Introduction Of Company Petronas Commerce Essay

PETRONAS is the acronym for Petroliam National Berhad. PETRONAS not only focused on oil and gas, and provide education. PETRONAS is an incorporated public organization and has it separate legal entity. PETRONAS was incorporated on the 17th of August 1974 and was owned and controlled by the government of Malaysia. PETRONAS has a set of vision, mission and values.

PETRONAS is a well known worldwide company that has ventured into 32 countries including Argentina, Russia and Egypt. PETRONAS practices a culture that stresses mainly on being environmental friendly and people orientated. It currently employs over 30, 000 employees of 38 nationalities.

PETRONAS with the fully integrated oil and gas multinational, it has involved the entire petroleum activities. From managing the sharing contractors of the foreign production, we have been change into developing our own capabilities in the upstream sector – allow us to take the lead in the exploration and production of the nation’s oil and gas resources.

Besides that, we also ventured into downstream activities. We seek to maximize value creation and strengthen of our operations all the way down the value chain. The range of our downstream activities includes oil refining, gas processing and liquefaction, gas transmission pipeline operations, petrochemical manufacturing and marketing, property investment, shipping, marketing of liquefied natural gas, marketing and distribution of petroleum products, and trading.

Furthermore, PETRONAS has operated service station in Malaysia, South Africa, Sudan, Thailand and Indonesia. It has distribution of automotive and industrial lubricants globally, including the PETRONAS Syntium and Sprinta premium grade engine oil.

Internal Environment

There is a high level of interdependence between an organisation and its internal environment. The internal environment comprises elements that have a direct influence on the day to day operations of the organisation. They have an impact on the achievement of the organization’s goals. The Micro forces of the environment are:

Vision and Mission

PETRONAS is a big organization and a corporation which is widely known to the world as it’s a company that exports Malaysian oil. Being a big organization, PETRONAS has of course its very own vision and mission to achieve its common goal and to serve its customers the best service they can provide.

As we all know vision is a long-term plan that almost every company or organization has. PETRONAS’s vision statement is to be a leading oil and gas multinational of choice. As an organization they are hoping to become a worldwide known organization and to become the first choice among all other oil companies present so far.

Their mission statement, on the other hand, is as follows:

We are a business entity.

Petroleum is our core business.

Our primary responsibility is to develop and add value to this national resource.

Our objective is to contribute to the well-being of the people and the nation.

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Their mission and vision we believe has made them grow tremendously since they were incorporated in the month of August on the 17th in the year 1974. PETRONAS has become a fully-integrated oil and gas corporation and is ranked among FORTUNE Global 500’s largest corporation in the world. They have now ventured globally into more than 32 countries worldwide in its aspiration to be a leading oil and gas multinational of choice.

Organizational structure

Organizational structure is the internal, formal framework of a business that shows the way in which management is linked together and how authority is transmitted. (Stimpson, 2006)

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Figure 1: The Corporation Organisational Structure of PETRONAS (Picture taken from http://www.chathamhouse.org.uk/files/6389_ggmalaysia.pdf)

PETRONAS adopts the functional organization structure. It enables specialization, allowing employees to focus on their respective areas. There is cross functional bonds between the respective divisions and departments. It is the bond and process of specialization that has led to the success of the organisation. Team work is encouraged, all the departments work together to achieve the company’s goals and targets. This has proved to rewarding for the organization as a whole and the employees, customers, suppliers and the community as a whole.

The line of authority is clearly drawn, orders are sent from the top most level, the president and the CEO. PETRONAS has also hired consultants to improve business and organization results.

Functional Strategies  

Human Resource division

Its main objective is to meet the organizational needs of the company it represents the needs of the people hired by that company. The most important function of the human resource department is recruitment, selection and training of employees among others. PETRONAS selects the best and brightest of employees through talent searches amongst local and overseas graduate. PETRONAS trains and molds its own employees through technical training and innovative program provided in University Technology PETRONAS.

Finance division

The Finance Function provides the company with its accounting and financial reporting backbone of the company. Its role is to identify financial sources willing to finance the operations of the company and to locate profitable areas where the business can invest their money to get higher returns. PETRONAS is involved in the sports world through its investment with Mercedes F1team. PETRONAS has also contributed towards the development of Turkmenistan economy, by investing US dollar $ 1.8 billion in the oil and gas industries.

Corporate Planning and development division

This division plans long term and short term business strategies which lead to the development of the organisation.

Technical Services division

This division is set up to drive and manage the technological activities of PETRONAS.

Education division

This division undertakes the responsibility of all the educational activities PETRONAS is associated with. It involves the scholarships provided by University technology PETRONAS and the education programs provided to the underserved community.

