Formulation Of Profitability Of New Exploration Block - Free Essay Example

Sample details Pages: 17 Words: 5101 Downloads: 3 Date added: 2017/06/26 Category Statistics Essay Did you like this example? This report is aimed to summarise the understanding of Indian Petroleum fiscal system and its application in the NELP bidding round. The study has been undertaken considering one exploration blocks from an investors perspective. The study deals with the measurement of the profitability potential. Don’t waste time! Our writers will create an original "Formulation Of Profitability Of New Exploration Block" essay for you Create order The economic modelling has been carried out using the production profile data for offshore block MB/OSN/2005/4. The assumptions for the oil gas prices as well as the exploration and development costs are as per the DGH documents. The sensitivity analysis has been carried out in order to find the impact of the oil gas price, cost and the discount rate. The analysis shows the significant effect of oil price on the project economics. 1. Introduction Government of India liberalized the Oil Gas sector by introducing the NELP (New Exploration Licensing Policy) regime in 1997. Under this regime, the participation of private players and foreign investors in Oil Gas Exploration Production was encouraged through offering of an attractive investment climate like 100% FDI participation permitted. This is turn has posed many opportunities for private players to increase their investment in to the Indian EP sector. NELP has provided a major impetus to exploration efforts in the country. According to the DGH statistics, the areas under exploration have increased more than 4 times to 48% of Indian sedimentary basin area, up from 11% before implementation of NELP. Implementation of NELP has resulted in 68 oil and gas discoveries made in 19 exploration blocks. Hydrocarbon reserves accretion has been more than 600 Million Metric Tonne of oil equivalent. With the Indian hydrocarbon prospectivity looking impressive and with the NELP regime offering good commercial terms, a potential investor could stand to gain substantial investment returns by reaping the benefits if participating under NELP. It is interesting to examine the investors approach towards assessing the profitability potential of an investment opportunity presented under the NELP. Such an examination would be important for two reasons. First that it would show the economic viability of undertaking a typical exploration project under NELP. In this project, an attempt has been made to undertake the economic assessment of exploration blocks awarded under NELP for the reasons cited above. The blocks which have been awarded are currently being operated by the Gujarat State Petroleum Corporation (GSPC), one of most successful EP operators in India in recent years. New Exploration and Licensing Policy (NELP) was launched in 1997 with an objective to accelerate exploration and production activities in the upstream sector and attract private investment in the sector. The policy framework provided a level playing field to the domestic public sector, private companies and foreign companies by offering similar regulatory, fiscal and contractual terms for exploration and production of oil and gas. This was a major change from the pre NELP regime under which ONGC and OIL were granted with Petroleum Exploration Lease on a nomination basis. Under NELP, the companies were awarded licenses for exploration blocks on the basis of international competitive bidding. In order to maintain greater transparency in the bidding process, the award of blocks is made on the basis of quantitative bid evaluation criteria, which are made public in the notice inviting offers. The salient features offered under the NELP policy can be summarized as under: Fast track approval mechanism through single window Empowered Committee of Secretaries. Foreign participation permitted up to 100%. Model Production Sharing Contract (PSC) to aid in negotiation. No commitment for any minimum expenditure. The limit for recovering cost recovery is biddable up to 100%. No signing, production or discovery bonus is to be paid. Contractors are free to market oil and gas in the domestic market at market determined price. Securitization of participating interest for raising project finance is allowed. There is no bank guarantee requirement for the work programme. Participation is permitted through unincorporated joint ventures The contract assures fiscal stability (clauses for change in tax laws). Transactions under production sharing contracts expressed in USD. (Source: DGH, MOPNG) NELP has provided a major impetus to exploration efforts in the country. According to the DGH statistics, the areas under exploration have increased more than 4 times to 48% of Indian sedimentary basin area, up from 11% before implementation of NELP. Implementation of NELP has resulted in 68 oil and gas discoveries made in 19 exploration blocks. Hydrocarbon reserves accretion has been more than 600 Million Metric Tonne of oil equivalent. With the Indian hydrocarbon prospectively looking impressive and with the NELP regime offering good commercial terms, a potential investor could stand to gain substantial investment returns by reaping the benefits if participating under NELP. Figure 1 PD Department Activities [Source: GSPC PD Department] AIM Develop an economic model that supports companys investment decision making process for the upstream projects company has considered to be potentially value adding to its upstream portfolio. The methodology followed is to critically examine the impact of project specific parameters on the techno-economic feasibility of upstream projects undertaken by company. To meet this aim, this case study has examined one upstream project (see Table 1) undertaken by company with respective techno-economic evaluation objectives shown below the exhibit. Table 1 List of Block Considered Upstream Project Operator Partners Acreage Awarded 1 MB-OSN-2005/6 ONGC-GSPC (NELP Round V) OBJECTIVE Techno economic Evaluation Objectives: Project was evaluated assuming the evaluation was at the pre-bidding stage and the operator sought to generate block profitability potential through economic analysis. In order for commencement of study, the following study objectives were followed Objectives Review literature of global petroleum fiscal systems to examine key fiscal terms favourable to investors Review of Indias NELP regime through examination of bidding evaluation criteria offered under the forthcoming licensing round. Building of an economic model in line with the design and structure of the Indian Petroleum fiscal regime or NELP PSC Carrying out economic modelling on the above project to simulate project economics under the hypothetical cases specified Undertake analysis and interpretation of results to provide the operator with information necessary for making the effective investment decision i.e identify whether the project is a value adding opportunity and complements companys upstream portfolio Draw key conclusions and recommendations after discussion and analysis of results. CHAPTER 2 LITERATURE REVIEW Literature Review This chapter aims to address the first study objective i.e. Review literature of global petroleum fiscal systems to examine key fiscal terms favourable to investors. This is done with an objective to examine the typical manner in which an oil investor examines an investment opportunity in the upstream sector. Petroleum Fiscal System The petroleum fiscal systems exist for the negotiation between the host government and oil companies. These fiscal systems are numerous due to the scope of flexibility and change in economic as well as political conditions. The objectives of a government are to à ¢Ã¢â€š ¬Ã‹Å"maximize the wealth from its natural resources by encouraging appropriate levels of exploration and development activity and get as high share of the profit as possible. The objectives of oil companied are à ¢Ã¢â€š ¬Ã‹Å"build equity as well as increase shareholder interest and maximize the wealth by finding and producing oil gas reserves at the lowest possible cost and the highest profitable margin. The petroleum fiscal system assists in achieving mutuality of interests between the two parties by creating a win-win situation for between government