investment because the
profitability ratio, activity ratio, and liquidity ratio is higher.

PETRONAS, short for Petroliam Nasional Berhad (Malaysian National Oil Company Inc.), is
a Malaysian oil and gas company that was founded on 17 August 1974. Wholly owned by the
Government of Malaysia, the corporation is vested with the entire oil and gas resources in
Malaysia and is entrusted with the responsibility of developing and adding value to these
resources. PETRONAS is ranked among Fortune Global 500's largest corporations in the
world. Fortune ranks PETRONAS as the 75th largest company in the world in 2013. Fortune
also ranks PETRONAS as the 12th most profitable company in the world and the most
profitable in Asia. PETRONAS has more than 100 subsidiaries and around 40 Joint Venture
companies in which PETRONAS has at least 50% stake in the company. Although
PETRONAS is considering to listing more of its subsidiaries, so far the company has listed at
least 3 of its subsidiaries in the Bursa Malaysia. Among these, one of them is PETRONAS
Dagangan Malaysia (PDM).

PETRONAS Dagangan Berhad (PDB) is the principal marketing arm of Petroliam Nasional
Berhad (PETRONAS). Incorporated in Malaysia under the Companies Act 1965 on 5 August
1982 and listed on the Main Board of Bursa Malaysia on 8 March 1994, PDB has since
established itself as Malaysia’s leading retailer and marketer of downstream oil and gas
products.
1. IFE (Internal factor evaluation) Matrix is one of the best strategic tools to perform
internal audit of any firm. IFE is use for internal analysis of different functional areas
of business such as Finance and Accounting, Marketing, Management Information
System, Production and Operation, Management, Research and Development (R&D)
and others depending upon the nature of business and its size.

Gather the strengths and weaknesses of a Multinational corporation of your choice.

The strentgh of multinational corporation on Petronas one of it are diversified

interests, Petronas has a huge base of highly diversified business interests spanning across
oil and gas and related domains. Some of their core interests include upstream exploration
and production of oil and natural oil refineries, marketing and distribution of
petrochemicals and lubricants, trading, gas processing and liquefaction, gas transmission
pipeline network operations, marketing of liquefied natural gas, petrochemical business,
logistics, automotive and real estate. Second, top grade facilities, Petronas currently owns
three refineries each with a capacity of 570 kbpd, 11 blending plants each at 615,000 mtpa,
18 petrochemical manufacturing plants and two fully integrated complexes constituting
10.8 million mtpa. They also have an infrastructure for gas and utilities which also
involves natural gas processing units, transmission, and regasification. Third,
state ownership, the company is owned by the government of Malaysia and thus it has been
given the responsibility of controlling and managing the oil needs of the country. Further,
it is also responsible for ensuring that the business is made sustainable and that the
resources suffice for this generation and the next. Next, future orientation Petronas have
ensured that they are geared up not just to meet the oil needs of the country today but also
in the years to come. They have around 216 oil fields and 381 offshore platforms. They are
also committed to a large number of social causes such as youth empowerment,
community well-being, and development. Strong customer relationships Petronas is a
company which has very strong relationships with their customers. One effort that the
company has always taken include understanding all the needs of a customer which are
connected to oil and gas and develop products that cater to all those needs.
 Then the weakness of Petronas are Excessive concentration in oil & gas, with a lot
of regulation governing the oil & gas sector and additional norms from various government
many companies in the sector are diversifying to non-oil industries. HoweverPetronas still
continues to have the majority of their business interests in the oil & gas sector which may
be a risky prospect in the long run. Then, high costs of the company has made major
investments in two major projects the RM60bil Refinery and Petrochemicals Integrated
Development (Rapid) project in Pengerang, Johor and the US$36bil (RM137bil) Petronas-
led Pacific Northwest LNG project in Canada. This investment was made right at the
beginning of the oil crisis and this wrong timing has proven to be expensive for the
business.Finally, ethical issues of Petronas has been part of a number of controversies such
as taking undue advantage of the state support, poor working conditions for the employees
and some problems such as oil spillage etc.

2. Gather the opportunities and threats faced by the Multinational corporation of your
choice.

The new technology provides an opportunity to Petronas to practices differentiated

pricing strategy in the new market. It will enable the firm to maintain its loyal customers with
great service and lure new customers through other value oriented propositions. Decreasing cost
of transportation because of lower shipping prices can also bring down the cost of Petronas’s
products thus providing an opportunity to the company - either to boost its profitability or pass on
the benefits to the customers to gain market share. New customers from online channel – Over
the past few years the company has invested vast sum of money into the online platform. This
investment has opened new sales channel for Petronas. In the next few years the company can
leverage this opportunity by knowing its customer better and serving their needs using big data
analytics. The new taxation policy can significantly impact the way of doing business and can
open new opportunity for established players such as Petronas to increase its profitability. New
trends in the consumer behavior can open up new market for the Petronas . It provides a great
opportunity for the organization to build new revenue streams and diversify into new product
categories too. Government green drive also opens an opportunity for procurement of Petronas
products by the state as well as federal government contractors. Organization’s core
competencies can be a success in similar other products field. A comparative example could be -
GE healthcare research helped it in developing better Oil drilling machines. Stable free cash flow
provides opportunities to invest in adjacent product segments. With more cash in bank the
company can invest in new technologies as well as in new products segments. This should open a
window of opportunity for Petronas in other product categories.

