A CASE STUDY First Author - Suresh Gyan Vihar University by manish mittal.pdf · A CASE STUDY First...

Marketing of a New Product – Petroleum Coke.

A CASE STUDY

First Author:

Manish Mittal

Head - Department of Management

Academic City College, Ring Road Central,

P.O.Box AD 421, Adabraka, Accra, Ghana (West Africa)

M- 00233 540 866 702 Email – [email protected]

Second Author:

Dr. Rajeev Johari

Professor – Management

Sharda University,

New Delhi.

mailto:[email protected]


Marketing of a new product – petroleum coke

Abstract

Fuel grade petroleum coke is a residual product of the refinery, launched for the first time in the Indian

market. Huge stock of petroleum coke is lying unused with the refinery. To sell the new product the

petroleum coke to the Indian market, the refinery needs to design the strategy for marketing it.

Instruments adopted to conduct this study include main actors and forces in the modern marketing

system, swot analysis and business buying behaviour analysis. Officials in the refinery were interviewed

to obtain the primary data. Secondary data was collected from journals, books and articles in the library of

the refinery. Findings from the study indicated that the refinery is both the supplier and marketer of the

petroleum coke. Findings also pointed out that competitors include M/s AMCOR and M/s Mitsubishi,

both as foreign players. The refinery contacts all its customers directly except export business which is

done using the help of agents. In SWOT analysis, the analysis of internal environment shows that

fourteen pints are of major strength while three are of minor strength with two being of neutral strength in

addition to one as minor weakness. The refinery gives high importance to fifteen features while giving

medium importance to four features with low importance to one feature. A Study of the external

environment shows that the mega power plant and the cement sector have high success probability and

attractiveness. To stop the negative publicity of petroleum coke and to provide guidance to limit the

quantity of petroleum coke in blended form are two threats rated high on probability of occurrence and

seriousness. Buying behaviour analysis of petroleum coke shows that buying petroleum coke is a new

task buying situation for prospective buyers and overall buyer behaviour is quite enthusiastic to use the

cheaper fuel against the conventional mixed coal they were using. On the basis of findings, it was

recommended that Refinery should follow „Focus‟ type of strategic thinking. Here the business focuses

on one or more narrow market segments rather than going after a large market. The firm gets to know the

needs of these segments and pursues either cost leadership or a form of differentiation within the target

segment.


Key words – Petroleum coke, new product, swot analysis, business buying behaviour, main actors and

forces.

1. Introduction

Fuel grade petroleum coke is a residual product of the refinery under study (therein called „the refinery‟ in

rest of the paper) processing heavy crude oil along with final products including high speed diesel (HSD),

motor spirit (MS), liquefied petroleum gas (LPG), super fine kerosene (SKF) and aviation turbine fuel

(ATF).

Huge stock of petroleum coke is lying unused with the refinery in India and there is lesser market for this

product in India, as this item has been introduced in India, for the first time by the refinery. In order to

sell petroleum coke in the Indian market and to meet the storage problem of petroleum coke, there is the

need to study the marketability of petroleum coke.

To explore the marketability of petroleum coke, this researcher has studied the petroleum coke market,

external and internal environment of petroleum coke business unit of refinery and customers of petroleum

coke business unit of refinery.

The quality of crude oil affects the specifications of the petroleum coke produced. Petroleum coke of the

refinery has high calorific value, low HGI and high sulphur content. The refinery has planned to construct

an independent power plant and petroleum coke can be used as fuel in this plant. As huge stock of

petroleum coke is lying unused, the refinery has to sell it. Mega power plant and cement sector are major

opportunities for petroleum coke business unit of the refinery. Emission of SO2 gas is major threat for the

petroleum coke business unit. Almost all performing units of the refinery are its major strength except

product quality which is a minor weakness. Officials of the refinery give required importance to all the

performing units. Buying behaviour of customers is affected due to the presence of SO2 gas causing

disturbance in process control, emission of SOx and corrosion. Cheaper price and easy availability have

attracted customers and they are using petroleum coke on trial basis.


1.1 Problem Statement

On one hand, technical specifications of petroleum coke has made its sale difficult while, on the other

hand, accumulation of huge inventory of petroleum coke (i.e. around 9.5 lakh ton) has made it necessary

to dispose of the product. Also, the stock of petroleum coke increases daily @ 6000 MT/d. Increasing

pressure has made it necessary to study the options and details regarding the marketing/disposal of the

product and formulating the strategies to fight the situation becomes grim day by day. All the above

factors have made it necessary to study the marketability of the product.

1.2 Objective – to study

1.2.1 Petroleum Coke market

1.2.2 External and Internal Environment of petroleum coke business unit

1.2.3 Customers of petroleum coke business unit

1.2.4 To propose the strategy, that should be adopted by the refinery on the basis of findings.

1.3 Methodology

Primary data was collected by interviewing the refinery officials through the use of questionnaires.

Secondary data was collected from company records, journals and reports prepared by research scholars.

Various management and technical books were referred to obtain detailed information on marketing of

the product along with information on the sale of the product.

