Statistical Analysis of the Problems of Petroleum Products Distribution in Nigeria

Statistical Analysis of the Problems of Petroleum Products Distribution in Nigeria

Chapter One 

OBJECTIVES OF THE STUDY

• To determine the quality of NNPC lubricants from Management perspective.
• To assess the effect of high cost of transportation on the company’s distribution activities
• To determine the impact of poor road network on the company distribution strategies.
• To determine the availability of NNPC products from customers perspective.
• To assess the effect of government policy on the company distribution strategies.
• To assess the effect of environmental factors (season) on the company’s distribution strategies.

CHAPTER TWO

LITERATURE REVIEW

COMPONENTS AND DEFINITIONS OF DISTRIBUTION

According to Philip kotler & Armstrong 2001, Distribution is the process of planning, implementing and controlling the physical flow of materials, final goods and related information from point of origin to points of consumption to meet customer requirements at a profit.

Schewe and Smith (1980) defined distribution as the physical movement of products to the ultimate consumers. Production is not complete until goods reach the final consumers and products are worthless until they are made available to those who need them. It is this process of making goods available to those that need them that gives rise to distribution basis in a marketing strategy.

Achison (2000) defined distribution as the process of getting products and services from producer to consumer or users, when and where they are needed. It provides time, place, possession utility and the transfer of ownership.

Revzan (1971) defined distribution as managerial battle field in which marketing strategy and tactics either succeed or fail. It is imperative to make a thorough study of available alternatives before choosing one. This is because distribution system is a key external resources which normally takes years to build and can not be easily changed.

According to him distribution involves two aspects: Physical distribution and channels of distribution. Physical distribution involves the physical flow of products from the producer to the consumer while channel of distribution involves the flow of title of goods from the producer to the consumer.

Achison (2000) denoted that unless products are distributed and delivered in the right quality, at the right time, in proper condition and at the right price; buyers may be reluctant to buy. He stressed further that distribution is regarded as a major consideration in strategic planning because it is an important marketing function that is responsible for making goods and services available to the consumers.

According to John O’ Shaughnessy (1992) in his book competitive marketing. A Strategic Approach denoted that a distribution system is the network of people, institutions or agencies involved in the flow of a product to the consumers, together with the informational, financial, promotional and other services associated with making the product convenient and attractive to buy and re-buy.

 PHYSICAL DISTRIBUTION

Physical distribution is often regarded as “logistics”, logistics refers to the interrelation and management of all the key element or activities involved in providing both raw materials and finished products to customers.

According to Kotler & Armstrong (2001) Physical distribution is the task involved in planning, implementing and controlling the physical flow of materials, final goods and related information from point of origin to points of consumption to meet customer requirements at a profit.

Traditionally, Physical Distribution typically started with products at the plant and then tried to find low-cost solutions to get them to customers. However, today’s marketers prefer market logistics thinking, which starts with the marketplace and works backward to the factory. Logistics addresses not only the problem of outbound distribution (moving products from the factory to customers) but also the problem of inbound distribution (moving products and materials from suppliers to the factory). It involves the management of entire supply chains, value-added flows from suppliers to final users. Thus, the task of logistics manager’s is to coordinate activities of suppliers, purchasing agents, marketers, channel members and customers. These activities include forecasting, information systems, purchasing, production planning, order processing, inventory, warehousing and transportation planning.

It has been discovered that customer service and satisfaction are the cornerstones of marketing strategy and distribution is an important customer service element. So many companies have discovered that they can attract and keep customers by giving better service or selling at lower prices through better physical distribution.

Secondly, logistics is a major cost element for most companies more importantly NNPC Petroleum Products Limited. Poor Physical distribution decisions result in high costs. Improvement in physical distribution efficiency can yield tremendous cost savings for both the company and its customers.

Thirdly, the explosion in product variety has created a need for improved logistics management.

Finally, improvements in information technology have created opportunities for major gains in distribution efficiency. The increased use of computers, point-of-sale scanners, uniform product codes, satellite tracking, electronic data interchange (EDI) and electronic funds transfer (EFT) has allowed companies to create advanced systems for order processing, inventory control and handling, transportation routing and scheduling.

