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Why Tesoro's Business Model is so successful?

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Tesoro’s Company Overview


Tesoro Corporation (Tesoro), formerly known as Andeavor and now part of Marathon Petroleum Corporation following an acquisition, has been a pioneering entity in the petroleum industry since its establishment on December 26, 1968. Tesoro specialized in petroleum refining, logistics, and marketing, operating robustly in these interconnected segments to optimize the journey of crude oil from extraction to end-user distribution. The company's core activities involved refining crude oil and other feedstock into valuable transportation fuels, including gasoline, jet fuel, and diesel. Additionally, Tesoro produced a range of other petroleum products such as heavy fuel oils, liquefied petroleum gas, and petroleum coke.

Tesoro's business model was multifaceted and designed to harness value at various stages of the petroleum supply chain. The Refining segment focused on converting crude oil into essential fuels and by-products, ensuring efficient processing to maintain product quality and supply reliability. Meanwhile, the TLLP (Tesoro Logistics LP) segment highlighted Tesoro's dedication to integrated logistics, including the gathering of crude oil and natural gas, processing natural gas and natural gas liquids (NGLs), and facilitating the transportation and storage of crude oil and refined products. Tesoro also operated a comprehensive marketing segment, distributing transportation fuels through an extensive network of branded and unbranded retail channels, thereby penetrating diverse markets and catering to a broad customer base.

The revenue model for Tesoro was constructed on generating income through strategic vertical integration across its refining, logistics, and marketing segments. The company earned revenue primarily from the sale of refined petroleum products to both wholesale and retail customers. This included selling large volumes of transportation fuels and other refined products to industrial clients, government entities, and independent retailers. Additionally, Tesoro leveraged its logistics assets to secure significant revenue streams by offering transportation, storage, and terminaling services to third parties, as well as from its own refined products. The combination of these diverse yet interconnected revenue streams ensured Tesoro’s financial robustness and sustained market leadership in the dynamic energy sector.

www.tsocorp.com

Headquater: San Antonio, Texas, US

Foundations date: 1968

Company Type: Public

Sector: Energy & Utilities

Category: O&G

Digital Maturity: Conservative


Tesoro’s Related Competitors



Tesoro’s Business Model Canvas


Tesoro’s Key Partners
  • Refineries and Suppliers
  • Logistics and Transportation Partners
  • Retailers and Distributors
  • Government and Regulatory Agencies
  • Technology Providers
  • Research Institutions
  • Financial Institutions and Investors
Tesoro’s Key Activities
  • Refining crude oil
  • Distributing petroleum products
  • Marketing fuels
  • Managing retail operations
  • Product innovation
  • Maintaining safety standards
  • Regulatory compliance
  • Environmental sustainability
  • Supply chain logistics
  • Strategic partnerships
Tesoro’s Key Resources
  • Refining assets
  • Crude oil supply chains
  • Technological infrastructure
  • Skilled workforce
  • Distribution network
  • Strong brand reputation
  • Intellectual property
  • Strategic partnerships
  • Marketing resources
  • Research and development capabilities
Tesoro’s Value Propositions
  • High-quality fuel products
  • Competitive pricing
  • Enhanced safety measures
  • Eco-friendly energy solutions
  • Reliable supply chain
  • Advanced fuel technology
  • Premium customer service
  • Comprehensive fuel management solutions
  • Customizable fuel supply options
  • Innovation in energy solutions
  • Strong brand reputation
  • Fuel efficiency improvements
  • Wide range of petroleum products
  • Dedicated logistics network
  • Environmental sustainability programs
  • Expert technical support
  • Cost-effective energy solutions
  • Robust market presence
  • Commitment to regulatory compliance
  • Tailored energy solutions for businesses
  • Community engagement initiatives
  • Leveraging advanced analytics
  • Industry-leading research and development
  • Strategic partnerships and collaborations
  • Pioneering renewable energy projects
  • Efficient bulk fuel delivery options
  • High-performance fuel additives
  • Exceptional account management
  • 24/7 customer support services
  • Training and consultancy on fuel usage and safety
Tesoro’s Customer Relationships
  • Customer support
  • Loyalty programs
  • Online user communities
  • Personalized service
  • Regular updates and newsletters
  • Social media engagement
  • Corporate social responsibility initiatives
  • Training and workshops
  • Customer feedback mechanisms
  • VIP customer access
Tesoro’s Customer Segments
  • Independent Retailers
  • Fuel Wholesalers
  • Convenience Store Chains
  • Commercial Fleet Operators
  • Industrial Customers
  • Government Agencies
  • Utilities & Energy Companies
  • Maritime Operators
  • Transportation and Logistics Companies
  • Consumers
Tesoro’s Channels
  • Website
  • Social Media
  • Retail Outlets
  • Wholesale Distributors
  • Mobile App
  • Customer Service Hotline
  • Email Newsletter
  • Trade Shows
  • Industry Partnerships
Tesoro’s Cost Structure
  • Raw material costs
  • Manufacturing expenses
  • Research and development
  • Marketing and advertising
  • Distribution and logistics
  • Employee salaries and benefits
  • Facility leasing and maintenance
  • Administrative costs
  • IT and infrastructure
  • Customer service and support
  • Regulatory compliance and legal fees
Tesoro’s Revenue Streams
  • Sales of petroleum products
  • Refining margins
  • Retail fuel sales
  • Wholesale fuel sales
  • Lubricants sales
  • Petrochemical sales
  • Transportation services
  • Logistics services
  • Midstream operations

