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Sinopec case study analysis

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Industry analysis, firm analysis, value chain

Text of Sinopec case study analysis

Presented By: Group 5

MISSIONDevelop the enterprise Contribute to the country Serve the society and Benefit staff Respect and protect the interests of stakeholders.

VISIONConstruct a multinational energy and chemical company with international competitiveness. Aiming at constructing a top-ranking enterprise in the world

PRODUCT LINESERVICE STATIONS Oil refining Petrochemicals. LPGNatural gas transmission through pipelines

LUBRICANTS Automotive marine industrial greases special synthetic lubricants

CATALYSTS FCC catalysts hydrogenation catalysts reforming catalysts ethylene polymerization catalysts propylene polymerization catalysts

OIL PRODUCTS Diesel Automotive Gasoline:

CHALLENGESDOMESTIC

Rising domestic inflationary pressure Continuing price controls on oil products in our home market Domestic economic growth facing downward pressureINTERNATIONAL

Complex geopolitical tensions, international oil prices are expected to Top 3 Competitors remain high.

PetroChina Company Limited CNOOC Limited Exxon Mobil Corporation

Internal Analysis

Strengths1. Market Leadership Position 2. Vertically Integrated Operations 3. Increased Revenues

Weaknesses1. Dependence on third party crude oil supplies 2. Lack of geographical diversification 3. Decline in crude oil reserves

External Analysis

Opportunities1. Growth through JV and

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1. Leverage its market position 1. Invest in exploration and alliances to form better JVs and alliances production and form JVs. 2. Increased emphasis on 2. Use its vertically integrated 2. Move into newer exploration and operations to communicate markets. production with R&D 3. High demand potential in 3. Achieve economies of scale China

Threats1. Government Regulations and Control 2. Environmental Laws and Regulations

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1. Leverage its market position 1. Reduce govt. regulations to reduce regulations. to form JVs with crude oil 2. Invest in green production suppliers. and innovations.

Porters Five Forces Model

Power of SuppliersHandful of suppliers have significant power over smaller drilling and Competitivsupport companies.

e Rivalry.

Availability of SubstitutesLOWAlso, oil has many uses.

(Slow industry growth rates, high exit barriers )

Power of BuyersHIGHBuyers to seek lower prices and better contract terms.

STRATEGIC GOALSSinopec's international strategy is to meet increasing domestic demands through expansion of its direct access oil and gas assets . Sinopec is investing heavily in establishing production facilities and in exploration in China and outside of China. E,g, Swiss Canadian petrochemical producer, Addax Petroleum Corp. Sinopec planned to make foreign investments of US$20 million in 2010 and 2011 (Wall Street Journal Eastern Edition 2009). To fund its acquisitions , it formed partnerships with companies. such as Kuwait Petroleum Corporation and released bonds into Chinese bond market.

STRATEGIC OBJECTIVES Focus on growth of core businesses and intensified efforts in R&D for key projects and technologies of strategic significance. Sinopec gave priorities to and achieved major progress in research on strategic planning, investment optimization, execution of key construction projects as well as structural adjustment. E.g. The evaluation and technological research of unconventional resources such as hydrocarbons in tight formation, shale oil/gas, etc. Emphasis on improving corporate management, forged ahead with standardized institutional upgrading via application of IT. Bringing forth the concept of green and low carbon development in the backdrop of the increasingly complicated environmental protection situation and a challenging job in

RESULTS In 2011, the companys total revenues and other operating income amounted to RMB 2,505.7 billion, an increase of 31% from 2010, Profits attributable to shareholders in accordance with International Financial Reporting Standards were RMB 73.225 billion, an increase of 2.0% from the previous year. Total annual dividend for 2011 to RMB 0.30 per share, an increase by 43% over the previous year.

3 ROUTES FOR PRODUCT DIFFERENTIATION SUPERIOR INNOVATION

7628 granted patents by end of 2011. 1 NATIONAL science and technology award 47 TECHNOLGY AND INVENTION AWARD 300 SCIENCE AND TECHNOLOGY PROGRESS AWARD

EXCELLENT QUALITY"Quality Management Measures" and "Quality-related Accident Management Regulation"

Multi-Functional Non-Fuel Businesses that enable Customers to Enjoy Convenient and premium Services in StationsThe Value-Added Services of the Fuel Cards and Self-Service Stations Are Enriching Customers' Shopping Experience. LISTENING to customers- opening telephone and internet information platforms to developing strategic cooperation, maintaining the profit margin of the downstream industry and conducting customer satisfaction survey

RESPONSIVENESS TO CUSTOMER NEEDS

THE VALUE CHAIN

R&D Internal integration and the reform of the R&D system, Sinopec has preliminarily set up the R&D management mechanism of "One entity, Three platforms, Unified planning and Integrated development".

close collaboration with our industry peers and clients. ACHIEVEMENTS Sinopec Discovered Yuanba Gas Field, the Deepest Large Marine Gas Field in China. CO2 capture & flooding technology Multi-stage fracturing technology for horizontal wells New S-Zorb technology Catalytic oxidative treatment technology for PO/SM off-gases Packaged technology for ethylene PX adsorption and separation technology S-MTO technology

PRODUCTIONSinopec is the largest producer and supplier of chemical products in China. Sinopec is the largest refiner in China and the second largest in the world.

MARKETING AND SALESSinopec has the most extensive service station network, the largest storage capacity and the longest pipelines for oil products, fueling all types of vehicles including cars, trucks, motorcycles, ships and agricultural vehicles.

CUSTOMER SERVICE

VALUE ADDED SERVICES OF THE FUEL CARDSImproving the fuel card system, including enhancing the system's functionality so the customers can experience more efficient and convenient services Broadening the types of services such as topping up the card outside of the city where it is issued, micro-refund, affiliated card application, etc. to increase service efficiency Establishing cooperation with third parties such as banks, Alipay, telecom companies etc to meet the demand of topping up cards in numerous ways Upgrading the customer service system to include voice service, online service, multi-media service to improve efficiency Providing the text message notice service to facilitate the smooth communication with customers and increase their satisfaction