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CHAPTER THREE

RESEARCH METHODOLOGY

RESEARCH DESIGN

In order to achieve meaningful result in this research work, the methodology will be purely on survey research work and will be given a particular attention – using mental scheme of solving the research problems in a systematic manner within the circumstances of the researcher.

However, this chapter will further explains the scope and area of study, source of data and method to be used in analysis of data collected etc. As the research objective is to carry out an evaluation of distribution strategies in marketing of petroleum products in NNPC Aba Depot.

Robbert Kreithner (1980:134) sees research design as the plan, structure and strategy of investigation concerned so as to obtain answers to research questions and control variance. It is therefore a blue print for all data and information collected, also specified the method and procedure for acquiring the information needed.

SOURCES OF DATA

Primary and secondary sources of data collection will be extensively used in conducting this research work.

PRIMARY SOURCE

The researcher will adopt a survey technique through the use of personal interview with some management Staff of NNPC Petroleum Product Ltd in the marketing department and extensive use of questionnaires to both staff and distributors of NNPC Petroleum products Ltd in Aba.

SECONDARY SOURCE

The researcher will extensively use the following:

1. Text books, magazines, newspapers, journals, calendars and hand bills
2. Research Project related to the study
3. Federal Ministry of Industry Enugu
4. National Library Enugu
5. Materials from UNEC Enugu
6. Journal of American Marketing Association
7. Internet source.

POPULATION

The population of this study includes:

1. The management staff of NNPC Petroleum Products Ltd
2. The company’s distributors in Aba.

 PILOT SURVEY

Questionnaire will be distributed to nine distributors in Aba with the following points; where they buy lubricating oil, period of delivery, disappointment posed during distribution, the effect of transportation on cost, customers satisfaction, assessment of distribution strategies, ways of improving and what should be done to the distribution strategies of NNPC Petroleum products Ltd.

CHAPTER FOUR

PRESENTATION AND ANALYSIS OF DATA

INTRODUCTION

The purpose of this chapter is to present and interpret the primary data collected for this study. In the analysis of this research work, descriptive statistics was used to arrange, summarize, present and interpret the data collected in a meaningful manner at glance. In the testing of the hypotheses, NPar and Chi-square test was used.

CHAPTER FIVE

SUMMARY OF FINDINGS, RECOMMENDATION AND CONCLUSION

 INTRODUCTION

This chapter is based on the analysis and interpretation given in chapter four. Sequel to presentation of data, a lot of observations and findings emerged from the study but will be summarized for easy assessment at a glance for the purpose of recommendation and conclusion thereafter.

 SUMMARY OF FINDINGS

Based on the analysis and interpretation of data in chapter 4 of this research work, the following findings were made:

1. It was ascertained that NNPC petroleum products Limited was a licensed manufacturing outfit meant for the production and marketing of NNPC lubricants to its numerous customers in the country for the servicing of motor engine, motorcycle engine, heavy duty engine, generators etc. Its channel of distribution starts from the Factory -> Depot -> Distributors -> Sub-Distributors -> Final Consumers.
2. It was discovered that the quality of NNPC oil was very good when compared to the competing products of Tonimas oil, Ammasco oil, Dossy flow oil and Lubcon oil. Moreover, it was certified by the American Petroleum Institute (API), Standard Organization of Nigeria(SON) and Society of Automotive Engineers(SAE) and other regulating bodies.

3. The researcher discovered that the cost of transportation significantly affect the price of NNPC lubricant because the firm bears the cost of transportation right from the source of raw materials (additives) to the point of delivery to distributor warehouse.
4. It was discovered that most of the customers enjoy the availability of NNPC lubricants. This easy accessibility to NNPC products was a good strategy of increasing the company’s market share and its presence in the market place.
5. The researcher discovered that bad road network significantly affect the demand of NNPC lubricants in Aba metropolis because some of the customers cum potential customers that suppose to buy from Aba moved to other neighboring towns like Port Harcourt, Uyo, Owerri to buy due to the bad road network currently experiencing in Aba.
6. From the management perspective, it was discovered that government policies adversely affect the company distribution activities. In most cases, government requires firms to pay certain levies, obtain emblems, daily ticket, yearly certificate (National/State) before such company can experience effective Marketing in an area / locality without molestation. This is a big hurdle to business growth and development of Nigerian economy.
7. Finally, it was discovered of recent that environmental factors like high level of social menace and upheaval in Aba metropolis significantly affect the demand of NNPC lubricants in the area because some of the distributors are relocating to a more secured and conducive neighboring towns. Another determinant is the climatic factors like the raining season; during this period there is decline in sales of lubricants.

