Luận văn thạc sĩ
Nâng cao chiến lược cạnh tranh sản phẩm dầu nhờn và
dẫu mỡ tại Công ty cổ phần hóa Dầu Petro
MBA THESIS TITLE
IMPROVING THE COMPETITION STRATEGY IN THE AREA OF
LUBRICANT AND GREASE BUSINESS FOR PETROLIMEX
PETROCHEMICAL J.S COMPANY
Our country is in the beginning period of the market economy under the State
management. Market economy opens the development opportunities as well
as the big challenges for Vietnam's enterprises.
An indispensable matter in economy - the most outstanding question of the
day in the market economy that is competition. Because, in spite of any
fields, any sectors, the market has the division by the domestic and
international enterprises. The competition is more and more severe. The
enterprises never satisfy with the occupied market (because it means they
accept to be annihilated), and they always try to expand their market share. In
order to reach this, the enterprises must have the suitable tools, solutions to
increase the competitiveness as the foundation to ensure the enterprises to
stand firmly and develop in the severe competition in the market.
Petrolimex Petrochemical Joint Stock Company (PLC) is specialized in doing
business on the products such as Lubricants and Grease and the products
originated from petroleum like asphalt, Chemical. Through 17 development
and operation years, the Company has built the position as one of the leading
enterprises in Vietnam’s Lubricants and Grease market. However, PLC
Company has had to confront with the strong competition from the renowned
enterprises inside and outside the country such as: BP, Castrol, Shell,
PVPDC, APP... in Lubricants and Grease market in
Vietnam. In order to continuously develop and expand the market share, the
Company needs to do research and set forth the suitable strategy to improve
its competitiveness. Then, the Company could win the competitors, stand
firmly in this severe competition market.
Originated from the above mentioned overview, Team 2 - Class M07.09 has
agreed to select “Improving the competition strategy in the area of lubricant
and grease business for PETROLIMEX Petrochemical J.S company
(PLC)” as the capstone project report of the course.
THE CAPSTONE PROJECT REPORT OF GLOBAL ADVANCED MASTER OF
BUSINESS ADMINISTRATION includes the main contents as followed:
Chapter 1: The theories in regard to competition and competition
improvement for enterprises
Chapter 2: Analysis on PLC’s current competition power in lubricant and
Chapter 3: Improvement of competition power and solutions to be
implemented within 2011 - 2015
THE THEORIES IN REGARD TO COMPETITION AND
COMPETITION IMPROVEMENT FOR ENTERPRISES
1. Competition and its roles in regard to an enterprise’s operations
1.1 The roles of competition in regard to the operation of enterprises
a. The concept of competition:
- The business dictionary (published in Britain in 1992) defines
“competition is the rivalry between the businesses striving for the same
-“Competition includes attacks and counter-attacks from businesses against
each other to build/ protect their competition advantages or improve their
market position”(1). Businesses have to compete against each others and at
the same time keep improving their competition power to be in a better
position than the rivals:
+ The action in which businesses compete against each other in regard to
some products or in some market areas are called multimarket competition.
The group of attacks and counter-attacks made by the businesses is called
+ As the time goes, businesses continuously attack or counter-attack each
other. This suggests that the businesses depend on each other in
competition...”the more severe the competition is the less profit the
businesses will gain”
- Competitors that are similar in resources and market coverage will best
define competition. Similarity in market means the number of markets that
competitors have in common. Similarity in resources means the
competitors can be compared against each other in term of tangible of
intangible resources etc. Businesses that are similar in resources and
market coverage will most likely be direct competitors.
- The forces that lead the businesses’ competition include: perception,
motivation and capabilities...
- Competing includes attacks and counter-attacks made by businesses in
order to be in a better market position...
- In economics, competition is categorized as follows:
+ Competition between sectors: businesses from different economic
sectors compete against each other to invest in the sectors that will benefit
them best. The competition between sectors therefore motivates businesses
to look for the most beneficial sectors to invest in and transfer capital from
the less profitable sectors to the more profitable ones.
+ Competition inside the sector: the businesses/ competitors produce and
market the same products/ services. The competition inside the sector
therefore forms market price for one product/ service basing on its common
values. In this type of competition, the competitors will eliminate each other.