as well as oil companies. This can be achieved by enabling provisions for Recovery of costs Division of profits arising from the petroleum operations. The bargaining relationship depends mainly on profitability and risk. It is crucial to relate the fiscal packages on the geological basis and where on the geological learning curve that province is. The figure shows the geological learning curve. Recoverable Years Years Figure 2- Geological Learning Curve [Source: Slatsveen, 2005] The petroleum fiscal system can be classified in two categories namely: Concessionary system and Contractual system. Concessionary system is where private ownership of mineral resources is allowed once they are successfully exploited and produced by a company. The state is liable to collected the economic rents (explained later) generated through taxes and royalties. This type of system is followed in Western countries such as United States, UK, Norway, Brazil etc. The contractual systems are where the government will retain ownership of the petroleum resources produced by a company but will guarantee a return of the share of production or revenue from the sale of oil gas depending upon the terms negotiated in the contractual arrangement in the PSC (Production Sharing Contracts). Another type of contract is the Service Contract (SC), where the contractor is given a fee for its Exploration Production activities. So, in the PSCs the contractors are awarded in kind whereas in SCs, the contractors are awarded in Cash. SCs can further classified between Pure Service contract and Risk Service contract. It depends upon whether the fees are based on flat rate (Pure) or on profit (Risk). Contractual arrangement is common in developing countries like China, India, Angola, Indonesia etc. The rationale for such system is that the natural wealth is the property of the sovereign state and should therefore be used first and foremost for the benefit and welf are for its citizens. Figure 3- Various Petroleum Fiscal Arrangements [Adapted From Johnston, 1994 Economic Rent The difference between the value of production and the costs to extract is known as economic rent in the petroleum industry (Johnston, 1994). The costs consists of Exploration, Development as well as production costs. The economic rent also refers to the à ¢Ã¢â€š ¬Ã‹Å"excess profits associated with the surplus profit remained after all costs are recovered. It is then this excess profit which is shared between a host government and the petroleum industry. Host governments collect as much economic rent as possible through upstream fiscal instruments namely royalties, taxes, bonuses etc. One of the most challenging and interesting area for examination of fiscal system with regard to collection of economic rent lies within the negotiation process of the fiscal terms, which refer to the agreement between host government and oil companies to explore, develop and produce hydrocarbons. These terms are negotiated in two fundamental types of petroleum fiscal systems (Slatsveen, 2005). The challenge is to how to capture rent when many of the exploration ventures are failures. Thus, the profit margins should be large enough to accommodate these failures. Fiscal Components of the fiscal systems Fiscal instruments are employed to collect economic rent regardless of the classification of the fiscal regime. The concessionary system has at the fundamental level, the following components. Royalty- It is the secure minimum payment based on gross revenue from sale of crude oil and natural gas. Deductibles- They are the operating costs and depreciation of the capitalised assets, amortisation. Tax-It is deducted from the taxable income (Gross Revenue- All deductions). This is generally at the countrys basic corporate tax rate which is higher than the regular income tax. Cost Oil/Cost Petroleum- The exploration, development and operating costs which can be recovered depending on contract terms are known as Cost oil or Cost Petroleum. Profit Oil/Profit Petroleum- The profit remaining after recovering costs and payment of Royalty is known as Profit Oil or Profit Petroleum. It is shared between the host government and the contractor depending on the contract terms. Production Sharing Contracts The production sharing contracts and concessionary system may differ in terms of ownership of the resource, but financially they have the same implications (Johnston, 1994). In this study, we would be focusing on Indian PSC regime as set out in the second objective i.e. Review of Indias NELP regime through examination of bidding evaluation criteria offered under the forthcoming licensing round. India introduced New Exploration Licensing Policy (NELP) in 1997, in order to open the market for private players. There have been seven bidding rounds up to now and about 167 PSCs have been signed till date. The NELP-8 round has also been declared as on April 9, 2009. Government has also released Petroleum Tax Guide (PTG) in 1999 to clarify the Tax implications for the operators and investors. The financial implications of the production sharing contracts can be expected as shown in the figure. Figure 4- Flow Diagram for PSC [Source: Venugopal, 2005] Royalty The royalties are the fixed minimum payment levied on the production of the reserves. It creates an up-front revenue stream which is assessed on volume or value of reserves (Venugopal, 2005). The royalties are often considered a disincentive to investment and are typically only deductible in home jurisdiction. They might cause investment distortions as it leads to payment from the Gross Revenues rather than Net Income, but can give early revenues to the Government as well gives relatively stable incomes to the Government. Four major disincentive effects of royalties It can reduce profitability of a field as the burden of Royalty decreases the contractors take. The pay-back or the recovery of costs can be slower with higher royalty levied. A field viable on pre-tax basis can be made non-viable after royalty deductions. The instances of premature abandonment increases as the royalties are levied on gross revenues. Royalties can be fixed or on the biddable terms. In the Indian PSC regime, the royalties are fixed, levied on the basis of the hydrocarbon type and by on land and offshore areas. However, in the more sophisticated PSCs it can be on the sliding scale of revenues. Cost Oil A portion of produced oil that the  operator  applies on an annual basis to recover defined costs specified by a  production  sharing contract is known as Cost Oil (Schlumberger Oilfield Glossary). The cost oil can be zero to hundred percent and it is often biddable. The revenues remaining after the cost recovery is shared between the contractor and the host government. The cost recovery works in two ways: At the pace of development costs incurred or based on the amount of oil production available for cost recovery. Typically, the slower cost recovery can cause following effects: Might cause investment distortions due to the depreciation rules; the timing of the recovery of investments costs. Due to the discounting and inflationary effect the tax share of the costs is lower than the tax share of incomes. A fiscal regime that allows cost recovery up to 100 percent is favoured by the investors. Profit Oil Under the production sharing contract, the amount of  production remained after deducting cost oil production is divided between the investor and the host government. This remaining production is known as profit oil (Schlumberger Oilfield Glossary). It is biddable and negotiable under the PSCs. The contractors share of profit oil is usually subject to taxation depending on the companys prevailing income tax rate. The contractors generally bid for profit sharing split based on the geological potential of the field. Thus, it is not the governments that always determine the appropriate divisions of the profit; the oil companies help define what the market can bear (Johnston, 1994). The profit oil split is particularly effective when it is applied on an incremental basis on varying field sizes. The profit petroleum is shared between the government and the contractor depending on a Pre-Tax Investment Multiple (PTIM) ratio. PTIM ratio is calculated using the Contractors Cash Flow in the previous year and is determined by dividing the accumulated Contractors