A study of sustaining growth in petroleum industry

Abstract

With slowdown in the growth rate of petroleum product consumption, petroleum business is maturing and becoming commoditized. In maturing industries, cost leadership and operational excellence is important, but it is not sustainable. Inevitably, competition will squeeze margins, even for the cost leaders. In order to sustain growth, companies should continuously explore potential enlargement of its offering vis-a-vis its competitors and customers' expectation. A set of industry case studies in petroleum, energy utility, steel and airline industries have been performed to identify opportunities for differentiation and to examines how the successful companies manage the innovation in developing sustainable growth strategy. Analysis of industry case study identified some important differentiating factors and approaches. It suggests, in general, that successful companies focus on Customer Solution. The customer solution reflects a shift in strategic attention from product to customer-from product economics to customer economics and customer's experience. To capture a value position and enhance profitability-in other words, to decommoditize the commodity product/service-they redefine its services to reach into the customer's own business to solve more fundamental problems. They segmented the market to better design and deliver tailored, customer-specific services bundled with commodity products. Unless companies are going to compete mainly on price, value added solutions are a necessity. Innovation, and more importantly effective implementation of innovation, is a prerequisite for a sustainable growth. In conclusion, I made suggestion for one company to achieve sustainable growth and recommendations for future research.