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Ahmed Raza Qadri

BUSINESS STRATEGY [Link]
The Millennium University College

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BUSINESS STRATEGY

PART-A

INTRO OF COMPANY

12 As the government combined PNO and Dawood Petroleum Limited, we were traveling under the
name Premier Oil Company Limited (POCL). After POCL and SOCL merged in 1976, we
eventually changed our name to Pakistan State Oil (PSO). Learn about the path we took to
become Pakistan's biggest energy company. Presently, we are referred to as the PSO Group,
which owns 63.6% of Pakistan Refinery Limited (PRL) and has significant holdings in Pakistani
related companies (PSO marketing team, 2024). The biggest energy provider in Pakistan, PSO,
2 has a vast nationwide network that includes 3,528 retail locations, 9 installations, 19 depots,
refueling stations at 14 airports, and activities at two seaports. PSO has the nation's greatest
storage capacity, with 1.14 million tons (PSO marketing team, 2024).

2 Mission

To leverage our strengths to grow, diversify, and build value (PSO marketing team, 2024). It
means that using its current capabilities to continue its growth, diversify its business portfolio,
and generate long-term value is a key component of PSO's mission statement. PSO hopes to
increase operations, penetrate new markets, and lower risks by leveraging its resources and
experience, all while improving profitability and boosting the overall economy. Building long-
term value for its stakeholders is the ultimate objective.

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8 Vision

We enrich lives around the world just as we do in our country (PSO marketing team, 2024)PSO's
vision highlights the organization's dedication to improving lives locally and worldwide. PSO
continues its efforts to provide value and change the world by improving the lives of people in its
own Pakistan. This demonstrates the company's goal to use its services, goods, and sustainable
business practices to improve communities all over the world.

Values

PSO's core values are Innovation, Integrity, Teamwork, Inclusive Leadership, and Caring and
Giving (PSO marketing team, 2024). The company's constant improvement and adaptation are
fueled by innovation. Honesty and openness in all dealings are guaranteed by integrity. The
focus of teamwork is on cooperation and group achievement. Diversity and empowerment in
decision-making are encouraged by inclusive leadership. PSO's emphasis on community support
and social responsibility is shown in Caring and Giving. These principles help the business
achieve positive impact and long-term growth.

Core Competencies

15 To improve its operational excellence and market leadership, Pakistan State Oil (PSO)
concentrates on a number of core skills. Human capital development, which encompasses
organizational growth, training, and talent acquisition to guarantee a trained workforce. This is
reinforced by a Core Competency Framework designed to match employee competencies with
the strategic goals of the organization (PSO Team, 2016). By creating a Project Support Office
(PSO), which acts as a center of excellence for project management and offers direction,
training, and support to guarantee successful project execution, PSO unifies project management
expertise throughout its activities (Bolles, 1998).

Macro Analysis

Pestle Analysis

Political

Due to changes in global oil prices, PSO must keep a 28-day inventory, which comes at a
considerable expense. Because of solid government regulations and mandated marketing margins
a 3.5% margin on regulated products Pakistan's oil marketing industry faces less risk. All
subsidies are funded by the government. Furthermore, taxes such as excise duty, general sales
tax, and development tax apply to petroleum goods in Pakistan. Depending on the government's

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income requirements and efforts to maintain domestic prices, the Petroleum Development Levy
on goods like gasoline and diesel varies; when oil prices rise, the PDL falls (Asad Mazhar, 2011)

Economical

Crude oil is essential to Pakistan's expanding economy, which calls for an expanding energy
supply. Petroleum product use has increased dramatically due to two primary sectors.

Industrial Sector

Government measures encouraging investment and lowering dependency on imports have fueled
industrial growth, which has increased demand for petroleum.

Transport Sector

The demand for petroleum products, particularly high-speed diesel, has significantly increased as
a result of trade and economic growth as well as better logistics infrastructure.

