This report demonstrates an idea for the business plan of a gas station, which will be operating the region of California and will serve as the new service provider for the area with respect to gasoline. Although there are already two existing gasoline stations in the locality that are providing similar services, but the price they are charging is high and are not fulfilling the needs of the customers completely.
The major location of the gas station will be Hammer Lane and Highway 99 in Stockton which indicates that the capacity of the locality is quite attractive and there are nu7mber of vehicles that pass through this route on a daily basis. Through researches it has been identified that targeting this area will be best opportunity and has a reasonable population to achieve attractive financial gains.
This report analysis the opportunity and the entire business plan framing all the necessary regulations and documentations that are essential to operate in this region. Besides that the EAP regulations, the regulatory constraints, the strategic analysis, the marketing plan and the financial plan will also be presented in the report.
The major goal of the report is to assess the opportunity present in the region and to highlight the basis on which a new gas station can be established or not. Besides that, as stated, that Shell and Chevron are already present in the area, but are providing expensive services which is why the new gas station will be competitive in this regard and will provide price penetration in the region to attract customers.
The main focus of this new gas station will be on assessing the latent needs of the target market that are still unmet and will facilitate those customers in meeting those needs which will result in customer satisfaction. The major products of a gas station include the gasoline and the diesel that accounts for the majority of the revenue that is generated from the gas station.
However, this new station, which will be a franchise of Shell, will be operating a separate owner who has a different objective. The owner wants to provide customer satisfaction to the customers in the target market by meeting their needs and demands explicitly. However, the gas station will also assimilate the services that are rendered at a gas station.
Every gas station provides inspection and repair services which will be part of this gas station as well, but the customers can avail these services without any cost until or unless there is as some major use. However, services like air filling in tires will be free as there will be free air pumps readily available at the gas station.
On the other hand, the convenience store is also there which will facilitate and serve the customers in a different manner and with different products. The reason to provide such services along with gasoline and diesel is because to give consumers an option to fuel up as well while fueling their cars, bikes, or any other vehicle.
The product offerings and the services that will be offered will be uniquely delivered at the station will have self-service and will also have a full service station. However, there will be no extra cost that will be charged from the customers for these services.
The prices will be kept competitive in order to provide the target customers full range of services at low cost and also to attract new customers. However, the customers that will be purchasing 5 gallons or less will be charged with extra prices and may suffer an increase in the price. The majority of pumps, in the station will be providing gasoline, but there will be a proportion that will serve diesel. The ration 1:3 which means that for 1 pump of diesel there will be 3 pumps of gasoline.
At the gas station will be operating as a franchise for Shell, which is why the color scheme of the station will be yellow and red which is the traditional color scheme of Shell. On the other hand the logo will be of Shell, which will play a vital role in attracting customers. Besides that the employees of the staff will be wearing jerseys of Shell, which clearly indicates that the station will be operating as a franchise of Shell.
The major aim is to deliver quality service and a variety of products, but also to offer a compelling environment for the employees as well in order to make their working environment attractive. The area at which the station will be operating is catering multiple segments, but the station will cater the segments that are residing in the society and are coming into the city and the majority of the attention will be invested on motor riders.
The strategic analysis of the station will be conducted in order to assess the internal and external environment for the gas station, which will be sufficient in designing the marketing mix for the gas station. However, the paper will also illustrate the regulatory constraints and the EAP regulations that the gas station will have to encounter in order to proceed with the decision. Secondly, the permits and the documents that are essential to operate the gas station will be discussed in the paper.
The mission statement of the gas station is quite clear and concrete and provides a clear statement to the people and clearly exhibits the main objective of the owner of this new gas station. The main aim is to cater the motorists who visit the city or are already residing in the city with the best gasoline and automotive services. Besides that the services that are being offered must be delivered ay reasonable and affordable prices. Thus the main aim is to [provide best quality at affordable price to the target market.
However, the mission statement also caters the employees that are working for the station and the objective of the mission statement describes that while providing all the above stated objectives the environment or the people working or the employees will also be taken care of. The environment needs to present a professional outlook and also provides an entertaining working environment.
The location at which the gas station will be operating is the Hammer Lane and Highway 99, Stockton, California. This location is selected due to the presence of Chevron and Shell and the immense need of competitive gas station for motor riders. This location is considered as a premium location as it is located at the south and the only competition is in the west, which is very far away and the gas station will have an entire target market to exploit easily.
