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11

ITS MORE THAN JUST OIL.ITS MORE THAN JUST OIL.

ITS LIQUID ENGINEERING.ITS LIQUID ENGINEERING.

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CIL: Managing in challenging

Times The Indian branch of Castrol was set up in

1919 and the name was changed toCastrol Ltd. in 1944.

Before 1991 they were governed byIndian Oil Corporation so they focused onmanaging within the availability of baseoil.

After 1991 due to liberalization theyfocused on volume growth and marketshare.

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Due to liberalization, MNCs encouraged tocome in India which result in increasing

competition but CIL was only focused onvolume growth and due to that their salesdeclined.

CIL focused on strategically important andgrowing segments namely:

1) Engine oil for cars.

2) Two wheelers.3) New Truck.

So, the overall sales volume continued todecline.

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PROBLEMPROBLEM

They focused on volume growthThey focused on volume growthignoring cost efficiency and costignoring cost efficiency and costeffectiveness, so the sales waseffectiveness, so the sales was

declined.declined.

SubSub--problem :problem :

In the year 2001In the year 2001--02 the02 thecommercial vehicle sales declined.commercial vehicle sales declined.

44

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20012001--acquistion of CIL by Britishacquistion of CIL by BritishPetroleumPetroleum--focus in efficient supplyfocus in efficient supplychain management.chain management.

ThreeThree broadbroad segmentssegments ofof lubricantlubricant--

automobile,automobile, industrial,industrial, marinemarine..

PublicPublic sectorsector oiloil companycompany dominatesdominatesthethe indianindian lubricantlubricant industryindustry byby aamarketmarket shareshare ofof 9090%%-- beforebeforeliberalizationliberalization..

55

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MNCs set up their plant in IndiaMNCs set up their plant in India--Due toDue to

deregulation ( shell, Mobil, Gulf Oil, BP )deregulation ( shell, Mobil, Gulf Oil, BP )

ThreeThree PhasesPhases ofof CILCIL--

SurvivalSurvival PhasePhase--BeforeBefore 19911991

GrowthGrowth PhasePhase--19911991 toto 19961996

CostCost--effectivenesseffectiveness PhasePhase--19971997

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77

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Functional strategiesFunctional strategiesH

SSEH

SSEProduct market and positioningProduct market and positioning

strategystrategy

Procurement policyProcurement policy

Rationalization of distributionRationalization of distribution

systemssystemsResponsive cost management systemResponsive cost management system

Performance management systemPerformance management system88

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HSSEHSSE

Health safety security andHealth safety security and

environmentenvironment

ISO 14000ISO 14000

Social investment programmesSocial investment programmes

Focus on health hygiene educationFocus on health hygiene educationPartnership with 750 droughtPartnership with 750 drought

affected villagesaffected villages99

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Product market andProduct market and

positioning strategypositioning strategy

The customer, the serviceThe customer, the service

organization and the individualorganization and the individual

service provider.service provider.

BP communication strategyBP communication strategy-- savingssavingsof diesel.of diesel.

1010

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Product market andProduct market and

positioning strategypositioning strategy

Mass media , direct consumerMass media , direct consumer

contact, BP health mediacontact, BP health media-- aimed ataimed atreaching 250000 customers.reaching 250000 customers.

1111

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Procurement policy: criticalityProcurement policy: criticality

and scaleof

spendingand scaleof

spending

Managerelationships

base oil

Partnershipsand profitsharing

outsource Do deals

1212

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Rationalization ofdistributionRationalization ofdistribution

systemssystemsInnovative workshopsInnovative workshops

Assurance and satisfaction to theAssurance and satisfaction to the

involved automotive customersinvolved automotive customers

Programme to make customerProgramme to make customer

management process best in themanagement process best in theworldworld

1313

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Responsive costResponsive cost

management systemmanagement systemDone through cultural change fromDone through cultural change from

chasing production volume targets tochasing production volume targets todeveloping competitiveness through totaldeveloping competitiveness through total

quality management, business processquality management, business process

reengineering, and a change in mindset.reengineering, and a change in mindset.

1414

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11stst PhasePhase -- Survival PhaseSurvival Phase

Manage within the limitedManage within the limited

availability of resources.availability of resources.

Company unable to invest or earnCompany unable to invest or earn

money.money.

Under investment and underUnder investment and underutilization of plant capacity.utilization of plant capacity.

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22ndnd PhasePhase-- GrowthGrowth

PhasePhaseThe strategic thrust on creatingThe strategic thrust on creating

capacity, modernizing infrastructure,capacity, modernizing infrastructure,improving quality and hiring people toimproving quality and hiring people to

manage change.manage change.

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33rdrd PhasePhase-- Cost effectiveCost effective

PhasePhase

The supply chain in CIL geared to makeThe supply chain in CIL geared to make

this whole change happen. i.e., thethis whole change happen. i.e., thestructure was changed.structure was changed.

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How organizations goHow organizations go

international..?international..?Global sourcingGlobal sourcing

Licensing or franchisingLicensing or franchising

Strategic alliancesStrategic alliances

Importing or exporting ( adopted byImporting or exporting ( adopted by

lubricant industry in 2003)lubricant industry in 2003)

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Management byManagement by

objectivesobjectivesMBO programs have 4 elements:MBO programs have 4 elements:

goal specificity, participativegoal specificity, participativedecision making, an explicit timedecision making, an explicit time

period and performance feedback.period and performance feedback.

Castrol followed MBO as it hadCastrol followed MBO as it hadobjectivityobjectivity..

1919

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PLANPLAN

They should also concern about costThey should also concern about costefficiency and cost effectiveness.efficiency and cost effectiveness.

ACTIONACTIONThe major focus of CIL should be onThe major focus of CIL should be on

the value of the market rather thanthe value of the market rather than

on the volume of the market.on the volume of the market.They should make supply chain moreThey should make supply chain more

effective by focusing on chasingeffective by focusing on chasinggrowth to cost effectiveness.growth to cost effectiveness.

2020