Social

Over the past five years, Pakistan's standard of living has significantly increased; nonetheless,
the cost of living has increased due to improved economic conditions. Softer bank lending terms,
an ongoing flow of domestic remittances, and the easy access to auto finance programs have all
contributed to the rise in demand for car purchases.

Technological

There is now a lot of competition in the energy business due to new technical advancements. To
become more cost-effective and offer the same value as others, every company is stealing
technology from the others. Using technology during a transaction helps to prevent oil theft and
track logistics.

Legal

The industry faces a high threat of entrance as a result of deregulation. The government gives
businesses three years to build infrastructure if they receive a license.

Environmental

PSO is under pressure from the environment to follow rules, cut emissions, and implement
sustainable practices. Initiatives to combat climate change and move toward renewable energy
have put pressure on PSO to innovate and reduce its environmental effect.

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SWOT Analysis

Strengths

A 70% market share, a solid reputation in the industry, and excellent product quality particularly
for industrial needs are some of PSO's advantages. 81% of the nation's retail sector is served by
its vast distribution network, and services like plastic cards offer value. While innovations like
Auto Car Wash set PSO apart from rivals, promotional efforts increase brand recognition. PSO's
market position is improved by its technical fleet management competence, visionary leadership,
and 80% of the nation's storage capacity (alinawazkhan, 2010).

Weakness

Among PSO's shortcomings are dissatisfied and lost clients, which give the impression that the
company is ineffective. Its market appeal is limited by its outdated retail locations, which cannot
compete with those of Shell, Caltex, or Total. Customer satisfaction is further impacted by
ineffective service provided by untrained employees at these establishments. Additionally, the
company's reputation is impacted by its weak quality assurance procedures, which make it
difficult to project a constant picture of "Quality & Quantity."

Opportunity

PSO has a number of important prospects in the future. Oil Marketing Companies (OMCs) in
Pakistan have a great chance to expand into the Afghan market. Furthermore, PSO has an
opportunity to rectify shortcomings in certain petrochemical market segments as a result of the
liberalization of Pakistan's oil industry. Another possible development path for black oil products
is exporting, however the emergence of gas oil is posing difficulties for this industry.
Additionally, the expansion of Pakistan's industry and trade raises demand for oil products. PSO
is also making the most of its earnings from the electricity industry, which is one of its biggest
clients.

Threats

PSO is threatened by a number of serious factors. The forward integration of suppliers, like
PARCO, which joined the OMC market through a collaboration with TOTAL and will put PSO
and other OMCs in competition, is one significant concern. Furthermore, the industrial sector's
technological diversity is a danger as new technologies are causing the market for some POL
products to drop. PSO's market share is seriously threatened by the availability of alternatives in
6 the black oil market, which also adds to the drop in the use of black oil products.

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6 Porter’s Five Forces:

Threat of New Entrants

The threat of new entrants in the oil industry is low due to high barriers to entry. While niche
segments like lubricants and fuel oil offer opportunities, established players like PSO dominate
the market. New competitors, such as Total and Parco, have entered through joint ventures,
leveraging existing infrastructure. However, the significant costs involved make it difficult for
newcomers to compete with established brands (Asad Mazhar, n.d.).

Bargaining Power of Buyers

7 Customers have little bargaining power. Buyers cannot compete with the industry by lowering
7 prices, requesting more services or better quality, or pitting rivals against one another at the
expense of industry profits. To satisfy the needs of cutting-edge technology, industrial clients are
requesting higher-quality, more effective goods. Consumers like reasonably priced goods with a
track record of dependability and effectiveness. In terms of technical support, they also seek out
superior after-sales care.

Threat of Substitutes

5 There is a moderate to low risk of substitution. Products that are produced by profitable
industries or that are subject to developments that improve their price-performance tradeoff with
the industry's product are the substitutes that need the greatest attention. In the second scenario,
replacements frequently enter the market quickly if a breakthrough boosts industry rivalry and
results in lower prices or better performance.
The following considerations are related to the danger posed by substitutes:
The majority of power sector customers are moving from heavy furnace oil and diesel to natural
gas. One of the biggest risks to OMCs' operations is this tendency. Another alternative to furnace
oil, which is increasingly being used as a source of energy, is coal. Pakland Cement Ltd is a
recent example.