The target market for the gas station is divided into primary and secondary target market with different demographic features. The gas station will be running under the brand name of Shell but will serve as the franchise and will cater the need of these two target markets efficiently. The defined target markets are partially different from each other, but possess the same set of needs.
Primary Target Market
The primary target market of the company consists of motorists who are roaming in the city or are coming into the city as tourists. Besides these motorists the primary target also includes people from the professional background who are working and have their own cars. The demographics of this target market suggest that they are either late adults or family person with newly married or having one kid. The age bracket of this target market is around 25-45 and has an average income of around $30,000-$40,000. The core product that these people will utilize from the gas station will be fuel and car wash services.
Secondary Target Market
The secondary target market of the gas station consists of people who are the residents of the city and are usually filled up their tanks either once a week or twice a week and are seeking car wash. Besides that these people also make purchases from the convenience store and a 24/7 convenience store is a major attraction for such people. The age group of these people is around 25-60 and the income bracket ranges from $25,000 to $50,000.
Services and Products Overview
The gas station will not only providing gasoline services but will also facilitate the target market with the repair services as well. The major revenue generating products will be gasoline and diesel, but on the other hand, repair services will work as a support service. Besides gasoline, diesel and automotive services, the station will also possess a convenience store which will offer a variety of products to the people visiting the station. The extensive variants that this convenience store will offer to the customers include, the ready-made food, ready to eat meals, beverages, packaged food products, different type of food items and bottled beverages, toiletries etc.
Methods of Business
As stated above that the locality already has a Shell gas station and Chevron Gas station, which are the two major competitors, but in order to settle in the region it is required to adopt the method of franchising. The suggested approach is to involve in a franchise agreement with Shell and hold the rights of the Shell gas station.
This agreement will be at a state level agreement as the franchise will seek the franchiser to run a similar business by imitating the business model and operations of the company. In this regard or according to this agreement the owner of the gas station will buy the right form Shell in the form of franchising by offering the services that the gas station is currently providing.
In this case the control of the gas station will be under the new owner’s hand, but the owners’ equity will remain under the possession of Shell. However, the new owner will have to pay an annual fee and also some part of the income generated. The shell will also serve as the major supplier of the gasoline and diesel while the automotive services and the convenience store will be run separately. However, immense focus will have to generate towards setting the price at a competitive level in order to achieve the objective stated in the mission statement.
Since the new gas station will be underground storage tanks so it will have to make sure the compliance with the following rules defined by EAP. According to EAP an underground storage tank must have at least 10% of its total combined volume underground. It is important for the owner to take care of the facts that the UST has corrosion protection, protection for spill and overfill, the UST possess at least detection system and most importantly in the case of a liability the financial assurance is there.
However, the EAP defines the rules or set of guidelines that are important for gas stations and are regarded as good management practices. The gas station will have to look upon the following factors in order to avoid any sort of fines and surcharges from EAP inspection inspectors in the region.
- The maintenance and organization of the documents that are defined or listed below is important and the records of these documents must be maintained at the facility. These listed records or documents include:
- Financial assurance
- Repairs and upgrades to tanks and also to the piping system.
- The detection results of the leakage of piping and the proof that the tanks are valid.
- Installation of overfill protection
- Corrosion protected tanks and piping system must be installed but only if the application is there.
- If applicable, keep the records of cathodic protection testing.
- If applicable, keep the records of the internal inspection held in steel tanks.
- Inspection of spill buckets and keeping them operational and assuring that they are leaky free.
- Checking the steel pipes that they are in contact with the soil and water in order to avoid corrosion.
- The dispensing area needs to check along with the piping slums that, is there any leak. Remove any gasoline and water if there is present any and assure the repairs that are necessary.
- The staff must be aware of the installation process of the system and have complete knowledge about the operations.
- The facility must possess the chart to check the specifications of the tank and needs to be available every time while the delivery is being made.
The 30 day duration is given to assess the above stated issues and in case of any query contact must be made by the EAP. However, in the recent times the EAP regulations have gone very strict and the disobedience of any of the above listed guidelines will result in the fine right away. The recent incidents or the industry trends indicate that in the region of California the EAP inspectors have been involved in charging fines ranging from $1000-$10,000 on the spot for every violation of the rules which is followed by a fine that needs to be paid in the court. As the new operator of the gas station, it is important for the entrepreneur to keep all these aspects in mind and follow the guidelines and regulations designed by the EAP.