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Tesoro’s Revenue Model


Tesoro makes money by combining different business models. Below, you will find the list of the different monetization strategies identified for this company:

  • Brands consortium
  • Lock-in
  • Solution provider
  • Performance-based contracting
  • Direct selling
  • Energy
  • Make and distribute
  • Supply chain
  • Customer loyalty
  • Integrator
  • Regular replacement
  • Credits
  • Guaranteed availability
  • From push to pull
  • Dynamic pricing
  • Self-service
  • Cross-selling
Analytics


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Tesoro’s Case Study


Tesoro's CASE STUDY


In the intricate and volatile world of energy and utilities, it's imperative to understand the strategies and milestones that define industry leaders. Tesoro Corporation, now a part of Marathon Petroleum Corporation, is a prime example of a company that leveraged expertise, strategic vertical integration, and resilience to become a trailblazer in the petroleum industry. Our narrative delves into the saga of Tesoro, examining elements that made it distinct and analyzing its pivotal moves and contributions.

Foundations of Excellence


Tesoro Corporation, founded in 1968, quickly pivoted from its origins to carve out a significant niche in the petroleum industry. Initially established with the primary aim of refining crude oil into transportation fuels, Tesoro's strategic foresight led it to diversify its operations across the refining, logistics, and marketing domains. This multipronged approach enabled Tesoro to navigate industry upheavals and emerge stronger with each challenge.
In its peak operations, Tesoro maintained a robust presence across the entire energy value chain, from refining to retail distribution. According to the U.S. Energy Information Administration (EIA), Tesoro had a refining capacity of more than 895,000 barrels per day, establishing its position as a formidable refiner capable of meeting extensive demand consistently.

Strategic Vertical Integration


One element that truly set Tesoro apart was its meticulous vertical integration. The Refining segment focused on the efficient processing of crude oil into high-demand products like gasoline, jet fuel, and diesel. To support this, Tesoro ensured its refining assets were up to par with industry standards, investing heavily in technological advancements and operational efficiencies.
A 2016 report by Deloitte highlights that the energy sector's volatility necessitates companies to be vertically integrated to mitigate risks associated with supply chain disruptions. Tesoro exemplified this approach by not only refining crude oil but also by integrating logistics through Tesoro Logistics LP (TLLP). This segment excelled in crude oil and natural gas gathering, processing of natural gas liquids, and facilitating the transportation and storage of both raw and refined products.

Logistics Brilliance


Tesoro’s logistics segment, managed primarily through TLLP, played a critical role. By maintaining control over the transportation and storage of petroleums, Tesoro could ensure supply reliability and operability. The importance of this segment was underscored by the sheer scale of operations; TLLP handled millions of barrels of crude oil and natural gas liquids across extensive pipeline networks and storage facilities.
A Frost & Sullivan analysis highlighted that the midstream oil and gas sector could significantly influence a company's efficiency and cost management. Tesoro’s logistics prowess undoubtedly contributed to its competitive edge in product delivery, allowing seamless service to a broad customer base, from independent retailers to industrial giants.

Customer-Centric Marketing


No case study on Tesoro would be complete without mentioning its strategic customer engagement through marketing and retail. Tesoro's marketing segment ensured that its refined products reached the end-users efficiently, leveraging a blend of branded and unbranded retail channels.
In engaging with its audience, Tesoro focused on creating value propositions that catered to various customer needs. These ranged from quality and convenience to advanced fuel technologies and eco-friendly solutions. Such a customer-centric approach fortified customer loyalty and substantially expanded Tesoro's market footprint.

Eco-Friendly Initiatives and Sustainability


Environmental sustainability is an oft-discussed facet of the oil and gas industry. Tesoro’s stance on sustainability, especially through initiatives aimed at reducing environmental impact, is noteworthy. Tesoro invested in eco-friendly energy solutions and emphasized environmental sustainability programs. According to a McKinsey & Company study, companies that prioritize sustainability tend to outperform their peers financially and reputationally.
Tesoro's commitment to reducing its carbon footprint, illustrated through initiatives like improving refining efficiencies and reducing greenhouse gas emissions, aligned with broader industry trends pushing for greener energies.

Community Engagement and Corporate Responsibility


Beyond operational efficiency and environmental stewardship, Tesoro was also known for its corporate social responsibility (CSR) initiatives. Engaging communities and supporting local development became part of Tesoro's ethos. From educational sponsorships to community development projects, Tesoro's CSR programs aimed at fostering a sense of belonging and support within the communities it operated.
Such initiatives not only reinforced Tesoro's brand image but also built a loyal customer base that valued these essential social contributions.

Conclusion


While the acquisition by Marathon Petroleum Corporation marked the end of Tesoro as an independent entity, its legacy continues to provide valuable lessons for businesses in the energy sector. Tesoro's strategic vertical integration, robust logistics frameworks, customer-centric marketing, sustainability initiatives, and community engagement remain exemplary.
In gleaning through Tesoro's journey, we witness the transformative power of strategic foresight and adaptability in nurturing a legacy that withstands market gyrations. As we navigate the ever-evolving energy landscape, Tesoro's story serves as both a roadmap and an inspiration for energy companies worldwide.
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By understanding and analyzing the distinct strategies and milestones of Tesoro, businesses can imbibe valuable insights into thriving amidst industry volatility and paving pathways for sustained growth and excellence.


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