Instruments adopted to meet the objectives of the study include i) main actors and forces in the modern

marketing system, (Kotler & Armstrong, Principles of Marketing, 2010, p. 32) ii) SWOT analysis,

(Kotler, Keller, Koshy, & Jha, 2007, pp. 48-51) and iii) analysis of business markets and business buying

behaviour. (Kotler, Keller, Koshy, & Jha, 2007, pp. 177-197).The instruments were adopted from

Marketing Management by Philip Kotler et.al. The main actors and forces, as shown in figure 1, are i)

suppliers of raw materials, ii) marketer, iii) competitors, iv) marketing intermediaries and v) end-user

market. External environment of petroleum coke business unit was analysed by rating opportunities and


threats for the petroleum coke business unit. Major opportunities and major threats were sorted out on the

basis of opportunity matrix and threat matrix. Similarly, the internal environment of petroleum coke

business unit was studied. Different performance units were rated on the basis of major strength, minor

strength, neutral performance, minor weakness or major weakness of petroleum coke business unit. Also,

the importance shown by the refinery to its different performance units was studied. The buying

behaviour of target customers of the petroleum coke business unit was also studied.

On the basis of the study, inferences were drawn and recommendations were suggested regarding the

strategy that should be adopted by the refinery for the marketing of petroleum coke.

2. Findings

2.1 Petroleum Coke Market

“A market consists of all the potential customers sharing a particular need or want who might be willing

and able to engage in exchange to satisfy that need or want.” (Tan Tiong, Kotler, & Leong Meng Siew,

1996)

The customers of petroleum coke include -

a. The Cement Sector:

Cement Plants

Mini Cement Plants

b. The Power Sector:

Electricity Boards

c. Carbon Source:

Carbon based industries

d. Anode Grade:

Aluminium electrode industry

e. Miscellaneous:


Brick kilns

Other kilns

Gasification

The above-mentioned customers constitute the market of Petroleum Coke.

Target Customers of the refinery include –

a. The Cement Sector

b. The Power Sector

c. Brick Kilns

d. Exports

e. Industrial Boilers (FCBC)

Figure 1. Main actors and forces in a modern marketing system

Source: (Kotler & Armstrong, Principles of Marketing, 2010, p. 32)

The Main Actors and Forces applicable in case of petroleum coke business unit of the refinery are as

follows (as presented in figure 1)

2.1.1 Supplier

The Refinery is the supplier of petroleum coke.

2.1.2 Marketer

ENVIRONMENT

COMPETITORS SUP

PLI

ERS

COMPANY (Marketer)

MA

RK

ETIN

G

INTE

RM

EDIA

RIE

S

END

USE

R M

AR

KET


The refinery is also the marketer of petroleum coke.

2.1.3 Competitor

Competitors of petroleum coke business unit of the refinery include:

a. AMCOR

Competitive features of AMCOR -

Biggest trader in Petroleum coke in the world

Have an Indian Representative

Already import for their JV Rain Calciner

Have indicated landed cost in east coast of India at Rs.150/t for petroleum coke

b. MITSUBISHI

Competitive feature of Mitsubishi -

Marketing rights for Malacca of patrons, Malaysia-offer to sell @ 8.5 per MT FOB and 27.5 $ per

MT CFR in 15 KT ships – 350 KT product available for disposal.

2.1.4 Marketing Intermediaries

Cement Sector No

Power Sector No

Exports Agent

Brick Kilns No

2.1.5 End User Market

Cement Sector

Power Sector

Miscellaneous

2.2 External & Internal Environment Analysis


External Environmental Analysis and Internal Environment Analysis of a business unit include

SWOT analysis i.e. analysis of opportunities, threats, weaknesses and strengths of a business unit. It is

a part of the Strategic Planning Process of a Business Unit of a company.

A Strategic planning process of a business unit consists of eight steps as shown in figure 2.

Figure 2 The Business Strategic Planning Process

Source: (Kotler, Keller, Koshy, & Jha, 2007, p. 48)

Second and Third points as mentioned in figure 2, namely External environment analysis and Internal

environment analysis, are known as SWOT analysis in short form.

External environment analysis involves analysis of opportunities and threats for a company and internal

environment analysis involves analysis of strengths and weaknesses of a business unit of a company.

2.2.1 External Environment Analysis

a. Opportunities – Petroleum coke business unit.

i. Petroleum coke can be used as fuel in Mega Power Plant to be installed by

Refinery in its refinery complex – rated 1.

ii. Petroleum coke can be used by the cement sector in blended form – rated 1

iii. Petroleum coke can also be used by the power sector in blended form – rated 2

BU

SIN

ESS

MIS

SIO

N

EXTERNAL

ENVIRONMENT

(opportunity &

threat analysis

INTERNAL

ENVIRONMENT

(strengths/weak

nesses analysis

SWOT

ANALYSIS

STR

ATE

GY

FOR

MU

LATI

ON

IMP

LEM

ENTA

TIO

N

GO

AL

FOR

MU

LATI

ON

PR

OG

RA

M

FOR

MU

LATI

ON

FEED

BA

CK

&

CO

NTR

OL


iv. Petroleum coke can be used by the miscellaneous sector – rated 3

v. Petroleum coke can be used by Carbon Source – rated 4.

Source – Rating is done by the refinery officials.

It should be noted here that opportunities of any business unit are rated on the basis of their success

probability and attractiveness as 1,2,3,4 (as shown in the opportunity matrix figure 3).

Figure 3. Opportunity Matrix


Opportunity Analysis of target customers of the Refinery shows that:

Mega power plant and Cement sector has high success probability and attractiveness.

Success probability of Power sector is low but attractiveness is high.

Success probability of miscellaneous sector is high but attractiveness is low.

Success probability and attractiveness of Carbon source is low.

b. Threats – Petroleum coke business unit.