Operating a Gas Station in Stockton, California the following regulatory constraints or permits are essential to operate freely and without them operating a gas station in the region will not be applicable. The first and the most essential legal document that is supposed to be obtained is the business license or the business tax certificate that is important and necessary for anyone doing business of any type and is doing that business within the city limits. Furthermore, the business will have to undergo a yearly inspection of the gas station regarding fire prevention.
The gas station will have to face such inspection every year in order to get the fire clearance certificate and to carry operations smoothly, but this will subject some charges in the form of an annual fee. On the other hand, the gas station will also require an industrial wastewater discharge permit which is dependent on the condition that whether the facility is using sewer as the possible drop of the industrial waste or discharges water in the sewer.
However, this document or permit is essential only if the above mentioned condition is applicable to it. Moving ahead with the legal constraints or regulatory requirements the gas station will need a permit to use the land or it can be stated as zone clearance, which is applicable only if the station is within the city limits.
As the designed plan is suggesting that the gas station will operate within city limits, therefore this document will be essential and in order to initiate freely the requirement of this document is important. Furthermore, the gas station will have to face police regulations that the police department has implemented in order to prevent crime and issue permits to the businesses for some activities that are support activities like solicitors or burglar alarms.
Although this may not be a critical to attain and can be obtained easily as it is for public safety and is not a major constraint but holds an important position. Furthermore, the gas station will have to attain a business property statement under which the facility will be monitored and the business will have to make the equipment, the fixtures, supplies and other leasehold improvements that are being used at the location apparent.
This is an important aspect to address as these property statements are due on 1st of January every year. Another major statement that is required by the owner before starting the gas station is a Fictitious Business Name (FBN) or Doing Business As (DBA). This document is essential to gain, but there are some conditions applicable that include the absence of the individual owner’s surname in the business name or in the case of partners the name of the partners is missing.
Secondly, the business name indicates that there are multiple owners of the business and the name made it clear that there are additional owners and their name is missing this document becomes essential to obtain. On the other hand, when the business name does not make it clear the nature of the business the document becomes essential to obtain. An FBN as an important document and before starting the business or the gas station, it is important to gain this document.
Since the gas station is storing a hazardous material in its storage tanks and is dealing with gas, which is the prime product of the business which is why the business plan according to local CUPA or through any designated agency in the county must obtain approval for hazardous materials or under waste generate programmed.
Furthermore, another major aspect that the business or the facility will have to undergo in accordance with the zoning clearance is to obtain the building permit that will allow the extra construction of any sort. On the other hand, the business will also have to obtain an Authority to Construct or Permit to Operate certificate which is applicable when the construction phase include operating in units that are subject to emit or reduce air emissions in the regions in which the facility will be operating and the construction will take place.
This is an important certificate or permit that is essential to obtain constructing or installing or modifying a new emission or existing emission unit simultaneously. Moving ahead with the regulatory requirements the gas station will have to require an Air Tanks Permit which is also an essential document for every business dealing with pressurized tanks especially gas station. The following three criteria are essential to cater in order to get this permit.
- Pressurized tanks with a volume greater than 1.5 cubic feet and containing greater than 150 PSI (pounds per square inch) of air.
- Steam boilers over 15 PSI.
- Retail stationary propane tanks.
Furthermore the business or the gas station will also be providing automotive services to the residents of the locality or the neighborhood. Therefore, it is important for the business to obtain an automobile repair dealer registration before pursuing these activities in the facility. On the other hand, the business will also have to face discrimination law as they gas station is hiring around 8 employees and under the discrimination law no harassment or discrimination in employment is allowed.
These two activities are strictly prohibited and discrimination caters multiple divisions or areas where discrimination between people is possible. Such activities include discrimination on the basis of race, gender, sex, ancestry, nationality, color, sexual orientation, religion, any sort of disability either physical or mental, medical condition, etc. Furthermore, refusing to permit employees to take leave for family care also comes under this category.
Maintaining personnel records of employees for at least 2 years is essential for every business that has more than 5 employees and in this regard the business has around 8 employees and this condition is applied to it. On the other hand, the business is liable to prepare an Injury and Illness Prevention Plan as well as the business has ample to fulfill occupational safety and Health Information.