Net Cash Income by Accumulated Investment by the Contractors. Such ratio for the profit oil split would ensure the accommodation of unexpected changes in oil prices (Venugopal, 2005). This also ensures that government share is low in initial years when the revenues are less and recovery is slow. As the ratio increases, the share of profit to the government increases. Taxes Taxes are generally levied on the contractors share of profit oil and this is usually at the countrys prevailing corporate tax rates. Taxes are more attractive to investors than the royalties as it is based on the profits unlike the royalties, which are based on the gross revenues. The tax incentive can be definitely more useful for the contractors in the case of discovery and subsequent production. The tax holidays applied in the early years can make a field more viable in terms of present value (Johnston, 1994). Tax holidays represent surplus NPV available in initial field production years. Assumptions 1. The Government share of Profit Petroleum will be calculated for the purpose of fiscal evaluation under three Scenarios of production profile and prices of oil and gas, such as Low, Most likely and High. 2. The block-wise Production profile for computation of Government Share is given . The Production profile are assumed only for the purpose of fiscal evaluation and are not indicative of actual or expected production. 3. Following nine scenarios, based on production profiles and prices, will be considered for evaluation of fiscal package based on the weighted average of Net Present Value (NPV) of Government share of Profit Petroleum under each scenario. 4. Weights will be assigned for NPV of Government Share of Profit Petroleum for the 9 scenarios as under for all types of blocks: 5. The exploration cost and development cost assumed for the purpose of fiscal evaluation is given in Annexure-II. Production cost is assumed at US $ 3 per barrel of oil and oil equivalent gas (O+OEG). The costs are assumed only for the purpose of fiscal evaluation and are not indicative of actual or expected cost. 6. First seven years are assumed for exploration phase for Type S blocks onland blocks (other than frontier area blocks) and shallow water blocks. The Production is assumed to commence from 8th year. For the purpose of evaluation, it is assumed that exploration cost is spread over @ 10%, 10%, 20%, 20%, 20%, 10% and 10% over the 7 year period of exploration phase and development cost is equally spread over in 7th and 8th year. 7. First eight years are assumed for exploration phase for Frontier Area onland blocks and Deep water blocks. The Production is assumed to commence from 9th year. For the purpose of evaluation, it is assumed that exploration cost is spread over @ 10%, 10%, 20%, 20%, 20%, 10%, 5% and 5% over the 8 year period of exploration phase and development cost is equally spread over 8th and 9th year. CHAPTER 3 METHODOLOGY Methodology Overview To accomplish the techno-economic objectives (as below) for the respective upstream project considered by GSPC, an economic based model was developed guided by the literature review discussed. Project 1 being an exploration block MB-OSN-2005/6, was evaluated assuming the evaluation was at the pre-bidding stage and the operator sought to generate block profitability potential through economic analysis. Measuring the Profitability Potential The section deals with examining the profitability potential of an exploration prospect in the block MB-OSN-2005/6. Company needs to determine the profitability potential of this block located in Mumbai Offshore basin. The sensitivity of the Post Tax Net Cash Flow (PTNCF) to variation in Oil prices, Production costs and discount factors in three likely reserve sizes (reserve sizes as given by the DGH) was examined using following method of sensitivity analysis generation (Nath, 2007): A base case is specified through the variable set and compute. The variables are then changed to factor in various scenarios that are likely to occur. The results for change in factor are plotted graphically to analyse the sensitivity of the project with respect to change in each factor. Thus the graphical relation in fiscal system analysis is employed. 1) Discounted Net Cash Flow (Before Tax After Tax) Cash flows are discounted at a certain rate to account for time value of money. The greater the value of à ¢Ã¢â€š ¬Ã‹Å"free net cash flow generated, more profit can be generated from the field. 2) Net Present Value (NPV) NPV is the sum of discounted Net Cash Flows and represents a value which factors in the time value of money. If NPV is positive, the project should be accepted. 3) Internal Rate of Return (IRR) IRR is the discount rate at which the Net Present Value is zero. Internal Rate of return indicates the project efficiency and robustness. If the IRR is higher than the discount rate i.e. opportunity cost of capital, the project should be accepted. If IRR is lower, the project should ordinarily not be considered for further development. 4) Government Take à ¢Ã¢â€š ¬Ã¢â‚¬Å" Sum of the components of government take namely Royalty, Profit Oil and Taxes (Johnston 1994). This shows the impact of the fiscal system on the cash flow of the oil/gas field. Take is represented as a percentage of the total project net cash flow. 5) Payback period à ¢Ã¢â€š ¬Ã¢â‚¬Å" The time until cumulative net cash flow becomes positive. Prospect at a glance Project Name- Hypothetical Development of Block MB-OSN-2005/6 NELP Round- NELP-V Block Name- MB-OSN-2005/6 in the Mumbai Offshore Basin Production reserves- Low Production- 103.4 MMbbl Medium Production- 129.25 MMbbl High Production- 155.10 MMbbl Economic Modelling Economic modelling is carried out considering the fiscal regime prevailing in India under the NELP. The results show the Pre-Tax and Post-Tax Net Cash Flows under different scenarios of Oil Price, Production profiles as well as Production costs. Further analysis is carried out in the subsequent chapters to understand effects of Government take as well as the exogenous variables such Oil Prices, Production Costs and the Production profiles. The cash flow modelling is prepared using the methodology utilised by Venugopal.S (2005). Accordingly a representation of the Cash flow model is given in the following figure. Figure 5- Flow Diagram for Cash Flow Model [Venugopal, 2005] Data used for the modelling The three cases are taken for the production profiles: Low Production, Most likely production and High Production. The total production output is as under: Case 1- Low Production: 103.40 MMbbl Case 2- Most Likely Production: 129.25 MMbbl Case 3- High Production: 155.10 MMbbl The variables in each case are Oil Gas Price and Production Cost. It is assumed that the Oil Gas prices are changing together, i.e. there is a correlation between the prices of the oil gas prices. This is assumed as the gas prices have historically been linked intrinsically to the oil prices .The summary of variables is listed in the table below: Assumptions Oil Prices ($bbl) Oil Price1 50 Oil Price2 80 Oil Price3 100 Gas Prices ($/mcf) Gas Price1 4 Gas Price2 4.5 Gas Price3 7.5 Cost ($mm/well) Cost 1 40 Cost 2 50 Cost 3 70Table 2 Summary of Assumptions Summary of the expenditures The expenditures assumed here are as per the data given by DGH (Directorate General of Hydrocarbon) for the block MB-OSN-2005/6 given in the pre-bidding documents. These are mainly the Exploration Development costs. These costs are summarised as follows: Expenditures Exploration Costs US$MM 194.00 Development Costs US$MM 775.00 The exploration costs are incurred during the first seven years of the project life. These costs are taken according to DGH guidelines. The development costs are incurred in the seventh eighth year of the project. Costs/Year 1 2 3 4 5 6 7 8 Exploration 10% 10% 20% 20% 20% 10% 10% Development 50% 50% The prevailing rate of Royalty has been considered for the calculation of the Royalty paid. The rates of Royalties are as shown in the table. Since, this is a shallow offshore block the corresponding rate has been considered.    