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For study purpose, this report is prepared on ConocoPhillips.
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Marketing Management Term paper on ConocoPhillips
Marketing Management Term Paper on
ConocoPhillips
A Term Paper Presented to the Faculty of Business
Administration in the partial fulfillment of the
requirements of the Masters in Business
Administration (MBA)
Submitted to
Professor M. Madmodul Hasan
Faculty EMBA/ MBA Program,
North South University, Bangladesh
Submitted By
Kochhoper Dim
Group Members
Sabrina Awal Upoma
ID:
Signature:
Md. Shamsul Arafin
ID: 151 2223 060
Signature:
Syeda Shotorupa Zafar
ID: 151 2772 660
Signature:
MBA- BUS 620: Marketing Management
Section: 4, North South University, Bangladesh
Date of Submission: 22 nd August, 2015
Letter of Transmittal:
14 August 2015
Professor Dr. M. Mahmodul Hasan
Faculty EMBA/ MBA Program, North South University
Plot: 15, Block: B, Bashundhara, Dhaka 1229, Bangladesh
Subject: Submission Term Paper on ConocoPhillips
Dear Sir,
This is our sincerely pleasure in submitting term paper on ConocoPhillips as
was the term paper requirement of the Marketing Management course for
MBA program this Summer 2015 in North South University.
We tried utmost to make and let it look like a professional one through some
practical analysis and research. Any shortcomings are expected to have a
kind view for our encouragement. Thank you for your sincere & honest try
and help us to make the paper a successful one.
Our efforts will be valued; if this term paper serves the purpose for what it’s
been assigned.
Sincerely Yours,
Name ID Signature
Sabrina Awal Upoma
Md. Shamsul Arafin 151 2223 060
Syeda Shotorupa Zafar 151 2772 660
Acknowledgement: At first, we would like to express our gratitude to almighty ALLAH who has
given us the opportunity to go through the total process of Marketing
Management and to write a paper in this regard.
The term paper on ConocoPhillips in light of the course Marketing
Management (BUS-620) results from considerable intellectual and moral
support given by our honorable course instructor, Professor Dr. M.
Mahmodul Hasan, Faculty EMBA/ MBA Program, North South University.
Over the last three months, he has been our guide from whom we got the
inspiration and guidance to learn “Marketing Management”. We strongly
believe works like this one will surely help us to develop & make us better
adapted as well as capable to cope with the issues & practical exposures in
this field as well as to the whole of the legislative tools that are being
extensively exploited in today’s world.
Finally we want to thank each other. As without the team effort the work
may not happen. Each and every member tries to give their best effort to
finish the report as per guidelines.
Executive Summary:ConocoPhillips Co. is an American multinational energy corporation with its
headquarters located in the Energy Corridor district of Houston, Texas in
the United States. It is the world’s largest independent exploration and
production company, based on proved reserves and production of liquids
and natural gas. They explore for, develop, and produce crude oil and
natural gas globally. A commitment to safety, operating excellence and
environmental stewardship guide our operations.
The company strategy, at the core, is based on a diversified approach to the
business – one that does not rely or depend on any particular product type,
geology or geography. Their diversified portfolio has helped them continue
operating long-term business without the need to react to short-term
market volatility. They run their business under a set of guiding principles
that are called their SPIRIT Values.
ConocoPhillips has big brand name and strong market position, high level
marketing, approximately 17000 employees’ worldwide, largest Exploration
and Production (Upstream) company. But the cost of environmental
hazards, declining oil reserves and production, pollution and increasing cost
and complexities of new exploration and production projects are the biggest
weaknesses of this industry.
Yet immense opportunities of increasing natural gas market, more oil well
discoveries, increasing demand for gas and refined products are on the line.
Perhaps, Government regulations, pollution guidelines, high labor costs and
hybrid cars not using Fuel can be giant threats to this industry.
ConocoPhillips is the simultaneous pursuit of differentiation and low cost.
The main head to head competition is with Chevron. The aim of
ConocoPhillips is not to out-perform the competition in the existing
industry, but to create new market space or a blue ocean, thereby making
the competition irrelevant. Marketing activities are performed through
offices in the United States, Canada, Europe and Asia. They mainly attempt
to minimize flow disruptions, maximize realized prices and manage credit-
risk exposure.
The company has a strong internal environment and in near future it finds
attractive to explore in Senegal, West Africa.
Conoco Philips’s recent move of focusing on oil for next five years is well
aligned with its energy outlook and long-term investments in relatively high-
growth area of energy. At the end we can conclude it by saying that their
presence in Bangladesh will definitely advance the national energy industry
in Bangladesh and will also add to the growing base of ConocoPhillips’s
core operations.