In this regard helpsfromthe state government can be taken that provides assistance in creating a safe working environment and to prevent hazards at the workplace. The business will have to obtain different certification, permits and licenses in this regard and to fulfill these requirements. This is just an essential requirement that every business despite the nature needs to operate in the region of California.
Role of Attorney
The role of an attorney or lawyer is very crucial especially while representing the clients in the deal regarding the purchase of the gas station. Before making the purchase, it is important to consult a lawyer or a legal attorney as he will be the one giving the right set of advices that are essential in the purchase. On the other hand, the legal attorney also plays a key role in designing the business team, which also consists of an insurance agent, a broker, and a banker.
The role of the lawyer is also important as the guidelines a lawyer can provide to the entrepreneur is very different and are not being provided by anyone else. All the legal constraints that the entrepreneur will have to endeavor along with all the legal nuances that will be apparent while making the purchase will be highlighted by the lawyer. On the other hand, a lawyer also exhibits the major challenges and opportunities that will arise during the course of purchase.
Thus, this will help in getting prepared in a more concrete way before making the deal with the board of Shell, regarding the franchise agreement. Besides that there are countless issues that the owner will have to encounter and are important to address in order to make the deal close in an appropriate manner and make the contract in a better way.
Therefore an experienced attorney or lawyer will be beneficial in addressing all these countless issues and will help in seeking the way out of this. There are certain issues that are important to address while purchasing or franchising atypical asset and where the role of attorney counts. The issues that will be addressed include:
- Identification of the assets that are to be sold, that may include the machines and other necessary equipment’s of the station, permits and licenses, books and records, customer information or documentation, trade accounts receivable, tangible personal property, the lease agreement concerning the property and more.
- The excluded assets, meaning what is “not included” to better protect the buyer from liability of the current corporation owning the gas station assets.
- How inventory is to be handled – counting on the day before, day of, or day after closing.
- Review of environmental issues, contracts with suppliers, and/or oil companies involved.
- Review of legal issues that may have a financial impact, or on the other hand can impact the equipment, the premises, the operations, the employees, contractual matters, and an “observation” period, if there is any decided between the two parties.
- Specifics as to the purchase price – how much is to be paid, how it to be paid is, and if paid in installments, how is the balance to be collateralized in the interim.
- Where a convenience store is involved, details of its’ operations and related concerns.
- Due diligence, time frames and specifics.
- The representations and warranties that each party must make to the other.
- The covenants, consents and approvals each side agrees to deliver in order to get to closing.
While opening a gas station or franchising it from a reputable company it is important to address all the issues mentioned above and in order to mitigate those issues, the role of attorney becomes very vital and impactful. Therefore, it is important to seek guidance from a legal attorney and catering all the above issues design or format a legal contract which will help in shaping all the rights and the rights and responsibilities at both the ends. Besides that the legal attorney is a key member of the business team and holds an essential position with significant importance which clearly indicates the impact that he can have on the final deal.
As indicated the owner will generate $80,000 as initial investment and will seek $140,000 as a loan from the bank. The utilization of these funds will be done in the manner which is shown in the chart below. The total start-up cost that is estimated is around $220,000 which is divided as initial lease payments which will be around $30,000, the working capital which will be around $80,000and furniture, fixtures and other equipment will be around $30,000. Since the new owners purchasing the franchise, which is why the entire cost will occur at his end. The leasehold improvement, security deposits, opening supplies, marketing budget, rent, and other miscellaneous expenses are all part of the budget that is required initially.
The sales forecast as shown in the tables below indicate that the company will have to divide sales in four categories. The first category is the sales generated from the assumed amount of $50 with which car wash is free. It is assumed that this sale occurs four times a day, which makes it $200. On the other hand, the sales 2 refer to the unprecedented sales, which are expected to be around $300 on a daily basis. Next is the sales 3 which refer to the sales of the convenience store while the sales 4 refer to the sales of the automotive services as shown below.
The sales forecast shows that per day sale of the gas station is assumed to be around $620 which, when multiplied by 360 days provides annual sales around $223,200. The five days are left due to uncertainty and the growth rate is assumed to be 10% for the next 3 years. The operating cost is taken around 60% of the total sales that will be generated in a year and the growth rate is assumed as 10% for the next 3 years. The earnings before income tax and depreciation and amortization are calculated by taking the difference of annual sales and operating cost. The other costs or the fixed cost takes 15% of the annual sales while the tax is assumed as 30%.
