Business

RESTRUCTURING ALL BUT DONE

Showa Shell turns focus toward customers' needs

With most of its restructuring completed, Showa Shell Sekiyu K.K. is now focusing on stimulating customer demand by improving its products and services, according to John S. Mills, the new president of the country’s fourth-largest oil wholesaler.

In the past several years, the Tokyo-based firm has spent heavily on restructuring and cost-reduction measures. While continuing these efforts, the firm will now focus on marketing, strengthening its retail network, and launching new products and services, according to Mills.

“A lot of basic restructuring has been done. We are switching the focus more to marketing” and boosting income, said Mills, 49, who became president and chief operating officer of the firm March 28.

Mills, a native of Britain, is the company’s first foreign president. Showa Shell Sekiyu was created through a merger of Showa Oil Co. and Shell Sekiyu K.K. in 1985. The Royal Dutch/Shell Group currently holds a 50 percent stake in Showa Shell Sekiyu.

The Royal Dutch/Shell Group began altering its marketing strategy around 1997. Mills, who previously worked in the group’s marketing division, is expected to bring that experience to the Japanese arm and adapt the knowhow to the local market.

As Showa Shell’s first marketing policy shift, the company introduced a gasoline called Shell Pura in March, which Mills calls the firm’s first “differentiated” product since 1987.

The new gasoline is touted as having an engine-cleansing agent, while also reducing emissions of carbon monoxide and hydro-carbon.

Although the gas is currently only sold in Tokyo and Kanagawa and Saitama prefectures, the firm plans to market the fuel in more areas in the future.

Following the deregulation in the country’s oil industry in the mid-1990s that liberalized imports of oil products, wholesalers have been pressured to restructure and streamline operations.

Additional deregulations triggered a fierce price-cutting competition among retailers of oil products, especially gasoline.

As part of an effort to drastically cut costs, Showa Shell formed a shipping, refining and distribution alliance with Japan Energy Corp. last spring.

The company hopes to reduce costs by 25 billion yen through its tie with Japan Energy.

Mills, however, stressed that it is important to counter the ongoing price-driven competition.

“The only way to break (the price competition) is to introduce premium products and premium services people like . . . and reduce the focus people have been placing on prices,” Mills said.

He also stressed rebuilding and strengthening the firm’s retail network as another way to beef up marketing capabilities.

Rebuilding and strengthening relationships with dealers, which have become strained in recent years as a result of restructuring, is a key part of its strategy, Mills said.

In addition to rebuilding ties with dealers, the company is implementing the “agency operation” plan, under which it retains control of retail prices in exchange for guaranteeing station operators a fixed profit margin.

Mills views the agent plan as a way to develop self-service gas stations, which he believes are important for future growth.

“What we found is that self-service is very popular with customers. Prices are partly responsible, but some people simply prefer to fuel cars themselves,” he said.

Self-service gas stations were not legalized in Japan until April 1998.

Although Showa Shell currently has only a small number of agents, many are opting to run self-service stations, Mills said.

The firm is counting on its existing customer base and retail network to serve as a marketing channel for future ventures in such fields as cogeneration systems and solar energy, he said.

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