Winning means expansion and losing means downsizing or even bankruptcy.
b. The roles of competition in regard to the operation of enterprises
- Competition is rooted from the freedom in business operation for greater
variety in services and products or for more participation from more
competitors. Competition is a race without a finish line. Competition means
not only leading but also “winning” customers by best satisfying their
- In a market economy, competition helps lowering prices of products
services and at the same time improving their quality.
+ Competition will remove businesses having high costs and encourage those
having lower ones. This pressurizes businesses to improve their competition
power via lowering costs and improving their productivity, which eventually
benefits the society in the long run but also forces some certain businesses to
go bankrupt, resulting in waves of unemployment.
+ Competition also forces businesses to apply new technology and advanced
production skills for the improvement of quality, productivity and variety of
products. The businesses are also forced to faster access into information as
well as take full advantage of opportunities.
In summary, competition does not mean elimination but instead it helps
replacing those having bad performance and wasting resources with better
ones in order to better meet the social demand for the development of nations.
Fair competition motivates the economies and businesses to grow...
1.2. Types of competition in business
The categorization of market basing on competition is closely attached to the
relationship of supply-demand. This categorization shows us the following
types of competition:
1.2.1. Perfectly Competitive Market
- In a perfectly competitive market, there are various competitors supplying
the same products/ services. Since the businesses can not make any
differences (on model, specification, quality...) from each other; none of them
are therefore able to supply a quantity of products big enough to influence the
price. The conditions for market entry/exit are easy. Hence, the only way for
businesses in the this market is to minimize their costs for better profit.
- This type of competition hardly exists in reality.
1.2.2. Imperfectly Competitive Market
Imperfectly Competitive Market is a normal one as it exists in reality. There are two
types of Imperfectly Competitive Market as follows:
a. (Full) Cartel Monopoly
There are only a few (a group of) businesses that supply the majority (or all )
of certain products/ services. These businesses are sensitive on each other’s
operation. They depend on each other while setting prices and deciding on the
quantity of products/ services that they are to supply. When a business in the
cartel lowers its price, the others will lower their prices even more OR when
one in the cartel increases its price while the other don’t, that one will finally
lower its price to the earlier rate or else will lose its customers. The way for
competitors of this type is to lower their costs via various ways, such as:
b. Cartel Monopoly (with differences)
There are a few businesses producing and marketing products/ services with
certain differences. The differences may be in quality, model etc.
c. Monopolistic competition
Many businesses are able to create differences for all or a part of their
products/ services. Customers recognize each business’s products/ services
via label, advertisement, packaging and other services. In this market, the
businesses are able to set their own prices, but not entirely on their own. The
competitors will focus on the market segments where they can better serve
their customers and therefore can set higher prices. This market will best
benefit big businesses.
1.2.3. Complete Monopoly
There is only one business supplying a certain product/ service. This
Monopoly is supported by the State or by patent, huge scale of investment,
exclusive right in technology. Competition does not exist in this market. The
monopolistic enterprise decides on the price.
1.3 Enterprises’ adaptability to competition
a. Relying on competition advantages to win
- The businesses’ common competitive weapons are structure of products,
product quality, prices, sales services and others.
+ Competition via quality: via reliabilities, design, technology...
+ Competition via prices: businesses attract customers via competitive prices
+ Competition via services: businesses design pre and after sales services to
build the prestige for their products. This is a good competitive weapon that
are used more and more by businesses today.
b. Building entry barriers to both new businesses and existing ones:
To boost the competition advantages, the businesses usually choose to build
entry barriers to new players such as: increase of size, diversifying
distribution channels etc.
- The businesses also build other types of entry barriers which try not to
directly confront other competitors, such as:
+ Selecting certain segments: selecting the segments with no or only a few
competitors; selecting areas with remarkable demand but with no competitors
or selecting the segments where the competitors do not perform well.
+ Preventing other competitors’ penetration: by having big stocks, good
quality, good marketing policy …
+ Cooperating with competitors: in such fields as science & technology etc…
1.4. Improvement of competition is vital and obvious to enterprises
1.4.1. Enterprises’ competition power
a. A business will have certain competition advantages when its profit is
higher than the sector’s average rate. This advantage is sustainable when it is
maintained in a long period of time. The indicators for competition
advantages are the values of the products/ services that customers enjoy and
the involved costs.