Table of Contents
Chapter 1:...............................................................................................................................................1
1.1. Definition of Marketing Management:.........................................................................2
1.1.1. Definition of Marketing Management (Theory 2000 – 2011).......................2
1.1.2. Definition of Marketing Management (Theory 2012 – 2016 ±)..................2
1.1.3. Marketing Management and ConocoPhillips:....................................................2
1.2. Mission-Vision-Business Plan-Corporate Strategy:..................................................3
1.2.1. Mission of ConocoPhillips:........................................................................................3
1.2.2. Vision of ConocoPhillips:...........................................................................................3
1.2.3. Business Plan of ConocoPhillips:............................................................................3
1.2.4. Corporate Strategy:.....................................................................................................7
Chapter 2:...............................................................................................................................................9
2.1. SWOT:........................................................................................................................................10
2.2. PASTLE:....................................................................................................................................11
2.3. Michael Porter’s Five Forces:...........................................................................................12
Chapter 3:.............................................................................................................................................13
3.1. Marketing Strategy of ConocoPhillips:.........................................................................14
3.2. Core Marketing Concept of ConocoPhillips:...............................................................15
3.3. Market Segment:...................................................................................................................18
3.4. Marketing Mix (7p& 4c):....................................................................................................19
Chapter 4:.............................................................................................................................................24
4.1. Value Chain Model:...............................................................................................................25
4.2. TQM- Loyalty-Quality-Control:.......................................................................................288
Chapter 5:.............................................................................................................................................31
5.1. Brand and Branding:............................................................................................................32
5.2. Box Analysis and Brand Elements:.................................................................................33
5.3. Brand Dynamic Pyramid:....................................................................................................35
5.4. The five M’s advertising:....................................................................................................37
Chapter 6:.............................................................................................................................................38
6.1. Mass Marketing:....................................................................................................................39
6.1.1. Advertising Budget and Campaign Cost:..............................................................39
6.2. Marketing Budget and Expenditure of ConocoPhillips...........................................41
6.3. Pricing Strategies of ConocoPhillips:.............................................................................42
6.4. Breakeven Analysis with Graph:......................................................................................43
Chapter 7:.............................................................................................................................................47
7.1. Recommendations:................................................................................................................48
7.2. Conclusion:..............................................................................................................................49
Chapter 8:.............................................................................................................................................50
8.1. References:..............................................................................................................................51
8.1.1. Reference from Book:...................................................................................................51
8.1.2. Reference from Online Report:.....................................................................................51
8.1.3. Reference from Internet:............................................................................................51
Appendices:............................................................................................................................................. i
Appendix 1: Annual Report of ConocoPhillips:......................................................................ii
Appendix 2: Blog Spot...................................................................................................................iii
Appendix 3: Academia 1-.............................................................................................................. iv
Appendix 4: Academia 2-...............................................................................................................v
Appendix 5: Academia 3-..............................................................................................................vi
Chapter 1
Kocchoper Dim | Marketing Management Term Paper 1
1.1.Definition of Marketing Management:
1.1.1. Definition of Marketing Management (Theory 2000 – 2011)
Marketing management is the art and science of choosing target markets
and getting, keeping, and growing customers through creating, delivering,
and communicating superior customer value.
1.1.2. Definition of Marketing Management (Theory 2012 – 2016 ±)
Marketing management depends on the size of the business and the
industry in which the business operates. Effective marketing management
will use a company's resources to increase its customer base, improve
customer opinions of the company's products and services, and increase the
company's perceived value.
1.1.3. Marketing Management and ConocoPhillips:
ConocoPhillips Marketing Strategy both Relate to Theory 2000-2011 and
Theory 2012-2016±. No doubt, ConocoPhillips choose its target markets
getting, keeping, and growing customers through creating, delivering, and
communicating superior customer value. Besides, ConocoPhillips is the
world’s largest independent exploration and production company based on
reserves and oil production. ConocoPhillips now focuses on exploration and
production. The company explores for produces, transports, and sells crude
oil, bitumen, natural gas and so on. Moreover, Effective marketing
management will use a company's resources to increase its customer base,
improve customer opinions of the company's products and services, and
Kocchoper Dim | Marketing Management Term Paper 2
increase the company's perceived value. Its prove ConocoPhillips relates
with Marketing Management strongly.
Kocchoper Dim | Marketing Management Term Paper 3
1.2.Mission-Vision-Business Plan-Corporate
Strategy:
ConocoPhillips Co. is an American multinational energy corporation with its
headquarters located in the Energy Corridor district of Houston, Texas in
the United States. It is the world's largest independent pure-play
exploration and production company and is also one of the Fortune 500
companies. ConocoPhillips was created through the merger of Conoco Inc.
and the Phillips Petroleum Co. on August 30, 2002
1.2.1. Mission of ConocoPhillips:
ConocoPhillips’s primary mission is to develop innovative ways to treat and
reuse by-product water from oil and gas production and refining operations.
1.2.2. Vision of ConocoPhillips:
The vision of the Global Water Sustainability Center (GWSC) is to become
the center of excellence for key water-related technologies particularly
those applicable to the petroleum and municipal sectors.
1.2.3. Business Plan of ConocoPhillips:
Oil and gas production is serious business. Over the years, ConocoPhillips
has undergone various changes, and now, it has become a much-organized
business. It comprises three sectors:
The upstream sector: The upstream sector entails oil prospecting
and exploration, drilling for oil, and drawing it out of the ground.
These activities are the earliest stages of oil production.
The midstream sector: The midstream sector entails transportation,
storage, and wholesale marketing or crude or refined petroleum
Kocchoper Dim | Marketing Management Term Paper 4
products. Activities in this sector are aimed at moving crude oil from
the site where it is drawn to refineries where it will be processed into
the various petroleum products.
The downstream sector: The downstream sector entails storage of
petroleum products as well as transportation, marketing, and
everything else that happens until the products finally get to
consumers.
Although several products are made from crude oil, only four of them are in
huge demand. These are:
o Petrol or gas (also called gasoline or PMS—premium motor spirit)
o Diesel (also called AGO–automotive gas oil)
o Kerosene (also called paraffin or DPK—dual-purpose kerosene)
o Cooking gas (also called LPG—liquefied petroleum gas).
The demand for these four products is high because they are widely used
for everyday activities such as transport, domestic cooking, and so on. With
the above in mind, let’s now look at the steps involved in starting an oil and
gas company.