Oil Gas Deep water 5% 5% On land 12.5% 10% Shallow Offshore 10% 10% The tranches of Profit sharing is taken according to NELP-V formulae. The profit sharing percentages to be offered were as per the terms negotiated in the PSC of this block signed between GSPC and the Government of India. Profit Sharing Tranches % to GOI PTIM 0 1.5 66% PTIM 1.5 2.0 76% PTIM 2.0 2.5 81% PTIM 2.5 3.0 86% PTIM 3.0 3.5 86% PTIM 3.5 1% Having acquired the necessary information as discussed in 3.1-Part-1, a cash flow model has been appended in Annexure [A] to this report. Results of the economic modelling have been discussed in the subsequent chapter. CHAPTER 4 ANALYSIS INTERPRETATION Analysis Interpretation Summary of results The results from the cash flow model yield the Net Present Value (NPV) which is the sum of all discounted Net cash flows (Before Tax Post Tax). Oil companies use the NPV values to measure the profitability potential of the project. Positive NPV values are considered to render the project economic and therefore accepted for project development. The NPV results under the different scenarios has been shown below and the detailed cash flow mode has been appended in Annexure A Discounting for NPV NPV ($MM) IRR (%)    Nominal Pre-Tax Net Cash Flow 9762.57 35% Pre-Tax Net Cash Flow @ 10% 1958.05 Pre-Tax Net Cash Flow @ 20% 430.89 Pre-Tax Net Cash Flow @ 30% 61.38 Pre-Tax Net Cash Flow @ 40% -36.94 Pre-Tax Net Cash Flow @ 50% -61.57    Nominal Post-Tax Net Cash Flow 3764.52 24% Post-Tax Net Cash Flow @ 10% 692.10 Post-Tax Net Cash Flow @ 20% 80.85 Post-Tax Net Cash Flow @ 30% -55.71 Post-Tax Net Cash Flow @ 40% -81.95 Post-Tax Net Cash Flow @ 50% -80.80    Analysis of Results The results show that the Post Tax Contractor Net Cash Flow (PTNCF) is positive in the medium and high price scenario. The general trend of the NPV can be shown as the chart-1. Chart 1 Post Tax Net Cash Flow The chart shows that the PTNCF increases with each production profile for the similar Oil Gas price and Production costs. Price Sensitivity The above figure shows that the project viability largely depends on the Crude Oil Gas prices. Since the field is having large oil reserves compared to the reserves of Natural gas, the oil price variation becomes critical. The chart-2 shows the Oil price sensitivity. The resultant chart shows that as the production increases, the sensitivity to the oil price increases. This is apparent from the chart as the slope of the curve gets steeper with each production profile i.e. the slope of the curve for the low production is less than the high production profile price sensitivity. This shows that as the production increases the project viability and the revenue is more vulnerable to the price variation. Chart 2 Price Sensitivity Sensitivity for low production The cost sensitivity decreases with the higher production reserves. This is mainly because with higher production profiles, the increase in revenue offsets the loss due to higher costs and vice-versa. This is apparent by the negative slop of the curve and the data point converges as the production cost increases. Chart 3 Sensitivity for case 3 The chart-3 shows the sensitivity with the change in production profile. Discount Rate Sensitivity Each cash flow must factor in the à ¢Ã¢â€š ¬Ã‹Å"time value of money; to know the value of the project in todays money considering the future risks represented by factors such as inflation (increases costs and reduces purchasing power). Discounting is done to factor in this risk element to thereby generate the discounted net cash flows, adjusting for the effects of inflation. Chart-4 shows the NPV value at the various discount rates, plotted at the each of the production profile with base case scenario of Price and cost. The chart shows that the curves of various production profiles diverge as the discount rate for the NPV calculation increases. Chart- 4 Discount Rate Sensitivity IRR (Internal Rate of Return) The internal rate of return (IRR) is the discount rate at which the NPV (Net Present Value) of the project equals to zero. IRR indicates the discount rate below which all investment will be with positive NPV. The results for the IRR are calculated in the above table. Pay-Back Calculation The Pay-back period is defined as the time required by the projects positive net cash flow to recoup initial capital expenditure (Venugopal, 2005). The chart shows that the pay-back period decreases with the increase in the production profile. The chart for payback is shown in the Appendix 5. Effect of Fiscal Components The various fiscal components like Royalty, government share of Profit oil, Taxes and cost recovery affects the project economics. The Post Tax NCF (PTNCF) is the residual left after deducting the above components from the gross revenue. The contractor is therefore more interested in maximizing the PTNCF from the project. It is however, interesting to note how the change in production profile impacts these components. While, it is obvious that the absolute figure increases with the increase in the production reserve, the more interesting notion is the relative variation of each component. Chart 5 Effect of Fiscal Components- Low Production The chart of percentage contribution of each component shows that the share of Profit oil decreases in percentage with the increase in production reserves. This is in-line with the criticism of NELP regime being regressive rather than progressive. Chart 6 Effect of Fiscal Components- Most Likely Production Also, the percentage of government share increases in the later years as the production declines. The faster cost recovery ensures lower risk to the contractor but the net cash flow to the contractor decreases in the later years. Chart 7 Effect of Fiscal Components- High Production CHAPTER 5 CONCLUSION RECOMMENDATION Conclusions Recommendations This report could hopefully draw meaningful conclusions towards determining profitability potential of the block as considered. The authors learning has been enhanced in case of recommending the effects of each parameter on the final contractor Net Cash Flow. The exercise was dealt with analysis and measurement of profitability potential of an exploration block. From the analysis it can be concluded that, the project economics for an exploration prospect is the most sensitive to the oil price. It is also evident that the project seems viable with a reasonably good IRR after multiplying the probability of occurrences of each scenario. The project is highly vulnerable to Oil Price uncertainty as the production increases the project viability and the revenue is more vulnerable to the price variation. The payback period tend to decrease with the increase in the production. The payback period for the high production is quite less. The contactor is interested in increasing the post tax net cash flow. References Alberta Royalty Review Panel. (2007). Our Fare Share. Edmonton: Canadian Ministry of Finance. DGH India. (2009). Model Production Sharing Contract. Retrieved May 15, 2009, from NELP VIII: https://www.nelpviii.com/content/BidApplication/MODEL_PRODUCTION_SHARING_CONTRACT(MPSC).pdf DGH India. (2009, April 9). Notice Inviting Offers. Retrieved April 25, 2009, from NELP VIII: https://www.nelpviii.com/content/BidApplication/NIO_01_05_09.pdf Dias, M. A. (2004). Valuation of exploration and production assets: an overview of real options models. Journal of Petroleum Science Engineering , 44, 93-114. GSPC. (n.d.). Retrieved April 5, 2009, from GSPC Group: Energy for Growth: https://www.gspcgroup.com/gspc.php Johnston, D. (1994). Petroleum Fiscal Systems and Production Sharing Contracts. Oklahoma: Pennwell Books. Khelil, C. (1995, May 15). Public Policy for the Private Sector. Public Policy Journal . Peseran, M. H. (1989). An Economic Analysis of Exploration and Extraction of Oil on the UK Continental Shelf. London: Oxford Institute of Energy Studies. Price Waterhouse Coopers. (2008). India Union Budget 2008 and its implication on Oil Gas Industry. Petrofed. Price Water House Coopers Ltd. Production-Sharing Agreements: An Economic Analysis. (1999, October). Retrieved April 20, 2009, from Oxford Energy Studies: https://www.oxfordenergy.org/pdfs/WPM25.pdf Schlumberger Oilfield Glossary. (n.d.). Retrieved April 25, 2009, from Schlumberger: https://www.glossary.oilfield.slb.com/ Slatsveen, T. (2005). Fiscal Policy- Finding the right Fiscal System. PPM/CCOP Workshop. Beijing: Norweign Petroleum Directorate. Venugopal, S. (2005). The economics of Petroleum Exploration and Development in India. Sydney: School Of Petroleum Engineering, New South Wales University.

