Petronas, which is short for Petroliam Nasional Berhad, is one of the most profitable companies in Malaysia. The company is ranked among the largest corporations in the world on the Fortune 500 and is one of the most profitable businesses in Asia. Petronas was established in 1974 and is Malaysia’s fully integrated oil and gas company. Unlike other some countries where private individuals run the oil and gas companies, in Malaysia, the government (sole owner of Petronas), used its power and took control of the country’s natural resources. Since its inception, the company has grown and developed into a large multinational corporation that produces a variety of petroleum products. For Petronas, the sky has always been the limit and with its numerous deals and contracts overseas, the company will continue to grow and spread its wings even further. Oil is a profitable business and corporations make a lot of money. However, it takes shrewd management as well as an eye for potential million or billion dollar investments to climb to the level of Petronas. The company’s influence domestically and regionally is colossal but looking into its recent developments, one gathers that the growth limit for the enterprise is still on the horizon.
As already stated, Petronas is an integrated company that currently has business interests and investments in more than 30 countries. The Petronas group is large and continues to grow yearly. Currently, the organization is made up of more than 100 fully owned subsidiaries; it is also associated with more than 50 companies and also co-owns around 20 companies. This group is indeed powerful and has earned respect in the oil industry. The primary focus of the company is petroleum, but its scale of operation is indeed huge. Aside from the usual downstream activities of oil companies (refining of crude oil and processing of natural gas), the group is also involved in upstream activities which mainly entails exploration and drilling activities. Petronas also does marketing and distribution of petroleum products, property investment, transmission of oil and gas via pipeline, and petrochemical manufacturing through its integrated producer Petronas Chemicals Group. The group is bent on conquering the whole of Asia and spreading its investment ideas far and wide. The Malaysian government understands the importance of the company, and it is no surprise that it is a national pride. With its vast amount of revenue, the company contributes a significant amount towards the state’s budget. For a state-owned company, Petronas has indeed surpassed the expectations and the barriers that often plague state-owned corporations.
A company’s or a business’s success is highly dependent on a fluid supply chain. The supply chain should not have the many bumps or the many hurdles that often plague supply chains. Customers should always have access to a company’s products. This fluidity goes a long way in determining the success of business. Efficiency should not be a gamble, or else returns will dwindle.
Marketing and retail activities are a part of the supply chain, and good managers understand their importance. The American Marketing Association (1985) defined marketing as "the process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organization goals." Marketing helps to make the final exchanges of money and property or services possible with the output being profited on the part of the business and satisfaction on the part of the customers. Promotion is an essential element of that and if executed well can ensure high returns for the business. It is a part of the supply chain that provides that a company can disseminate its products to its potential customers. The role of marketing in the supply chain should not be downplayed because as is always the case, it helps to integrate different processes within the supply chain. The influence of marketing can also be seen in the various collaborations that it helps to broker between the different business' stakeholders.
First of all, marketing aids in streamlining communication between the various sections or in Petronas’ case the different entities of the group. Knowledge sharing is indeed of the essence, and an organization that has mastered the art of sharing information smoothly is often efficient in the execution of its activities. Through marketing, customers can provide feedback to organizations, and this helps to maintain a good relationship with the product developers who will always understand what their customers expect from them. The different entities in a business process should always know the thought of the others and without the presence of marketers, this will be hard to achieve. The significance of marketing in a business process, as well as the supply chain, is indeed enormous and unless a company invests in marketing, then being profitable will become foreign fast.
Marketing goes hand-in-hand with distribution with the latter’s success being dependent on the former. It is indeed illogical for a business to distribute their products where there is no guarantee of high yields. It is, therefore, essential that a company invests in promoting its products. Petronas is a huge company that is widely known all around Malaysia as well as in Asia. However, it has always maintained a strong marketing and retail section that ensures that profits are guaranteed both domestically and regionally. For such a big company, it is easy to neglect marketing duties but over the years, Petronas has grown its marketing branch, and this has continued to pay off.
Domestically, Petronas Dagangan Bhd (PDB) manages all the marketing for the group. Being government owned company is not easy especially when one considers all the bureaucracy that is involved. However, the Malaysian government decided to take a back seat and entrust the company to managers who are well endowed with the skills and knowledge of running the business. Marketing has always taken center stage when it comes to PDB and through its activities and business deals, the company has maintained its profitability streak at home. For example, in 2003, PDB adopted Aspen Technology Incorporation to expand further and grow its marketing agenda. According to AspenTech’s report, PDB selected it for purposes of “fuels marketing to optimize the distribution of fuels and specialty liquid petroleum products.” It was a huge step on the part of PDB and showed the group’s commitment and determination to stay at the top domestically. PDB’s goal was to have a fluid marketing and distribution mechanism that will help to optimize the supply of its petroleum products to the group’s clients.
In Malaysia alone, the group has over 5000 customers as well as a network of more than 600 service stations. Without an efficient marketing and distribution system, the company will incur ghost losses that are often hard to track and hence accountability will eventually be hurt. The group’s domestic dominance made it possible for the company to expand into other countries and increase its profitability. Unlike at home where it was relatively easier to do the marketing, in the international scene, it became increasingly difficult for the company. Barriers such as language, different cultures, the duties and levies in place as well as the reluctance of people to change their preferred vendors made things difficult for the company. However, through its extensive marketing and involvement in community development initiatives, the group was able to break into the international scene and connect with customers.