For Business Plan, ConocoPhillips usually follows the steps are given in the
below:
Kocchoper Dim | Marketing Management Term Paper 5
Figure 1: Steps of Winning Corporate Plan of ConocoPhillips
For making a market winning corporate plan ConocoPhillips does market
research to understand the intricacies of the market and pitfalls or
challenges that new entrants are likely to encounter. This research always
helps them to make and know goals and objectives of your business,
required startup costs, operation plan and cost, market analysis and
competition, projected income over the first few years, marketing strategy,
unique selling point, exit strategy, and other vital information through
which ConocoPhillips easily make the entry planning in the new market and
develop the existing market by hiring effective employees and Buy and
install the necessary equipment. By following these steps ConocoPhillips
turn into a successful industry now.
1.2.3.1. Environment Analysis of ConocoPhillips:
The company business plan, at the core, is based on a diversified approach
to the business – one that does not rely or depend on any particular product
type, geology or geography. Their diversified portfolio has helped them
continue operating long-term business without the need to react to short-
term market volatility. With a steady stream of production from legacy
assets, conventional and unconventional opportunities in development
drilling programs, major project startups across the portfolio, and an
Kocchoper Dim | Marketing Management Term Paper 6
extensive inventory of exploration prospects, they are well positioned to
deliver organic growth. They believe this is the right formula for a company
of our substantial size.
1.2.3.2. Goals Formulations:
ConocoPhillips runs their business under a set of guiding principles that are
called their SPIRIT Values. These set the tone for how they behave with all
their stakeholders, internally and externally. ConocoPhillips has both long
term and short term goals. To formulate the long term and short term
goals, company strictly follows some steps:
Safety- Company operates everything safely.
People- Company respects one another, recognizing that the success
depends upon the commitment, capabilities and diversity of the employees.
Integrity- ConocoPhillips is ethical and trustworthy in their relationships
with stakeholders.
Responsibility- Company is accountable for the actions.
Innovation- Company anticipates change and respond with creative
solutions. Teamwork: The “can do” spirit delivers top performance.
Company encourages collaboration, celebrate success, and build and
nurture long-standing relationships.
1.2.3.3. Strategy Formulations:
ConocoPhillips remain committed to our 5 strategic priorities:
Maintain a relentless focus on safety and execution.
Offer a compelling dividend.
Deliver 3 to 5% compound annual production growth.
Deliver 3 to 5% compound annual margin growth.
Achieve ongoing improvements in financial returns.
Kocchoper Dim | Marketing Management Term Paper 7
1.2.3.4. Program Formulations and Implementation:
To achieve organizational goals ConocoPhillips continue investing and
implementing its goals and strategies in projects and programs that deliver
long-term production and margin growth.
In 2013, the company was funded a $16.3 billion capital program for
continuing operations and prepaid $2.8 billion obligation to our 50%
owned FCCL business venture.
In 2013, budget allocated approximately 10% of this capital toward
maintenance of the legacy base assets, 45% to development drilling
programs, 30% for major growth projects, and 15% for exploration
and appraisal programs.
1.2.3.5. Feedback and Control:
After implementing all goals, strategies and programs ConocoPhillips takes
feedback and control the feedbacks. If the plan is not according to the
schedule, then Company evaluates it and adjusts for the betterment and this
continuous process of improvisation remains present all the year.
1.2.4. Corporate Strategy:
ConocoPhillips corporate strategies are:
1.2.4.1. Corporate Mission:
ConocoPhillips’s corporate mission is to- develop innovative ways to treat
and reuse by-product water from oil and gas production and refining
operations.
Kocchoper Dim | Marketing Management Term Paper 8
1.2.4.2. Strategic Business Units:
ConocoPhillips’s Strategic Business Units are:
Energy Efficiencies Units
Units of Centralized Facilities. Because, Centralizing water collection
reduces truck mileage which is more energy efficient and creates less
emissions
Using Green Completions Technology in 2007
1.2.4.3. Asses Growth Opportunities:
ConocoPhillips is setting a goal to grow up its productions. Because
company believes that, through its asset base, technological capacity
and world class workforce and financial strength company can easily
add its value propositions.
Besides company’s investments and financial strength indicates its
high volume of productions. For Example, The Company estimates to
increase its production from 1.8 billion barrel of oil to 2.5 billion
barrel of oil.
ConocoPhillips wells have the highest oil rates.
Focus on improving financial returns by through Capital Discipline
and ongoing cost efficiencies.
Kocchoper Dim | Marketing Management Term Paper 9
Kocchoper Dim | Marketing Management Term Paper 10
Chapter 2
2.1. SWOT:
Kocchoper Dim | Marketing Management Term Paper 11
Figure 2: SWOT analysis of ConocoPhillips
Kocchoper Dim | Marketing Management Term Paper 12
Threats1.Government regulations 2.Pollution guidelines3.High labor costs4.Hybrid cars not using Fuel
S W O T
2.2. PASTLE:
Figure 3: PASTEL
Kocchoper Dim | Marketing Management Term Paper 13
T rad e R estr ic tio n s
E n v iro n m eta l R eg u la tion s
T ax P o lic ies
E m p loym en t L aw s
P o litic a l E c o n o m ic a l
H ea lth C o n csiou sn ess
E m p h asis o n S a fe ty
V a lu es & B e lie fs
C S R A ctiv itie s
S o c ia l T e c h n o lo g ica l
Ecological Legal
Supplier Power
Importance of the large volume to the suppliers
Switching costs in the same industry
Relative cost benefit judgments & preference to uphold core values
2.3. Michael Porter’s Five Forces:
Figure 4: Michel Porter’s Five Forces
Kocchoper Dim | Marketing Management Term Paper 14
Threat of Substitutes
new energy conserving technologies that are being developed.
Alternative fuel products are a threat to the oil and gas industry in the long run.
Price-performance trade off substitutes.
Switching costs
Threat of New Entrants
High barriers to entry with existing large & powerful companies
Brand identity
Absolute cost advantages
Growth of industry with access to inputs
Buyer Power
Influential bargaining power in forcing the price down.
