Castrol Case

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MANAGEMENT CASE
describes a real-life situation faced, a decision or action taken by an individual manager or by an organization at the strategic, functional or operational levels

Castrol India Limited: Managing in Challenging Times
Manoj Anand

Executive Summary

ifficult times have their own merits. This is as much true for an individual as it is for an organization. These are the times when the entire organization gets an opportunity to display its resilience through its innovative skills and creative abilities. Naveen K Kshatriya, Chief Executive and Managing Director of Castrol India Limited (CIL), echoed similar thoughts while reflecting on his company in October 2002. After the liberalization of the Indian economy in 1991 and the opening up of the oil sector, CIL focused on volume growth and achieved a market share of 20 per cent. In the growth phase, cost efficiency and cost effectiveness of the operational aspects were ignored. In the late 1990s, due to increased competition and acquisition of CIL by British Petroleum, the focus shifted from high growth to efficient supply chain management. This brought about a sea change in the cost and performance management systems at CIL. It required a cultural change — from chasing production volume targets to developing competitiveness through total quality management, business process reengineering, activity-based cost management system, and change in mindset. The focus of performance contract changed from a few financial measures to a broad set of perspectives to achieve the company’s corporate mission. Kshatriya wondered which path the company should traverse that would take it to a sustainable, prosperous future.

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Adversity has the effect of eliciting talents which in prosperous circumstances would have lain dormant. — Horace (65-68 BC)

INDIAN LUBE INDUSTRY
KEY WORDS Corporate Strategy Liberalization Performance Management Castrol India Indian Lube Industry

The lubricant industry in general has three broad segments, namely, automobile, industrial, and marine. As per the global trends, the automobile segment dominates the industry, and, within the automobile industry, the diesel engine lubricants form the major part of the market. Lubricants function as friction inhibitors by forming a viscous layer between mechanical links of machines. This viscous layer reduces friction by ensuring that the mechanical links do not come in direct contact with each other. Thus, in the current era of mechanized economy, lubricants find extensive usage not only in terms of

VIKALPA • VOLUME 30 • NO 1 • JANUARY - MARCH 2005

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reducing friction but also in providing extra durability to the machine. Lubricants are obtained as lower order distillates from the fractional distillation of crude petroleum. They are characterized by high wax content which provides the necessary viscosity. Since they are expected to function at extreme and varied conditions of temperature, they are provided with the required properties by adding various additives. Before the liberalization of the Indian economy, the public sector oil companies dominated the Indian lubricant industry with a market share of 90 per cent. The lubricants produced were simple blends based on low and medium level technologies. More sophisticated lubricants were imported and these accounted for a relatively small market share. The liberalization of the Indian economy in general and the oil sector in particular led to decanalization of base oil imports which used to be canalized through Table 1: Key Statistics: 1995-96 to 2000-01

Particulars Import quantity Import value Sales value Market size (value) Domestic consumption (value) Unit 000 Rs Rs Rs Rs tonne billion billion billion billion 1995-96 58 1.30 48.717 50.017 50.017

Indian Oil Corporation earlier. There has been substantial reduction in the level of import duties. Free pricing has been permitted and administered pricing regime has been...
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