Threats for petroleum coke business unit of Refinery are as follows –

i. To stop the publicity of negative factors of petroleum coke – rated 1

ii. To guide for its limited usage – rated 1

1 2

3 4

SUCCESS PROBABILITY

ATT

RA

CTI

VEN

ESS

HIGH LOW

HIGH

LOW


iii. To keep an eye on production of some other better fuel than petroleum coke – rated

2

iv. To keep an eye on foreign production units i.e. the present markets of petroleum

coke as well as future markets – rated 2

Source – Rating is done by the refinery officials

Threats are rated according to their probability of occurrence and seriousness as shown in threat matrix in

figure 4.

Figure 4. Threat Matrix


Analysis of threats to Petroleum business unit shows-

The analysis of Threats to Petroleum coke business unit of Refinery shows that emission of SO2 gas is a

major threat to the refinery. The refinery should take necessary steps to keep an eye on emission, blending

ratio, usage etc. of petroleum coke (threats 1 and 2). The refinery needs to prepare contingency plans that

spell out what changes the company can make before or during the occurrence of the threats as their

probability of occurrence is high.

Corrosion due to sulphur content has high seriousness as shown in the figure above. The refinery should

guide users regarding blending of petroleum coke with coal (i.e. technical assistance).

1 2

3 4

PROBABILITY OF OCCURENCE

SER

IOU

SNES

S

HIGH LOW

HIGH

LOW


2.2.2 Internal Environment Analysis

Strengths and Weaknesses Analysis involves the studying of various internal features affecting the

business unit and importance rating of different features according to the company‟s priorities.

Strengths and Weaknesses Analysis of Petroleum Coke business unit shows the given results.

a) Major Strength –

Table 1. Major Strength of Petroleum Coke Business Unit of Refinery

A Marketing

1. Company Reputation

2. Service Quality

3. Pricing Effectiveness

4. Distribution

B Manufacturing

1. Facilities

2. Economies of Scale

3. Capacity

4. Able dedicated work force

5. Ability to produce on time

6. Technical manufacturing skill

C Organizational

1. Visionary capable leadership'

2. Dedicated employees

3. Entrepreneurial orientation

4. Flexible / Responsive

Information Source: Collected by Researcher (as per table 16 – appendix)

b) Minor Strength

Table 2. Minor Strength of Petroleum Coke Business Unit of Refinery

A. Marketing

1. Promotion effectiveness

2. Sales force effectiveness

3. Innovation effectiveness



c) Neutral Performance

Table 3. Features showing neutral performance of petroleum coke business unit include

A. Marketing

1. Market share

2. Geographical coverage


Major Weakness

There is no major weakness in case of petroleum coke for petroleum coke business unit of Refinery.

d) Minor Weaknesses

Table 4. Minor weakness of petroleum coke business unit

1. Product Quality


e) Importance

The refinery gives high importance to the given performance units –

Table 5. Performance Units – High Importance

A Marketing

1. Company Reputation

2. Product Quality

3. Service Quality

4. Pricing Effectiveness

5. Distribution Effectiveness

B Manufacturing

1. Facilities

2. Economies of Scale

3. Capacity

4. Able dedicated work force

5. Ability to produce on time

6. Technical manufacturing skill

C Organizational

1. Visionary capable leadership'

2. Dedicated employers

3. Entrepreneurial orientation

4. Flexible / Responsive



The refinery gives medium importance to the given performance units –

Table 6. Performance Units - Medium Importance

A Marketing

1. Promotion Effectiveness

2. Sales Force Effectiveness

3. Innovation Effectiveness

4. Geographical Coverage


The refinery gives low importance to the given performance units –

Table 7. Performance Units - Low Importance

A Marketing

1. Market Share


Analysing Business Markets and Business Buying Behaviour

Analysing business markets and business buying behaviour involves answering the questions given

below –

1. Who is in the business market?

2. What buying decisions do buyers make?

3. Who participates in the buying process?

4. What are the major influences on the buyers?

5. How do buyers make their buying decisions?

The answers to the above questions as per the discussions of the researcher with the refinery officials are

listed below-

2.2.3 Who is in the business market of Petroleum coke?

The Business market of petroleum coke comprises of the sectors mentioned in table 8.

Table 8. Who is in the Business Market?

Cement Sector 1. Cement Plants

2. Mini Cement Plants


Power Sector Carbon Source 1. Carbon based industries

Anode Grade (low sulphur-sweet) 1. Aluminium Electrode Industry

Miscellaneous Sector 1. Brick Kilns

2. Gasification

3. Other kilns

4. Exports

Information Source: Collected by Researcher

2.3.2 What buying decision do buyers make?

Buyers have to take buying decisions on the basis of type of buying situation they are facing i.e. Straight

Rebuy, Modified Rebuy or New Task.

In case of petroleum coke, the buyers face new task buying situations. The new task buying situation is

described as purchaser buying a product or service for the first time. In this situation, the buyer

determines –

i. Product specification

ii. Price limit

iii. Delivery terms

iv. Service terms

v. Payment terms

vi. Order quantities

vii. Acceptable suppliers, and

viii. The selected suppliers

In case of petroleum coke, there are different buyers. The detailed requirements of different buyers are

shown in table 9.

Table 9. What Buying decisions do buyers make?

Cement Sector Power Sector Miscellaneous Sector

(Exports)


Product Specification

HGI 40 - 50 50 - 55 45 min.

