BACHELOR IN BUSINESS MANAGEMENT (HONOURS)

INTERNATIONAL BUSINESS MANAGEMENT

BBM 2013

INDIVIDUAL ASSIGNMENT :
PETROLIAM NASIONAL BERHAD
(PETRONAS)

PREPARED FOR :
ZAILIAMRI BIN DERAMAN @ RAMLI

PREPARED BY :
NUR AIN SYAFAWANIE BINTI MAHADI
23B12I006

SUBMISSION DATE
28 DECEMBER 2023
 TABLE OF CONTENT

COVER PAGE

TABLE OF CONTENT I

INTRODUCTION 1

MARKET ANALYSIS 3

SELECTION OF MARKET ENTRY MODE 5

RISK ASSESSMENT AND MITIGATION 7

CONCLUSION AND RECOMMENDATION 9

REFERENCES 10

I
 INTRODUCTION

Petroliam Nasional Berhad or known as Petronas was established in 1974, it

is a legal entity incorporated under the Malaysian Companies Act and reports to the
company's Board of Directors. The corporation is given rights to all oil and gas
resources in Malaysia and is entrusted with the responsibility to develop and add
value to other resources. Petronas is involved in a broad spectrum of petroleum
activities, including upstream exploration and production of oil and gas to
downstream oil refining, marketing and distribution of petroleum products, trading,
gas processing and liquefaction, operation of gas transmission pipeline networks,
marketing of liquefied natural gas, manufacturing and marketing of petrochemicals. ,
shipping, automotive engineering and real estate investment. Petronas is a huge
source of income for the Malaysian government contributing more than 15% of the
government's revenue from 2015 to 2020.

Several factors converged in the early 1970s to encourage the Malaysian

government to establish a state oil and gas company. The Organization of the
Petroleum Exporting Countries (OPEC) has caused the price of a barrel of oil to rise
from US$2.28 a barrel to US$12.00, thus giving Malaysia an incentive to establish its
own oil company. Some countries such as Saudi Arabia, Egypt and Indonesia have
adopted production sharing agreements instead of the concession system for the
distribution of oil revenues. The Malaysian government also believes that foreign oil
companies do not properly inform the government about oil exploration activities in
their own concessions, such as new oil field discoveries, resulting in lost revenue
from the government. This encourages Malaysians to master various modern
industries and open up more economic opportunities for bumiputeras.

Oil exploration is by no means over and it can still produce more reserves.
One of the richest oil fields to date has been discovered in Malaysian waters, and
extended concessions to key fields will encourage the exploration of deeper waters
around Malaysia, where unknown reserves can be found. It is commercially viable to
re-explore abandoned fields.

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 Petronas, with its policy of encouraging self-reliance to help develop related
industries and diversify the resources and use of oil and gas, plays an important role in
the Malaysian economy as a whole. Petronas is not only a big oil company but it
controls an important economic sector and remains, for better or worse as an
important instrument for the country. Petronas now serves as an excellent example of
the vision of realizing the nation's aspirations, turning into reality with the same belief
among Malaysians. Furthermore, Petronas has transformed itself into a global oil
company over the decades and become a symbol of success for the country.

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 MARKET ANALYSIS

Market analysis is a large part of market research and an important component

of a business plan. In this plan, business founders document their business ideas in
writing. During market analysis, specific markets are taken into account. With the
help of the displayed results, the company can identify the opportunities and risks of
that particular market. Target groups form the basis of market analysis.

Economic conditions refer to economic conditions that determine the scale of

production and consumption activities related to determining how resources are
allocated. Petronas recorded a revenue of RM375.3 billion mainly due to the effect of
better prices for key products in line with higher benchmark prices. Petronas will
continue to strengthen our integrated value chain with a greater focus on commercial
and operational excellence. This will focus on the delivery of a three-pronged growth
strategy as well as the aspiration of Net Zero Carbon Emissions by 205 in a
disciplined manner including prudent management of financial commitments and debt
obligations. PETRONAS has no choice but to strengthen the Group's future to
maintain our ability to deliver sustainable long-term value as a National Oil Company
and global energy player. For this purpose, PETRONAS needs to remain steadfast in
providing safe, affordable and accessible energy towards uplifting the community and
supporting the country to achieve the goal of net zero. PETRONAS is determined to
implement this firmly through stronger partnerships with stakeholders, partners, local
OGSE players and customers worldwide.