Shareholders

Shareholders of a firm can directly influence its policies and activities. PETRONAS shareholder is the government. It generates income and value for its shareholder. PETRONAS gave the government RM 52.3 billion from its RM86.8 billion pre-tax profit, in the form royalty, dividends, corporate tax, income tax and export duty. PETRONAS provides shareholders with the opportunity to gain first hand exposure on the Company’s operations by organizing several visits to its Gas Processing Plants. Such two-way communication increases corporate transparency and helps shareholders take a longer term view of their investment based on a better understanding of the company’s corporate strategy and operation PETRONAS recognizes the importance of timely and equal dissemination of information to shareholders. Therefore they arrange the Annual General Meeting (AGM) which is a crucial mechanism in shareholders communication.

Employees

“PETRONAS must be committed to enhancing the capability of its employees, as a corporation is only as good as the people who work for it.”

This phrase is from PETRONAS mission statement. Employees are the most important asset of an organisation, since it is the dedication, motivation and skills of an employee that make a business successful. PETRONAS highly values its employees and understands the importance of their motivation. Therefore PETRONAS arranges various programmes to encourage and support its employees by involving them in voluntary work. Programmes such as Sentuhan Kasih and Jalinan Insan allow our employees to contribute directly to homes for disadvantaged children and orphans in the areas of their operations. These programmes provide the employees with job satisfaction, which in return highly motivates them to perform better.

Community

Lord Holme and Richard Watts used the following definition. “Corporate Social Responsibility is the continuing commitment by business to behave ethically and contribute to economic development while improving the quality of life of the workforce and their families as well as of the local community and society at large”

The culture now is to be generous by giving back to the community. Therefore organisations have certain responsibility towards the community they work in. PETRONAS is a responsible citizen of the community, thus is has successfully imitated and supported various social, environmental and community projects.

PETRONAS and Education

PETRONAS is committed is developing the people and they operate in by providing education particularly in the field on science and technology. They are determined to create a skilled human resource base for Malaysia through various schemes.

Scholarships

University technology PETRONAS (UTP) – Provides hands on technical training and innovative programs to help employees build skills and competencies.

PETROSAINS – provides a rich and stimulating environment for the public to learn about science and technology

PETRONAS benefit’s from this program since they are molding their own workforce, by educating them in standards which are important to PETRONAS.

PETRONAS and Environment

PETRONAS recognizes the importance of conserving biological diversity in order to ensure people, animals and plants. Therefore they developed the KUALA LUMPUR CITY CENTRE (KLCC) PARK, to balance the challenging demands of growing urban populations, with the environmental conservation. A much needed public park and green lung for the city of Kuala Lumpur.

External Environment

External environment refers to the factors that happen outside the business which cannot be controlled by the business. These factors will influence the internal functions of the business and its strategies to adapt itself to the changing environment.

Political Environment

The Malaysian government chose to create a state company, rather than using taxes, production limits, leasing, or other familiar instruments of supervision. The government sought to assert national rights over the use of the country’s resources. A state company, having both supervisory powers over the majors and production activities of its own, was a workable compromise between allowing the majors full rein and excluding them, along with their capital and expertise, altogether.

Petronas is given fulltrust by Malaysia government to conduct business independently from the government. Government holds 100% of Petronas and formulates and implements energy policies including oil & gas. The company cooperates with the government for the common purpose to develop the country to achieve the level of advanced countries. Regarding the relationship between Petronas and the government, one executive at Petronas said, “There is a world, especially in the Third World, where only the government and the government (G&G) can open the first door.” He claimed that there is the world which does not function well with the absence of “mutual trust” between the government and NOC.

Legal Environment

PETRONAS is a multinational organisation. Therefore the company is subjected to laws in all of its host countries, such as taxation and consumer rights.

Government taxation – A large sum of the profit is usually paid off to government in the form of income tax, dividends etc. Despite the lowered net profit, PETRONAS paid RM 30.0 billion as dividends, RM20.3 billion as income tax, RM 9.1 billion as corporate income tax, RM 2.2 billion as export duties and RM 6.2 billion as royalties.

Health and safety at work – This aims to protect the workers from any kind of physical injuries. It requires the working environment to be safe with adequate equipment and sanitation. These requirements usually add up to the business cost.

Consumer rights – This law protects the consumer from products that do not reach a reasonable level of safety. PETRONAS sternly practices this as to ensure maximum popularity amongst other oil and gas company as well as looking after customer satisfaction.

It generates income and value for its shareholder. PETRONAS gave the government RM 52.3 billion from its RM86.8 billion pre-tax profit, in the form royalty, dividends, corporate tax, income tax and export duty.