In Malaysia, Corporate Social Responsibility or CSR is not obligatory as it is in other countries (Business Circle, 2015). However, big corporations such as Petronas have decided to make it their obligation with their many domestic and regional CSR activities. Businesses make decisions based on their goals and even get involved in CSR activities that seem to align with their goals of activities and objectives. Organizations also understand that their reputation among their customers and potential customers is of the essence. Therefore, many of these corporations often get involved in CSR activities to build and sell their caring image to the people. Petronas’s CSR policy is one that seeks to help the community as well as the environment. In 2014, Petronas’s CEO maintained that the company's commitment to its responsibility to the people as well as the environment is still intact. In as much as this is a public relations stunt, it is prudent to note that the group has been involved in community development and environment conservation related initiatives.
In 2012, for example, Petronas initiated the BEACON which is a project that aimed at saving marine life. The location of most of Petronas's oil reserves is offshore but within the Malaysian waters. According to environmental activists, this is injurious to the environment but being a major financier of the country’s budget, the company has not received much heat. Its participation in the BEACON initiative was very deliberate because it not only helped the company to market itself as a responsible corporation but also contributed to covering its activities offshore. Environmental activists have always been against the offshore drilling that is a characteristic of oil companies. To steal the limelight from them, oil companies like Petronas have been involved in initiatives like those as mentioned above to help propel their business agenda while being selling their accountable image. Petronas’ involvement in the BEACON initiative aligns well with its CSR mantra to protect and conserve the environment and hence to the people it appears blameless.
In 2014, Petronas got involved in yet another CSR initiative to help flood victims in Kelantan, Pahang, and Terengganu. Due to heavy rainfall, these three areas experienced floods and to help with the problem Petronas, through two of its subsidiaries (Petronas Carigali Sdn Bhd and Petronas Dagangan Bhd), decided to offer help. According to the MalayMail (2014), through its subsidiaries, Petronas provided two helicopters to help ferry the stranded victims, it also donated blankets, mattresses, candles, power banks, fuel for generators, vehicles, hygiene kits, batteries as well as torch lights. Appealing to people’s emotions is hard, but corporations have become masters at this. This is indeed one way to promote the company by ensuring that people know that Petronas is “with them” through the trying times. Corporations compete for customers via all means possible and they all aim to outdo each other and one way to achieve that is to be the first to offer aid whenever people need it.
Ethically, organizations should make it a habit of giving back to the society and helping the community. When it comes to the environment, organizations should also ensure that their activities do not in any way negatively impact the environment. Looking at Petronas, one can say that the company is not doing enough for either the people of Malaysia or the country’s environment. As already stated, CSR is not obligatory in Malaysia, however, for a company of Petronas’ stature giving back to the society and taking part in environment conservation initiatives should not be a big deal as it often made to look. One might ask, is Petronas doing enough in the society? Regardless of the laws of the land, Petronas should ensure that it is doing its part and serving the Malaysian community.
The triple bottom line theory is a CSR approach that requires that companies measure or weigh their actions based on either environmental sustainability, economic viability as well as social sustainability. According to this theory, organizations should ensure that they strive to strike a balance between these three during their assessment. On economic viability, Petronas has done tremendously well but on the other two fronts, it has not fared well. The balance should not be perfect, but companies need to ensure that they are effecting change on all these fronts. Petronas needs to involve itself more in the social and environmental front and not when it is strategic or when profits are guaranteed.
In conclusion, Petronas made a name for itself in the oil industry all over the world. The organization has managed to build itself and to climb the profits ladder and is currently among the most profitable in the world. Through its shrewd marketing initiatives both domestically and regionally, the company has expanded its reach and subsequently its influence and profit margin. However, all of its achievements have been overshadowed by its lack of commitment to CSR. Petronas has been involved in some CSR activities domestically and regionally, but almost all these have been deliberate and strategic. This means that it always looks to score whenever it gets involved in community development or environment conservation. Petronas needs to apply the triple bottom line theory and ensure that it tries to strike a balance in the three fronts. The company needs to get involved more in society development and environmental conservation. The main aim of a business is to make a profit, but ethically, it has never been and should never be at the expense of either the environment or the society.
References
American Marketing Association. Chicago, IL.(1985)
Aspentech. Petronas adopts Aspen Tech's solution for fuel's marketing to optimize the distribution of fuels and specialty products. Retrieved July 30, 2016 from <http://www.aspentech.com/uploadedFiles/News/Press_Releases/Pre-2004/pr9-15- 03.htm >
Business Circle. Rebuilding nature: Malaysia corporates’ CSR initiatives. Retrieved July 30, 2016 from <http://www.businesscircle.com.my/rebuilding-nature-malaysia-corporates- CSR-initiatives/ >
“Influence on the Entire Supply Chain.” Boundless Marketing. Boundless, 26 May. 2016. Retrieved 29 Jul. 2016 from <https://www.boundless.com/marketing/textbooks/boundless-marketing- textbook/introduction-to-marketing-1/the-importance-of-marketing-22/influence-on-the- entire-supply-chain-127-7314/>
MalayMail. Petronas embarks on flood assistance initiative. Retrieved July 30, 2016 from <http://www.themalaymailonline.com/malaysia/article/petronas-embarks-on-flood- assistance-initiative >