The gas station has to keep inventory for gasoline and diesel and as there will be a convenience store in which managing inventory is also necessary there. The inventory management system that will be applied is about holding on to more inventories in terms of perishable items for the convenience store, but a maximum of 10 days inventory will be maintained depending upon the sale ability and the permissibility of the items.
The inventory will be visited over 7 days and according to the demand of the locality and the predicted sales the inventory levels will be maintained. This will be done or will be mentioned in the franchise contract between the owner and the Shell, who will be the main supplier of gasoline and diesel. As the supplier is Shell who will be providing the inventory in the form of gasoline and diesel which is why agreement with the company on maintain the maximum or minimum inventory levels is important.
However, managing or maintain the levels of inventory also depends on the capacity of the USTs that are installed with the capacity. The maximum capacity of the USTs will be maintained in order to fulfill demand a strong back up will be established by tying strong relationships with the company. This will allow meeting the uncertainty in demand rapidly and maintain the levels of inventory which is necessary.
The reason to maintain or to hold on to extra inventory is to cut off the challenge posed by the uncertainty in demand. Furthermore, the inventory levels will have to be maintained after gaining permission from the national, state and local levels. On the other hand, the EAP regulations and the guidelines are also supposed to be catered while maintaining the inventory levels otherwise penalty can be faced. The visits will be after every 7 days in order to check the level of inventory and the need that is there to be fulfilled.
On the other hand, the inventory levels for the convenience store will also be following the method of holding on to more inventories. The reason is the location which is far from the center of the city and it will take a sufficient to make the delivery of the perishable items and other food and beverages. Therefore, holding onto more inventories will help in facilitating the demand easily.
However, there are two methods of inventory management that will be followed for the convenience store. The first method, mentioned above will be holding on to more inventory which will be followed for less perishable items and for the most saleable items. Identifying the most saleable items is a difficult task, but in order to identify that the sales of the last month will be evaluated. This will help in identifying the most saleable items and will guide in managing their inventory effectively.
Furthermore, the perishable items will also be identified which are easily identifiable and a weekly visit will be made in order to check the status of the inventory. Usually an inventory of perishable and saleable items will be maintained around 25 days, which is sufficient to carry inventory and prepare a backup. This method will allow in maintaining inventory effectiveness and will be suffice to manage the demand.
On the other hand, the perishable items another method of inventory management will be adopted which is very effective and popular. This method is known as just in time inventory management system. This method will allow the operations to flow easily and do not put the burden on the inventory. To implement this strategy a weekly visit will be made to anticipate the need and after accessing and evaluating the demand the levels of inventory for the perishable items will be maintained.
This method will allow obtaining certain benefits which will be very effective in many regards to the gas station. Since perishable items have small life and damage to the items can create financial pressure, which is why this method is adopted to overcome the cost of obseclecne. Besides that this method will allow to maintain the flow of inventory without pressurizing the inventory.
Thus, more focus on non-perishable items and more saleable items can be made which is very important. However, in order to identify the most saleable items immense focus will have to be made towards the sales forecast and sales evaluation. This will make it easier to identify the most saleable items from the sales evaluation conducted for the past 30 days. However, the numbers can change or vary from month to month, which is why this will be done after 6 months of operations.
The reason for this strategy is that it will allow overcoming the uncertainty and also identifying the average amount of saleable items that have to be maintained in the inventory. Thus the inventory management is quite effectively planned and various methods that are being implemented globally are adopted.
Holding to more inventory will allow managing demands for saleable and non-perishable items while just in time will make room for nonperishable and saleable items. A weekly visit will allow checking the levels of inventory and an inventory for at least 25-30 days will be maintained in order to manage the demand and inventory levels effectively.
This section will incorporate different analysis in order to grab a better understanding of the business and conduct a more rapid and thorough analysis. This section will first highlight the environmental factors that will allow better understanding the political, economical, social and technological factors and their impact on the business.
Secondly, the industry analysis will be conducted in order to grab an in-depth knowledge of the industrial factors impacting the situation. Lastly, customer analysis will be conducted to analyze the customer and its preferences in order to decide on the strategy to be followed.