Bargaining Leverage & price sensitivity due to the prevailing market conditions of crude oil.
Amount of product differentiation.
Degree of Rivalry
Intense competition among the existing companies, as ConocoPhillips is the world’s largest exploration & production company
Chapter 3
Kocchoper Dim | Marketing Management Term Paper 15
3.1. Marketing Strategy of ConocoPhillips:
Marketing Strategy:
As a Successful company ConocoPhillips follows some marketing strategies.
4 Killer Marketing Strategies that ConocoPhillips are following from many
years are given below:
Figure 5: Marketing Strategy of ConocoPhillips
1. Talk to Those who Matters in the Market:
This is really a tough task for ConocoPhillips to go to the petrol or gas pump
and talk with the industries and customers. But to market its product
ConocoPhillips employees communicate strongly with its target customers
regularly to fulfill their demand and to be updated.
2. Concentrate only one Customer at a Time:
Kocchoper Dim | Marketing Management Term Paper 16
Talk to those who Matters in The Market
Concentrate Only One Customer at a time
Look at Local Small Pump
Advertise on Mass Media
Basically ConocoPhillips is sale its product as station basis. And every day a
huge quantity of Oil or Gas is sold at a time and here every customer and
stations are important for them. So, make a strong and profit making
position in the market, it needs to give full concentration at a single time.
Because, this time increase one customer means increase supply and
increase supply means rising of profit.
3. Look at Local Small Group:
Not only large Companies, to make a strong position in the market
ConocoPhillips also focus on different specific areas even if local groups of a
country, as local station or pump has small tanks, they need to buy huge oil
and gas every day. Through this way ConocoPhillips emerge its networks.
4. Advertise on Mass Media:
ConocoPhillips widely promotes it’s any project or News in the Online news
paper and magazine to branding themselves. It’s a great marketing strategy
ever which makes them a company with a huge success.
3.2. Core Marketing Concept of ConocoPhillips:
ConocoPhillips is one of 23 Integrated Oil and Gas companies. The
Integrated Oil and Gas Industry’s average sales in 2005 were $1.4 trillion.
While 23 companies may seems like a lot of competition, it is in fact
relatively small when compared to the size of the industry. ConocoPhillips’
average sales over the last 3 years were $142 billion; this accounts for
roughly 10% of the industry’s sales in 2005. It is also important to note that
ConocoPhillips’ sales are on the upturn, so this percentage is likely to
increase 6. Its main integrated oil competitors are Amerada Hess,
ChevronTexaco, ExxonMobil, Marathon, and Occidental.
Kocchoper Dim | Marketing Management Term Paper 17
These companies deal in both up upstream and downstream operations.
Upstream operations involve exploration and production while downstream
operations include refining and marketing. ConocoPhillips has other
competitors whose entire business is focused on either downstream or
upstream operations. These competitors included Anadarko, Dynegy,
Valero, and Halliburton just to name a few. ConocoPhillips has a
competitive advantage over these companies because being involved in both
downstream and upstream operations allows the company to remain
profitable when one operation lags. If prices or competition in one operation
becomes unfavorable, the other operation can cover the losses.
ConocoPhillips is the third largest integrated energy company in the United
States and second largest refiner in the United States. Worldwide,
ConocoPhillips has the fifth largest proved reserves and is the fourth largest
refiner. Because the energy business has very high demand and there are
relatively few competitors in the industry, existing firms do not engage in
price wars. Instead, they compete on non-price dimensions. One of the
major non-price dimensions firms compete on is the size and reach to which
they can offer their products.
Kocchoper Dim | Marketing Management Term Paper 18
Figure 6: Core Marketing Concept of ConocoPhillips
ConocoPhillips has a competitive advantage over most of these companies
due to their size, vertical integration, and scope of operations. Because
existing firms do not engage in price wars, firms focus on increasing the
size and reach to which they can offer their products and offer other
products such as asphalts and chemicals. The degree of differentiation for
ConocoPhillips and its competitors is low, so their customers are ready to
switch from one competitor to the other based on price. This is one of the
most competitive markets involving heavy the art of technologies where
both barriers (Entry, Exit) are high. The competition ranges from public and
state owned enterprises and the level of competition varies within different
geographic locations like Latin America, Alaska would be much more
different than the Middle East and that in Asia including Bangladesh.
Company in the entire industry; however, the largest publically owned firms
and competitor of Conoco Phillips are Exxon Mobil, Chevron, Royal Dutch
Shell PLC, BP PLC and Total SA. With decades of experience as an
organization, COP is without doubt one of the dominating market leaders
since they had the third largest worldwide liquids compare to other
competitors include Chevron, Exxon, Santos, BP, Gazporm, etc. Conoco
Phillips competes with private, public and state-owned companies in all
facets of the E&P business. Some of our competitors are larger and have
greater resources. They deliver their production into the worldwide
commodity markets. Chevron is the industry leader with a strong global
presence in the energy sector. Gazporm is more aggressive in and regular
assesses its strength and quality benchmarks which COP can take into
account.
In Bangladesh the company such as Petro-bangla and BP are state owned
public ventures with strong support and continuous growth and
development by government, which is a disadvantage or drawback for
ConocoPhillips in the Asia Pacific region. But by the help of advance
Kocchoper Dim | Marketing Management Term Paper 19
technology and skill, it has a huge alive hope to operate in such region in
near future where just like Chevron Bangladesh is operating, which is very
much successful and operates successfully as a biggest energy provider
organization in Bangladesh.
Kocchoper Dim | Marketing Management Term Paper 20
3.3. Market Segment:
ConocoPhillips is broadly classified into three segments in the market. The
upstream segment comprises exploration and production (E&P), while the
downstream segment includes refining and marketing (R&M). In between,
the midstream segment includes the transportation, storage, and trading.