Literary Love Essay - 968 Words

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Advantages and Risks of First Mover †Myassignmenthelp.com

Questions: The Gillette Company has a long history of being 'the first to market...' in its own areas of operation. Its achievements include producing the first successful: safety razor 1901 twin bladed razor 1972 twin bladed disposable razor 1976 pivoting head razor 1979 pivoting head disposable razor 1980 razor designed specifically for women - Sensor 1992 triple blade razor - Mach 3 1998 battery powered razor - M3Power 2004. As well as being first to market, Gillette has also continuously produced products which feature improvements to existing technologies, including 3 bladed disposables and ergonomically superior handle developments, including Sensor, Venus Divine and M3Power. This timeline above also demonstrates how the speed of innovation has accelerated with shorter and shorter gaps between new introductions and superior products. Being 'the first to' can bring advantages known as 'first mover advantages'. These include being able to generate initial consumer interest via both media investment and accompanying press and PR coverage. This then leads to the main retail stores displaying the products in-store and supporting the products with powerful promotional campaigns. For as long as products remain the only one of their kind available, the 'first mover' can establish loyalty and reputation in its brands before potential competitors get going or catch up. A Brand is thus created. There are risks to being the innovator, however. To be successful, the innovation process has to be conducted thoroughly. This usually involves a great deal of research, and in more than one form. As well as being first to market, Gillette has also continuously produced products which feature improvements to existing technologies, including 3 bladed disposables and ergonomically superior handle developments, including Sensor, Venus Divine and M3Power. Researching and developing a new product Properly conducted market research will identify the kinds of new, improved products that consumers would switch to if they become available. That involves asking the right questions of the right people, and also placing a proper interpretation on their answers. In the past, manufacturers produced products and then tried to sell them to consumers. Successful organisations find out what the consumer wants and then produce this product for them. This is done via research. There are two main approaches to market research. Qualitative research. e.g. working with several small focus groups comprising, for example, people who shave, and discussing with them what they look for in a razor/blades/shaving system. This generates a core understanding of HOW consumers use razors and what they think about the experience. Quantitative research. e.g. using a questionnaire with a large, representative sample of people; this data gives a broad view of the information, looking more at the numerical objective data rather than the more subjective data acquired via qualitative research. For example, how many people shave, what do they use to shave, what products do they buy? From consumer research the company moves into technological research and development. This involves converting a good idea into a product design and then discovering whether modern technology is able to reproduce it to the high specifications required and in the quantities needed. Usually a firm will produce prototypes that can be test marketed on a representative sample of potential consumers. In the light of their reaction, the product can then be refined and developed until it is as good as it can be. Within the original research and analysis, there is also another vital question which needs to be asked. "Will this proposed new venture generate profits for the company?" Many businesses have come unstuck by wrongly believing the answer to be "Yes". Usually, such businesses either underestimated the investment levels required for research and development, or the cost of setting up and operating the production process, or both. Generally speaking, any business must be careful in estimating potential sales; some organisations may get into financial difficulties if they are overly optimistic in their planning which may result in them going bankrupt or being acquired by a better managed rival. Ironically, the rival may not be as creative but is better at managing their overall business. A successful product will generally attract competition. Patents can protect products, but it is impossible to prevent other firms coming up with their own interpretation and application of the original good idea e.g. for self-adhesive labels, shavers, or subsonic aircraft. In essence, the fact that competitors bring out products to challenge the original idea, is generally good for that category because the market becomes stimulated and total sales can increase. This is why product improvement through innovation in both concept and design has to be on-going. This is also why Gillette has remained at the forefront of the shaving industry for the last century. Properly conducted market research will identify the kinds of new, improved products that consumers would switch to if they become available. Beating the competition and growing the business In order to guide itself and ensure the entire company is aligned in its objectives, an organisation often develops a vision statement. A vision statement is intended to convey what the organisation 'is all about'. It is important to internal audiences i.e. Gillette's staff, so they all know in which direction to pull. It is also important to external audiences such as the retailers who buy from Gillette and sell the products to consumers. Gillette's vision statement reads: 'To build total brand value by innovating to deliver consumers value and customer leadership faster, better and more completely than our competitors.' The component words really do matter. 'Delivering value' to consumers is not necessarily about being the cheapest, but about earning a reputation for high quality products that represent good value for money. That's true of many industries, and particularly those in which consumers believe there is a direct relationship between price and quality. 'Customer leadership' involves discovering what customers most want and then finding ways to fulfil those wants. It also involves helping customers to obtain maximum value out of their purchases e.g. by providing supporting literature, sound advice and a good after sales service, including product guarantees. 'Faster, better and more completely' represent key targets. As suggested earlier, speed of response to changing market conditions can be vital to success. Aiming to be 'faster' recognises that being 'second to....' can lead to poor sales and low market share. Being 'first to ...' successfully can also generate intense product and brand loyalty from consumers. Leading the way with a firm focus on consumer needs. Aiming to be 'better' recognises that there are no gains from being first with a big breakthrough if the innovative product performs poorly, fails to meet the claims made for it, earns bad professional reviews, disappoints initial purchasers, and is rapidly followed by a clearly superior product from a rival firm. 'More completely' recognises that a razor is just one component of the much broader market of 'personal appearance and wellbeing'. 'Looking good, feeling good' is a many-staged process of personal grooming, of which shaving is just one aspect. It is no accident that Gillette is heavily involved in the market for deodorants and antiperspirants. The company recognised that rising incomes would lead consumers to spend more on a 'total package' that enhances personal appearance, personal hygiene and as such developed a strategy to expand its position within this expanding market. The market for razors is not one uniform market but a market that contains different segments, the needs of which have to be met in carefully targeted, subtly different ways. Gillette recognised that different segments of the market are seeking different product benefits. So, over the years, it has sought to develop several product categories ranging from popular disposable razors to elaborate shaving systems. In the UK an increasing number of men have switched from disposable razors to shaving systems which fuels the market demand for handle and replaceable blades. Gillette's overall emphasis is on providing premium performance via the best value for money shaving experience, whether this is a system razor for the discerning customer seeking the best in shaving technology, or a high quality disposable product for people looking for a good quality shave with the convenience of a disposable. Many businesses look to expand into related areas that offer opportunities for growth and also an element of protection through market diversity. Gillette has four core business areas. Personal grooming - a range of products using the Gillette brand, including razors, razor blades, shaving creams. Brands include Gillette, Gillette Series, Right Guard, Right Guard Extreme, Natrel Portable power - the full range of batteries and torches sold under the Duracell brand name Oral care - dental and oral care products e.g. Oral-B manual toothbrushes and Braun Oral-B electric toothbrushes Electrical appliances - domestic items e.g. dry shavers, hair dryers, hair stylers, under the Braun brand name. Personal diagnostic appliances e.g. electronic ear thermometers, under the ThermoScan brand name. Arrange of Braun household appliances including kettles, coffee makers and food processors. Gillette is the market leader in the majority of these areas, and the company continues to invest in each of these core categories. Clearly, Gillette has grown not only by developing its core business but also by acquiring successful businesses with growth potential in markets related to its core activity. It is important to internal audiences i.e. Gillette's staff, so they all know in which direction to pull. As suggested earlier, speed of response to changing market conditions can be vital to success. Identifying consumers' needs and wants: Gillette Gillette's research shows that in 2002, more than 1.7 billion men over 15 years old remove hair daily, with over 80% using a blade and razor. From this, Gillette has calculated that the world market for blades, razors, shaving creams and gels in 2002 was in excess of 5 billion a year. Gillette's research has also revealed that