Petro Canada - Strategic Paper

Running head: PETRO CANADA - STRATEGIC PAPER

Petro Canada - Strategic Paper

Rishi Pandya

University of Phoenix

MGT 578

Jan 22, 2007

Executive Summary

Petro-Canada is a publicly traded, Canadian integrated oil and gas company with headquarters in Calgary, Alberta. The Company’s core business lays in petrochemical products, refining and supply operations, retail and marketing networks, and a specialty lubricants business.

Petro Canada has evolved to be one of the major players in the petroleum industry and uses price as well as non-price strategies to enhance market share. In today’s changing environment, where gasoline prices are volatile and supply and demand is shifting, Petro-Canada should create long-term plans and expand the current portfolio of assets and products. The company needs to be aware that escalating prices of gasoline as well as the alternative fuel sources and more economic cars, may negatively affect demand for gasoline and therefore product sales and price of gasoline in the future. Although Petro-Canada revenues increased by 23% in 2006, crude oil and products purchases increased over 31%; therefore, the net profits slightly increased to1.9% in 2006. Technology plays a significant role in reducing the operation cost and increasing reliability. Petro-Canada is committed to maintaining long-term oil reserves by investing in oil explorations to reduce fluctuations-effects of crude oil prices. Petro-Canada needs to exploit the present opportunity of the higher price environment by making today's fuels better and by developing new fuels for tomorrow's vehicles. Economic Indicators like GDP, interest rates and unemployment play a huge role and are vital to Petro Canada decisions. Based on these factors, Petro Canada is able to make viable decisions and hold its position as one of the top companies in the petroleum industry.

Background

Petro-Canada was founded as a Crown Corporation by an act of Parliament in Ottawa, Ontario in 1975. Petro – Canada is one of Canada’s largest integrated oil and gas companies. Petro Canada operates efficiently with almost 5,000 employees around the world.

Petro - Canada enjoys a track record of financial discipline giving them a strong and flexible balance sheet to grow and prosper. Operating as a highly principled company with a strong reputation for ethical conduct, environmental responsibility, corporate governance and citizenship, Petro Canada’s vision is to balance continued success with the highest standards of honesty and integrity wherever they operate. Petro Canada’s mission is to expand more rapidly and be able to develop a wider range of valuable operating skills with the integration of businesses to create greater value as well as capitalizing on changing market conditions. The Company, after careful planning, has been able to develop sound corporate policies and procedures, taking into consideration government policies. These policies and procedures are continuously monitored and reviewed. Petro – Canada’s approach is a best practices approach towards corporate government policies. Petro – Canada though being a mid size company welcomes small acquisitions in order to expand its retail reach to customers.

Remote Environment

Economic Factors:

The remote environment is comprised of factors beyond individual firm’s efforts. The effects are visible in the entire economy. Economic forecast data are not 100 % correct but the forecasts have a huge impact on the market and help consumers, firms and the government to make better decisions and to have an economic view of the future.

In order to study the effects of the remote environment, a few economic factors play a vital role for Petro - Canada to develop strategies to avoid losses. The four factors in the economy that will impact the demand for Petro-Canada oil are the national output measured by the GDP, inflation rate, unemployment and the overnight rate charged by the Federal Reserve to banks.

The Gross Domestic Product (GDP) is defined as the market value of all final goods and services produced within a country in a given period (Government of Nova Scotia, 2006).

If GDP growth fails to meet or beat the market expectations, it will hurt the country’s economy and have a severe impact on the demand for Petro- Canada oil. People will grow doubts that the economy may not do well next