A strategic business unit is a separate and specialized subsystem in the organization which acts as an independent entity. It is a fully-functional unit of business that has its own vision and direction. A strategic business unit is a division or team of the organization that is responsible for its own strategies. Typically, it operates as a separate unit but it is also an important part of the company. A strategic business unit has to report directly to the headquarters of the organization about the status of its operation. It is big enough to have its own support such as HR, training department and others. Each strategic business unit has its own budget and also has its own sales target. It typically have a discrete marketing plan, analysis of competition and marketing operation. A strategic business unit also own set of competitors. This principle works best for the organization that have multiple product structure. It bring in profits independently of other strategic business units. A strategic business unit in the organization can be considered a separated business who may compete with other strategic business units for corporate resources. The main features of the strategic business unit are they present in the organizational structure and they are organizational units without separate legal personality. A strategic business unit has divisional structure which is determined by the size of the production, technology and research activities, financial and accounting processes and marketing activities.
There are some benefits that can gain by having a strategic business unit. A strategic business unit are able to affect the most factors which influence the organization’s performance. It is able to adapt to the quick changes in the market and able to analyse all of that. A strategic business unit needs to be flexible because it needs to adapt to any major changes in the market. Having strategic business unit can assists organization to plan their strategies and make manufacturing decisions. A strategic business unit also create to avoid any decision making concentrated only in the central management. By adjusting to change on strategic business unit levels, the organization can become more profitable. A strategic business unit allows the organization to concentrate on the target consumers and provide cost leadership to the company. It also supports cooperation between the departments of the company which has similar range of activities. Other than that, strategic business unit’s advantages are improvement of strategic management, improvement of accounting operations and easier planning of activities (Khairul, Jale & Hooi, 2010).
PETRONAS DAGANGAN BERHAD (PDB)
Committed to an aggressive growth journey, Petronas Dagangan Berhad endlessly delivers innovative products and differentiated services in its core businesses of Liquefied Petroleum Gas (LPG), Lubricants, Retail and Commercial. Petronas Dagangan Berhad invests broadly in research and development to ensure that it continuous offer a wide range of internationally-recognised high quality petroleum products. In addition, Petronas Dagangan Berhad’s top line and bottom-line are further enhanced by its grocery store business which is Kedai Mesra.
Moving forward, Petronas Dagangan Berhad’s growth strategies will be somewhat different from its strategies before. Before, the majority of the company’s capital spending is focused on establishment of the new stations across the country in an attempt to enhance its physical presence. However, the company will now be more focused on increasing the quantity of its existing stations and to only establish new stations in niche areas where necessary. The business unit of Petronas Dagangan Berhad are Liquefied Petroleum Gas (LPG), Lubricants, Retail and Commercial which also known as their core business (Khairul, Jale ; Hooi, 2010).
LIQUEFIED PETROLEUM GAS (LPG)
Petronas Dagangan Berhad which currently holds about 50% shares of the domestic Liquefied Petroleum Gas market, remains positive on the Liquefied Petroleum Gas’s industry in the country. In its annual report, Liquefied Petroleum Gas business in Malaysia contributed about 20% to its bottom-line. Petronas Dagangan Berhad continues to be the market leader in the Liquefied Petroleum Gas sectors with a strong fundamentals to maintain and further strength this position. Its market growth is usually determined by the country’s population growth which is continuing to increase.
Liquefied Petroleum Gas products sell under the brand name of Gas Petronas. Gas Petronas is offered in 12 kg and 14 kg cylinders for domestic use and 50 kg cylinders or bulk storage for commercial and industrial use. Petronas Dagangan Berhad expects to maintain its leadership position in Liquefied Petroleum Gas segment in Malaysia with monthly sales volume of around four million cylinders. Petronas have gone to places so far out to deliver supplies of Liquefied Petroleum Gas. With this kind of strategy, Petronas has been able to meet the demand of energy in the rural areas in Malaysia. The challenges are various but Petronas Dagangan Berhad continues its mission to make Liquefied Petroleum Gas accessible most times even absorbing the cost of delivering these cylinders to communities in remote areas.
As one of the Liquefied Petroleum Gas dealers to Pulau Bruit, Sarawak, Petronas knows that they have the challenges involved in ensuring the villages on the island are properly supplied. The island itself is connected to the mainland and towns by just two ferry pints which means the only way to reach there by boat. The real challenge is when monsoon season come which usually lasts for about three months between November to January, where big waves up to two metre high in the waters around Pulau Bruit pose a threat not just to the smooth delivery of the Liquefied Petroleum Gas but also the lives of the employees.