the primary factors that consumers look for include: Through its market research, Gillette has identified two main segments of the male shaving market - Systems and Disposables. Within the systems segment, we can identify two sub segments: premium shaving systems, such as Sensor Excel, Mach3, Mach3, Turbo and M3Power standard shaving systems, such as Contour and GII. Within the disposables segment, we can now identify a further two sub segments: Premium disposables e.g. Sensor 3 Disposables Standard disposables, e.g. Blue II, Agilite. Consumers' benefits depend upon which segment they buy into. For example, consumers in the premium disposable market may be seeking a convenient set of razors to take on holiday, whereas at the top end of the market those consumers buying premium shaving systems are looking for all-round top-quality shaving experiences. Gillette's advertising focuses on clarifying premium product benefits. This is because more and more consumers prefer to move up-market to premium shaving systems. The standard disposable razor is still extremely popular but there is a clear trend to system razors, such as M3Power and Venus Divine. Nevertheless, Gillette has still improved its market share in this segment because of the quality, value for money, and reliability of its disposable products. Gillette's philosophy is very clear in whatever the consumer chooses to shave with, whether a systems product or disposable, Gillette wishes to give that consumer the opportunity to shave with the best product possible. Gillette's Blue II and GII products remain key and the company is convinced that consumer satisfaction with its products leads them to continue to buy its products when they are ready to trade up to more sophisticated market segments. It is therefore an entry-level product in the same way for example a smaller BMW 1 Series represents the first rung on the BMW ladder. Conclusion Gillette has a long, distinguished history. It remains innovative. Its scientists, technicians and product engineers are continually trying out new features and production techniques with a view to improving product performance e.g. how to: get the closest and most comfortable shave make longer-lasting batteries, which meet the changing needs of the consumer produce increasingly effective and best in class electric and manual toothbrushes design the ultimate user-friendly ear thermometer, or the most technically advanced shaver. Its scientists, technicians and product engineers are continually trying out new features and production techniques with a view to improving product performance. Questions 1. Evaluate their first to get it right policy in terms of Gillettes continuing progress and prosperity. 2. How important and applicable do you feel segmentation was for Gillette? 3. Evaluate the usefulness of Gillettes marketing communications campaign. 4. Brand loyalty is very important for Gillette. How can the company maintain brand loyalty in the face of intense competition? Answers: Introduction: Gillette is a PG product. PG companies are forces in the world. PG market their product in 180 countries and the GDP is greater than its market capitalization. Their purpose is to provide a branded product and services of a best quality and their value is to satisfy their customer for now and for coming generation. The Gillette company is one of the most popular and upcoming brand used mainly by men. Gillette companies sell personal care of products used by men. Through sustained profitable growth the company committed to build shareholders value. This company is mainly known for the category of mens grooming products. The company has a long history of being the first to market in its own area of operation. The product used by Gillette are the different variety of razors( safety razor, twin bladed razor, twin bladed disposable razor, pivoting head razor, triple blade razor, battery powered razor, women razor etc) they also produce a shaving gel and foam, skin care product( face wash, fairness cream etc) (Gillette, 2007). The company focus on the shaving equipment, the still believed half profit is coming from their saving products. Gillette maintains 64 manufacturing facilities in 27 countries and they believed that their products are sold more than 200 countries and the more than sales are occur from US. The vision of Gillette companies is to build a brand value by innovating and mission is to sustained profitable growth by building the shareholder value. The biggest strength of Gillette company are they have a strong brand image, they bring more innovation and variety of products, the product range are profitable. The price range of Gillette is low to high so the customers can afford it easily (Fossum et al., 2008). In Indian market the product of Gillette entered in 1984 with the newest triple blade system with its key features which is long lasting, ergonomic handles, smoothness, the price range are premium than the other competitors products (Rezaeinia, Keramati and Albadvi, 2012). Gillette create a market campaigns focusing on changing the consumer attitude, for supporting their campaigns they introduce some of bollywood celebrities to endorse their brands. In india Gillette come up with the strategy of selling their product at cheaper price because they want to see that how much Indian customers can afford it because many customers are their who could not afford the Gillette premium price razors. They mainly focused on understanding their customers and keep on challenging them how much grooming is required in their lives (Sokolik et al., 2001). Gillette understand the mind of their customers and launched a new customized product which is a Gillette guards, they created this product first time in Indian market with the low pricing strategy and they care for their customers safety and ease to use (Mitchell, 2002) Gillette want their customers to feedback and how they feel when they touch their product (Rezaeinia, Keramati and Albadvi, 2012).. 1. According to him (Tankard, 2009), to get the first to get it right policy in terms of Gillettes continuing progress and prosperity are they own its area of operation (Rezaeinia, Keramati and Albadvi, 2012). Gillette first to the market they continuously produced products which feature improvement is to existing their technologies, including the range of product (Yanai, 2010). They demonstrate the speed of innovation in shorter gaps between introducing a new and superior products. The first to can bring the first mover advantages which includes how they generate their customers interest via media investments, press and PR coverage. This will leads the retailer to keep the Gillette products in their stores and sell them with the powerful promotional campaigns (Brannon, 2007). The brand is created as long as the remaining products and the first mover can establish the brand loyalty and reputation before their potential competitors to get going and catch up. They bring risks to the i nnovators and for the success of innovators process should be thoroughly conducted, it involved a great deal of research more than one form. As well as being first to the market Gillette continuously produced a product. They bring improvement to the existing technologies (Rezaeinia, Keramati and Albadvi, 2012). Gillette is one of the biggest leaders in shaving innovation and technology to their customers. Gillette did partnership with many sportsmen and athletes. In the ads of Gillettes safety razors they use a print ad with the image of basketball. In 2004, Gillette sports to marketing their product which is endorse by the football celebs David beck ham. For being First to get it right policy, they probably conducted a market research which will identify the kind of new products, product improvement that consumer will switched off if they become available, which involves asking the write question from the right people with the proper interpretation. For the successful organization we should find out what the consumer wants and then produce that product for them. For consumer research the company should come up with the new technology and development, which involve creating a new ideas and product design and discovering with the modern technology are able to reproduce it to the high specification required for the quantities needed. Usually what the firm do they test the prototypes which can be test marketed on a representation sample of potential consumers, with that reaction the product can be refined and developed until as good as it can be. They say that about being cheapest it is not necessary to deliver the value to customers but also earn the reputation for high quality of product that represent with the good value for money (Rezaeinia, Keramati and Albadvi, 2012).. Here customer leadership describe what customers want from the company and then they find the way to fulfill it. It also involved helping the customers to obtain the maximum value out of their purchases. The key target is faster, better and more completely. Aiming to the faster will generate poor sales with the low market shares, being first to also generate how you are loyal to your customers and how you fulfill the needs for your customers (Rezaeinia, Keramati and Albadvi, 2012).. Marketing mix refers to the four major Ps used in marketing which refers to product, place, price, promotion. It is the bases of marketing without this we cant launch our brand in the market (Jager, 2007). We can also say the first to get it right policy related to the 4Ps of marketing like: Products- Product is very important for company to survive in the market. A product is repositioned to make it more acceptable. Suppose take a Gillette sensitive shave gel, they focus on new segmented area. The additional features of this particular product is soothing effect to satisfy the customers. Shaving gel should be mild fragrance, should be antiseptic. To launch the variety of products to satisfied their customers wants (Kim, Lee and Chon, 2010).. Pricing- Price created sales revenue and other costs. Price is really important to determine the value of sales made. Shaving gel, were highly competitive and focus on cheap local imitation which keep on challenging to Gillette. They focus on low pricing strategy so people can afford it easily (Kim, Lee and Chon, 2010). Place- Place is widely differed from product to product. A place concerned various method of storing goods. They diversify the selling channel by saying that single customers are not good for the business. In this the target market is to focus on young and educated people. Gillette should come up with the online buying strategy so people can shop it from home easily (Kim, Lee and Chon, 2010). Promotion- Promotion is the process of communicating with customer. It provides information for making the decision and purchase the product and services (Rezaeinia, Keramati and Albadvi, 2012). To promote this sensitive shave gel they should come up with the video which says the benefits and requirement of the products. For promoting the product they should come up with the free sample testing in salons so the customers can know the benefits of it. There is no doubt about the Gillette product advertising, they know very well how to brand the product because they are doing for a long time (Boyer and Frohlich, 2006). Gillette thought not to recruit the new buyers, instead of recruiting new buyers they set their market focus and search for the current buyers who buy or use their product more. They branding their product for informing their customers that its better idea to throw their old blades faster and buy the new one. The Gillette marketing strategy is to brand a product by showin g handsome men engaging the ritual of shave this is the powerful way to build their association. Gillette used a subscription policy they deliver the product you selected on a schedule you set. Gillette sometime offered a discount on free shipping available in the subscription. The subscription order may vary. The payment method in subscription order is visa, master card, discount cards etc (Boyer and Frohlich, 2006).. 