- The values that customers enjoy from a business’s products/ services are
usually higher than the price they pay for those products/ services. This
difference is called consumer surplus. The competition between businesses
has awarded the consumers with this surplus. In other words, this is because a
business can not categories its products/ services into segments that cover the
customers well enough so that it can ask for the right price for the values that
customers enjoy… From these this standpoint, the businesses can select either
of the following competition solutions:
+ Creating more values for customers, exceeding the customers’ demand by
outstanding design, functions, quality, etc so that the customers can feel the
values and therefore they are willing to pay higher prices.
+ Improving the business’s performance/ operational efficiency in order to
lower the costs increasing the marginal profit.
“Hence, by fully utilizing its core business to go beyond standards, a business
will create added values for their customers” (2).
In order to create outstanding values, it is not a must for a business to either
have the lowest costs or to make products with highest quality in the sector.
Instead, it is vital that the business must create a bigger difference between
Value & Cost (compared to other competitors). Following M.E Porter:
“competition advantage (higher profit) will be with any business that can
create outstanding values. The way for creating outstanding values comes the
efforts in lowering costs or/ and creating differences for its products. And
thus, the customers will better realize and willing to pay an additional
b. Competition power/ advantage may also mean “the ability that a business
has to maintain its position in the market for a long period of time and to
make a profit that can cover the ambition for its strategic target”
Theoretically, there are various indicators reflecting the competition power.
One important one is the market share that a business has. The bigger the
market share, the better the competition power. To survive and develop, a
business must have a market share that is big enough.
1.4.2. Factors affecting enterprises’ competition power:
Four fundamental factors:
- Efficiency: to a business, the inputs are labor, land, capital, management,
technology and the outputs are products/ services. Efficiency can be measured
by the ratio of output/input.
- Quality: this factor can influence competition power as follows: 1. increase
the quality of the product following customers’ feeling higher price.
2. higher quality higher efficiency and lower costs
- Improvement: is the new idea or new way that a business operates or
produces. Successful development is the development of new products or the
new way of management that creates values for customers (4)
- Meeting customers’ demand/ expectation: to this, a business must meet the
customers’ demand better than other competitors, These include outstanding
quality and other improvement for customers’ satisfaction; supplying
customers with unique products/ services; time of delivery (5)
1.4.3. The tendency of competition in the 21st century:
a. Competition is more and more severe because of the following reasons:
+ The appearance of information technology
+ The application of new knowledge in science & technology that has
improves the quality of human resource
b. The differences between sectors are disappearing. Knowledge plays a vital
role in competition.
c. Globalization is booming
d. The competition power of a nation is combined from those of businesses/
- In a market economy, competition in inevitable and the businesses must
accept this. Competition will improve production/ operation and at the same
time competition will remove the businesses with poor performance. Hence,
every business must design a reasonable competition strategy.
- Together with the booming of science-technology, customers are better and
better served. Presently, Vietnam has become a WTO’s member and thus the
local businesses have to compete with other international players. So, they
have to improve their competition power.
2. The fundamentals of strategy and business strategy
2.1. Concepts of strategy and business strategy
- Alfred Chandler defines strategy to be “the specification of long term
targets of a business, application of actions and the allocation of necessary
resources to reach the said targets”(6).
- Quinn defines strategy to be “the integrated plan aiming at major targets,
policies with a closely structured actions” (7)
2.2. Strategy management and selection
2.2.1. The concepts of strategy management
+ Alfred Chander defines strategy management to be “the process that a
business specifies its long term targets, actions and allocation of resources to
reach those targets”
+ John Pearce II and Richard B. Robinson define strategy management to be
“a system of decisions and actions designed to reach a business’s set targets”
- “Strategy management” is a bit different with “business policy” in a way
that strategy management not only focuses on internal functions but also on
the environment and strategy (8)
2.2.2. Types of business strategy
a. Functional level: focuses on how a business creates competition power
following such factors as efficiency, quality, improvement and meeting
customers’ demand. These aim at improving the activities of marketing,
material management, development of production and customer services.
b. Business unit level: focuses on how a business position itself in the market
to win competition advantage. These are 3 types of strategy at this level. They
are: 1. cost leader, 2. making differences and 3. focusing in certain market.
c. Corporate level: focuses which product/ operation is most beneficial in the
d. Globalization level: in the current globalization requests a business to step
out in to global arena in order to win competition advantage. When a business
penetrates a new market, it needs to consider/ calculate its benefits & costs
basing on the following strategies: multi-domestic, international, global and
2.3. The role of business strategy
Strategy management delivers the following benefits:
- Helping businesses to better realize its visions by setting targets and ways to
- Improving businesses’ mindset on the changes from the environment.
