An Evaluation Of The Distribution Strategies For The Marketing Of Petroleum

Project and Seminar Material for Marketing

Abstract

This research was motivated to apprise the evaluation of distribution strategies adopted by Oando Plc for the marketing of petroleum product. There was a problem of the tendency of distribution of those petroleum product to the Northern and Southern which effect to a scarcity of the product in other areas of the country. On the contrary to the problems of this research work, an objective came to be as to ascertain whether there is an effective and efficient distribution of petroleum products, all round the country. The research looked at the relationship between the distribution and the relationship between the distribution strategies and the availability of petroleum products for public use and to find out if there were other factors other than poor distribution strategies responsible for these scare products.

The population of this study were the management staff of OANDO PLC petroleum products Ltd and the company’s distributors in Kaduna South metropolis. The researcher collected data from both Primary and Secondary source. Meanwhile, Pilot survey was carried out among nine distributors in Kaduna South, eight of the distributors responded positively to the concerned questionnaires given to them while only one of them responded negatively. Topman’s formular was used to determine the sample size of (150) questionnaires used. Out of which 30 questionnaires were given to management staff of OANDO PLC Petroleum Products Ltd, 25 completed and 120 questionnaires were given to OANDO PLC distributors, 92 questionnaires completed. Stratified sampling technique was used for larger sample of the study. The research instrument was tested for validity and reliability using test retest approach in order to ensuring that the research instrument is error free and capable of measuring what it suppose to measure.

The statistical technique used to test the hypothesis was chi-square at 5% level of significance. The hypotheses were tested to know whether they are researchable or not. Table and percentages was equally used to summarize data collected and the option with highest score was favoured. At the end of the study, the researcher was able to make some findings and recommended among others that the management of OANDO PLC Petroleum Products Ltd should intensify their production activities / capacity by ensuring availability of products at every Depot. Most especially for OANDO PLC crown super 1litre that normally involve rationing, Strengthening of channel of distribution and motivation of production and field sales personnel so that product can be made available to customers as at when needed. Knowingfully well that decision on the choice of distribution channel is one of the cogent and sensitive issues steering at management in recent times.

Chapter One

Introduction

This chapter consists of details of the topic under research. Here the background of the study, statement of the problem, objectives and significance of the study will be revealed along with research question so as to enable the researcher know what the research work is all about.

1.1 Background of the Study

As a result of petroleum products being the major exporting product among others, of our country. Our country solely depends on it as the highest percentage revenue on the overall percentage of the total exportation products or items.

In the 1979s after the civil war, Nigerians have Agricultural products as the dependent product in both domestic and international uses. But today due to greater lucrative of this product all over the world, abandoned the former for the latter.

As the uses is universal, the extractive regions which are at South east and south west encountered a difficult impact to be supplied or distribute to various areas of other regions of the country, due to mainly mismanagement and other opposing factors. The transportation of this extracting products from the originated area to the refinery was a great problem in the country, because of its form bulky and channel of distribution. The government them employed foreign bodies to refine this product in order to reach to the hook and of the country. The refinery built and managed by government admitted a foreign firm to have a part in the refinery for the bases of their services as regards to importation. Still not adequate as the dealer divert this product to their own perspective regions where they expect to dispose it in a high value.

At times, this petroleum products ie fuel, kerosene, diesel, bitumen to mention but few do change totally the generic colour used to it to another unpredicted colour thereby caused a harm to human body. These dealers were formerly the staffs of one firm and another for years, left their various perspective offices for the marketing of these products thereby formed one organization and another to impose the prices on this products. The region that is basically not interested in the use of this product by their majority because of their belief or customs has low cost and optimal quantities than other regions.

From the facts, it becomes clear that if the left cream of the nation is to be feasible accordingly, a great percentage or rate of the standard of living would have been a something of smile to the populace.

Oando Profile

Oando’s earliest roots can be traced to the formation of ESSO Africa in 1956. ESSO Africa was a petroleum marketing company, a subsidiary of the Exxon Corporation on U.S.A. In 1976, the Nigerian government purchased a controlling stake in the company and rebranded the company as Unipetrol Nigeria. On 1st March 1991, Unipetrol became a Public Limited Company, later on in the same year, the Nigerian government sold 60% equity to the Nigerian Public in an initial public offering. By February 1992, Unipetrol was listed on the Nigerian Stock Exchange.