Figure 7: Market Segments of ConocoPhillips
The exploration and production segment is capital intensive, soaking up 70
percent of total investment of ConocoPhillips. The activity is also riddled
with uncertainty with the number of failures outstripping the number of
successful finds. The downstream segment, meanwhile, is a relatively safer
business with operating efficiency and energy consumption governing
profitability.
Kocchoper Dim | Marketing Management Term Paper 21
Segment 1-
Upteam
Segment 2-
Midtream
Segment 3-
Downtream
3.4. Marketing Mix (7p& 4c):
Figure 8: 7p of ConocoPhillips’s
Kocchoper Dim | Marketing Management Term Paper 22
7p of ConocoPHillips
7P in Details of ConocoPhillips
Product
Natural Gas :
Their natural gas production, along with third-party
purchased gas, is primarily marketed in the United
States, Canada, Europe and Asia. Their natural gas is
sold to a diverse client portfolio which includes local
distribution companies; gas and power utilities; large
industrials; independent, integrated or state-owned
oil and gas companies; as well as marketing
companies.
Crude Oil, Bitumen and Natural Gas Liquids
Their crude oil, bitumen and natural gas liquids
revenues are derived from production in the United
States, Canada, Australia, Asia, Africa and Europe.
These commodities are primarily sold under contracts
with prices based on market indices, adjusted for
location, quality and transportation.
Place
Barring a successful addition to ConocoPhillips’s
proved reserves, its future crude oil, bitumen and
natural gas production will decline, resulting in an
adverse impact to the business. This is typical of
energy companies. The rate of production from
upstream fields generally declines as reserves are
Kocchoper Dim | Marketing Management Term Paper 23
depleted. This depends on the extent that
ConocoPhillips conducts successful exploration and
development activities, or, through engineering
studies, identifies additional or secondary recovery
reserves. It’s proved reserves will decline materially
as it produces crude oil and natural gas.
Promotion
Marketing activities are performed through offices in
the United States, Canada, Europe and Asia. They
mainly attempt to minimize flow disruptions,
maximize realized prices and manage credit-risk
exposure. Commodity sales are generally made at
prevailing market prices at the time of sale. In
addition they purchase third-party volumes to better
position the Company to fully utilize transportation
and storage capacity and satisfy customer demand.
A point of note is that since they have separated from
their downstream business since 2012, they have
focused on the production and thus there was a very
limited scope for promotion. However, since COP is
still engaged in marketing their technologies and
products, they utilize exclusive promotional activities
like Advertisements, documentaries, stakeholder
meeting to promote the organization.
Price
The effects of changing commodity prices and
refining margins. The revenues, operating results and
future rate of growth are highly dependent on the
prices that the Company receives for the crude oil,
Kocchoper Dim | Marketing Management Term Paper 24
bitumen, natural gas, natural gas liquids, LNG and
refined products. The factors influencing these prices
are beyond the Company’s control.
Any material change in the factors and assumptions
underlying ConocoPhillips’s estimates of crude oil,
bitumen and natural gas reserves could impair the
quantity and value of those reserves. Reserve
estimation is a process that involves estimating
volumes to be recovered from underground
accumulations of crude oil, bitumen and natural gas
that cannot be directly measured.
Physical Evidence When as ConocoPhillips is an Oil and Gas Company,
its products evidence is its smell.
Process ConocoPhillips’ working process starts from
exploration for oil & gas underwater or underground.
When resources are found, they start collecting them
then refine or process to transform them into finished
goods to transport to the users.
People Mainly there are two types of people get highest
preferences in ConocoPhillips-
The people who works there
Its customers
Kocchoper Dim | Marketing Management Term Paper 25
4C’s of ConocoPhillips:
Kocchoper Dim | Marketing Management Term Paper 26
Figure 9: 4C’s of ConocoPhillips
Kocchoper Dim | Marketing Management Term Paper 27
ConocoPhillips supplies or provides Oil and Gas to different Oil and Gas Stations.
Conocophillips do cost by Long Term Lease, Price Uncertainity, Geographical Placemenr Cost, PromotionalCost.
Company Strongly maintain communications with their clients and all people involve in Company's activities like emplyee, area managers so on
ConocoPhilips gives customer flexibilitiess by giving them supply and transport oil and gas time to time.
Clients Cost
CommunicationConventence
Chapter 4
Kocchoper Dim | Marketing Management Term Paper 28
4.1. Value Chain Model:
The value chain is a tool for identifying ways to create more customer
value because every firm is a synthesis of primary and support activities
performed to design, produce, market, deliver, and support its product. For
ConocoPhillips, we can develop their value chain model analyzing their
value delivery system as-
Figure 10: Porter’s Generic Value Chain
Kocchoper Dim | Marketing Management Term Paper 29
Kocchoper Dim | Marketing Management Term Paper 30
ConocoPhillips Value Chain:
Exploration: Using technologies to find new oil resources.
ConocoPhillips performs seismic surveys to get info about possibility of
oil underwater or underground.
Collection: Production of oil is the operation that brings hydrocarbons
to the surface and prepares them for processing. In ConocoPhillips,
production begins after the well is drilled. The mixture of oil, gas and
water from the well is separated on the surface. The water is disposed of
and the oil and gas are treated, measured, and tested. Production
operations include bringing the oil and gas to the surface, maintaining
production, and purifying, measuring, and testing. Artificial lifting
methods are used when the pressure from natural reservoir drive
decreases to the point where the well stops producing. Artificial lift uses
pumps and gas injection.
Transportation: Crude oil must be moved from the production site to
refineries and from refineries to consumers. These movements are made
using a number of different modes of transportation. Crude oil and
refined products are transported across the water in barges and tankers.