Bargaining Power of Supplier

The supplier has a lot of negotiating power. The industry benefits from this. The rationale is that
3 suppliers have the ability to influence industry participants through price increases or lower-
3 quality goods and services. Strong suppliers might thereby reduce an industry's profitability if it
is unable to recoup cost increases in its own rates. Since there aren't many suppliers, they have
complete control on the availability and supplies of raw materials. The following criteria are
related to the supplier's threat:
Businesses look for alternative sources to meet their needs for packaging components.
In addition to reducing the suppliers' negotiating power, this encourages healthy competition

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amongst them. In the end, this lowers packing expenses. Base oils are produced in refineries.
Both domestic and international refineries are included in this.

Rivalry among Existing Competitors

There is a relatively high threat from competitors. Although the product is not unique, it has a
1 recognizable and well-established brand. Since government organizations are now receiving oil
supplies from PSO on a credit basis, they will be the only ones with switching costs. Other
1 suppliers, however, could agree to supply oil to PSO on a credit basis as well because
government is a risk-free institution. Although Caltex and Total are not doing enough to threaten
these two formidable rivals, PSO and Shell are employing highly aggressive tactics to increase
their market share. PSO has a significant portion of the market, whereas Shell and Caltex are the
competitors and followers, respectively. Although Total might pose a challenge in the future, its
current position in the market is not very important.

Internal Environment and Capabilities Analysis

Value Chain Analysis

PSO has a significant role in the value chain for oil and gas. The company has the largest storage
Base in Pakistan and imports a variety of POL products and petrochemicals. Through a robust
nationwide network of retail locations, PSO also distributes and marketing these items to
Millions of retail customers as well as end users in a variety of industries, such as defense,
aviation, railroads, etc (PSO Marketing Team, 2018).

From purchasing to customer service, Pakistan State Oil (PSO) is involved in every step of the
petroleum industry's value chain. PSO gets crude oil and processed products through imports and
local refineries, storing it in key terminals including Keamari and Mehmood Kot. The process
starts with incoming logistics. To guarantee adherence to industry standards, the operations
phase includes fuel mixing, quality monitoring, and refining (via partnerships). In outbound
logistics, PSO supplies power plants, industrial customers, and aircraft with gasoline via a vast
network of more than 3,500 retail stations. Through collaborations with financial institutions,
loyalty programs like the PSO Card, and good branding, the corporation places a major emphasis

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on marketing and sales. Lastly, digital platforms, round-the-clock station assistance, and creative
payment methods all improve customer service.

Mckinsey’s 7S model
10 The alignment of an organization's seven essential components strategy, structure, systems,
shared values, skills, style, and staff can be examined using the McKinsey 7S Framework. Here
is a quick summary of how PSO fits into each component.

Strategy

By streamlining its supply chain, seeking long-term supply agreements, and emphasizing human
resource development, PSO hopes to keep its position as the market leader. Additionally, the
business places a strong emphasis on ethical business practices and regulatory compliance (PSO
Team, 2024).

Structure

To ensure efficient governance, PSO is run by a Board of Management that consists of nine
members including a chairman. The managing director is in charge of day-to-day operations and
puts plans into action that support the goals of the business (Umair Feroze, 2025).

Systems

Mismanagement and antiquated procedures undermined PSO's internal systems, resulting in

financial inefficiencies and a bad public perception. PSO resolved this by putting in place the
SAP ERP system, which allowed for better financial controls, increased operational efficiency,
and real-time data access. The organization has already streamlined procedures through Business
Process Reengineering. All offices were connected by a countrywide wide area network (WAN),
and a business planning and reporting system was implemented to track performance in relation
to SMART goals. Decades-old procedures were replaced with updated guidelines for buying,
authority limitations, and human resources, encouraging uniformity and accountability. To make
sure PSO became a completely system-driven organization, cross-functional teams, structured
response mechanisms, and Total Quality Management systems were also implemented.

