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MANAGING THE CHANNEL SYSTEM IN PETROLEUM PRODUCT MARKETING

CHAPTER ONE

INTRODUCTION

1.1      BACKGROUND OF THE STUDY

This study evils the channel relationship existing between the Petroleum products marketing companies and the Petroleum products marketing Dealers. This study would provide a general appraisal of the channel system in petroleum product marketing industry in Enugu State. This topic was chosen because the researcher fact that Petroleum marketing has become very important in recent years especially in post civil war Nigeria of 1970’s when the era of oil boom set in.  The oil boom made many people wealthy and this led to unprecedented increase in the transport sector, with many people owing many cars.  The demand for Petroleum products therefore increased tremendously, leading to may Nigeria owing petrol filling stations and the established major oil marketing Companies increasing the number of their retail outlets.

The increase in number and sophistication of ventricle in Nigeria also meant that more  demand in efficiency by the retail outlet management was needed.  There is therefore need to know if the dealers and Companies had fared well in this regard.   As there was a dearth of research in this line, the research was therefore an exploratory one. The distribution channel in the petroleum marketing industry depend to a large extent on inter-dependent agencies charge with the task of moving the petroleum product tot he consumers and performing function of adding activities of time, place and possession.

This study is essentially a study in franchiser/franchise relationship.  The franchising system was introduced in the Nigerian economy by the automobile and petroleum industry early in nineteen century.   Producing firms contracted with independent business men who agreed to sell their brand exclusively. However, from the franchisee’s point of view, the franchise package represent a compromise between complete autonomy and reduction in this risk of failure. The individual gives up certain element of operational independence in return for special forms of security, assistance and information from the franchise. It is this from of relationship that exist among the major oil marketers, independent marketers and dealers in Nigerian and Enugu State in particular.

1.2      STATEMENT OF THE PROBLEM

This research topic “Managing the channel system in petroleum products marketing in Enugu state” is a pertinent one because of the incessant and constant storage of petroleum products in Nigerian and Enugu state in particular.  Rarely does any Month pass without one witnessing petroleum products scarcity in Enugu State. This research therefore, to examine the source (s) of such scarcity; is form the Nigeria National Petroleum Corporation (NNPC) depot at Emene, whether it is from the petroleum products major marketers or from the retail outlets. Also the research considers the relationship that exists among the major petroleum markets, independent marketers and Company dealer in the state. Meanwhile, Considering the economic and social implication of such scarcity, this research is considered very imperative.

1.3      OBJECTIVE OF THE STUDY

The objectives of this research cannot be over estimated, these include:

The study was embarked to find out how petroleum products channels are managed in Enugu State, considering the people responsible for the management and means adopted to managed the channels.

The researcher embarked on the study to find how effective the petroleum products channels are and at the same time considering what can be done to make them more effective.

One of the Cardinal objectives of this work was to find out how channel members are motivated by the channel captains.

Also, considered in the work is the cause and sources of incessant petroleum scarcity always witness ion the state.

Summarily, one f the objectives of this study was to find out efforts made by the petroleum products  marketers towards the availability of the product at the right place, time quality and quantity.

1.4      SIGNIFICANCE OF THE STUDY

This study “Managing the channel system in petroleum products marketing in Enugu State” is of immense important, as the researcher have the following people in mind:-  marketers, both major and independent marketers, customers, nations economy and the researcher themselves.

The knowledge of reactions of petroleum dealers would be of immense benefit to there major marketers in managing their channel members.

This study is immense important to independent marketers as the study cut across petroleum products marketing legal environments.  (i.e legal enactment guiding petroleum product marketing in Nigeria)

Some of the suggestions made in this work would help government in checking the activities of vandals in the country.

This study would help consumers appreciate the efforts made by the petroleum marketer towards their satisfaction.

This work would always be source of information to readers both in marketing and other management course, because the researchers gave an indepth into how channel systems are managed in Enugu state.

If the suggestions recorded in this work are carefully adhered to, it would in no small measure help our economy forward.

However, in the course of writing this work, the researcher have grasp a lot of knowledge for which this work speakers for itself.

1.5      SCOPE OF THE STUDY

This study is limited to Enugu State because of the incessant and regular petroleum products scarcity witnessed in the state.  However, since this scarcity is witnessed all over the country, its study in Enugu state would throw light on how this problems could be encountered in other states of the country.

1.6      FORMULATION OF HYPOTHESES

The following hypotheses would be tested in this research work.

A.          Ho Petroleum product marketing channels are not 
        effectively managed.

Hi    Petroleum product marketing channels are

        effectively managed.

B.           Ho   Marketing dos not help in managing of      
        petroleum product channel system. 

Hi     Marketing helps in managing of petroleum 
        product channel system.

C.          Ho    Petroleum product dealers does not play a   
                role in petroleum product marketing.

        Hi     Petroleum products dealers play s role in 
                petroleum product marketing.

1.7      LIMITATION OF THE STUDY

In the course of carrying out this research the researchers encountered some problems which include finance, time and other artificial problems.

Time -  This study was expected with in to be completed within a short period of time and at that time the researchers have other academic commitments.

Finance – While the value of naira was falling, price of things were going up astronomically.  As a result of these the amount used in production of a work of this size in the past two years in need now for the same purpose.

It is on this backdrop, that the researcher restricted the scope of this work to Enugu State.

1.8      DEFINITION OF TERMS

MARKETING OR DISTRIBUTION CHANNEL

This is an inter-organizational system comprised of a set of inter-independent institutions and agencies involved with the task of moving anything of value form its point of production, conception, extraction to a point of consumption.

CHANNEL STRUCTURES

This reveals the kind of participants involved in the productions, distribution and ultimate use of a product.  It shows the nature of the linkages connecting the producers, the middlemen and the consumers.

CHANNEL CAPTAIN

This is the firm or individual who organizers, Co-ordinates or managers a channel system.

CHANNEL  CONTROL OR POWER

This is the ability of a channel participant to determine the marketing polices of another firm in the channel.  It is also the ability of a channel member of predict events and achieve desire out-comes in his relations with other channel members.

CONFLICT IN THE CHANNEL

This is the disagreement between members over interpretation of goals, amount of margin to enjoyed and over levels of sales, selling effort etc.

CHANNEL RELATIONSHIP

This is the assumption that one channel member will behave as another expects him to do i.e both channel members and channel captains must obey laid down rules regarding, say, delivery, billing, order, size, standardization, customer car, assistance/aids, prices, margins etc. In the broadest sense the relationship refers to all the exchange both economic and non economic which takes place between the franchisers and the franchise.

In the petroleum industry the following terms are defined as detailed below:

MAN PRODUCTS

These products refined at he petroleum refineries they included:

Premium Motor spirit (P.M.S) – fuel (Petrol) Commonly used by most motorists i.e cars, Motorcycle, etc.

Diesel Oil (A.G.O) fuel most commonly used by heavy vehicles ie trucks or buses.

Dual Purpose – Kerosene, Commonly used by household in cooking, lighting, etc.

LUBRICANTS OILS AND GREASES

These are various classes of engine oils and greases used for car services and maintenance.

SPECIAL PRODUCTS

These include various airfreshners, detergents, insecticides, pesticides and chemical etc.

NNPC

Nigeria National Petroleum Corporation

FRANCHISE

This is a form of channel distribution in which a parent company grants an individual or a relatively small company the right or privilege to do business in a  prescribed manner over a certain period of time in a specified place.  The right r privilege is called a franchise.

FRANCHISEE

This is the receivers of the privilege in the franchise system.  Terms used in this study were defined according to E. I Ansary (1977) and Webster (1974).

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