On land crude oil and products are moved using pipelines, trucks, and
trains.
Refining (For Crude Oil): Crude oil is processed or refined to produce
useable products such as gasoline. The process is very complex and
involves both chemical reactions and physical separations. Crude oil is
composed of thousands of different molecules. It would be nearly
impossible to isolate every molecule and make finished products from
each molecule.
Processing (For Gas): Natural gas produced from underground
reservoirs must be processed to remove water, impurities, and heavier
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hydrocarbons. The impurities are usually hydrogen sulfide and carbon
dioxide. The heavier hydrocarbons or natural gas liquids (NGLs) are
ethane (C2H6), propane (C3H8), butane (C4H10), and natural gasoline.
Natural gas liquids are removed from the natural gas feed to recover the
heavier hydrocarbons and to allow the treated gas to move through the
pipeline network. The liquids are removed from the stream because they
are more valuable (have higher prices) as raw materials to produce
chemicals and gasoline than they are as fuel. In addition the heavier
liquids can condense out of the natural gas stream and cause problems
in transporting the gas through pipelines. After several processing, final
usable gas is ready to transport.
Marketing & Sales: After crude oil is converted into refined products or
gas ready to transport, these must be transported and sold to end-users.
ConocoPhillips uses its own marketing channels and mixed distributors
to sell the final oil to users. So far, ConocoPhillips has not been using
commercial advertisement for this marketing purpose.
After Sales Service: For this product lineup, after sales service is not
applicable.
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4.2. TQM- Loyalty-Quality-Control:
ConocoPhillips’s are using Total quality management (TQM) system which is an organization-
wide approach to continuously improve the quality of all the organization’s processes, products,
and services. Product and service quality, customer satisfaction, and company profitability are
intimately connected. TQM ran into implementation problems as firms became overly focused
on how they were doing business and not the why they were in business.
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Figure 11: Total Quality Management Process of ConocoPhillips
From the Diagram of TQM, we can say that, ConocoPhillips is very concerned about the
customers’ expectations. & that’s why they follow different types of strategies Technical
development, Risk Management, Organizational Planning. After that, they also monitor the
whole process and analyze it. For Maintaining total quality management ConocoPhillips
identifies the customers need, Customer’s order review. More Over the organization provide
advanced quality products of Oil and Gas by using different types of production planning and
production processes.
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Figure 12: Increase Loyalty of ConocoPhillips Consumers
ConocoPhillips now a global company and it is very much concern about
consumer loyalty and retention of its consumers. Some Loyalty programs of
ConocoPhillips are:
1. Rolling out Kick Backs Loyalty Program: It’s a program about branded
marketers through road shows. Those who join in this program
ConocoPhillips will provide them a special pricing consideration.
2. The Kickback Points Coalition Loyalty Program will deliver state-of-
the-art customer relationship management tools, highly personalized
rewards, and real-time program reporting. The program’s flexibility
allows participating retailers to identify their most loyal customers
and engage them through customized offerings.
3. This company’s Gas and oil Stations would issue membership card to
(Individual/Corporate) customers to build the customer's loyalty
through encouragement of continuous expense, sticking to the
company forever. When a member fills gasoline, buy goods in the
chain stores of the gas stations, loyalty points can be calculated and
accumulated into the membership point account. Later to some tier
level, the member may get some special discount or get some reward.
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Chapter 5
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5.1. Brand and Branding:
A brand is a name, term, sign, symbol or design, or a combination of them, intended to identify
the goods or services of one seller or group of sellers and to differentiate them from those of
competitors.
Branding is one of the most important aspects of any business, large or
small, retail or B2B. Branding is endowing products and services with the
power of the brand.
The process involved in creating a unique name and image for a product in
the consumers' mind, mainly through advertising campaigns with
a consistent theme. Branding aims to establish a significant and
differentiated presence in the market that attracts.
ConocoPhillips individual name, its logo and symbol, identity, products and services are
differentiate them from those of competitors. That is called brand of ConocoPhillips Company.
Basically this brand:
Identify the maker.
Simplify product handling
Organize accounting
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Offer legal protection
Signify quality
Create barriers to entry
Serve as a competitive advantage
Secure price premium
And using this name, sign, symbols, branding process ConocoPhillips basically take huge
advantages like:
• Improved perceptions of product performance
• Greater loyalty
• Less vulnerability to competitive marketing actions
• Less vulnerability to crises
• Larger margins
• More inelastic consumer response
• Greater trade cooperation
• Increased marketing communications effectiveness
• Possible licensing opportunities
5.2. Box Analysis and Brand Elements:
The energy sector is intensely focused on increasing ROI and improving
customer relationships, but branding strategy usually takes a backseat.
However, ConocoPhillips is now realizing that a brand identity can help
survive the existing competitive market.
Memorable Meaningful
Likeability Transferable
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Adaptable Protectable
Brand Elements Box
Analysis: From these six brand elements, ConocoPhillips has basically
three criteria:
1. Memorable : An oil and energy company logo symbolizes what your
business represents – the quality of service, your promise to the
customer, your company’s unique selling features. So, ConocoPhillips
has a brand identity through its Logo and this logo and symbol of this
oil and energy company becomes a unique identity with which
customers recognize your existence and have a lasting memory of the
trademark its carry. ConocoPhillips used its name in its logo with its
own symbol through which a customer can easily understand this
indicates ConocoPhillips or can easily recognize when they again see
the logo. So, logo is very important for any Oil and Gas companies
like ConocoPhillips. Moreover, ConocoPhillips is a globally organized
company. So people can easily memories the name and its logo.
2. Adaptable : It is widely adapted and accepted by the consumers.
3. Protectable : This brand name is very much protected. As it’s is a
market leader and exists in the market from a very long time.
