Indian Oil Corporation: Vertical Specialization to Vertical Integration
(10 pages of text)
Indian Oil Corporation Limited was a large public sector company operating in the downstream segment of the highly regulated oil and natural gas industry in India. It made large investments in the segment-specific assets in refining and distributing petroleum products. In fiscal year 2014/15, the annual turnover of Indian Oil Corporation Limited was ?4,507 billion (US$73.7 billion), and its net profit was ?52 billion. The strategic positioning of the company was heavily influenced by its social agenda and supported by the Indian government. After the liberalization of the Indian economy, the company was faced with serious competition from the private sector, and had limited access to the upstream segment. In 2015, Indian Oil Corporation Limited attempted to vertically integrate in order to become an integrated energy company. The senior management team evaluated the challenges and strategic choices available to Indian Oil Corporation Limited in terms of integration and exploration, brownfield investment in the petrochemicals sector, and modernization of refineries. The key question before the team was how to distribute Indian Oil Corporation Limited's resources among these three strategic choices.
This case is suitable for core strategy courses and advanced elective courses, such as those on strategic management in emerging markets. This case is appropriate for use at the graduate level. The case can be used to do the following: Describe vertical segments and the logic behind strategic positioning in a very challenging and competitive industry.
- Illustrate the dynamics of the oil and gas industry that affect the growth and expansion of companies operating in this industry.
- Examine the role of government policies and directives affecting the specialization and expansion of public enterprises in the oil and gas industry.
- Examine the reasons behind vertical specialization and economies of scope in a successful oil refining and marketing company.
- Illustrate a related diversification strategy that leverages specialized technological and organizational capabilities into a set of linked and related business.
Mining, Quarrying, and Oil and Gas Extraction
India, Large, 2015
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