- Assisting businesses to focus on important issues
- Assisting businesses to see its strengths, weaknesses, opportunities & threats
to design relevant policies.
- Assisting businesses to make right decisions.
2.4. Models of superior profit:
a. As defined at point 1.4.1, a business will have competition advantages if its
profit is higher than the average of the sector.
There are 2 models. One is sector and the other is resource
b. Sector model:
- This model shows that supernormal profit is affected by external factors.
- It is more affected by the sect oral factors rather than the business’s internal
factors. An attractive sector is the one that bring about a profit that is higher
than the average the business will have to indentify such a sector
designing the right strategy allocating necessary resources continuing
its strategy to succeed gaining supernormal profit…
c. Resource model
- This model shows that supernormal profit is affected by the business’s
- Allocating necessary resources by identifying strengths & weaknesses
compared to other players identifying which resource it has is better than
its competitors indentifying a sector that it can win by investing its
resources designing a right strategy so that it can best utilize its resources
3. Strategy design process
The strategic management process: the details in attached Figure 1
3.1. Vision & mission
a. Strategy management is to satisfy the involved parties/ stake holders
- “The involved parties are those that are affected by the business’s
performance and are entitled to benefit from the business’s result” (9);
+ internal: share holders, staff, board of directors & management
+ External: customers, suppliers, government, trade union, public …
- These involved parties are linked to the business by supporting the business
with resources and at the same time benefiting from the business’s
b. A business’s mission & vision are what it states to gain and plan for basing
on the stake holders’ request.
3.2. Objectives of strategy
The objective of strategy has 4 characteristics:
+ Accurate & measurable
+ Aiming at important issues
+ Challenging but doable
+ Good scheduling
- Share holders are the first and most important stake holder of a business.
Hence, it must satisfy this stake holder the most.
3.3 Analysis on external enviroment
External environment includes factors that are out of the leader’s control but
they affect the planning and implementation of a business’s strategy. The
analysis of the external environment helps the business to identify
opportunities & threats to a business. External environment are divided into 2
categories: macro & micro
3.3.1. Analysis on macro environment
This macro environment is analyzed by the matrix PESTLE
a. Macro economy: is the state/ prosperity of a nation’s economy. This affects
a business’s performance. There are 4 factors in this macro economic
- Growth of economy:
- Interest rate
- Exchange rate
b. Technology environment
c. Sociological environment
d. Political environment
e. Legal environment
3.3.2. Analysis on micro/ sectoral environment
a. Industry & competition:
-An industry includes businesses supplying similar products/ services.
b. Five competitive forces (the details in attached Figure 2):
The five competitive forces will affect a business’s performance and profit.
The strength of these forces changes from time to time the business’s
leader must see the opportunities & threat and take relevant actions.
b1. Potential entrants
They are not direct competitors but will be if they want to. These potential
entrants are interested in the existing sector and therefore force the existing
players to improve.
b2. Industry competitors
This is the direct competitive force to a businesses. Hence, the businesses
have to indentify this force and design a right strategy.
b3. Bargaining power of buyers
Buyers are end users and are considered as a threat when they have the
bargaining power and therefore they are able to ask for better quality with
lower price increasing a business’s costs.
b4. Bargaining power of supplier
The suppliers are considered as threat when they ask for higher price or
deliver lower quality lowering a business’s profit
Substitutes are the products/ services from other industries. These products/
services are similar and are able to substitute for the excising products/
services provided at the existing industry.
b6. The defects of “Five Competitive Forces”
The model misses the importance of renovation & the differences between
c. Competition changes during the life cycle of an industry
-Introduction: slow growth, entry barrier is the key, technology plays a more
important role than cost saving or loyalty to brand.