In 1999, Unipetrol acquired a 40% stake in Gaslink Nigeria Limited, a gas utility company. The acquisition was motivated by a desire to utilize its excusive gas sale and purchase agreement with the Nigerian gas company. In 2001, the company increased its stake to 51 percent.

In 2000, ocean and oil, a private investment company led by Nigerian entrepreneurs, Adewale Tinulu and Omamofe Boyo acquired a 30% controlling interest in Unipetrol Plc. In 2001, Ocean and Oil increased its stake in Unipetrol to 42% via on irredeemable convertible loan stock issue.

In 2002, Ocean and Oil led Unipetrol’s bid for a 60% stake of Agip Nigeria Plc, a rival petroleum marketing firm, owned by Agip petroli BV, an Italian-based oil company. The merged company was named Oando Plc in 2003, making the company the largest downstream petroleum marketing company in Nigeria.

In 2005, Oando Energy services was incorporated as an integrated oilfiled services company to achieve the groups objectives in the upstream services industry. In 2007, Oando Energy services acquired two oil drilling rigs in Nigeria’s Niger Delta. In 2008, the company emerged Nigeria’s first indigenous oil company with interest in producing deep water assets through the acquisition of equity in two oil blocs. By 2009, the company had acquired 5 swamps rigs and in 2010, the company launched its first independent power plant for the Lagos water corporation. The project involved the construction of a 12.5mul power plant to provide uninterrupted power supply to the Lagos water corporation.

History and Business of the Company (Oando)

The company commenced business operations as a petroleum marketing company in Nigeria in 1956 under the name of “ESSO” West Africa Incorporated” a subsidiary of Exxon Corporation of the United State of America. In 1969, the company was incorporated as ESSO standard Nigeria Limited, and in 1976, the Nigerian Government acquired all of ESSO’s shareholding interest, thereby fully indigenizing the company whose name was subsequently changed to unipetrol Nigeria limited. It become a public limited liability company in 1991, when the federal government divested 60% of its shareholding to the general public, and was quoted on the Nigerian stock Exchange in February 1992. In 2000, the federal government divested its remaining N0% shareholding in the company, 30% of which was acquired by ocean and oil investment limited whilst the balance of 10% was taking by the Nigerian public.

In 2002, the company acquired Agip Petroli International BV’s 60% shareholding in Agip Nigeria Plc (Agip) and subsequently merged with Agip to become the second largegst player in the downstream petroleum marketing industry. In December 2003, the company announced the launch of “Oando Plc” its new corporate identity to signify the creation of a proudly West Africa brand. The new corporate identify and branding exercise portrays the values and brand essence of the company service excellence, performance – driven, dynamic and progressive, consistent quality experience and proudly West African.

1.2 Statement of the Problem

Petroleum products have a numerous problems on marketing on its distribution, it is the only and major exporting product of our country, which is disposed in a high rate to another country thereby expect the citizening to do the same the tendency of distribution strategy to the Northern and Southern regions of the country is much more sufficient than other regions, which causes scarcity of the product in these areas. Some quantities of these products are being diversified to other different stations for a tremendous income, impact on hoarding which reveals the control is not effective.

Many of the distribution channels are being vandalized by unscrupulous individuals in the area which stagnantly affects its distribution and transportation. Moreover, there is weights and measures on the quantities of this petroleum products making the dealers to have different prices of disposing this product in their various areas. Finally, the Boards that deals on the marketing of this petroleum products (NUPENG, PENGASIN, etc) do impose some requisitions from the federal government which may not come forth, affect its distributions.

1.3 Objectives of the Study

To determine the quality of OANDO PLC lubricants from Management perspective.
To assess the effect of high cost of transportation on the company’s distribution activities
To determine the impact of poor road network on the company distribution strategies.
To determine the availability of OANDO PLC products from customers perspective.
To assess the effect of government policy on the company distribution strategies.
To assess the effect of environmental factors (season) on the company’s distribution strategies.

1.4 Research Questions

What is the quality of OANDO PLC lubricants from Management perspective?
What is the effect of high cost of transportation on the company’s distribution activities?
What is the impact of poor road network on the company distribution strategies?
What is the availability of OANDO PLC products from customers perspective?
What is the effect of government policy on the company distribution strategies?
What is the effect of environmental factors (season) on the company’s distribution strategies?

1.5 Hypothesis Formulation

Ho: The quality of OANDO PLC lubricants does not significantly affect its demand.
Hi: The quality of OANDO PLC lubricants significantly affects its demand
Ho: Cost of transportation does not significantly affect the price of OANDO PLC lubricants.
Hi: Cost of transportation significantly affect the price of OANDO PLC lubricants.

