Case study solution

1. Internnational
Indian Oil
Marketin
Corporatio
ng Mana
on’s Intern
agement
national St
Submitted
Case Stu
trategy
by Sec A Gro
Abhay
Anirud
Devan
Mana
Sachin
Vidoo
udy
up 6
y Sharma(1A)
ddh Srivastav
nsh Doshi(16A
si Jain(23A)
n Gupta(38A)
oshi Joshi(55A
)
va(9A)
A)
)
A

2. Executive Summary
Indian Oil Corporation is the largest commercial undertaking of India and the only company featured in
the Fortune Magazine’s ‘Global 500 Listing’.
IOC has entered into various foreign markets by the following ways:
 Strategic Alliance in Mauritius
 Wholly owned subsidiary in Sri Lanka
 Joint venture with Caltex in Mauritius
 Export to Bangladesh
 Turnkey projects in Mauritius
The IOC has been expanding very aggressively.
Q1. Identify the main reason behind IOC’s expansion into global market
These are the major reasons for IOC to expand globally
1. Growth and Profit:
This is the driving force behind IOC’s decision to venture out of India. IOC saw an opportunity as
mentioned in the executive summary of little competition in the international market and seized the
opportunity.
2. Risk Mitigation
IOC wanted to mitigate the risks by expanding into new markets. Also the balance sheet in India was
always red due to subsidies. Thus IOC had to look towards other markets where profits would be better.
3. Access to imported technology:
IOC had strategic advantages in collaborating with bigger oil firms like BP to learn better technologies
4. Spreading R&D costs
The R&D costs that IOC incurred in R&D of say new exploration would be spread out to various
geographies like USA and keep it sustainable in other markets.
5. Product portfolio expansion
IOC wanted to explore more fuel types like gas which were in limited supply in India.
6. Competing against China

3. Q2. IOC has adapted a mix of entry modes for approaching international markets. Critically
evaluate the factors affecting IOC’s selection of these entry modes
IOC adopted the following entry modes:
1. Exporting(Bangladesh, Sri Lanka)
Economic incentive: The profits in exporting are very high. As IOC had low cost operation, exporting oil
and related products was economically effective.
Operation considerations: IOC also exported to nations like Mauritius where there are no infrastructure
for oil production. Also skills are absent in the local population
Political considerations: The government and their policies must be favorable for exports.
2. Turnkey projects(Mauritius)
Economic incentive: The profits in turnkey project are very high. As IOC had low cost operation,
exporting oil and related products was economically effective.
Operation considerations: Physical infrastructure is poor also the government wants to develop skill set
in their nation with the help of outside companies
Political considerations: The government and their policies must be favorable for turnkey project. The
level of competition is also low
3. Strategic Alliance(Caltex, Shell‐ Mauritius)
Economic incentive: Cost of investment is shared between the partners and IOC can use the distribution
channel of its partners.
Operation considerations: Expertise from reputed and established players like Caltex can be gained.
This helped IOC to explore less profitable oil reserves.
Political considerations: Government involvement is low.
4. Joint Venture(Caltex‐Mauritius)
Economic incentive: Cost of investment is shared between the partners and IOC can use the distribution
channel of its domestic partners. Also IOC could make use of the benefits of the local government
extended to its partners.
Operation considerations: Expertise from reputed and established players like Caltex can be gained.
This helped IOC to explore less profitable oil reserves.

4. Political considerations: Reduce political risks by providing with information and skills to local
population and company.
5. Wholly owned subsidiary(Sri Lanka‐ LIOC)
Economic incentive: Avoid conflict with other foreign players. Also risks are mitigated for IOC into
different markets and economies. Benefits also provided by host country.
Operation considerations: Cheaper raw material.
Political considerations: Government is helpful in building the facilities.
Q3. In the view of emerging economic and political scenario, evaluate IOC’s entry into Sri
Lanka as a wholly owned subsidiary.
There are the following political and economic implications on IOC:
1. Fall out between India and Sri Lanka over the recent human rights violation can affect the
operations of LIOC in Sri Lanka which would further hamper the growth.
2. Economically any bad sentiment between the two countries can result into economic losses for
IOC.
3. Though this can be used as a cushion for leveraging the relation between the two countries as
both countries have economic interests tied.
4. In the view of growing oil demand in India this is a positive step as it will compensate for CAD
losses India is incurring due to high cost imports