Shared Values

PSO lacked well-defined common values before to 2000. Since then, the business has worked
hard to create and instill a solid set of fundamental principles throughout the whole enterprise.
These include quality, customer satisfaction, teamwork, open communication, innovation,
diversity, ethics and integrity, health and safety, and staff development. Employee conduct and
company culture are now guided by these ideals, which are now regarded seriously.

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Style

In place of the previous bureaucratic approach, PSO's management style places an emphasis on
co-operation and teamwork through Cross Functional Teams. Open involvement and distributed
authority promote employee empowerment. All levels of accountability are upheld, and
interactive sessions, emails, bulletins, and video conferences facilitate communication.

Staff

PSO values its workforce as a key asset. Since 2001, it shifted to merit-based hiring, improving
employee quality and increasing female representation. Competitive salaries, a fair performance
system, regular training, and recognition programs keep staff motivated. PSO also promotes a
professional, ethical, and inclusive work environment.

Skills

PSO has started ongoing training initiatives to improve staff competencies, such as WOW
experience-based customer service training for more than 3,500 attendants. University students
may gain practical experience through internship programs, and staff members receive specific
SAP training in important modules including MM, S&D, and HR.

Cost Benefit Analysis

In recent fiscal years, Pakistan State Oil (PSO) has shown impressive financial success. PSO had
a net profit of PKR 15.9 billion for the fiscal year that ended on June 30, 2024, which was a
considerable rise from PKR 5.6 billion for the year before. Improved margins in the white oil
market and a significant increase in other income, which went from PKR 12.6 billion to PKR
25.2 billion, were the main drivers of this gain (PSO Team, 2024).

9 PSO reported a net profit of PKR 11.2 billion for the first half of the fiscal year 2024–25, which
ended on December 31, 2024, continuing this encouraging trend. In a difficult economic climate,
this result highlights the company's tenacity and sound financial management. Notwithstanding
these encouraging numbers, PSO continues to encounter difficulties, most notably the problem of
circular debt. Sui Northern Gas Pipelines Limited owing the business PKR 340 billion of the
PKR 467 billion in receivables as of December 31, 2024. For PSO to maintain its financial
stability, addressing this problem is still of utmost importance.

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BCG Matrix

Energy Products

13 Fuel, JP 1, furnace oil, high-speed diesel, and other energy products are examples. The industry
had a 2.2% increase. PSO's market share in energy products fell from 76% to 65% as a result of
Shell stealing its market share via service and quality improvements.

Non-Energy Products

1 Lubes, greases, motor oil, marine oil, and other non-energy items have grown by around 4% in
the petroleum sector. While the market share of non-energy goods, APL, has decreased from
45.5% to 44.1%, the relative proportion of PSO has increased from 19% to 22% (Asad Mazhar,
2011).

Strategies from BCG MATRIX

To grow its market share, PSO should spend money on non-energy items through advertising
and product promotion. To support the expansion of the agriculture industry, PSO should
increase its retail locations, particularly in rural regions. As the market leader in energy goods,
PSO will profit more than any of its rivals, and the sector will grow more appealing as a result.

Ansoff Matrix

11 The Ansoff Matrix in relation to Pakistan State Oil (PSO), the biggest oil marketing firm in

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11 Pakistan. Through an analysis of product and market parameters, this strategic framework aids in
the identification of growth prospects.

Market Penetration (Existing Products, Existing Markets)

PSO can use a number of tactics to increase its market share in Pakistan:

Loyalty Programs

Launching consumer loyalty programs to promote recurring business.

Aggressive Marketing Campaigns

Promoting consumer interaction and brand recognition via the use of digital and media channels
(PSO Team, 2024).

Competitive Pricing Strategy

Modifying gasoline costs to increase consumer demand while preserving profitability.