C.V. 8000 kcal/kg. 8000 kcal/kg. N.A.

ASH Should be less 0.8 min. 1.0 max.

Sulfur Should not be present 6.5 max. 6.5 max.

V.C.M. Should be high 9 min. 9 - 13.

Size mm NA less than 50 0 - 50.

Total Moisture

(as recd)

on air dried basis

NA NA 8 min.

Gross Calorific Value

(as recd.), k.cal./kg

NA NA 8000 min.

Price limits Landed cost should not

be more than coal.

Modvat should be

claimable.

Price should be stable.

Should be equal to or

lower than existing

fuel in terms of

equivalent heat unit.

NA

Delivery terms Different for different

Cement

plants and Mini Cement

plants as per agreement.

The product is to be

supplied on delivered

basis including

unloading cost.

All shipping related

terms have been

finalized.

Service terms Marketer should provide

technical assistance for

determining blending

ratio.

Technical assistance

required.

Need to jointly appoint

the Surveyor for draft

survey as well as for

issuing the certificate of

quality.

Payment terms As per the agreement As per the agreement The payment would

normally be by

telegraphic transfer.

Order quantities As per the permissible

blend in existing fuel

used to meet Sox

emission

norms fixed by state

pollution

control board.

As per the permissible

blend in existing fuel

used to meet Sox

emission norms fixed

by state pollution

control board.

1 MMTPA petcoke

perannum for 3 years

beginning 1/5/2000.

Acceptable suppliers As given in the list. NA NA

Selected suppliers Different for different

Cement plants.

NA NA

Not applicable


Abbreviations and meaning of Product Specification features are given in detail in Annexure 1 – Quality

Parameters of Coke and Glossary.

2.3.3 Who participates in the buying process?

In a buying process, various persons influence the purchasing of a product. Buying involves deciding

about many factors.


The buying centre includes all members of the organization who play any of six roles in the purchase

decision process. These are Users, Influencers, Deciders, Approvers, Buyers and Gatekeepers.

Buying Centres in case of Petroleum coke of different buyers are shown in table 10.

Table 10. Who participate in buying process?

Cement Plants Mini Cement

Plants

Power Plants Brick Kiln

Operator

Decision Maker Managing

Director/Site

President is

approached to

present the overall

view.

NA

Chairman of

respective

Electricity

Board. NA

Influencer Technical Head and

Commercial Head

are approached

separately

People from

within the mini

cement industry

act as influence in

this case. Word of

mouth act as most

influencing factor

Power Secretary

and the State

Power Minister

Dealer from

who present

fuel is

purchased.

Gatekeeper Technical Staff

directly in usage.

Technical Staff

directly in usage. NA NA

Decision Maker

& Buyer

NA

Managing

Director is

approached to

present the

overall view.

NA NA

Buyer &

Gatekeeper

NA NA

Technical In

charge / Director

operations of the

respective

location.

NA

Equipment

Supplier NA NA BHEL* NA

Decision Maker,

Buyer & Gate keeper NA NA NA

Owner of

Brick Kiln.

NA - Not Applicable

*BHEL - Bharat Heavy Electricals Limited


Definitions of Terms used are explained in Annexure 2

2.3.4 What are the major influences on business buyers?

Webster and Wind have classified the various influences on business buyers into four main groups:

Environmental, Organizational, Interpersonal and Individual.


These four groups influencing business buyers have influence on buyers of petroleum coke too.

These are shown in table 11.

Table 11. What are the Major influences on Business Buyers?

Environmental Organizational Interpersonal Individual

1 Level of primary

demand of petroleum

coke

Objective i.e. objective

of the particular

organization.

Authority i.e. power to

influence obedience or

power to take

decisions to buy.

Age of the person

buying and taking

decisions.

2 Economic outlook i.e.

if it is economical to

purchase petcoke as

fuel

Policies i.e. a plan of

action of particular

organization.

Status i.e. rank or

position of a person

Income level

3 Cost of money i.e.

required rate of return

which a firm expects

after investing money

in this fuel.

Procedures i.e. a series of

actions taken by

organizations purchasing

petroleum coke

Empathy i.e. ability to

identify mentally.

Education

4 Rate of technology

change i.e. rate at

which the technology

of using petcoke as

fuel is going to

change.

Organizational structures Persuasiveness i.e.

ability to persuade

people.

Job Position

5 Political & Regulatory

Development i.e.

effect of political

parties and regulators

on use of petcoke.

Systems i.e. a set of

connected things that

form whole or work

together.

Personality i.e.

distinctive qualities

of a person

6 Competitive

development i.e. the

rate at which the other

competitors of

petcoke will emerge.

Risk Attitude i.e. if

he has ability to take

risks or not If yes, to

how much extent?

7 Culture

Information Source: Collected by Researcher.

2.3.5 How do buyers make their buyer decisions?

There are mainly eight stages through which Business buyers pass while taking Business buying decisions as

shown in table 12.


Table 12. Major stages (buying phases) of the industrial buying process in relation to major buying

situations (buying classes)

Sou

rce: (Kotler, Keller, Koshy, & Jha, 2007, p. 185)

Buying decision regarding petroleum coke is a new task situation for business buyers. Business buyers of

petroleum coke will follow the following stages.

1. Problem Recognition – In case of Cement sector, Power sector, Miscellaneous sector etc., the

problem with present fuel i.e. Coal is that it has low calorific value, its ash content is very high,

the end users have to spend much on transportation. These problems create a need to have some

better fuel than coal.