The political condition is pretty much stable and the country is on the verge of elections, which may bring some distortions and changes in conducting the business. However, the overall scenario explains that no rapid changes will occur in conducting the business associated with petroleum and running a gas station. The political connection has a huge impact, though to shift the position of the business from growth to decline.
However, in the US the political condition is somewhere between moderate and stable and is facing a crisis to some extent as well. This condition is expected to change once the elections are over and a more suitable and clear environment will be there for the business to proceed. The changing political condition of the country is expected to bring a significant decline or incline in the purchasing power and the fuel cost.
Besides that, the country is one of the strongest economies in the world and the political outlook of the country is very much influential which is why it has to be in the position to sustain its image. The past scenarios have explained that the political conditions of the US have impacted several businesses, especially the one related gas and petroleum as it is in the major interest of the country.
Therefore, the new gas station must have to comply with the rules and regulations and must fulfill every regal requirement and must show compliance in this regard in order to survive in the worst case scenario. Besides that, it is also important to safeguard the business in the volatile political condition.
The country is one of the most developed and strongest economic nations in the world and is considered as the largest economy in the world. Besides that the company has a GDP of more than $16 trillion, which is the proof of the financial and economic health of the country and signifies its financial strength. Although, the country has suffered immensely from the economic crisis that occurred in the last quarter of 2008 but the economy has done tremendously well to bounce back and bring the economic outlook back on track.
By the end of last year the economy started to show signs of development and is on the verge of becoming the strongest once again. The services and the manufacturing sector have a major role to play in developing the economic health of the country. These two industries or sectors are highly preferred and supported by the government. These two sectors have played a considerable and important role in providing survival turmoil to the country’s economy.
This scenario exhibits a more stable and positive outlook for the gas station and hints that the purchasing power of the consumer is quite healthy. However, the economic condition of the country is still at risk due to the budget deficit that the country is facing and is hinting a serious drought in the coming years. Therefore, this factor can be a concerning point before pursuing the business and achieving the desired potential.
However, the overall scenario indicates that the political condition of the country is to some extent moving in a positive direction but is also surrounded by the risk. The budget deficit can create distortions in operating the business, but once survive the business can be run on smooth growth.
Aging is one of the most significant issues in the country, unlike other developed nations which is the basic social factor of concern nature. On the other hand, the country has another major issue in the form of racism which is another concerning factor for those wanted to initiate busi9nesses or become entrepreneurs. The country has some of the finest business sectors and is providing the best medical and educational facilities.
However, aging will make the labor issue significant for the new businesses and finding young and long serving employees is a concerning factor. Secondly, racism is an issue that can seriously disrupt operations and it becomes essential to witness the location and make sure that the territory is clear from such issues. Such issues may bring distortion in the earnings of the businesses that are operating on a daily basis.
The country has command over adopting and assimilating innovation and new technologies and the relationship with technology is quite old. New technologies have created new opportunities for businesses in various sectors and in the [petroleum sector refining and digging has become easier.
Besides that the technologies installed at gas stations have also enhanced which is why the fixed and operating cost has increased, but the efficiency of the machines and their salvage value have enhanced. The country has professional possessing expertise in various fields that can be hired and utilized in developing new and innovative technologies to further develop the technological strength of the country in various sectors. However, the technological environment is quite favoring the business plan of the gas station.
This will help in conducting an audit of the strategic business unit and will analyze the industry with regards to the five forces that are helpful in shaping the strategy. This is an important aspect and will guide in developing the marketing plan and strategy for the gas station.
Bargaining Power of Buyers
Buyers in the industry have multiple options to choose from and there is abundance of multiple gas and petroleum products provider. Besides that the switching cost of the buyers is also very low which is why they show less resistance in changing the brand or the gas station. Furthermore, the brand loyalty is at the lowest side and is not a significant factor that can restrict the customers from purchasing from a specific gas station. The purchase is dependent on the viability, availability, accessibility and convenience of the customers. These factors are the major attractions of the customers which is why the bargaining power of the buyers is quite high in the industry.
Besides that the service quality and the availability of the supported material like convenience store and other facilities can be of an important nature. The role played by these services can be significant and can attract people from the neighborhood, thus generating a significant consumer base. However, these factors are of an important nature, but do not impact the overall; bargaining power of the buyers.
The bargaining power depends upon the dependency over the station and low switching cost and in this case, these two factors are totally opposite. Therefore the buyers have multiple options to choose at a lower switching cost which is why they are enjoying a high power to bargain.