In Conclusion it’s clear that, ConocoPhillips’s branding through its logo,
symbol and name-
Catch interest and intrigue people to know more about the brand
Create strong memory about ConocoPhillips
Inspire brand loyalty among customers
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5.3. Brand Dynamic Pyramid:
Figure 13: Brand Dynamics Pyramid of ConocoPhillips
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ConocoPhillips exist to power civilization. It explores to produce explore for,
produce, transport and market crude oil, natural gas, natural gas liquids,
liquefied natural gas and bitumen on a worldwide basis - the energy that
plays a foundational role in enabling global economic development and
human progress. Its key focus areas include safely operating producing
assets, executing existing major projects and exploring for new energy
resources in promising areas. Besides its portfolio is included legacy assets
in North America, Europe, Asia and Australia; growing North American
shale and oil sands businesses; a number of major international
development projects; and a global exploration program.
Moreover ConocoPhillips is active in a wide range of geologic and
geographic settings, including some of the world’s most challenging areas.
From the frozen Arctic to the arid desert, it has a proven track record of
responsibly and efficiently finding and producing oil and natural gas.
Through this discussion it is clear that, ConocoPhillips is now in the
Advantage Position, where it is deliver something better than others. There
is lot of competitors in the market. Competitors of Conoco Phillips are
Exxon Mobil, Chevron, Royal Dutch Shell PLC, BP PLC and Total SA. And
ConocoPhillips still tries to deliver its consumers better products.
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5.4. The five M’s advertising:
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Figure 14: The Five M’s of Advertising of ConocoPhillips
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Mission
Combination of growth and returns with a competitive dividend.
Money
The stage where Conocophillips posesses currently is the PEAK of the PLC combined with growth & maturity.The market share and consumer base.
MediaDiversified portfolio operating long-term business without the need to react short-term market volatility.
MeasurementSteady stream of production.Major project startups across the portfolio & extensive inventory exploration prospects, well positioned to deliver organic growth. Formula for a company of a substantial size.
Message
"SET FOR GROWTH"
Chapter 6
6.1. Mass Marketing:
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6.1.1. Advertising Budget and Campaign Cost:
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6.2. Marketing Budget and Expenditure of ConocoPhillips
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6.3. Pricing Strategies of ConocoPhillips:
With oil's and gas build as a high-demand global commodity comes the
possibility that major fluctuations in price can have a significant economic
impact.
The two primary factors that impact the price of oil and gas of
ConocoPhillips are:
Figure 15: Pricing Strategies of ConocoPhillips
The concept of supply and demand is fairly straightforward. As demand
increases (or supply decreases) the price should go up. As demand
decreases (or supply increases) the price should go down. So as like as
other oil and gas companies, ConocoPhillips follows this pricing strategies.
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Pricing Strategies of ConocoPhillip
s
Supply and Demand
Market Sentiment
Market sentiment is the feeling through the activity and price movement in
that market. And ConocoPhillips follow that strategy. For example, rising
prices would indicate a bullish market sentiment to ConocoPhillips, while
falling prices would indicate a bearish market sentiment.
6.4. Breakeven Analysis with Graph:
Breakeven Analysis
Breakeven analysis is a useful financial tool that would determine the
minimum number of production that ConocoPhillips would have to produce
to cover its fixed costs and then make a profit. This analysis is particularly
more important for high-tech engineering companies like COP since fixed
costs are a major chunk of the operating costs.
Table: Break Even Analysis
Details (2013) (2012)Per
Barrel
US$
Total (US$
million)
Per
Barrel
US$
Total (US$
million)
Production 1545
MBOED
x 365
1578
MBOED
x 365
Sales 96.49 54,413 100.64 57,967
Purchased Commodities (22,643) (25,232)
Production and Operating
Expenses
(7,238) (6,793)
Total Variable Costs 52.99 (29,881) 55.60 (32,025)
Contribution margin 43.50 24,532 45.04 25942
Selling, General and
Administration
854 1106
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Exploration 1232 1500
Depreciation, depletion,
amortization
7434 6580
Impairments 529 680
Total Fixed Costs 10049 9866
Net Income from Operations 14483 16076
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Breakeven Quantity= Fixed Costs/contribution margin per barrel
Contribution margin per barrel: Sales Price per unit-variable cost
Breakeven Sales = Breakeven quantity x Sales price per unit
Margin of Safety= Current Production - Breakeven Production
For The year 2013
Breakeven Quantity= $10049million/$43.50=231 million barrels or
632MBOED
Breakeven Sales= 231 million barrels x $96.49= $22,289 million
Margin of safety= 1545 MBOED - 632MBOED= 913 MBOED
For the Year 2012
Breakeven Quantity= $9,866million/$45.04=219 million barrels or
600MBOED
Breakeven Sales= 332 million barrels x $96.49= $32,034 million
Margin of safety= 1578 MBOED - 600 MBOED= 978 MBOED
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Breakeven Quantity580
590
600
610
620
630
640
20122013
Breakeven Sales ($ million)0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
20122013
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Margin of Safety880
900
920
940
960
980
1000
20122013
For ease of Analysis we have taken into account the consolidated figure
provided in the income statement of ConocoPhillips. The table shows per
barrel figures and the total value in terms of sales, variable costs,
contribution and fixed costs. From the breakeven analysis, we can conclude
that COP enjoys a high margin of safety and that the current level of
production is much higher than the breakeven level which is approximately
900 MBOED and thus even with disruptions in some of the current
extraction locations like Libya; COP continues to enjoy strong financial
stability. Nevertheless it should be noted that the fixed costs have increased
in 2013 in comparison to 2012 which could be attributed to the capital
investments made for future production, which must be accounted for in the
depreciation value.