-Growth: the businesses can increase their profit without fighting for other
competitors’ market share.
-Restructuring: competition is severe. The businesses’ normal strategy during
this phase is lowering prices.
-Maturity: demand grows poorly. The businesses try to maintain their market
Decline: negative growth due to different reasons. Competition in prices is the
3.4. Analysis on internal environment
3.4.1. Value chain
Value chain means a chain of a business’s activities/ process that convert
inputs into values for customers (the details in attached Figure 3). This
a. Main activities
a1. Inside logistics: handling of materials, warehouse…
a2. Production: converting inputs into values
a3. Outside logistics: collecting, storing and delivering products to customers
a4. Marketing & sales:
a5. After sales service/ customer service
b. Supporting activities
b1. Technology R&D: focusing on the product/ service improvement
b2. Human resource management: including recruitment, training, payment…
b3. Business’s infrastructure: including its structure, management system,
accounting & finance system, government relation…
c. The above mentioned activities must be compared to other competitors’
d. The business can outsource a part of or all of main/ supporting activities
d1. Why outsourcing is necessary:
- Improving the business’s capabilities by hiring outside experts for technical
- Utilization of global resources
- Increase of profit via process renovation
- Risk sharing
- Redirecting investment/ resources to other sectors
d2. Principles for outsourcing
- Searching for the best from the outstanding companies.
- Evaluation of resources & capabilities: not outsourcing the services that the
business is able to handle by itself.
- Not outsourcing services/ capabilities that are the keys to the business’s
3.4.2. The benefits of sustainable competition to enterprises/ businesses
a. The businesses must keep focusing on the factors, described at point 1.4.2.
b. The business must turn itself into a learning organization which is able to
learn from the mistakes and improve.
c. Benchmarking: the business must compare its products/ services to its most
d. Overcoming its own stagnancy
3.5. SWOT analysis:
3.5.1 Concepts of SWOT:
SWOT stand for Strengths, Weaknesses, Opportunities, Threats. SWOT is used
when a business wants to analyze the internal & external factors while
designing its strategy.
3.5.2. SWOT analysis:
a. External Factor Evaluation (EFE) matrix is at the same time used.
b. External Factor Evaluation (EFE) matrix is also used.
c. Businesses usually use SWOT matrix to analyze and design its strategy.
A business may use one or more SWOT matrix to analyze and make decisions
ANALYSIS ON PLC’S CURRENT COMPETITION POWER
IN LUBRICANT & GREASE BUSINESS
1. Introduction of PLC
1.1 Establishment & development
a. Earlier, PLC was a lubricant & grease trading company. Later in 2003, the
company was privatized and becomes Petrolimex Petrochemical J.S company.
On 27/12/2004, PLC was listed in Vietnam stock market.
- Full name
: Petrolimex Petrochemical J.S company (PLC)
- Office address : 195 Kham Thien Str.- Dong Da Dist- Ha Noi
- Before 1994, PLC imported 100% of its products. Currently, PLC has been
importing materials and blending products under PLC brand. PLC distributes
its products in domestic market and exports some to Laos, Cambodia, China,
Hong Kong, Taiwan and Philippines.
1.2. Business areas
- Trading, import - exporting grease, lubricant, chemicals and petrochemical
- Trading, importing-exporting petrochemical equipments.
- Operating in other relating areas such as: warehousing, blending, testing,
- Currently, PLC (the parent company) is mainly dealing with lubricant &
grease. PLC’s two other wholly owned subsidiaries are in charge of chemicals
1.3. Organization and management structure
The total number of PLC’s staff is 326 people
1.4. A brief introduction of PLC’s products
1.4.1. An overview of grease & lube products
-Grease & lube products are blended from base oil & additives.
-Function: lubricating, etc.
-The products are categorized into:
+ Engine lubricant: for motorbikes, commercial cars, passengers cars, certain
+ Industrial lubricant: including transmission lube, hydraulic lube, transformer
lube and others
+ Marine lubricant: for marine engine & equipments.
1.4.2. PLC’s products
a. PLC’s products follow international standards and can be substitutes for
b. PLC has about 400 products, divided into 6 groups:
- Motorbike engine lube: PLC Racer Scooter, PLC Racer SJ, PLC Racer SG,
PLC Racer SF, PLC Racer SD, PLC Racer 2T, PLC Racer 2T Extra,...