2. General Need Recognition – In case of users of coal the requirements include a product having

high calorific value, less ash content, easily available, economical and so on. Some of these

requirements are met by petroleum coke.

3. Product Specifications – In case of petroleum coke product specification is different for different

users as mentioned above in new task buying situation of petroleum coke.

4. Supplier Search – In case of petroleum coke The refinery is supplier of fuel grade petroleum coke

in India. There are two other suppliers of petroleum coke of foreign origin, M/s AMCOR and M/s

Mitsubishi, supplying coke all over the world and in India too.

BUY PHASES BUY CLASSES

NEW TASK MODIFIED REBUY STRAIGHT REBUY

1. Problem Recognition Yes May Be No

2. General Need

Description

Yes May Be No

3. Product Specifications Yes Yes Yes

4. Supplier Search Yes May Be No

5. Proposal Solicitation Yes May Be No

6. Supplier Selection Yes May Be No

7. Order-Routine Specifications Yes May Be No

8. Performance Review Yes Yes Yes


5. Proposal Solicitation – In case of petroleum coke, proposals are invited by various cement plants.

Proposals are also called by some agents of Coal. Some other sectors have also called for

petroleum coke specifications of Refinery.

6. Supplier Selection – Proposal solicitation calls for selection of a supplier from the number of

proposals. The selection of suppliers is done by comparing various points as mentioned in vendor

analysis as shown in table 13.

Table 13 - Example of Vendor Analysis

Attributes

Rating Scale

Un Acceptable

(0)

Poor

(1)

Fair

(2)

Good

(3)

Excellent

(4)

1. Technical &

Production

capabilities

x

2. Financial

Strength

x

3. Product

Reliability

x

4. Delivery

Reliability

x

5. Service

Capability

x

Total Score:

4+3+4+3+4 = 18

Average Score:

18/5 = 3.6

Note: This vendor shows up as strong, except on two attributes. The purchasing agent has to decide how

important the two weaknesses are.


In case of petroleum coke supplied by Refinery, the purchasing agent will do the above given analysis

and will compare it with other suppliers as well as his own requirements. If it is approvable, he will

approve.

7. Order Routine Specifications – The buyer will now negotiate the final order with the chosen

supplier(s) and place the order. In case of petroleum coke, various purchasers have already

negotiated the deal with Refinery.


8. Performance Review – At this stage, the buyer reviews the performance of the particular supplier

on different grounds as:

i. The buyer may contact the end users and ask for their evaluations, or

ii. The buyer may rate the supplier on several criteria using a weighted scare method, or

iii. The buyer might aggregate the cost of poor performance to come up with adjusted costs of

purchase including price.

In case of petroleum coke, the buyers can use any of the above-mentioned methods for evaluating the

performance of Refinery.

3 Conclusion

3.1 Petroleum Coke Market

3.1.1 Product

1. The fuel grade petroleum coke (a by-product of refinery) is being produced first time by

the refinery. Hence, it has no ready-made market for selling the product in the Indian market.

2. The quality of crude oil affects the specifications of the petroleum coke produced.

Refinery is using heavy crude oil. It has more amounts of residual content compared to lighter crude oil.

Sulphur content in petroleum coke produced from heavy crude oil is high. And presence of sulphur

affects the quality of petroleum coke. The more the sulphur content, the more is the emission of SO2 gas.

The emission of SO2 gas is harmful for the environment and it is permissible to a limited extent.

3. Refinery has designed its production unit to process heavy crude oil as well as lighter

Crude oil.

4. As Refinery is using heavy crude oil, the petroleum coke so produced has high sulphur

Content which causes emission of harmful SO2 gas. Further hard groove grind ability index of Refinery‟s

petroleum coke is low which restricts the blending of petroleum coke to the desired level. Its calorific

value is very high, due to this quality it can be proved as very good fuel.


3.1.2 Market

1. Petroleum coke has been sold in the international market for long, but the refinery has

launched fuel grade petroleum coke for the first time in the Indian market. Therefore it is needed to create

the market for petroleum coke.

2. Marketing features of petroleum coke include: marketer as the refinery, its competitors

include AMCOR and Mitsubishi. The petroleum coke competes with indigenous coal, imported

petroleum coke and imported coal. Marketing intermediaries include agents for the export sector and in

the remaining cases; the refinery has maintained direct relations with customers.

3.2 External & Internal Environment Analysis

As per the findings, the cement sector and the future power plant are considered as the major opportunity

for petroleum coke business unit of the refinery.

The major threat to petroleum coke business unit is considered to be negative effects of high sulphur

content in petroleum coke.

Company reputation, service quality, pricing effectiveness and distribution effectiveness are major

marketing strengths of petroleum coke business unit. Facilities, economies of scale, capacity, able

dedicated work force, ability to produce on time, technical manufacturing skills are major manufacturing

strengths of petroleum coke business unit. Visionary capable leadership, dedicated employees,

entrepreneurial orientation, flexibility/responsiveness are major organizational strengths of petroleum

coke business unit. Promotion effectiveness, sales force effectiveness and innovation effectiveness are

minor marketing strengths of petroleum coke business unit of the refinery. Market share and geographical

coverage are neutral performing points, product quality is minor marketing weakness of the petroleum

coke business unit.