Overall the breakeven analysis shows that COP is in a strong financial
position in terms of its direct operations and that production could drop by
600 MBOED and COP could still be profitable.
Overall View on Breakeven Point for the year 2013 & 2012
(combined):
Average Fixed Cost= (10049+9866)/2 = $9957.5 mill
Selling Price per Barrel= (43.50+52.99) = $96.49
Average number of barrel for 2012 & 2013= (231+219) = 225
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Graph 1: Breakeven Point Analysis
Here, also from the graph we can see that the number of barrel at
breakeven point of 225million where breakeven sales is $21710.5million.
Fixed cost is included in total cost calculation. The intersect point between
sales line & total cost (where total cost = Total Sale) show the breakeven
point. ConocoPhillips has to sell 225million barrels to cover total cost
incurred in 2012 & 2013 combined. But, for each yearly breakeven point
can be calculated for more precise estimation.
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Chapter 7
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7.1. Recommendations:
1. ConocoPhillips should better financial control to tackle commodity
price and high variable costs.
2. Company should ensure re-emphasis on safety in non-conventional
exploration and small scale programs.
3. Company should take steps for a global marketing campaign to
counter the negative publicity with regard to safety and
environmental standards.
4. ConocoPhillips should maintain a consistent Focus on Core Business
Strengths.
5. It may look toward diversifying into renewable sources of energy
projects.
6. Company should formulate a technological roadmap which would
mark the life cycles of the technologies where major investments are
channeled.
7. As a Successful global company, ConocoPhillips should focus on
online advertisement strongly.
8. As competitors of this company are increased day by day they need to
follow some unique marketing strategies, advertising methods as well
as pricing methods.
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9. To increase the number of loyal customer globally, ConocoPhillips’s
can use some strategies like: Provide Monthly discount and so on.
10. Provide products and service quick and flexible so that
customer’s repetition occurs.
7.2. Conclusion:
ConocoPhillips is a high tech industry leader in the field of exploration and
production of fuel. It has a venerable status as the industry leader with a
long-term orientation; disciplined management, a globally well-integrated
value chain, and operational excellence. An outstanding multinational
organization, their values and mode of operations display the
characteristics of an organization which maintains high standards of
excellence in innovation, sustainability and safety. As the industry leader,
Conoco Philips has balanced to take on the challenges of the world energy
needs for decades to come. The magnitude of its reserves, strong
technology orientation, and its financial strength gives it a commanding
position in the industry. Conoco Philips’s recent move of focusing on oil for
next five years is well aligned with its energy outlook and long-term
investments in relatively high-growth area of energy. At the end we can
conclude it by saying that their presence in Bangladesh will definitely
advance the national energy industry in Bangladesh and will also add to the
growing base of ConocoPhillips’s core operations.
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Chapter 8
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8.1. References:
8.1.1. Reference from Book:
David Fred R., Strategic Management Cases and
Concepts, (12th ed.), Prentice Hall, Inc. (2009).
8.1.2. Reference from Online Report:
ConocoPhillips Annual Report 2013
Proxy Statement
8.1.3. Reference from Internet:
http://www.hoovers.com/company-information/cs/company
profile.Conocophillips.c354965d3fd53845.html
https://www.env.nm.gov/aqb/4C/Documents/
COP_EmissionsReductionsv4_082008.pdf
http://www.conocophillips.com/who-we-are/Spirit%20Magazine/
1qtr13_spiritmag.pdf
http://www.mba-tutorials.com/strategy/mission-vision/1702-
conocophillips-vision-mission-statement.html
http://www.conocophillips.com/newsroom/Pages/2014/ConocoPhillips-
Outlines-Plans-for-Growth-and-Returns-at-Analyst-Meeting.aspx
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http://www.cstoredecisions.com/2011/08/10/conocophillips-begins-
rolling-out-kickback-loyalty-program/
http://www.businessdictionary.com/definition/branding.html
http://www.sba.pdx.edu/faculty/johns/jsaccess/0web/573/Sectors/
Energy/COP/COP_ConocoPhillips_Buy_MBonfield_Winter2011.pdf
http://www.freeswotanalysis.com/oil-gas-swot/33-conoco-phillips-swot-
analysis.html
http://en.wikipedia.org/wiki/ConocoPhillips
http://www.mba-tutorials.com/strategy/mission-vision/1702-
conocophillips-vision-mission-statement.html
http://csimarket.com/stocks/growthrates.php?code=COP
http://www.conocophillips.com/sustainable-development/Documents/
2013.11.7%201200%20SD%20Final.pdf
http://www.researchandmarkets.com/reports/612871/
conocophillips_analysis_across_the_oil_and_gas
http://www.conocophillips.com/investor-relations/Company
%20Reports/2013_Annual_Report_CR.pdf
http://investing.businessweek.com/research/stocks/financials/
financials.asp?
ticker=COP&dataset=cashFlow&period=A¤cy=native
http://www.conocophillips.com/investor-relations/company-reports/
Pages/annual-report-archive.aspx
http://www.conocophillips.com/investor-relations/Company
%20Reports/2012_Annual_Report_CR.pdf
http://mmoore.ba.ttu.edu/ValuationReports/Fall2006/
ConocoPhillips.pdf
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http://www.petrostrategies.org/Learning_Center/
ExxonMobil_CapstonePaper_FINAL.pdf
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Appendices
Marketing Management Term Paper i
Appendix 1: Annual Report of ConocoPhillips:
Marketing Management Term Paper ii
Appendix 2: Blog Spot
Marketing Management Term Paper iii
Appendix 3: Academia 1-
Marketing Management Term Paper iv
Appendix 4: Academia 2-
Marketing Management Term Paper v
Appendix 5: Academia 3-
Marketing Management Term Paper vi