Bargaining Power of Suppliers
Vertical interrogation is being followed in the industry, which is why the dependency over the suppliers is minimized or diminished and gives very low power of bargaining in regards to suppliers. The suppliers in the industry have every minimal role to play. However, in regards to the gas station the supplier is the company providing the refined gasoline and the price is what is demanded by the company. However, in the case of licensing and franchising, the business is smooth and power has no impact as the relationships are well established.
Threat of New Entrant
Starting a new business related to gasoline and petroleum is a risky task and to some extent hard to achieve. The reason for this factor is the high entry barriers as the new entrant will have to invest heavily in the initial capital requirements. Besides that acquiring new gas pipeline and facility will be challenging.
Furthermore, meeting the government requirements and fulfilling every aspect is a breathtaking task. On the other hand, establishing strong relationships with the government to get the permit is also a hectic task. Besides that the government has some established player with which the benefits are distributed which makes it difficult for the new comers to achieve economies of scale.
The taxes, the volatile business condition, the changing prices, the legal constraints, and other regulations are all proving hint to the new comers and discouraging them to enter into the business and operate freely. Therefore the entire scenario exhibits that the environment and the business opportunity is not viable for the newcomers and they are deeply discouraged to enter. Thus, the threat of new entrants is very low.
Threat of Substitutes
The threat of substitutes is to some extent moderate as there are some substitutes available for gasoline but the availability is not rapid. The substitutes present offer same functioning, but the efficiency and the productivity to the same extent is doubtful. The products that are available that can serve as the replacements for gasoline are not readily available and are not being used frequently.
The experts and the users also not recommend the usage of the substitute product despite being cheap. It has been quite evident that with the transformation in technology and rapid research activities have allowed the scientists to develop alternative ways to fuel the engine of the cars and the bikes.
Therefore, cars running from solar energy and electricity are also major substitute products that are not readily available but environments; frequently as well. These substitutes are of moderate threat as the availability is not easy along with the expensive nature is also a concern along with the hybrid cars that are becoming quite attractive.
The rivalry in the industry is quite high as there are a number of players that are operating globally and the gas stations running under the brand name of Shell will have the advantage of being strong players. However, the overall rivalry in the industry is intense due to some major global players that are operating in large territories and have significant advantages that allow them to seek benefits in various forms. The product differentiation is low and the price is almost competitive which is why the rivalry is intense, but the collaborative effort is adopted instead of competing with each other in the industry.
The customers that the gas station will acquire are the already established clients of the gas station. Since the gas station is acquired through licensing this is why the brand name, the outlook, the location and the customer base will remain the same. However, with the services being offered by the gas station, it is assumed that the customers will be mostly bikers and the family residing in the neighborhood. Besides that the people travelling inside the city or the tourists coming inside the city are the major customer that are mostly occupied and having their own business.
These people have short families or they are newly married, but can be bachelors as well as the bikers are mostly unmarried. Furthermore, these customers have a child as well and they will prefer to utilize the convenience store once they stop by. On the other hand, the services provided at the gas station will be targeting middle income people with white collar jobs. The consumers are not brand loyal or the one that will stay loyal in the hard times as the services are readily available with low switching cost. Therefore the customers that prefer visibility and accessibility are preferred and will be targeted by the gas station.
The competitive analysis suggests that the gas station has only one competitor of Caltex but it is in the opposite direction and the area is not quite threatened by competition. Therefore, the gas station has the advantage of being the prime location with the busiest route which also caters the people from inside the city and also those entering the city. However, the competitor is also quite attractive and has the advantage of being in the city and catering the population living in the city.
Caltex itself is a renowned brand with high market share and quality fuel which is why it is being referred by the majority of the people. However, the gas station is not under real threat as the gas station of Caltex is operating in a different location but is in the same city. On the other hand, the convenience store is under real threat as the superstores and other marts are the major attraction and serve the sole purpose with a variety of items.
Therefore, this cannot serve as the only attraction for the gas station and in order to increase its sales and attract families’ strong efforts will be required. This will have to be done appropriately in order to keep the sales going and achieve the target of profitability in the desired period.
The marketing plan holds a key position in the overall strategy of the gas station and the implementation and development of the marketing plan is very important to achieve the objectives that are set in the initial stages. The marketing plan comprises of various strategies that are being practiced in different stages and are very critical for success.