Product Development

The organization is demonstrating innovation in the manner it provides its current products by
automating terminals and utilizing digital capabilities. As part of expanding the product offering,
integrating 700 new retail locations into a central management system suggests that service
delivery will be improved (PSO Team, 2023).

Market Development

By opening 22 additional stores in key areas, PSO increased its reach and now has 3,525 retail
locations overall. This demonstrates initiatives to cater to underserved markets or new
geographic regions in Pakistan, hence following a market development strategy (PSO Team,
2023).

Diversification

During the stated time, there is no discernible indication of diversification into new markets or
new goods. However, as part of larger industrial changes, there could be chances in
petrochemicals or renewable energy in the future.

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Resource Based View Using VRIO/VRIN Analysis

Extensive Retail Network

With more than 3,500 stations, PSO runs Pakistan's biggest retail network. Its broad reach
guarantees that its products are widely accessible, which helps explain why it leads the market
(Zomby, 2012).

Vertical Integration

In order to transform crude oil into a variety of final products, PSO has made investments in the
building of refineries. Better quality and pricing control are made possible by this vertical
integration, which also strengthens supply chain control and lessens reliance on imports.

Digital Infrastructure

The business has made investments in connecting retail locations into a centralized management
system and automating important terminals. Customer service is improved, operational
efficiency is increased, and response to market changes is increased because to this digital
transformation.

Brand Reputation & Customer Loyalty Programs

The business has made investments in connecting retail locations into a centralized management
system and automating important terminals. Customer service is improved, operational
efficiency is increased, and response to market changes is increased because to this digital
transformation.

Government Support & Regulatory Access

PSO's strong position in the market is strengthened by advantageous government policies, such
as guaranteed fuel delivery and infrastructural assistance, which it enjoys as a state-owned firm.

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Identification of Competitive advantage

Key tactics have given Pakistan State Oil a competitive edge in the country's energy market.
4 With more than 3,500 locations, it runs the biggest retail network in the nation and provides a
wide range of goods to meet the requirements of both consumers and businesses, such as
14 gasoline, diesel, jet fuel, and LPG. With about 68% of the country's storage capacity, PSO also
leads the way, guaranteeing dependable supply and energy security. The corporation has
improved its reputation by focusing on corporate social responsibility and diversifying into LNG
to meet energy concerns. PSO's market domination is further reinforced by its dominance in
industries like aviation fuel, where it has a 99.1% market share. PSO maintains its position as
Pakistan's leading energy provider because to innovation, infrastructure, and moral business
practices (PSO Team, 2023).

Strategic and Tactical Objectives

To strengthen its industry leadership, PSO focuses on promoting low-carbon fuels, ensuring HSE
compliance, and optimizing its supply chain. It invests in CSR, employee development, and
maintains ethical operations, while pursuing growth through market leadership, diversification,
and upstream synergies (Pso Team, 2024). PSO wants to increase its market share, make
investments in cleaner energy, improve digital operations, train its employees, and guarantee
long-term financial and environmental success over the next three to five years.

To increase efficiency, PSO is renovating convenience shops, growing its retail network, and
implementing cutting-edge technologies like Dispensing Unit Controllers. In order to support
future mobility, it is also collaborating with Pakistan Railways to provide refueling services,
expand storage capacity, and investigate EV charging stations further solidifying its position as a
pioneer in the energy industry. (Urdu Point Team, 2025).

Blue ocean vs Red ocean strategy

PSO works in extremely competitive marketplaces in the Red Ocean, where there is little room
for differentiation and intense competition. Important items in this category include

Red Ocean Strategy

Motor Gasoline and High-Speed Diesel

In the white oil sector, where PSO has a substantial market share, these are key products. With
more than 3,500 locations around the country, the firm has concentrated on growing its retail
network in order to increase accessibility and draw in more clients. To enhance customer
satisfaction and brand loyalty, PSO has also launched cutting-edge services including loyalty
programs and mobile quality testing units.