2. Segmentation means which diving a target market into a subset of consumer or countries. Segmentation is very important part of marketing, for launching a product we should select a target market and divide them into the particular area which will define your product well (Weinstein, 2000). Gillette recognized different segments of market with different product benefits. Over the years they develop a several products categories ranging from popular disposable razors to shaving systems. In UK they mainly used disposable razors which fuel the market demand and replaceable blades. Gillette uses a premium performance which leads to money shaving experience (Rezaeinia, Keramati and Albadvi, 2012). Gillette focuses on four core business areas (Frederick, 1999): This are the main area which Gillette market leaders focused and the company invest in this (Rezaeinia, Keramati and Albadvi, 2012). Gillette not only developing the core business but also arise it business with potential market which is related to their core activity. Gillette also need to identify what consumers, need, wants, and demand from the company they also introduce the two main segment that is system and disposables segments. The system segment divided into two major part that is, premium shaving system and standard shaving system, similarly the disposables segment also divided into two major part that is, premium disposables and standard disposables. This segments are depends upon the consumer benefits (Kim, Lee and Chon, 2010). The important and applicable segmentation for Gillette are, in marketing terms buyers are differ in their tastes, desires , needs etc which is based on motivation, especially in competitive environments the entrepreneur must understand the demand d iversity, because the reaction would be differ the goods and services they offered. It is very difficult to satisfy each customer because every individual customer has different requirements and it is impossible to satisfy each of them (Ray Chaudhuri, 2014). Market segment is very important, production and sale of goods are the basic primarily targets of market segments. Purpose of segment is to target the particular market, design them well n manufacture it. Gillette segment size is rapidly increasing in India and America. The segment is made to attract customers because Gillette mach 3 has no longer strong and popular customers. Because of the income factors some segments are purchased. Gillette uses the strategy to convert the mach3 product into Venus to attract the women users (Rezaeinia, Keramati and Albadvi, 2012). So Gillette designed the separate segments. There are four general types of segmentations that is, 1.geographic segmentation means country, area, the boundaries which impact the 4 Ps of marketing like for Gillette they launched their product according to Indian test and preference, 2.demographic segmentation means genders, age, etc Gillette launched razor for both men and women as per customer requirement, 3.Psychographi c segmentations, product according to the lifestyle as well as values for Gillette they launched a product which is according to the customers tests and preference like disposable razor.4. Behavioral segmentation, Gillette launched their product according to the customers needs, wants, and demand for that particular product and they try to fulfill all their needs. The main objectives of segmentation is to reduce the risks of whom, were the bend will be marketed (Kim, Lee and Chon, 2010). In segmentation there is one more thing that is customer segmentation there are different reasons to segment the business market. For ideal market segments there are many criteria like segment should be measured in possible ways, to earn profit the segment should be large, through marketing activities you need to reach potential buyers. Customer segmentation means dividing the customers according to their purchase level (Bayer, 2010). According to (Rezaeinia, Keramati and Albadvi, 2012), they are of different types like: 1. Ready to buy customers means idea of something they need. Means they try to understand what they demonstrate the customer needs. For example Gillett always take care about their customers and they launched the product according to their customer requirement.2. To being a potential customers they have to enter the store or visit the stores regularly, This type of customer need not hurry to buy the products, be relax and buy the product (Boyer and Frohlich, 2006).. For example they see the product by taking time Gillette shaving gel they take the testers and then they buy the product (Rezaeinia, Keramati and Albadvi, 2012).3. Repeat customer is the most loyal customers who regularly visit the company and purchase the products. For example Gillett razor, the razors are so good and after using that razor you get smooth skin so if the customers like that product they keep on buying the product and being loyal to that brand (Boyer and Frohlich, 2006).4. Sales and discount customers are those who visit the stores when they find some discounts and best deal. For example Gillett product are on sale and giving discount on particular product like buy one you get another one free so Gillett customers will love this offer and come to buy it .5. Customers who take their purchase decisions on a great sales presentation not in position anything particular is called impulsive buying decision (Boyer and Frohlich, 2006).. 3. The technique or tools which a company uses to introduce the new message which helps to promote them into the target markets is known as marketing communication. In marketing communication it requires to maintain some of the things which are Attention, Interest, Desire, Action which is also known as AIDA model (Rathod, 2011) . Marketing communication is such a thing which is the most important parts of all the business and non-business organization (Tomse and Snoj, 2014). To improve their marketing communication Gillette can use some of the tools which help them to improve their product market which are advertisements, personal selling, publicity campaign, brochures, websites, and etc. By improving the marketing communication Gillette can create the awareness of their brand by advertising and by introducing the new promotion strategies which can mainly tell about the important and main messages in which direction the company is trying to indicate (Miles, 2013) . They also can ret ain the creativity of the things which the company is introducing. It can be done by using the main key phrases, headlines, taglines repeatedly which can shows the whole thing which the company are trying to show or deliver by every messages (Ramaseshan and Stein, 2014). Gillette can reduce their costs to some extent by using the same taglines, messages, images which can fulfill their requirements and needs with low cost. Now days the use of the internet technology is also increasing in a rapid pace as most of the every person are using the internet technology in their daily life to accomplish their daily work (Tomse and Snoj, 2014). So internet is also the one of the best way to advertise about the product and also about the pros and cons of the product. So Gillette also can use the internet media to do the publicity of their product which can do advertisement of their brand because the internet media acts as the mass media of the whole world where we can get the information of the whole world (Maheshwari, Lodorfos and Jacobsen, 2014) . Figure: Campaign Model (Rezaeinia, Keramati and Albadvi, 2012) According to Batchelder and Matusitz (2014), this model describes as Current brand evaluation In brand evaluation it comes about the share market, portfolio of the brand, lifecycle, brand history which helps Gillette to evaluate the brand in such a way that it describes about the share market of the product, portfolio of the brand and also describes the history of the brand which helps the customer to know better and to do the better analysis about the Gillette which can easily attracts the customers towards their brand. Analysis Analysis of the brand includes the assessment of the market value of the product and also do the evaluation on the basis of the factors which includes environmental, physical, etc and also describes the dynamics of the customers what they tells in the survey of the feedback report and in this analysis it also consider the contextual meaning of the brand which can be taken in consideration (Batchelder and Matusitz, 2014). Marketing communication objectives In short marketing communication is the transmission of the messages between the seller and the buyer. In this process the seller discuss about the objectives of their brand, marketing strategy, objectives of the communication mix. By this Gillette can do the analysis of the strategy of their marketing process (Batchelder and Matusitz, 2014). Planning Planning is also the one of the important part of the campaign. In this part it discuss about all the strategy of the product which includes the target of the market of the product where the seller