Threats Petronas Facing

Rising pay level especially movements such as $15 an hour and increasing prices in the
China can lead to serious pressure on profitability of Petronas. Next, the demand of the highly
profitable products is seasonal in nature and any unlikely event during the peak season may
impact the profitability of the company in short to medium term. Then, intense competition stable
profitability has increased the number of players in the industry over last two years which has put
downward pressure on not only profitability but also on overall sales. New technologies
developed by the competitor or market disruptor could be a serious threat to the industry in
medium to long term future. Afterthat, new environment regulations under Paris agreement
(2016) could be a threat to certain existing product categories. Imitation of the countethe rfeit and
low quality product is also a threat to Petronas’s product especially in the emerging markets and
low income markets. Rising raw material can pose a threat to the Petronas profitability. No
regular supply of innovative products, over the years the company has developed numerous
products but those are often response to the development by other players. Finally, supply of new
products is not regular thus leading to high and low swings in the sales number over period of
time.
3. Explain at least TWO (2) choice of strategies for the company you have chosen and
how the strategies have made or broken them.

- Integration Strategy
The integrated nature of PETRONAS’ business helps create a diversified revenue
base that mitigates cash flow volatility across the commodity price cycle. This
integration, coupled with scale and reliability of its operations allow PETRONAS to
realize economies of scale, cost advantages and operational synergies that resulted in
improved margins and profitability.
PETRONAS has expended its global footprints through organic growth and selected
acquisitions. Its international resources stood at 10.0 billion BOE or 30% of its total
discovered resources. It has a worldwide lubricants distribution network in over 80
markets and is major petroleum products refiner and retailer in South Africa. With its
recent acquisition of Progress Energy, it became one of the biggest shale gas producers in
North America.
Among other strategies, PETRONAS is pursuing backward integration by purchasing
its own ships to transport its own oil and gas, especially its liquefied natural gas (LNG).
Petronas is directly procuring new LNG ships to meet its LNG transportation
requirements. The strategy will allow PETRONAS to have direct access to LNG shipping
capacity at the lowest possible costs.

- Intensive Strategy
Intensive growth strategies deal with the development of new products or markets to
accomplish corporate growth objectives. The multinational companies like PETRONAS
consider these strategies to understand how to further penetration into existing markets is
possible and how the customer base can be expanded through the market and/or product
development.
The broad aim of PETRONAS when considering these strategies is to maximize the
profitability and broaden market share to maintain relevancy and ensure long-term business
growth. The effective implementation of these strategies requires the firm to exert the
intensive efforts, particularly when management considers them as a source of competitive
advantage.
4. Conduct a strategic analysis of the company of your choice by using Porter five
forces.

- Cost leadership
Cost leadership strategy involves gaining a competitive advantage by lowering the cost.
Cost leadership is the main generic strategy that PETRONAS uses in various consumer
markets. The primary objective of using this strategy is to preserve the market leadership
position through efficient value chain management.
This strategy allows PETRONAS to expand the market share by targeting the middle
class, which makes the largest proportion of overall consumer market mix in most of the
countries. Middle class consumers generally place high importance to the pricing factor and
cost leadership is the best strategy to cater the needs of this consumer segment. PETRONAS
focuses on affordability and easy accessibility of its produce across the globe, which leads
towards high brand awareness and high sales growth and provides a strong competitive
advantage basis.
- Differentiation
The adoption of differentiation as a secondary generic strategy allows PETRONAS to
expand the customer base by emphasizing over the unique product features. PETRONAS’s
strategic objective of using this strategy is to differentiate by embedding the innovation and
address the consumers’ growing health concerns. For example, PETRONAS has extended its
product line after studying the consumers’ changing interests to differentiate itself from
competitors and expand the scope of opportunities within the industry. The combination of
the differentiation and cost leadership has helped PETRONAS build a strong and loyal
customer base.
Through differentiation generic strategy, PETRONAS positions its product offerings in a
way to stand out and be different from the available alternatives. Being the experienced brand
with strong foothold, the company uses differentiation as a tool to reduce the pressure by
other brands. Heavy investment in marketing, advertisement and celebrity endorsement is
made just to differentiate the PETRONAS from other brands.
Extensive experience, the oldest brand and strong presence in all over the world are some
differentiation factors that are highlighted in the company's marketing and communication
strategies.
 - Focus strategy
PETRONAS adopts the focus strategy both in terms of low cost and offering the best
value. The low-cost focus strategy is adopted by serving the needs of a niche market segment
at the lowest possible price. While, best value focus strategy is adopted by emphasizing over
the taste, size and design of the product that could best match the customers’ needs and
requirements.
By focusing on product attributes, PETRONAS revises its branding strategies and brings
continuous changes in the product designing and packaging to satisfy the customers’
psychological expectations and maximize value for money.
 REFERENCE

1. Galpin, T. J. (2019). Strategy beyond the business unit level: corporate parenting in focus.
Journal of Business Strategy

2. https://www.petronas.com/media/press-release/petronas-takes-deliberate-steps-strengthen-
resilience-amidst-unprecedented

3. https://www.petronas.com/sites/default/files/2020-07/petronas-annual-report-2018.pdf