Transcript Pennzoil’s Major Business Units Pennzoil HQ Oil & Gas Motor Oil Filters Bottled Oil Drum Oil Installed Oil Other.

Pennzoil’s Major Business Units
Pennzoil HQ
Oil & Gas
Motor Oil
Filters
Bottled Oil
Drum Oil
Installed Oil
Other
Portfolio by Revenue
Oil & Gas
Motor Oil
Filters
Other

Motor oil dominates
Portfolio by Profit Volume
Oil & Gas
Motor Oil
Filters
Other

Other dominates (?)
Portfolio by Profit Ratio
10
9
8
7
6
5
4
3
2
1
0
Oil & Gas
Motor Oil
Filters
Portfolio by Capital Outlay
Oil & Gas
Motor Oil
Filters
Other

Most spent on Oil & Gas
Portfolio by Asset Efficiency Ratios
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Oil & Gas
Motor Oil
Filters
Quick Lube Industry
OPPORTUNITIES
 Need for convenience
 Vehicle complexity
 Trend toward DIFM
 Increase in miles driven
THREATS
 Extended drain intervals
 Leasing cars
 Escalating land costs
 Increased competition
 Industry consolidating
 Vertical integration
5-Forces Model of Quick Lube Industry
Potential
(?)
Entrants
Low capital cost
• Brand name oil
•
Suppliers (+)
(-)
Rivalry
Commodity
market
•
Substitutes (-)
•
Do-it-yourself
Buyers (-)
Low switching
costs
• Price sensitive
•
• Marketing
• Price Cutting
Vertical Integration via Acquisition
Related Horizontal Diversification
Q-Lube
Bottled Oil Costs (Data from Case)
Oil
Package
Labor
Freight
Marketing
Oil & Marketing dominate
Installed Oil Costs (Data estimated)
Oil
Labor
Overhead
Marketing
Labor and Overhead significant
Industry Value Chain
Oil Co. Value Chain
Buyer Value Chain




Motivations ?
Strategic alternatives ?
Better off ?
Cost of entry ?
Pennzoil Strategic Alternatives
Pennzoil Strategic Alternatives
Pennzoil Strategic Alternatives
Electric, Fuel Cell, or Hybrid Engines?
Honda Insight
Toyota Prius
Ashland Oil’s Major Business Units
Ashland Oil
Refining
Valvoline
Bottled Oil
Chemical
Installed Oil
Asphalt
Distribution
Valvoline
VIOC - DIFM
Bottled - DIY
Quick Lube Industry
OPPORTUNITIES
 Need for convenience
 Vehicle complexity
 Trend toward DIFM
 Increase in miles driven
THREATS
 Extended drain intervals
 Leasing cars
 Escalating land costs
 Increased competition
 Industry consolidating
 Vertical integration
5-Forces Model of Quick Lube Industry
Potential
(?)
Entrants
Low capital cost
• Brand name oil
•
Suppliers (+)
(-)
Rivalry
Commodity
market
•
• Marketing
• Price Cutting
(-)
Substitutes
•
Do-it-yourself
Buyers (-)
Low switching
costs
• Price sensitive
•
Bottled Oil Costs (Data from Case)
Oil
Package
Labor
Freight
Marketing
Oil & Marketing dominate
Installed Oil Costs (Data estimated)
Oil
Labor
Overhead
Marketing
Labor and Overhead significant
Valvoline Strategic Alternatives?
Valvoline Strategic Alternatives
Valvoline Strategic Alternatives
Electric, Fuel Cell, or Hybrid Engines?
Honda Insight
Toyota Prius