- Passenger vehicle engine lube: PLC Motor Oil Extra 40 & 50, PLC Komat
SHD 40 & 50, PLC Komat CF, PLC Cater CH4, PLC Cater CI4,...
- Commercial vehicle engine lube: PLC Racer Plus, PLC Racer HP,...
- Marine lube: Atlanta Marine D, Disola, Aurelia XL, Talusia HR70,...
- Industrial lube: PLC Rolling Oil 32, 46, 68,... PLC AW Hydroil 32, 46, 68,...
PLC Supertrans, PLC Gear Oil MP 90 EP & 140 EP, PLC Angla 150, 220,...
PLC Brake Fluid Dot 3, PLC Super Coolant 100...
- Grease: PLC Grease L2, L3, L4; PLC Grease C2, PLC Grease L-EP 0, 1, 2,
3; PLC Grease BHT 252,...
c. PLC’s product standards
1.5. PLC’s general process of production and business
- Theoretically, the process starts from refinery and looks like:
Crude Mazut base oil grease & lubricant products
- Currently, PLC has no refineries. Instead, it has two blending plants located
in Hai Phong & Hochiminh. PLC’s production process is:
Import of materials & additives production
- PLC also import 15% of its products for domestic distribution
1.6. Main materials and inputs:
a. Main materials:
- Main materials include: base oil, additives, steal drums and plastic cans,
carton boxes. PLC imports base oil & materials from France, U.S, Japan,
Korea, Taiwan, Singapore, Thailand.
b. Other materials:
- PLC buys other materials from both domestic & international suppliers.
c. Commercial products:
PLC imports some special & commercial products for its distribution
1.7. Facilities and technology
1.7.1. PLC’s facilities (warehouse, port, plants...) locates at strategic positions
equiped with advanced technology. Its existing quality management is ISO
Can Filling Production Line
Drum Filling Production Line
a. Thuong Ly – Hai Phong blending plant:
Area: 25.000 m2; Capacity: 25.000 MT/year and being expanded. Port can
receive 1,500 MT vessels, number of base oil tanks: 8, number finished
product tanks: 07, number of blending tanks: 07, drum blending plant:
b. Hochiminh blending plant
Area: 41.000 m2; Capacity 25.000 MT/year and being expended. Port can
receive 7,000 DWT vessels, number of base oil tanks: 09, number of additive
tanks: 06, number of finished product tanks: 07, drum blending plant:
c. Duc Giang – Hanoi warehouse: total area of 6,000m2.
d. Nguyen Khoai (Hochiminh) warehouse: total area of 3,000m2
1.8. Quality and quality control system:
- PLC’s materials, products are strictly controlled.
PLC’s testing labs have advanced equipment, handled by experienced staff.
PLC’s labs are able to analyze 34 petrochemical standards.
- PLC is now applying quality management system of ISO 9001:2008
1.9. Market & sales channels
a. Petrolimex master dealer channel:
Petrolimex is having more than 5,500 petrol stations nationwide that has
provided PLC with a good competition advantage over other competitors.
PLC’s sale volume is the biggest via this channel.
b. Dealer channel/Outside Petrolimex channel:
PETROLIMEX. This channel helps increasing PLC’s sale, especially in the
segment of motorbike/ car engine lube.
c. Direct channel:
PLC sell its products directly to such customers as: railway, coal, power,
cement, steal & sea transport.
d. Direct export:
PLC is currently exporting its products to China, Taiwan, Hongkong,
Cambodia, Laos, Philippines....