needs to do some improvements of the strategy of the market, also notice the measure of the profit and positioning of the product and also the strategy of setting the budget. Application In Application there are the two parts (Rezaeinia, Keramati and Albadvi, 2012). One is message which delivers the important message of the products to the customer so that the customers can easily understand what the product wants to tell and another is Media which is used to deliver the message about the product and also used as the communication media between the customer and the seller. Implementation Implementation helps to tell about the success of the creativity of the product, media usage for the product, and also how to implement the product to the market. In implementation it requires to find that in which of the place where they are required to do introduce the new innovative idea about the product which can give the best result on the basis of the product. Implementation should be on the basis of the customers feedback which they mentioned on their survey report and also on the basis of the entire positive and the negative point which they mentioned on the report so that they can get idea about how to improve their business plan and also in what direction (Batchelder and Matusitz, 2014). Goal evaluation In goal evaluation it describes and decides about the goals of the market where they need to target in the market. In this they take the ethical issues into consideration, measure the loyalty of the customer and also make the budget of the resources where and how to utilize. In goal evaluation they also can get the detailed idea about what they had already achieved and what they also needs to be achieved in future and also what are the necessary steps they are required to take to attain this goal (Batchelder and Matusitz, 2014). Next stage in brand development This is the last stage of the campaign model where they can analyze the next stage which are required to take in the development of the brand so that it can get popular among the customer and also they can rely on the brand in that a way so they have no doubt about the product. This stage also gives the idea about the stages of the development which is going to be carried out in the next stage and also gives the idea how about the development can be carried out (Batchelder and Matusitz, 2014). 4. According to (Khoury, 2014) Brand Loyalty is the term which reflects the consumer behavior in what rate the consumer are loyal or dedicated or committed towards one of the specific brand. It also drawn that to what extent the customer is faithful towards a particular brand which is particularized by the repeat purchases of the every customer and also by how frequently they are doing purchasing. In one word brand loyalty is the relation which is built between the brand of the company and the consumer (Keller, 2014). To build the consumer loyal to the specific brand first they have to examine that to what extent the needs of the consumers are fulfilling by this specific brand and also to what extent they are comfortable and happy by this brand (Severi and Ling, 2013). In case of Gillette, to maintain their brand loyalty they take some measure by which they retain the much numbers of customers faithful to their brand. Some of them are: 1. Giving reward towards the loyalty At the time of intense competition Gillette starts to offer rewards to the customer who are consistently buying the things from their brand maximum times. Gillette to attract the customer toward their brand tries very hard to impress the frequent buyer by giving some special offers and some of special treatments. For instance, they start some of the special offers program for some days which can attracts the frequent customers, they also can distribute leaflets of that special offers among the peoples and also can built the banners attractive with the offers so that the people can give a look and get attracted (Rezaeinia, Keramati and Albadvi, 2012). And incase to retain the old customer loyal Gillette can starts some special discounts, coupons and some of payback points reward specially to the old customers.2. Better customer service Customer service is also the other methods to retain the customers. Gillette to give the better service to the c ustomer can starts the feedback methods for the every customer through which they can tell all the pros and cons of the brand easily and also can give the solution on the basis of their personal experience that what are the required changes Gillette needs to do to improve the customers requirements and then surveying the solution and the problems which are stated by the customers. To improve this customer service they need to consider both the good and the bad comments and on the basis of these comments they can do the adaption of their business plans. They also can starts the special rating program on the products which are available and also on the products which are not available but needs to be there and also on the quality of the products. So that they can fulfill the customer needs to some extent.3. Communication Communication is the basis of all the true relations. If it is needed to build the professional relation of buyers and the seller they also have to build a nice rela tion to get their products sold. So in case of Gillette also they needs to built this relation with the customers by updating all the business happenings occurs in the company and also if they are placing some of the new offers, introducing any new products to the market. They can contact to the customers and tell about the products, offers etc so that can get updated with all the knowledge about the companys changes. By this they can also feels that they are also the part of the company and also can get the information which is happening in the company.4. Quality product As per knowledge quality is the one of the most important things on which every company must have a look and also have to maintain it. In case of Gillette, they always have to maintain the quality so that the numbers of customers who use it always get happy. They also maintain the quality always. If the company is facing any problem then also they should not do any compromise with the quality of the product which only reduces the companys profit rather than increasing the sale or profit.5. Advertisement There is another step which Gillette should follow to improve the sale of the product, to attract the more customers towards their company by doing the attractive advertisements through the social media such as TV, face book, posters, banners and they can use some of the brand ambassadors to do their advertisement who have demands on public. For instance in case of Samsung they are using Aamir khan as their brand ambassadors because he have the popularity demand. By using this brand ambassador technique they can launch their brand and also can give a popular look to their brand which can improve the demand of the products (Rezaeinia, Keramati and Albadvi, 2012).6. Concerning of appreciation To retain the customer Gillette can show some concern towards the customer that to say simple thank you, welcome for the business which they have done. They can also wish the persistent clients simple ha ppy birthday, happy New Year, etc by sending emails to them and it will be good to avoid doing calls as some of the customers may feel annoying. As I know it might sound some silly but at the end all of us only remember only the experience because there is a saying first impression is the last impression.7. Gillette also needs to keep an eye to the improvements of the competitive brands so that they have the knowledge that what are their present status and also keep some information that what are they going to introduce in future. By also doing this they also become up-to date which helps them to persist the customers (Rezaeinia, Keramati and Albadvi, 2012).8. Gillette also needs to give the specific reasons to the customers for which reasons they choose the Gillette brand by ignoring other brands which can be by introducing new products, new features to the existing products. Etc.9. Every brand has at least that one product which becomes the brand of the company. In case of Gillett e, the brand product is their Razor by which their brand is most popular among the customer. So Gillette needs to more concern on razor and also needs to look how to improve that product and also how the new innovative features can be introduced to that. Conclusion By concluding this it overall describes that Gillette needs to do some improvement in their business plan so that they can retain the overall numbers of the customers and also maintain the quality of the product so that it can also attract the frequent customers to their product which can increase their value in a rapid manner. By improving this brand loyalty, Gillette can improve the customer loyalty and also the business market which helps them to build their place in the business world. They can introduce the customers feedback system and also have to review on the comments which they have mentioned in that report and also have to consider all the recommendation which are mentioned and on the basis of these recommendation they can take the suitable steps to improve their business plan and also have to find the suitable way to improve the needs of the customer so that they can happy and in future also they can rely on that brand. They also have to give the importance to the marketi ng communication system that how they are reaching to their target customer and also have to notice that up to what extent their advertisement and publicity are influencing the customers. So generally the marketing communication plays a vital role to any of the brands and most probably the publicity of the brand depends upon the extent of the marketing communication. In case of Gillette market segmentation also plays the important role so they needs to improve the segmentation of the market so that they can broadly categorize the target market in to consumers who are going to use the brand or the product, they also can target to the businesses of the product so that they can understand what and how to carry out the business to the success and in segmentation they can target to the countries or place in which they are doing the business and also have to notice about the favorable culture of the place where they are targeting to do the business so that they can do the success and can gain the profit which they are targeting. 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