Petron Case Study

Submitted by: Jos Costa

as a requirement for the Course of: Innovation Management
lectured by: Prof. Dr. Sanjay Mohapatra
Bhubaneswar, 13th of February 2015

Executive Summary
Infrastructure is the foundation of a strong economy. With a dream to be a pioneer in
world class construction and development, Petron Engineering Construction Limited,
came into existence nearly thirty years back. Based on the professional deliverance and
commitment levels of its employees and with the focused management vision, the group
today has successfully executed nearly 600 projects, for renowned public as well as
private sector companies nationwide. In this report we will try to analyse the
management techniques behind this company and a possible innovation framework to
be implemented.
1. Firm size
To this date the firm has expanded in many sectors like refineries which includes of
reformers and crackers, oil and gas, power, cement, fertilizer and petrochemicals,
specialized Insulation & Refractory work, Fabrication work along with Electrical &
Instrumentation work.
Assets and liabilities:- 6.11 million usd (aprox)
Turnover:- 68 million (approx.)
Net profit:- 79.34 crs (approx.)
Market capitalization:- 100 crs (approx.)
Labour force:- 12000 (approx.)
Given the above data it can be concluded that the firm is a large size firm.
Holding pattern of Petron engineering - Shareholding Pattern as on 30th September, 2014

CATEGORY OF
SHAREHOLDER

TOTAL NO. OF
SHARES

PERCENTAGE
(%)

5463203

72.47

NIL

NIL

150782

2.00

Financial Institutions

NIL

NIL

Banks

250

0.00

223435

2.96

NIL

NIL

66039

0.88

Promoters' Shareholding *
Directors' and their Relatives
Mutual Funds

Bodies Corporate
Foreign Institutional Investors
NRIs/OCBs

Others - (Public)
Trust
TOTAL

1634691

21.69

NIL

0.00

7538400

100.00

*PROMOTERS (KSS GROUP)

KSS PETRON PVT LTD

3945393

52.34

KAZSTROYSERVICE GLOBAL B.V.

1507680

20.00

10130

0.13

5463203

72.47

KAZSTROYSERVICE HUNGARY KFT.

TOTAL

2. Technology
In terms of technology, not only an improvement of the machinery used is advisable as
this has brought problems before, but also a bigger effort to improve the internet
communication is needed. The website is obsolete and doesnt transmit an image of an
innovative company. A better platform can also help to improve communication with
clients.

3. R&D Fund
-

To provide a framework for the development of a research culture within

NBCC, to improve research performance and to achieve high quality
technological outputs.
To promote R&D activities as complimentary to construction activities so as to
improve the quality of work and sustainability.
To contribute towards creation of wealth and well-being of the company and
further the construction sector as a whole.
To be supportive of the Organization's aspiration to be a world class
Construction Company.

4. Internal Processes

Considering the five main components of PETRON ENG operational structure

strategy, organization, personnel, process, and information system, working-level staffs
are from the departments of planning, financing, processing, human resources, and
information, the following processes have to be considered:
Improve customer satisfaction;
Process standardization that can result in cost reduction;
Real-time measurement can make it easier to analyse rebar loss factor;
Increasing speed & accuracy of construction planning;
Establish a process Innovation Team
Establish an appropriate business process and system

5. Collaboration
Government:
As already has been proved by past events, the collaboration between Petron and
the Governmental Entities has not been the best, with construction works being
carried on in public places, being therefore illegal. In order to overcome this
legal issues that often result in fines and in delays of the construction works,
Petron should try to establish a closer relationship with the responsible
authorities so that a more coordinate flow of information can be established and
future queries can be avoid.
Suppliers:
A better management of the supply chain is also one of the most pressing needs
for Petron. In some of the construction sites, equipment had to be procured from
other place and moved over to the site adding cost to the entire operation.
Therefore, opening the range of options in terms of looking to other suppliers
and try to get the best service for an acceptable cost maybe be the next step to
take.
Workers:
A shortage in the workforce has been reported in some construction sites and
also the fact that the workers were not trained on the safety measures lead to
some accidents. This not only brings a moral issue, as the safety of the workers
starts to be questioned, but also brings down the moral and the commitment of
the workers towards the company. To tackle this issue, an increasing of the
workforce has to be done, and special training has to be given to the workers.

Clients:
A higher compromise with legal responsibilities has to be establish with the
clients in order to avoid extra fees that Petron has being forced to deal with.
Changes in the management structure of the clients, or any other issue in
general, cannot continue to result in losses for Petron. So, contractual
obligations have to be established with the clients making them responsible for
delays or any kind of constrains that result from their own actions.
Local Community:
Until the moment no real partnerships have been established with the local
community, but this community can be an important scope to recruit workers in
the future. Approaching not only the communities itself and offering trainee
internships, but also by establishing partnerships with the local universities and
institutes of education, Petron can gain a more specialized, capable and loyal
workforce in the future.
6. Management and Holding Patterns
To keep the levels of commitment in a firm, the vision, mission and goals that
make the firm move forward should always be present in everyones minds: the
workers, the partners and the shareholders. Therefore, bringing all of this parts
together is fundamental to the improvement of the organization. Having a big
part of the shares owned by state corporations can sometimes dissolve the bonds
between the company and the means needed to reach their goals. In order to
improve this situation, a better communication and constant contact both with
workers and shareholders must be encouraged by the board of directors.
7. Organizational Structure
Petron is organized in 4 divisions covering different lines of production, with the major
sectors being:
o

power

cement

refinery

fertilize

steel

Although the structure in itself is not the problem, some problems have arised in the
past mainly because this is an organization with a very hierarchical structure, which
results many times in communication issues, lack of flexibility to improve processes
and lack of independency to make decisions at the middle-lower levels of the
organization. This not only causes a bigger time consumption, but also drags down the
possibilities for improvement. Apart from that, the interdependency that exists with the

costumers, makes them more like partners, for that reason, it may be a good option to
make them more accountable for the business decisions that are taken together.
8. Organizational Life Cycle
Petron is now, after almost 30 years of existence, in the end of the 3rd stage of an
organisational life-cycle. There are processes that can still be improved but a
new approach with changes in the business model its very likely to happen in
the next few years.

Recommendations
Has we have been stating during this analysis, some changes need to be done in order to
improve processes, productivity and partnership relations.
In the first place, a bigger investment both in technology and R&D is advisable if the
company wants to innovate and be prepared to the future challenges.
Suppliers and workforce are also a main issue. Shortage of materials and labour have
resulted in delays and fines that reduce the profits in the overall process. Improve the
network of suppliers and hire more skilled workers, if possible inside the local
communities is essential for the company and can get the community more involved.
Also the relationship with the Governmental Authorities in order to save time, legal
complications and other queries that often result in fines and delays as well.
To finalize, more accountability should be given to the clients, as most of the times,
more than clients, they are more like partners and can be as responsible for the final
outcome as Petron. This should be worked out in contractual obligations that make the
clients responsible for the losses that result from their own actions.