Political stability is a state characterized by the preservation of an intact and

smoothly functioning government or political system, avoiding significant disruption
or change over a long period of time. Political stability indicates a state of calm,
organization, and continued continuity in the political domain. Petronas managed to
maintain the stability of the country. Petronas developed the oil and gas sector in
Malaysia and exported to all countries involved. Hence, a stable political environment
is essential to running a business. Any company that does business involves the
economy and politics in the country. Petronas entered the aromatics market through a
joint venture that created Aromatics Malaysia Sdn. Bhd. A final and important factor

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in the creation of Petronas and its continuation in many similar forms was Malaysia's
political stability.

Legal requirements are like rules or laws that everyone has to obey. These
are things you must or cannot do by law to stay within the boundaries set by the
government or authorities. These requirements are in place to ensure that everyone
acts fairly, safely and responsibly in society or industry. This Act is made by
Malaysian law which is a provision for exploration and petroleum exploitation either
on land or offshore by the Corporation in which the whole will vest ownership and
exclusive rights, powers, liberties and privileges in respect of said petroleum, and to
control carry out related usage and development activities with petroleum and its
products; to make provisions on the establishment of a Corporation under the
Companies Act 1965 [Act 125] or under laws relating to the incorporation of
companies and on the powers of the Corporation; and to make provision on matters
related or incidental thereto.

Cultural nuances affect how marketing messages are perceived. Petronas

wants to maintain its market to the world level by doing a positive reaction between
other companies and especially with their own employees. With the production of oil
and gas that is increasingly reaching the world level, it is able to make big strides by
attracting more companies out there in the production of oil and gas. Not only that,
PETRONAS aims to create positive relationships with the communities where the
company operates, by protecting and adding value to the well-being of employees,
partners and communities.

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 SELECTION OF MARKET ENTRY MODE

A market entry strategy is a method for a company to enter a new market. This
can be a domestic market or an international market. The process of entering a new
market can be very complex with many unique risks, challenges, factors and
circumstances. There are 4 types of entry mode :

First, Exporting is selling goods or services from one country to another.

When a company produces goods in its own country and then sells them to customers
or businesses in another country, it is considered exporting. This process involves
shipping products across borders to reach customers in different parts of the world.
This is a way for companies to expand their market beyond their own country and
reach international customers.

Second, Franchises and Licenses are commercial contracts that allow the
sharing of certain brand elements in return for a price. Franchise agreements, on the
other hand, cover the company's entire brand and activities, but license agreements
only apply to registered trademarks. Franchises often work best for service-based
businesses, while licenses are more appropriate for product-based businesses.

Third, A Joint Venture (JV) is a business arrangement where two or more

parties agree to pool their resources for the purpose of achieving a specific task. This
task can be a new project or any other business activity. Each participant in the JV is
responsible for the profits, losses and costs associated with it. However, the venture is
its own entity, separate from the other business interests of the participants.

Fourth, Foreign Direct Investment (FDI) is an ownership stake in a foreign

company or project made by an investor, company, or government from another
country. Business decision to acquire a substantial stake in a foreign business or to
buy it outright to expand operations to a new region. The term is usually not used to
describe a stock investment in a foreign company alone. FDI is a key element in
international economic integration because it creates stable and long-lasting links
between economies.

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 According to Petronas market entry mode. A joint venture may be suitable for
Petronas to enter the market. According to sources, through joint ventures, Petronas
has close ties with Asian countries such as Saudi Arabia, Egypt and Indonesia as well.
Not only that, Petronas also exports many oil and gas products to other countries.

BASF PETRONAS Chemicals Sdn. Bhd. is a Malaysia-based joint venture

between BASF and Petroliam Nasional Berhad (PETRONAS), a fully integrated
Malaysian multinational oil and gas company, under its subsidiary PETRONAS
Chemicals Group Berhad (PCG). Incorporated in 1997, the company operates an
Integrated Verbund Site located in Gebeng Industrial Zone, Pahang. The company's
share capital is 60% held by BASF and 40% by PCG. Key products include acrylic
monomers, oxo products, 2-Ethylhexanoic Acid, highly reactive polyisobutenes and
aromatics.

