external analysis on petron

Topics: Petroleum, Petroleum industry, Oil well Pages: 26 (4371 words) Published: January 30, 2015

Chapter 4
External Analysis
Petron Corporation
Submitted by:
Amurao, Andrea
Diaz, Marco
Mendez, Hannah
Mosquisa, Jono
Santos, Claire
submitted to:
Prof. Zernan De Ramos

A. General Environment
General Environment is also called External Forces, which can be divided to five broad categories: (1) Economic Forces; (2) Social, Cultural, Demographic, and Natural Forces; (3) Political, Governmental and Legal Forces; (4) Technological Forces; and (5) Competitive Forces.

Changes in external forces translate into changes in consumer demand for both industrial and consumer products and services. External Forces affect the types of products developed, the nature of positioning and market segmentation strategies, the type of services offered, and the choice of businesses to acquire or sell. External forces directly affect both suppliers and distributors. Identifying and evaluating external opportunities and threats enables organizations to develop a clear mission, to design strategies to achieve long-term objectives and to develop policies to achieve annual objectives. (David 2010)

1.) Economic Forces

Economic forces refer to the nature and direction of the economy in which business operates. Economic factors have a tremendous impact on business firms. The general state of the economy, interest rate, stage of the economic cycle, balance of payments, monetary policy, fiscal policy, are key variables in corporate investment, employment, and pricing decisions.

1.1) Organization of Petroleum Exporting Countries (OPEC) Policies. An organization consisting of the world's major oil-exporting nations. The Organization of Petroleum Exporting Countries (OPEC) was founded in 1960 to coordinate the petroleum policies of its members, and to provide member states with technical and economic aid. OPEC is a cartel that aims to manage the supply of oil in an effort to set the price of oil on the world market, in order to avoid fluctuations that might affect the economies of both producing and purchasing countries.

Opportunities - With OPEC, Petron, along with its competitors are guided as to how they should properly manage and run their company to avoid disputes with other companies and countries. OPEC also helps Petron and all other Oil Companies belonging to its organization aid in aspects that it encompasses.

Threats - OPEC's control also hinders Petron's freedom in some aspects, like its pricing and policies.

1.2) Price fluctuations are the rising and falling of the prices for the given product. It is very much common in oil companies as the prices inflate and deflate.

Opportunities – With these fluctuations, Petron will have the opportunity to invite in more consumers if they are able lower their prices better than their competition. They will also create a better relationship with their consumers and gain their loyalty when their oil products’ prices often deflate.

Threats – Not only Petron has price fluctuations. Its competitor might be able to have better outcome due to these fluctuations. Price inflation does not mean bigger profit, it means that the prices of the products themselves increase due to more expenses, therefore it poses a risk to the company as well.

1.3) Inflation rate is the percentage rate of change of a price index over time. Evaluation:
Opportunities – When prices inflate, there may also be chances to have more profit.

Threats – As stated above on the previous page, price inflation does not always mean more income; it may also mean more loss for the company, along with losing more consumers.

1.4) Tax rates are the percentage of taxes laid for the merchandise. It is considered as burden for the company for that percentage will go to straight to the government instead of being an additional income for the company.

Opportunities – Tax may be a burden on the company itself but due to tax, the company will be able to...
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