Company reputation, product quality, service quality, pricing effectiveness and distribution effectiveness

are some of the marketing features highly important for the refinery. Facilities, economies of scale,


capacity, able dedicated workforce, ability to produce on time and technical manufacturing skill are the

manufacturing features highly important for the refinery. Visionary capable leadership, dedicated

employees, entrepreneurial orientation and flexibility/responsiveness are highly important organizational

features of the refinery. Marketing features like promotion effectiveness, sales force effectiveness,

innovation effectiveness and geographical effectiveness are of medium importance for the refinery and

market share is of low importance for the refinery.

Business Buying Behaviour Analysis

Buyers are at the first apprehensive of high sulphur content causing disturbances in their process control

emission of SOx beyond permitted levels and lastly corrosion.

However, cheaper price and very high calorific value attracts them to make use and give a fair trial to this

new product. All the buyers, therefore, are price conscious. They are all comparing the price of Petroleum

coke with presently used fuels to optimize fuel cost without jeopardizing the process parameters

significantly.

Easy availability is cutting lead time and buyers are reacting favourably for this attribute also.

Buyers are also asking for credit period for making payment which Refinery has hither to restrain.

Buyers are even prepared to change/modify certain equipment and have appointed certain consultants to

maximise the use of this cheaper fuel.

However, wherever there is disturbance in the production process, the buyer immediately stops its use and

even blames the faults due to other reasons also on the use of petroleum coke.

Many customers are using sized coal and as such they want sieving to be done by the supplier. They do

not want to understand sieving operation at their site.


Overall buyer behaviour is quite enthusiastic to use the cheaper fuel against the conventional mixed coal

they were using.

4 Recommendations

Based on the findings and analysis of the information collected, the following strategic base is developed

for marketing the product.

Goal formulation

Goal formulation involves setting up of objectives, priority-wise. In case of the petroleum coke business

unit of the refinery the objective should be as follows:

4.1 Company objectives

a. Reduction of opportunity costs

b. Increasing returns

4.2 Marketing objectives

c. Sales growth

d. Increased geographical coverage

e. Increasing market share

f. Enhancement of sales force effectiveness, and

g. Improving promotion effectiveness.

4.3 Strategy formulation

Goals indicate what a business unit wants to achieve; strategy answers how to get there. Michael Porter

has condensed a list of many types of strategies into three generic types that provide a good starting point

for strategic thinking:

1. Overall cost leadership,

2. Differentiation, and


3. Focus

Refinery should follow „Focus‟ type of strategic thinking. Here the business focuses on one or more

narrow market segments rather than going after a large market. The firm gets to know the needs of these

segments and pursues either cost leadership or a form of differentiation within the target segment.

5 Limitations

5.1 Limited study regarding technical features of the product was undertaken.

5.2 Limited time duration was available with Refinery personal to discuss various issues.

5.3 Internal environment analysis excludes the information regarding financial strengths and

weaknesses of the Refinery due to confidential issues.

6 Literature Review

6.1 Fuels

A substance which produces heat is called a fuel. Fuels are classified mainly in four general classes-

namely fossil, by-product, chemical and nuclear fuel. Fuels in each general division are further classified

as primary and secondary fuels. Primary fuels are those which occur in nature viz. coal, wood, petroleum

and natural gas etc. Secondary fuels are those which are derived from primary fuels e.g. fuel oil and

kerosene (derived from petroleum), coke oven gas (derived from coal etc.) For details see Classification

of Fuels (Chart 1 -Appendix)

6.2 Petroleum

6.2.1 The composition of petroleum

Petroleum was first used over five thousand years ago when it was recognized that the heavier derivatives

of petroleum (asphalt) could be used for caulking and as adhesives for jewellery or for construction

purposes. There is also documental use of asphalt for medicinal purpose. (Dolbear, Khan, Mushrush,

Patmore, Reynolds, & Speight, 1998, p. 1)


Refining petroleum involves subjecting the feedback to a series of physical and chemical processes as a

result of which a variety of products are generated. (Dolbear, Khan, Mushrush, Patmore, Reynolds, &

Speight, 1998, pp. 1-2)

Petroleum also known as crude oil is the product of natural changes to organic debris over millennia. It is

a water-white to black liquid that may vary from flowing to having difficulty in being mobile at room

temperature. The predominant constituents of petroleum are hydrocarbons, but compounds containing

nitrogen, oxygen, sulphur and metals are also present. Thus, a simple definition of petroleum (also known

as crude oil) is a naturally occurring mixture of hydrocarbons in a gaseous, liquid or solid state. (Dolbear,

Khan, Mushrush, Patmore, Reynolds, & Speight, 1998, pp. 3-4)

6.2.2 Petroleum formation

First, and by way of an additional definition that is specific to this section, protopetroleum is a generic

term that has been employed on occasion to indicate the product after initial changes in the precursors

have occurred that results in the formation of petroleum. In some instances, the terms protopetroleum and

kerogen have been used interchangeably, although there is the notion that protopetroleum is the first

product of diagnosis and the kerogen is a later product of this sequence. (Dolbear, Khan, Mushrush,


Thus, using this form of terminology, difference in petroleum composition can be ascribed not only to the

nature of the precursors that form the protopetroleum but also to the relative amounts of precursors in the

mix and the maturation conditions under which the protopetroleum is converted to kerogen and thence to

petroleum. (Dolbear, Khan, Mushrush, Patmore, Reynolds, & Speight, 1998, p. 6)

The exact mechanism by which petroleum is formed from kerogen is unclear and speculative (figure 6.1);

there are several theories, and the proponents of each theory can vociferously state their reasons.

