Challenges tapping into the new markets

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Castrol products are of high grade with international specifications. They are not currently being sold in the SADC region, although there is competition with other brands.

As a Consultant for Castrol, I will advise the company to introduce this strong brand on the markets and get a good market share. I know for sure that Zimbabwe, the DR Congo, Malawi and Botswana will grow even faster than Zambia due to less competition from other brands.

7.2 Introduce fuel business in these other SADC markets

It is my understanding that Zimbabwe, Malawi, Botswana, Lesotho and Swaziland are landlocked and do not have fuel refineries with free trade in place. I would therefore, recommend, fuel exports into these countries from the Indeni Fuel Refinery, situated in Zambia.

Castrol Petroleum could therefore increase its petroleum business by diversifying into fuel and take advantage of these markets.

One other possible source of diesel is the bio diesel concept. This is diesel from natural products from a tree called Jayatroper. This tree grows over the years and produces some substances which is used to make diesel. I would recommend this to be considered as it can be a substitute to the diesel from Crude Oil. South Africa is already growing this tree

7.3 The diversification strategy can be classified into four categories. One where new investments involve similar products; two when they lead to the vertical integration of complementary activities (corresponding to backward or forward integration); three, when firms internationalize by adding operations in foreign markets which involve similar products (even if these investments take place in culturally and geographically distant markets); and four when the new business shares intangible assets such as marketing knowledge, patent protected technology, product differentiation, superior managerial capabilities, or routines and repertoires (Nelson and Winter 1982).

Related Diversification is corporate development beyond current products and markets, but within the capabilities of the value network of the organisation. Johnson et al (2008)

An example of related diversification is that of Lyons who had a vast array of businesses not only in cakes, biscuits and other confectionery, where it owned firms such as Donut Corporation, but also operated in grocery and frozen chilled foods. Williamson (1975)

Unrelated diversification is the development of products or services beyond the current capabilities or value network. This is usually described as a conglomerate strategy.

One good example of unrelated diversification is in the case of Unilever who have diversified into the food industry, where they have now included the production of Ice Cream into their product portfolio.

Some of the benefits of diversification include efficiency gains made through the applications of the organisation’s existing resources or capabilities to new markets and products or services.

Diversification also increases the market power of an industry due to having a diverse range of businesses which can be used to support or subsidize one or more businesses from the earned surpluses in a way that competitors cannot imitate.

7.4 The other ideal market entry strategy is to access the market through Acquisition or Mergers.

Acquisition involves the acquiring of another business in order to improve the market share and growth of a firm.

Right now there is a bidding process taking place for the acquisition of all the British Petroleum (BP) Outlets in the Southern Africa, this has come about after the gulf oil spillage that took place sometime back, which has caused the British Petroleum Company to lose billions of money rectifying the problem and compensating companies or industries who were affected by this spillage. The highest bidder will be given a chance to acquire all the outlets. Castrol Oil Petroleum could take advantage of this opportunity.

An example of an acquisition is that of the Chinese personal computer manufacturer Lenovo who acquired IBM’s PC business, which accounted for two-third of its revenue in 2005 The acquisition helped Lenovo to rapidly extend its market reach and become a global player. Cavusgil et al (2008)

Recently, here in Zambia Engen Oil Marketing Company had acquired Caltex Oil Zambia outlets, a move which has increased the market share for Engen, which will now give then higher profit margins.

Mergers involves two firms coming together to form a larger firm. One typical example of a merger is the coming together of Lucent Technologies in the United States and Alcatel in France. Their merger resulted in the creation of the world’s largest company in the global telecommunications equipment business. Cavusgil et al (2008).

CONCLUSION

Finally, looking at the potential in the SADC region for Castrol Petroleum Limited to increase its businesses, diversifying and investing will be the best strategy for growth.

The absence of tariffs and other trade barriers will enhance the penetration into these foreign markets. Many multi-nationals, such as Coca Cola, Colgate Palmolive, Toyota and many others are what they are today because they took advantage of a similar initiative.

Castrol Petroleum Limited, going by the benefits of international markets outlined above can one day join the list of these successful multi-nationals who have grown internationally.

As a Consultant for Castrol Petroleum Limited, I will urge my client to immediately put strategies of investing in the SADC region.

APPENDIX 1

SADC MEMBER COUNTRIES

ANGOLA

BOTSWANA

DEMOCRATIC REPUBLIC OF CONGO

LESOTHO

MALAWI

MAURITIUS

MOZAMBIQUE

NAMIBIA

SEYCHELLES

SOUTH AFRICA

SWAZILAND

TANZANIA

ZAMBIA

ZIMBABWE

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