2. The analysis of environmental factors affecting competition power
2.1. The macro environment
a. Macro economic factors
a1. Vietnam’s economic growth after 1990 is detailed out in the following chart
+ Vietnam’s GDP growth is above 7% on average for the last five years
(2005-2010) and is seen to be quite stable, ranking 2nd in the Asia after
-Development of industries and the economy: Among industry, agriculture and
service, the highest development goes to industry. This is because of the waves
of urbanization and the coming of many new industrial & processing parks,
etc. These lead to a growth in the demand for lube.
a2. The structure of Vietnam’s economy: has greatly transformed and seen a
growth in industry, construction, service and a decline in agriculture. This
transformation has increased the demand for petrochemical and lubricant
a3. Integration into the global arena: Vietnam becomes a WTO’s member
better opportunities for foreign lube players in Vietnam more competition
a4. Interest rate is increasing in the recent years increasing the production
costs lowering the profit and competion power of players, especially to
players with poor financial capability.
a5. Exchange rate increases the price USD and other power currency
increasing such price imported materials as base oil, additives.
b. Technology development brings about new equipments lube businesses
must invest in higher quality products for these equipment.
c. Sociological environment: by 2008, Vietnam’s population is 86.21 million
and according to reports from the Ministry of Transport, the main mean of
trasport in Vietnam is motorbike (98% of Hochiminh’s families have
motorbike while the figure is 87% in Hanoi). The growth in transport mean is
16.6% in the last 5 years. The growth in the numbers of motorbikes and cars
is estimated to be ongoing in the next 5-10 years growing demand for lube.
d. Legal & Political environment: is better and better regulated better
environment for lube players at the same time these players also have to
improve to be more professional.
c. Global environment: creates more opportunities for new international
players to join Vietnam’s market at the same time domestic players can also
export inland produced products to the global arena.
2.2. The micro environment (lube industry)
2.2.1. Legal issues – threats & opportunities – in the lube industry
There are no more entry barrier to lube players. Now, both local and
international players can own and operate lube blending plants low entry
barrier more severe competition.
- The Ministry of Science, Technology & Environment (MOSTE) sets stricter
regulations on the lube business players have to invest better in equipments
& facilities to comply with the new requirements.
2.2.2. Overview on Lube Demand in Vietnam
In general, the demand is growing stably, equivalent to or lower than the
a. In such a booming economy, the growth in transport & industry is also
booming. PFC estimates Vietnam’s demand in 2006 is 266,000 tons, an
increase of 12% compared to 2005. Vietnam has replaced Malaysia to be the
3rd largest market in the Southeast Asia.
b. Two segments in Vietnam’s lube market:
b1. Transport segment accounts for roughly 80% of the demand. This
segment also sees an annual growth of 11.76%. Demand for heavy duty diesel
engine oil (HDDEO) accounts for 38% of the segment.
b2. Demand for non transport segment (industry) is also sharply growing,
reaching 55,000 tons in 2006, accounting for 20.7% of the overall market.
In summary, the growing demand for lube products has awarded lube players
with good opportunities to increase their sales and margin.
2.2.3. Supply chain
a. Production of base oil: base oil is not produced in Vietnam’s existing
refinery of Dung Quat and the other two upcoming refineries of Nghi Son &
b. Renewal of used lube: there are not any big players operating in this
segment in Vietnam now.
c. Blending lube: there are about 15 blenders in Vietnam with a total designed
capacity of 325,000 tons/year. Most of the blenders locate in Haiphong, North
of Vietnam or Hochiminh, South of Vietnam. The total blended volume in
2006 is 219,000 tons/year. It is noted that the blenders are having excess
capacity now they have to lower prices risk of price competition.
d. Import of base oil, lubricant & grease
As Vietnam do not produce base oil the players have to import 100% in
the long run. These suppliers of base oil (from Singapore, Middle East,
Russia, South Africa..) play an important part in the success of these lube
As Vietnam, local blenders can not produce some certain high quality types of
lube, Vietnam still have to import some for domestic distribution (26,000 tons
in 2006 and increasing) (Source: PFC Energy)
2.2.4. The power of material suppliers
a. The power of main material suppliers
As Vietnam has to import all of main materials (base oil & additives) from
hot markets such as Iran, Iraq and due to the economic-petroleum policy of
such powerful countries as the U.S, the suppliers’ power is getting stronger
ever Vietnam has to buy the materials at higher prices or have to lower its
requirements on quality lowering the businesses’ profit affecting the
local lube business.
b. The power of other material suppliers
Other materials include steel drums (217 liters), plastic cans (0.4, 4, 18 & 25
liters, carton boxes…). The materials of this type are not high in quality. At
the same time, there are many suppliers in the industry at scattered locations
these supplier can not pressurize the local lube businesses opportunity
for the local lube business.