RECOMMENDATIONS

1. Since NNPC petroleum products Limited was licensed manufacturing outfit fpr the production and marketing of lubricants in the Nigeria market there is need for its expansion internationally. The chairman and the management should start thinking of converting the firm from what I regarded as indigenous national company (entrepreneur) to a multinational public limited liability company. Its intense outlook should go beyond the nation most especially as it has been certified by various regulating bodies both locally and internationally like the Standard Organization of Nigeria and American Petroleum Institute respectively. Moreover, as a player in the oil and gas industry, the firm should fully diversify into the establishment of filling stations in major cities and acquiring oil well in Nigeria and beyond.
2. It is true that the quality of NNPC oil was certified as very good when compared to the competing Products of Tonimas oil, Ammasco oil, Dossy Flow oil and Lubcon oil during the course of this research work but what happens when compared to the BIG 8 (Mobil, Total, Texaco, Oando, AP, Conoil etc). Therefore, management should not relax in there quest for top brands and higher quality products that are capable of competing internationally. These products in question should be outstanding and unique in its features and marketing mix arrangement. This will enable the management of the firm to curtail the pressure and problem of brand switching in the market among the consumers couple with the rapid proliferation of technologies nowadays.
3. In order to cut-down cost on transportation, themanagement should at times supply directly to distributors warehouse with the consent of the depot manager after due confirmation of its payment instrument / balance as the case may be. This will help to minimize cost.
4. Since it has been discovered that most of the customers enjoy the availability of A – Z lubricants, effort should be made to ensuring continuity of supply and that the distribution channels have easy access to the company’s products as at when needed. This will help to reduce the tendency for product switching among the consumers or diversification of money by the distributors to other firms. In the same vein, improvement of policy on Product availability is very crucial as this will help to enhance the market share of NNPC, promote product intensity and acceptability in the market.
5. Since bad road network adversely affect the demand Of NNPC oil, the management of the company through its numerous direct and indirect agencies, Business Associates, Clubs, Associations, government representatives should join the masses in their quest for good road network in Nigeria for social and economic development of Nigerian business. This will help to boost demand in Aba metropolis.
6. Since government policy affect demand of NNPC Lubricants, management should device means of negotiating properly with government or its agents for smooth and efficient marketing. Moreover, this will help the company sales force to avoid molestation by the government task force which may dent the corporate image of the firm and generate de-marketing if care is not taken. Meanwhile, government policy should be drawn in such a way that will suit the economy at hand and favor existing or potential firms.
7. Since the environmental factors are becoming higher each day in Aba and some other places, the firm business is affected evident in its low turnover, the firm should stand out among others/public to say NO to the social and economic menace. This will help to define the stand point of the firm and goodwill restored for increase turnover.
8. Finally, the management of the firm should strive to stabilize prices of various products at least to a reasonable time with the aid of effective management of pricing functions and general improvement on pricing policy of NNPC petroleum products limited. Moreover, there is need for line managers in the company especially in marketing related areas to reappraise the company, adopt more strategies through periodic research and adequate human resources development of field sales men.

CONCLUSION

This study has generated an exciting package on the assessment of the distribution strategy of NNPC petroleum products Ltd. The researcher collected relevant data, analyze, and interpret the data, summarize its finding and recommend to the management how to sustain, maintain and improve the market share of the company and better ways of strengthening its distribution strategy.

It is pertinent to appraise and reappraise corporate distribution strategy/objectives and ensuring that organizational activities are not deviated from the attainment of goals. The researcher hope that the firm will continue to sustain its prevent levels of operations in distributing its products and even surpass it in the interest of the future.

Finally, the researcher is of the view that if the recommendations are judiciously looked into and implemented by the management of the firm it will go a long way towards improving company’s physical distribution activities, performance of field sales managers and other researchers that will like to study more on this work.

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