We have grown into a leading chemical company, a foundation in producing

and marketing chemical products that are always present and very important in the
daily lives of consumers. In doing so, we strive to not only provide the best service to
our customers, but also to be relevant and beneficial to our employees, suppliers, the
communities in which we operate, and the environment in general. We are also
subject to the Global Code of Conduct by BASF and will ask all our external
stakeholders to comply with this.

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 RISK ASSESSMENT AND MITIGATION

Risk assessment is like taking a good look at the potential problems that might
occur and thinking about the likelihood of that problem and how bad it might be.
Mitigation is about finding ways to reduce or avoid the problem altogether. It's like
making plans or taking actions to reduce the likelihood of bad things happening or
minimize the impact if they do happen.

Accountability and oversight of risk management is one part of our

governance includes Climate Change governance. The board reviews and considers us
the main risks in the PETRONAS Corporate Risk Profile, covering operational and
strategic risks on a periodic basis update. The update includes an overview of the
principal risks, a summary of important changes, and updates on reduction and
performance against key indicators. Risk Management Committee, Executive
Leadership Team (ELT) and Risk Committee assist the Board with risk management
supervision including the environment, social, and governance (ESG) and climate-
related risks management.

Transition risk refers to the potential risk arising from global shift towards a
more sustainable, net-zero direction economy, which includes policies, regulations,
markets and technological changes that may impact our business operation. One of
the transition risks identified is the impact of oil and gas prices or margins, which may
reduce commercial returns stem from user change priorities, regulatory pressures
and/or our approach to sustainability. This in turn can result in a decrease revenue,
cash generation and return realization.

Furthermore, the energy transition needs to be better enhanced disclosure and

transparency in view of its impact important climate-related issues or risks to us
financial. Our inability to respond at rate will lead to reduced access to capital,
inflated and limited cost of capital type of investment. In addition, our ESG
downgrade score can lead to higher loan costs, which in turn limiting the capacity to
access the capital market.

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 Physical risks due to climate change can be acute form of risk caused by a
single or chronic event risks due to long-term changes in climate patterns such as such
as sea level rise and global average temperature, water lack, and heavy rain. Our
physical assets and ongoing projects are exposed to physical risks like ours has a
presence in more than 30 countries around the world. Therefore, we are not and will
not be separated from directly and indirect damage caused by physical impact
climate-related risks. Although actions are being taken to manage physical risks, we
constantly reassessing the implications, taking into account taking into account
changing views for geography location where we are present. Reassessment results
serve as a must to strengthen us existing mitigation strategies in ensuring
sustainability and the sustainability of our organization in the future.

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 CONCLUSION

PETRONAS is a company that is under an oligopoly market structure. Fully

owned by the government, PETRONAS is one of the national companies that
provides petroleum and gas for the country. PETRONAS from previous years it has
expanded throughout the country and around the world because some of its products
are used in other countries even outside Asia and even Egypt in Africa. It earns a lot
of profit from its products and therefore the country benefits a lot from it.
PETRONAS is not only concerned with petroleum and gas production but also
cooperates with other markets such as education and provides sponsored loans to
students who need it. PETRONAS has also established various institutions because
their main goal is to enrich the country with quality education.

RECOMMENDATION

Since PETRONAS is fully owned by the government and it is a government-

focused company, I recommend that it merge with another energy company, Tenaga
Nasional Berhad. If the government for the next decade focuses on Biomass,
PETRONAS should join forces with companies like Sime Derby who are recognized
as champions of biomass, because I believe this effort coupled with re-engineering
technology, will reap a sustainable company that will have a good impact for the
sector energy and food in Malaysia.

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 REFERENCES

PETRONAS - WIKIPEDIA
https://en.wikipedia.org/wiki/Petronas

PETRONAS WEBSITE
https://www.petronas.com/media/media-releases/petronas-catat-prestasi-kukuh-
bagi-tahun-kewangan-2022-terus-menyokong

AKTA KEMAJUAN PETROLEUM 1974

https://www.kpdn.gov.my/images/dokumen/awam/perundangan/4-bm-Akta-
Kemajuan-Petroleum-1974-sehingga-1-6-2013.pdf

MARKET ENTRY STRATEGY

https://study.com/academy/lesson/market-entry-strategy-definition-example

BASF PETRONAS CHEMICALS

https://www.basf-petronas.com.my/about-us

PETRONAS REPORT DATA

https://www.petronas.com/integrated-report-2022/assets/pdf/appendix/PETRONAS-
Integrated-Report-2022-pages-163-165.pdf

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