1.6 Significance of the Study

This research work is very crucial for the management of OANDO PLC Petroleum products Ltd as it will make management to device means of cutting down cost on distribution activities in order to make reasonable profits.
It will serve as a knowledge base for management to employ.
It will enable the management to provide consumers with the right products at the right time, right place and at the right price which result to a substantial percentage of sales for the company.
Finally, it will serve as a blue print of action guide to infant companies and as a compendium of knowledge for further research work in logistics/distribution channel management of indigenous and multinational companies in the oil and gas industry (FMCG).

1.7 Scope of Study

In this study, the researcher examine clearly on how OANDO PLC Petroleum product Ltd; A lubricant manufacturing company distribute its products to her numerous customers, so as to assess the effectiveness of the distribution strategies used by the firm in distributing its manufactured lubricating oil in Kaduna South.

However, the management staff of the company and their distributors in Kaduna South is mainly used in this research work.

1.8 Limitations of the Study

Time factor is the major constraint of this research work. This research work was made in a comprehensive way in order to meet the aspirations of people interested in the field for further studies though time could not permit me to go further.

Inability to provide and unveil top management exclusive sales policy and strategy in respect of the subject matter under consideration. Moreover, the competition in the market makes the respondents to be skeptic to the questions, its implications or the actual purpose of the study not cleared to them because of their level of education and exposure.

Financial factor is another constraint to this intensive research work. The extra cost of running around to different locations, academic and non-academic institutions couple with my inability to assess some relevant but encrypted sites online due to high cost of online registration.

1.9 Definition of Terms

Distribution:

This is the process of planning, implementing and controlling the physical flow of materials, final goods and related information from point of origin to points of consumption to meet customer requirements at a profit.

Distribution Strategy:

This is the efficient channel arrangements that may be used to make goods and services available to consumers by deciding on which intermediaries and marketing channel structures to be selected to move products in the most competitive and efficient manner to satisfy customer’s needs and wants.

Distribution Channel:

This is a set of firms and individuals that take titles in transferring titles to a particular goods as it moves from the point of production to the points of consumption.

Distribution Centre:

This is a large, highly automated warehouse designed to receive goods from various plants and suppliers take orders.

Product:

This is anything of value offered to a market for attention, acquisition and consumption that may satisfy needs.

Customer:

This is the bonifide buyer of a product that makes repeat purchase from time to time.

Consumer:

Individuals who purchase for personal or domestic consumption.

Marketing:

Marketing is the business process of creating relationships with and satisfying customers.

Chapter Five

Summary of Findings, Recommendation and Conclusion

5.1 Introduction

This chapter is based on the analysis and interpretation given in chapter four. Sequel to presentation of data, a lot of observations and findings emerged from the study but will be summarized for easy assessment at a glance for the purpose of recommendation and conclusion thereafter.

5.2 Summary of Findings

Based on the analysis and interpretation of data in chapter 4 of this research work, the following findings were made:

It was ascertained that OANDO PLC petroleum products Limited was a licensed manufacturing outfit meant for the production and marketing of OANDO PLC lubricants to its numerous customers in the country for the servicing of motor engine, motorcycle engine, heavy duty engine, generators etc. Its channel of distribution starts from the Factory -> Depot -> Distributors -> Sub-Distributors -> Final Consumers.
It was discovered that the quality of OANDO PLC oil was very good when compared to the competing products of Tonimas oil, Ammasco oil, Dossy flow oil and Lubcon oil. Moreover, it was certified by the American Petroleum Institute (API), Standard Organization of Nigeria (SON) and Society of Automotive Engineers(SAE) and other regulating bodies.
The researcher discovered that the cost of transportation significantly affect the price of OANDO PLC lubricant because the firm bears the cost of transportation right from the source of raw materials (additives) to the point of delivery to distributor warehouse.
It was discovered that most of the customers enjoy the availability of OANDO PLC lubricants. This easy accessibility to OANDO PLC products was a good strategy of increasing the company’s market share and its presence in the market place.
The researcher discovered that bad road network significantly affect the demand of OANDO PLC lubricants in Kaduna South metropolis because some of the customers cum potential customers that suppose to buy from Kaduna South moved to other neighboring towns like Port Harcourt, Uyo, Owerri to buy due to the bad road network currently experiencing in Kaduna South.
From the management perspective, it was discovered that government policies adversely affect the company distribution activities. In most cases, government requires firms to pay certain levies, obtain emblems, daily ticket, yearly certificate (National/State) before such company can experience effective Marketing in an area / locality without molestation. This is a big hurdle to business growth and development of Nigerian economy.
Finally, it was discovered of recent that environmental factors like high level of social menace and upheaval in Kaduna South metropolis significantly affect the demand of OANDO PLC lubricants in the area because some of the distributors are relocating to a more secured and conducive neighboring towns. Another determinant is the climatic factors like the raining season; during this period there is decline in sales of lubricants.