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Lubricants

PSO's lubricating products are up against fierce competition in a mature sector. PSO has made
4 investments in production facilities and provides a variety of goods to meet the demands of
different customers in order to preserve its position. To maintain its market share, the business
keeps concentrating on distribution and quality (Marketing Team, 2024)

Blue Ocean Strategy

PSO aims to establish new, less competitive market niches in the Blue Ocean by emphasizing
uniqueness and innovation. Among the noteworthy initiatives are:

Liquefied Natural Gas

PSO has entered the LNG market in response to the rising need for greener energy sources. This
calculated action seeks to establish PSO as a progressive energy supplier by serving the power,
residential, and industrial sectors (Marketing Team, 2024).

Electric Vehicle Charging Infrastructure

In anticipation of the eventual transition to electric mobility, PSO is investigating the

construction of EV charging stations. PSO hopes to be a major force in the developing EV
industry by making this infrastructural investment, which will be in line with worldwide
sustainability trends.

Evaluation of Strategic Directions

The strategy path that Pakistan State Oil (PSO) is following is centered on innovation,
sustainability, and market leadership. Investing in LNG and EV infrastructure, increasing storage
capacity, and growing its retail network are among of its main initiatives. Long-term growth is
supported by these actions, but obstacles including circular debt, legal concerns, and the
requirement for digital transformation still exist. For PSO to remain resilient and competitive in
the future, these issues must be resolved (PSO, 2025).

Strategies for Sustained Competitive Advantage and Market Position

Through strategic measures including growing its retail and storage network, investing in LNG
and EV infrastructure, and improving supply chain efficiency, PSO continues to hold its market
leadership. Sustained competitive advantage is ensured by cutting-edge technology like
Dispensing Unit Controllers and robust CSR initiatives, which also increase consumer trust and
brand reputation (PSO, 2025).

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Recommended Growth Strategies

By concentrating on diversifying into renewable energy, especially through its PSO Renewable
Energy subsidiary, which is already making progress in solar power projects, PSO can safeguard
its future and increase its market leadership. In order to enhance customer service, PSO should
also extend its retail network with digital technology and speed up digital transformation,
particularly in finance through its Cerisma subsidiary. Fuel distribution and operating efficiency
will be improved by increasing storage capacity and strengthening the supply network. Lastly,
PSO's position in alternative energy will be strengthened and energy shortages will be addressed
by expanding investment in LNG infrastructure (PSO Team, 2024).

Emerging trends and opportunities in the industry

1 In order to improve its market position and financial stability, PSO is continuously pursuing new
developments and possibilities in the energy industry. Starting with a solar power plant in
Shikarpur, PSO is moving forward with renewable energy through its subsidiary, PSO
Renewable Energy (Pvt.) Ltd., helping Pakistan achieve its target of 30% renewable energy by
2030 (Salman Siddiqui, 2023). PSO is adopting AI technologies to boost operational efficiency,
optimize its supply chain, and enhance customer service (BR Web Desk, 2024). These programs
establish PSO as a pioneer in Pakistan for creative and sustainable energy solutions.

Conclusion

2 Pakistan State Oil (PSO) is the country's top energy supplier, with the biggest storage capacity,
more than 3,500 retail outlets, and a significant market presence. Its position in the cutthroat
energy industry has been cemented by its emphasis on innovation, customer happiness, and
operational excellence. With a concentration on essential products like gasoline, diesel, and
lubricants, PSO controls Pakistan's competitive energy market. It keeps its competitive
advantage by making investments in technology, infrastructure, and client loyalty. In an effort to
diversify and promote sustainability, PSO is also investigating Blue Ocean initiatives like LNG
and EV charging. It needs to tackle issues like digital transformation and circular debt in order to
guarantee long-term growth. PSO is well-positioned to dominate the energy industry and support
Pakistan's economic expansion with sustained innovation and investment in renewable energy. In
summary, PSO's flexibility, emphasis on innovation, and foray into new technologies and
renewable energy will be essential to preserving its position as a market leader in a cutthroat and
sustainable energy sector.

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Summary of VRIO Analysis of Pakistan State Oil (PSO)

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