The strategy that Petronas Dagangan Berhad focus is optimise cost on the back of an efficient supply and distribution network. The Liquefied Petroleum Gas Business started cost optimisation initiatives in order to achieving greater cost efficiencies that is centred on improving contract management performance and enhancing operational excellence to unlock value across its business chain.
Next strategy that Petronas Dagangan Berhad focus is maximise value in domestic and regional markets. Petronas Dagangan Berhad also focus on international business. Liquefied Petroleum Gas Business is a key segment of the Philippines downstream oil industry. As a widely used fuel commodity in the country, the Liquefied Petroleum Gas Business sector is highly competitive in a deregulated market condition (Joanne, 2013).
Lubricants is the fluid that required by the vehicles to maximize it performance through tailor-made products offerings and expert services. The products under Lubricants Business are passenger car motor oils, motorcycle oil, commercial vehicle lubricants such as Heavy Duty Diesel Engine Oil, automotive functional fluids such as brake fluids, industrial ; marine lubricants such as hydraulic oils and agriculture oils and fully branded outlets which is Petronas LubeXperts.
The challenge that Petronas Dagangan Berhad faced is they need to take everything they learn on the track to the road. They need to be selective in what they can use for the road. There are things that cannot be translated to the road. For example, they cannot have the same fuel in F1 on the road, not that it’s not possible from the regulatory perspective but due to the customers’ price point. Another challenge that Petronas Dagangan Berhad faced is they need to constantly improve. With the push towards hybrid technology, the fuel technology team is working on developing fuel that maximizes efficiency not just for traditional internal combustion engines but also for hybrid technologies (Joanne, 2013).
On the Retail front, Petronas Dagangan Berhad is rolling out effective measures to rise up its position to lead the market in these sectors. The strategy that Petronas Dagangan Berhad focus is grow the market share via enhanced network channels in key target segments. Petronas Dagangan Berhad also enhance brand equity via Fluid Technology Solutions and superior product range. Next strategy that Petronas Dagangan Berhad focus is increase cost competitiveness via efficient supply chain.
The products under Retail Business are fuels which include Petronas Primax 95 ; 97, energy formula and diesel, convenience store which include Kedai Mesra, banking facilities, terminal services and quick serve restaurants and cards which include loyalty card, gift card and fleet card. On the Retail front, Petronas Dagangan Berhad is rolling out effective measures to rise up its position to lead the market in these sectors. Petronas Dagangan Berhad launched the new Petronas Primax 97 with Advanced Energy Formula with Euro 4M specifications.
The strategy that Petronas Dagangan Berhad focus is strengthen product branding and excellent customer experience. Petronas Dagangan Berhad do the marketing and promotions for their products especially for Petronas Primax Petronas Dynamic Diesel and Kedai Mesra offerings.
In Liquefied Petroleum Gas, the activities include the trading of Liquefied Petroleum Gas and petroleum products, supplying it to meet domestic requirements and Petronas’ Overseas marketing ventures and marketing of Liquefied Petroleum Gas and petroleum products produced by the Petronas’s gas-processing plants and factories. The strategy that Petronas Dagangan Berhad focus for Liquefied Petroleum Gas Business is optimise cost on the back of an efficient supply and distribution network. Another strategy is internal and external audits were undertaken to ensure the governance and internal control was properly exercised. Petronas Dagangan Berhad also focus to maximise value in domestic and regional markets.
The strategy that Petronas Dagangan Berhad focus is strengthen product branding and excellent customer experience. To attract the customers, Petronas have done Petronas Ways2Win and Bank Islam Swipe ; Drive Further Campaign. Other than that, Petronas Dagangan Berhad improve their customer relationship management.
The Commercial Business markets petroleum products including manufacturing, aviation, power, oil and gas exploration, agriculture, fisheries and transportation. The strategy that Commercial Business do is provides aviation technical service assistance. Other than that, Petronas Dagangan Berhad do is support the RAPID Pengerang Project.
Even though the Liquefied Petroleum Gas Business, Lubricants Business, Retail Business and Commercial Business is a division of the Petronas Dagangan Berhad that have their own strategies. All this business is important for the revenue of Petronas Dagangan Berhad. Liquefied Petroleum Gas Business, Lubricants Business, Retail Business and Commercial Business have to report directly to the headquarters which is Petronas Dagangan Berhad about the status of their operations.