In this regard the new owner of the gas station will have to invest extensively on the marketing strategies of the gas station. However, the gas station will be serving under the brand name of Shell, which is why extensive media promotion is not required and no need to invest heavily on the promotional aspect.
There are certain benefits that the owner is getting in this deal as he is paying only to use and operate under the brand name of the Shell and vast strategies will be handled by Shell. However, certain risks are also involved that needs to be catered by the owner and will have to suffer from. The marketing plan is important, but the owner will also have to invest some amount in promoting and pricing for which some strategies are required.
The marketing objectives of the owner with regard to the gas station are to attract the local residents and the people travelling by specially the tourists coming into the city. Besides that the gas station also needs to make the visibility apparent by leveraging different communication channel. The marketing objectives will cater the target market and in regards to that cover the gap between the target market and the gas station to attract people for regular, weekly and monthly visits. Besides that the marketing objectives are also to promote the station in such a manner to generate sales and increase the number of daily visits.
Secondly, the gas station also needs to take complete leverage of the support activities to build customer satisfaction and as a source of promotion adds value to the money of the people. On the other hand, by offering discounts and coupons increase the sales of the convenience store and attract people to become regular customers. The marketing objectives of the gas station are clear and are described very precisely but clearly. To achieve these objectives, strategies need to be developed which will allow the owner of the gas station to increase the sales and achieve the objectives described above.
This section will describe the products that will be delivered by the gas station, the pricing strategy, it should adopt, the placement techniques and the promotional strategies that are in best favor of the gas station. The section presents a brief but beneficial outlook of the fundamental strategies essential to develop and achieve the desired objectives without any hindrance.
The products that are being offered at a gas station include the primary and secondary products and have their own significance. As stated above the products and services overview the company is offering services and products of wide range. The gas station must offer the basic gasoline products to cater the prime needs of the customers. The gasoline products are different in which the gas station can offer a variety of gasoline and petroleum products that can serve as fuel for the car, bike or any other automobile. Basically, everything that is being offered at the gas station is serving as the product with benefits that are being purchased by the customers.
Customers buy value for their money and in this regard, they demand the best. Therefore, the gas station must focus on delivering the prime product efficiently and without any delay. However, the convenience store is also there to offer an abundance of products. Therefore, the gas station must have the enough inventories to meet the requirements of the customers as forecasted. Besides that the services offered as support products must be well delivered and must be complementary.
The place that will hold the responsibility in terms of placement is the location at which the gas station will be located. The location is pre-determined and is serving the station and its objectives very well. However, the placement deserves very less attention, but efforts should be made to improve the appearance of the gas station and also to use different measures to make the place attractive for customers.
Pricing is an important aspect that holds key importance in the overall strategy development of the product. There can be different pricing strategies that can be followed by the company or the owner of the gas station which is why the options are there. However, there are also some restrictions that are being imposed by the industry and the regulatory environment that does not allow deciding on strategies freely.
The company has the option of following price skimming or price penetration strategy that has different objectives. However, the industry scenario and limitations and also the guidelines set by the regulatory environment; the best strategy for the gas station will be a competitive pricing strategy. This strategy is efficient and most suitable for the company in many ways as it allows the company to stay in collaboration with the other brands.
The pricing strategy for the gas station will play a vital role in the sales generation of the prime product. However, the pricing strategy for the convenience store cannot be developed as the prices are pre-determined and set by the companies delivering those products. On the other hand, the gas station will have to serve the clients with air filling in tires and window cleaning as complementary products for which no products will be charged.
The promotional plan of the gas station needs to be aligned with the promotional plan of the company. This is very important and asks for strong relationships between the owner of the gas station and the Shell Company. As stated above the gas station will serve under the brand name of Shell as it is being licensed.
Therefore, the marketing and promotional activities will be decided at the company’s end. In this regard strong integration between the two partners must be there in order to achieve the marketing objectives derived from both of them. However, the owner of the gas station can introduce coupons and discounts on personal behalf in order to attract people from the neighborhood or residing nearby.
Similarly, this strategy can be followed to increase the sales of the convenience store as well. The owner can also support different sports events held locally to embark his personal presence and establish stronger relationships with the company. This will allow the owner to gain extra benefits and maintain high quality standard and special consideration for the gas station at the board meeting.