(Dolbear, Khan, Mushrush, Patmore, Reynolds, & Speight, 1998, p. 7)


Figure 5. Representation of the pathways by which petroleum is formed

Source: (Dolbear, Khan, Mushrush, Patmore, Reynolds, & Speight, 1998, p. 8)

Thus, petroleum is formed from various precursors and (whether it by way of a mysterious material called

protopetroleum or a somewhat less mysterious material called kerogen), it is the relative amounts of these

precursors as well as the prevailing maturation conditions that dictate the composition of petroleum. And

it is the composition of petroleum that dictates its behaviour in refineries. (Dolbear, Khan, Mushrush,


6.2.3 Petroleum products

Petroleum products are made from petroleum crude oil and natural gas. A list of the principal classes of

products made from petroleum crude oil is given in Table 14. (Mcketta, 1992, pp. 1-2)

Table 14: Principal classes of products from petroleum crude oil

Product Volume %

Still Gas 4.9

Liquefied Gas 3.2

Gasoline, Motor 45.8

Gasoline, Aviation 0.2

Jet Fuel 9.8

Kerosene 0.7

Special Naphtha 0.4

Petrochemical Feeds 3.1

Distillates 21.2

Lubricants 1.2

Waxes 0.1

Coke 3.8

Asphalt / Road Oil 3.1

Residuals 6.7

Miscellaneous 0.5

GAS

PRECURSORS PROTOPETROLEUM KEROGEN

ASPHALTENES RESINS OILS GAS


Total 104.7 (b)

(a) Source: US Energy Information Administration, Petroleum Supply Annual 1986. DOE / EIA –

0340(861), published May 1987.

(b) 100 wt. % Volume gains because most products are lighter than original feed.

(Mcketta, 1992, p. 3)

References

Dolbear, G. E., Khan, M. R., Mushrush, G. W., Patmore, D. J., Reynolds, J. G., & Speight, J. G. (1998). Petroleum

Chemistry and Refining. (J. G. Speight, Ed.) Washington, USA: Taylor & Francis.

Hunt, J. M. (1996). Petroleum Geochemistry and Geology. USA: W.H.Freman & Company.

Hydrocarbon Asia - An Asian Pacific Energy Publication. (June 2000). Hydrocarbon Asia - An Asian Pacific Energy

Publication, 10(4).

Kotler, P., & Armstrong, G. (2010). Principles of Marketing (13th ed.). USA: Pearson Prentice Hall.

Kotler, P., Keller, K. L., Koshy, A., & Jha, M. (2007). Marketing Management, A South Asian Perspective (12th ed.).

New Delhi: Dorling Kindersley (India) Pvt. Ltd.

Mcketta, J. J. (1992). Petroleum Processing Handbook. (J. J. Mcketta, Ed.) New York, USA: Marcel Dekker, Inc.

O.P.Gupta. (1996). Elements of fuels furnaces and refractories. New Delhi: Khanna Publishers.

Tan Tiong, C., Kotler, P., & Leong Meng Siew, A. H. (1996). Marketing Management - An Asian Perspective.

Singapore: Prentice Hall.

Tull, D. S., & Hawkins, D. I. (1987). Marketing Research - Measurement and Method (4th ed.). New York:

Macmillion Publishing Company.

Zikmund, W. G., Babin, B. J., Carr, J. C., & Griffin, M. (2010). Business Research Methods, Eighth Edition (Eighth

ed.). (J. W. Calhoun, Ed.) Canada: South-Western Cengage Learning.

Glossary

1. Ash Content – It is an impurity in coke which adversely affects the quality of coke.

2. Battery Limit – The outer boundaries of the area assigned to a unit.

3. British thermal unit – The energy required to heat one pound of water to temperature of 1 F.

The British thermal unit or BTU is typically used in refinery operations to compare the relative

heating values of various fuels and to rate the capacity heat exchange equipment.


4. Coking – The formation of solid, non-distillable crude by-product on internal furnace tubes

and other process areas.

5. Green Coke – Coke produced during thermal cracking of petroleum residue in reaction.

During thermal reaction heavy molecules crackers in to lighter molecules and simultaneously

polymerisation also takes place. Coke is produced because of thermal cracking.

6. HGI – It is measurement of Coke strength. The more HGI is less strength will be.

7. Luffing – This is the term used in radial stacker operation. When boom moves up and down at

particular position. It is called luffing.

8. Moisture Content – It is an amount of water present in Coke.

9. Real Density – It is determined to know the porosity of lump coke.

10. Sulphur Content – Sulphur in coke creates Corrosion problem and hence in tolerance is

limited.

11. Slewing – This is the term used in operation of radial stacker. When boom moves right or left

at particular height it is called slewing.