Economical Environment

Economical environment refers to the economic factors that affect the business in terms of recession, interest rates, exchange rates and global economic factors.

Recession

Recession results in the fall of demand for certain products, as income is reduced. To keep the demand on going, the prices of products is lowered. PETRONAS has net profit declined by 13.9% due to high production costs and low oil price that has been caused by the recession.

Interest rates

During inflation, there will be increase in the supply of money associated to the amount of goods available. This will result in a rise in prices of goods and services in the economy over a period of time. The high interest rates and fall of purchasing power would consequently affect the cash flow of the organization.

Globalisation

Technological Environment

In order to adapt itself to the rapid growing technological environment, an organisation has to be versatile and recognises the value of technology to its business growth. PETRONAS is a technology dependent organisation that promotes and uses technology vastly for research and development.

PETRONAS focuses its technology on advancing operational excellence through better plant and Health, Safety and Environment (HSE) performance. It also aim to create niche technologies to improve the performance of its core businesses.

In the upstream sector, PETRONAS focuses on technological development to increase hydrocarbon resources and to enhance productivity and recovery of its fields. On the other hand, downstream, PETRONAS maximises yield in oil, gas and petrolchemical operations by applying appropriate technology. It also creating a renewable energy lab to enable itself to move further forward and become a technology-driven company.

Competition

PETRONAS PRIMAX 3 is designed to provide maximum protection and performance for your car. Based on comprehensive tests, PETRONAS PRIMAX 3 unique cleaning formulation will starts to work right from the first time you fill it up, ensuring that your engine is always at its most powerful. By formulating with unique additive components, PETRONAS PRIMAX 3 efficiently protects your engine against injector fouling and corrosion, reinstating your car to its peak performance to improve fuel economy.

However, Shell is the leader in developing high quality fuels. Shell Super with fuel economy formula is specially designed by Shell experts to give you extra miles at no extra cost. It is formulated with Shell’s Synthetic Viscous Friction Improver, designed to reduce friction in this crucial part of your engine, helping to improve its efficiency.

On the other hand, all Caltex petrol’s now include technologically-advanced, patented fuel ingredient, Techron®. Caltex Techron with cleaning agent is unsurpassed at keeping engines clean and cleaning up deposits to help reinstate original performance. It contains powerful detergents which help in removing deposits from fuel injectors intake ports and valves. The key benefits for using Techron® are improved performance, enhanced reliability, smoother drive, restored fuel economy and lower emissions.

Social

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Sponsorship Programmes:

PETRONAS will offer academic sponsorships to deserving students for studies in secondary schools and institutions of higher learning every year. There are more than 19,000 students have benefited from PETRONAS’  tertiary education sponsorship programmes at the Foundation, Undergraduate and Postgraduate levels. Besides that, more than 11,000 secondary school students have received sponsorships from PETRONAS. Students can get the sponsorships by obtaining excellent results in the Sijil Pelajaran Malaysia (SPM) examinations for undergraduate studies at established universities, both in Malaysia and overseas. On the other hand, students can choose to pursue technical and non-technical courses that are related to the industry. In addition, scholarships are offered to Malaysian secondary school students.

Employees and Community:

In reaching out to society, PETRONAS promised to serve disadvantaged groups and communities around the world goes the extra mile with the proactive participation of their employees at the grassroots level as volunteers. PETRONAS’s employees dedicated their time and energy to help ease the needs of the disadvantaged communities in Malaysia and abroad. Group-wide, PETRONAS organized different programmes to encourage their employees in their voluntary efforts to connect with the communities that need help the most. PETRONAS organized annual programmes like “Sentuhan Kasih” and “Jalinan Insan” for allowing their employees to contribute directly to homes for disadvantaged children and orphans in the areas of PETRONAS’s operations. In addition, the “PETRONAS Volunteer Opportunity Programme” works together with selected NGOs and relevant parties to scout for volunteer opportunities and provide necessary training, direction and support to develop skills useful in programmes such as disaster rehabilitation and education outreach activities.

Conclusion

PETRONAS has managed its business environment well because it is now has ventured to 32 countries. Therefore, PETRONAS has to be innovative and creative to adapt the dynamic environment of business in order to maintain and expand its business. As the result of well planning and well utilizing of technology, PETRONAS has grown to become a massive power to succeed in petroleum industry from the past to the present. Great organisation of power and technology had become the main factor of this success.

With the strategy of integration, adding values and globalization, PETRONAS has the new routes to deliver excellent performance to the stakeholders, employees, nation, and host countries and communities where PETRONAS operate.

PETRONAS will continue to develop the businesses in Malaysia and overseas as the journey towards comprehend our vision “To be a Leading Oil and Gas Multinational of Choice”.