5.3 Recommendations

Since OANDO PLC petroleum products Limited was licensed manufacturing outfit fpr the production and marketing of lubricants in the Nigeria market there is need for its expansion internationally. The chairman and the management should start thinking of converting the firm from what I regarded as indigenous national company (entrepreneur) to a multinational public limited liability company. Its intense outlook should go beyond the nation most especially as it has been certified by various regulating bodies both locally and internationally like the Standard Organization of Nigeria and American Petroleum Institute respectively. Moreover, as a player in the oil and gas industry, the firm should fully diversify into the establishment of filling stations in major cities and acquiring oil well in Nigeria and beyond.
It is true that the quality of OANDO PLC oil was certified as very good when compared to the competing Products of Tonimas oil, Ammasco oil, Dossy Flow oil andLubcon oil during the course of this research work but what happens when compared to the BIG 8 (Mobil, Total, Texaco, Oando, AP, Conoiletc). Therefore, management should not relax in there quest for top brands and higher quality products that are capable of competing internationally. These products in question should be outstanding and unique in its features and marketing mix arrangement. This will enable the management of the firm to curtail the pressure and problem of brand switching in the market among the consumers couple with the rapid proliferation of technologies nowadays.
In order to cut-down cost on transportation, themanagement should at times supply directly to distributors warehouse with the consent of the depot manager after due confirmation of its payment instrument / balance as the case may be. This will help to minimize cost.
Since it has been discovered that most of the customers enjoy the availability of A – Z lubricants, effort should be made to ensuring continuity of supply and that the distribution channels have easy access to the company’s products as at when needed. This will help to reduce the tendency for product switching among the consumers or diversification of money by the distributors to other firms. In the same vein, improvement of policy on Product availability is very crucial as this will help to enhance the market share of OANDO PLC, promote product intensity and acceptability in the market.
Since bad road network adversely affect the demand Of OANDO PLC oil, the management of the company through its numerous direct and indirect agencies, Business Associates, Clubs, Associations, government representatives should join the masses in their quest for good road network in Nigeria for social and economic development of Nigerian business. This will help to boost demand in Kaduna South metropolis.
Since government policy affect demand of OANDO PLC Lubricants, management should device means of negotiating properly with government or its agents for smooth and efficient marketing. Moreover, this will help the company sales force to avoid molestation by the government task force which may dent the corporate image of the firm and generate de-marketing if care is not taken. Meanwhile, government policy should be drawn in such a way that will suit the economy at hand and favor existing or potential firms.
Since the environmental factors are becoming higher each day in Kaduna South and some other places, the firm business is affected evident in its low turnover, the firm should stand out among others/public to say NO to the social and economic menace. This will help to define the stand point of the firm and goodwill restored for increase turnover.
Finally, the management of the firm should strive to stabilize prices of various products at least to a reasonable time with the aid of effective management of pricing functions and general improvement on pricing policy of OANDO PLC petroleum products limited. Moreover, there is need for line managers in the company especially in marketing related areas to reappraise the company, adopt more strategies through periodic research and adequate human resources development of field sales men.

5.4 Conclusion

This study has generated an exciting package on the assessment of the distribution strategy of OANDO PLC petroleum products Ltd. The researcher collected relevant data, analyze, and interpret the data, summarize its finding and recommend to the management how to sustain, maintain and improve the market share of the company and better ways of strengthening its distribution strategy.

It is pertinent to appraise and reappraise corporate distribution strategy/objectives and ensuring that organizational activities are not deviated from the attainment of goals. The researcher hope that the firm will continue to sustain its prevent levels of operations in distributing its products and even surpass it in the interest of the future.

Finally, the researcher is of the view that if the recommendations are judiciously looked into and implemented by the management of the firm it will go a long way towards improving company’s physical distribution activities, performance of field sales managers and other researchers that will like to study more on this work.

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