Appendix

Table 15. Classification of Fuels

General Division Primary Fuels Secondary Fuels

Natural Manufactured By-Product

Solid Wood Semi Coke Charcoal

Coal Coke Wood Refuse

Charcoal Bagasse

Briquettes Coke Breeze

Pulverized Coal Waste material from grain

Liquid Petroleum Petrol Tar

Kerosene Pitch

Alcohol Benzoyl

Colloidal Fuels Paper pulp mill waste

Fuel Oil

Naptha

Vegetable Oil

Gaseous Natural Gas Producer Gas Blast Furnace Gas

Water Gas Coke Oven Gas

Carburetted Water Gas Oil Refinery Gas

Coal Gas Sewage Gas

Oil Gas L.D. Converter Gas


Source: (O.P.Gupta, 1996)

Table 16. Strengths & Weaknesses Analysis of Petroleum Coke Business Unit of Refinery

Performance Rating Importance

Major

Strength

100%

Minor

Strength

75%

Neutral

50%

Minor

Weakness

25%

Major

Weakness

0%

High

100%

Medium

60%

Low

20%

Marketing

1. Company Reputation MS HI

2. Market Share NEU. L

3. Product Quality MI.WK. HI

4. Service Quality MS HI

5. Pricing Effectiveness MS HI

6. Distribution Effectiveness MS HI

7. Promotion Effectiveness MI.ST. MED.

8. Sales Force Effectiveness MI.ST. MED.

9. Innovation Effectiveness MI.ST. MED.

10. Geographical Coverage NEU. MED.

Manufacturing

1. Facilities MS HI

2. Economies of Scale MS HI

3. Capacity MS HI

4. Able dedicated work force MS HI

5. Ability to produce on time MS HI

6. Technical mfg. skill MS HI

Organization

1. Visionary capable

leadership MS HI

2. Dedicated employees MS HI

3. Entrepreneurial orientation MS HI

4. Flexible / Responsive MS HI

Information Source: Collected by Researcher. Chart Source - (Kotler, Keller, Koshy, & Jha, 2007, p.

51)

Gobar Gas

Reformed Natural Gas

Butane

Propane

Acetylene

Hydrogen

LPG


Annexure 1

Quality parameters of petroleum coke

1. Asphaltenes

The asphaltenes content is percentage by weight of a wax free material insoluble in n-heptane but soluble

in hot Benzene. Asphaltenes in Crudes from different sources will vary depending on the quality of the

crude. This will have certain bearing on the characteristics of the products derived from such crudes.

2. Ash Content

The Ash from a sample is the percentage by weight of the inorganic residue left after ignition of the

sample under the prescribe conditions. This gives an idea of the ash forming impurities in the oil, mostly

metallic or inorganic contaminants. Increase of ash content adversely affects coke quality.

3. Calorific Value

The heat released (in calories per gram or BTU per pound) by the combustion of a unit mass of fuel in a

constant volume bomb with substantially all of the water condensed to the liquid state.

Net calorific value = Gross calorific value – Heat recovered by condensation of water vapour. This gives

the measure of the heat producing capacity of the fuel.

4. Carbon Residue

Carbon residue can be defined as the amount of carbon residue left after evaporation and pyrolysis of oil

and is intended to provide some indication of relative coke forming properties.

This can be determined by i) Conradaon method, ii) Ramsbottom method.

Significance – it gives an indication of the coke – forming tendency of the fuel. The board of revenues

utilizes this property for classification of fuels for excise duty purposes. It is also used in design

calculations of Coker.

5. Real Density of Coke


A known metal moisture free 75-micron size coke sample is taken in a specific gravity bottle and boiling

with distilled water expels air in the pores. The real density is then calculated by dividing the weight of an

equal volume of freshly boiled distilled water.

Both green and calcined coke is porous material and true relative density refers to the intrinsic property of

the substance, which the porous material is made of. For the purpose of this, standard relative density is

equal to density (mass/volume) when the latter is metric units.

Real density or true specific gravity is determined to know the porosity of lump coke, which is calculated

as follows –

Porosity = 100 – 100 (Apparent sp. gr.)/True sp.gr.

6. Sulphur Content

This is determined by lamp test method or wick bold method for volatile petroleum products and by bomb

method for heavier products. Sulphur in the sample is oxidised by combustion and is estimated

volumetrically after absorption in H2O2 or by gravimetric method after converting to barium sulphate.

7. Ultimate analysis of coke

Ultimate analysis is the determination of carbon, hydrogen, nitrogen, oxygen and sulphur in coke. Ash

content is determined by difference. It is carried out when we want to investigate the composition of coke

thoroughly.

8. Volatile Matter

It is the loss in weight of moisture free coal/coke when heated in a platinum crucible fitted with cover, in

a furnace at 950 +/- 25 degree Celsius for 7 minutes.

The percentage of volatile matters related to the length of flame, smoke producing tendencies and the

ignition temp. of coal. High volatile coke has long flames high smoke and low heating values. Coke with

about 20% volatile matters have the least heating value. The percentage of volatile matter in coke is the

production of coke which will be converted into gases and products by heat. The classification of coke

depends upon the volatile matter content.


Annexure 2

Participants in the Business Buying Process

1. Users – are those who will use the product or service. In many cases, the users initiate the buying

proposal and help define the product specifications.

2. Influencer – are persons who influence the buying decisions. They often help define specifications and

also provide information for evaluating alternatives. Technical persons are particularly important as

influencers.

3. Deciders – are persons who decide on product requirements and/or on suppliers.

4. Approvers – are persons who authorize the proposed actions of deciders or buyers.

5. Buyers – are persons who have formal authority to select the supplier and arrange the purchase terms.

Buyers may help shape product specifications, but they play their major role in selecting vendors and

negotiating. In more complex purchases, the buyers might include high-level managers participating in

the negotiations.

6. Gatekeepers – are persons who have the power to prevent sellers or information from reaching

members of the buying centres. Example – purchasing agents, receptionists, telephone operators may

prevent salespersons from contacting users or deciders.


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