Businessmodel of Tesoro Corporation

Customer Segments

Tesoro provides a broad range of products and services, serving a diverse network of customers spanning multiple industries and market segments. The Company’s customers can be organised broadly into the following core categories:

• Retail and Consumers, principally comprising general consumers that purchase products and services through the Company’s network of retail branch outlets;
• Oil and Gas Customers, including national, multinational and independent oil and gas companies, including downstream, midstream, and upstream operators;
• End-Use Industrial Customers, including automotive manufacturers and aftermarket service providers, airlines and marine operators, utility companies, railroad operators, and other industrial end-users; and
• Wholesale and Distribution Customers, principally comprising independent refined products marketers, independent unbranded distributors, and high-volume retailers. Tesoro’s largest market is its native US, which accounts for the bulk of the Company’s business. The Company does, however, serve an international customer base, in particular selling products to customers in Mexico, Asia Pacific, and Latin America.

Value Propositions

Tesoro provides value to its customers in the following ways:

• Its industry standing and reputation, with the Company established as a reliable provider of refined oil and gas products, as well as related services, with a track record for providing high-quality products and efficient services;
• Its diverse product and service portfolio, with the Company offering a broad range of refined products – including gasoline blendstocks, jet fuel and diesel fuel – as well as related marketing and logistics services, designed to serve a diverse client base;
• Its industry expertise and experience, with the Company employing specialist technical personnel across its multiple operating segments, as well as a team of experienced industry executives;
• Its use of technology, with the Company utilising state-of-the-art technologies across various aspects of its business – including data networks, and communications systems – that enable the Company to efficiently serve its customers; and
• Its extensive network of facilities and outlets, with the Company operating a broad network of refining and processing facilities, as well dedicated retail outlets, which enables the Company to serve its customers quickly and easily. ### Channels

Tesoro operates a website at www.tsocorp.com, through which it provides information on its products, services, and operating locations. The Company does not sell products or services to its customers via an online sales channel. It does, however, operate an online customer portal, through which customers are able to manage their accounts and transactions, and access various online tools and resources.

Tesoro’s Marketing segment is principally responsible for selling the Company’s purchased and refined products. The Company employs a dedicated sales force that deals directly with clients, operating out of the Company’s network of offices across the US. Tesoro also operates a separate wholesale team, which sells gasoline and gasoline blendstocks, jet fuel, diesel fuel, heavy fuel oils and residual products in bulk markets in the western US. Tesoro’s Marketing segment sells transportation fuels through branded and unbranded channels. The branded business sells transportation fuels using a unique brand portfolio across a network of 2,397 retail stations.

Tesoro operates its own refining and distribution infrastructure, with its refining assets spread across California, the Pacific Northwest, and Mid-Continent US. It also has an interest in various pipeline assets.

Customer Relationships

Tesoro does not make sales to customers on a self-service basis. Customers are, however, able to use certain online tools and resources, and manage their accounts and transactions through the Company’s online customer portal without interacting with members of the Company’s sales and service personnel.

Tesoro sells its products to commercial customers through its direct sales force, which consults closely with customers in order to establish the details of each individual sales and service contract. The Company seeks to provide tailored services where possible, with a view to establishing long-term relationship and securing recurring business.

Tesoro provides ongoing support to its customers, with its larger commercial clients having their own account management teams on hand to provide timely assistance. Customers can also contact the Company over the phone across its various offices, or can make enquiries via an online contact form. Customers are also able to interact directly with the Company and follow its activities through its social media accounts, including with Facebook, Twitter, LinkedIn, and YouTube.

Key Activities

Tesoro is an independent petroleum refining and marketing company. The Company aligns its operations into three reportable business segment: Refining, which owns and operates a network of refineries across the US, refining crude oil and other feedstocks into transportation fuels; Logistics, which includes certain crude oil and natural gas gathering assets, natural gas processing and crude oil and refined products terminaling, and transportation and storage assets through its TLLP unit; and Marketing, which sells a range of transportation fuels.

Tesoro owns and operates approximately six petroleum refineries with a combined crude oil capacity of over 850 thousand barrels per day. The Company’s Marketing segment sells transportation fuels in approximately 20 states through a network of approximately 2,270 retail stations.

Key Partners

Tesoro works closely with a network of partners spanning multiple sectors that support the Company’s core operations. The Company’s partners can be organised broadly into the following categories:

• Supplier and Vendor Partners, including suppliers of raw materials, equipment, and tools that the Company utilises in its refining processes, and suppliers of products which the Company goes on to resell, as well as suppliers of services and technologies;
• Channel and Distribution Parties, including various distribution and sales partners that assist in extending the Company’s sales and marketing reach;
• Joint Venture Partners, comprising various other oil and gas marketing and refining companies with which the Company jointly produces and or sells products and services through mutually owned entities; and
• Community Partners, comprising various non-profits and charitable organisations with which the Company collaborates on social and community projects, primarily in the US. Tesoro has launched a number of partnerships in recent years. The Company notably announced recently that it would partner with several biofuel companies to run more crude made from renewable plants and waste, and launched a separate partnership with Virent to develop plant-based biofuels.

Key Resources

Tesoro’s key resources are its intellectual properties and technologies, its equipment and refining facilities, its raw materials and supply chain, its distribution and logistics infrastructure, its IT and communications infrastructure, its sales channels, its partnerships, and its personnel.

Tesoro uses a number of technologies in its operations. Searches of records published by the US Patent and Trademark Office identified several patent applications in which Tesoro or its subsidiaries were named as assignee, including applications entitled ‘Direct match spectrographic determination of fuel properties’, and ‘Analog hall-effect liquid level detector and method’.

Tesoro notably owns and or leases a number of physical properties across the US, namely its refining and distribution facilities, which are key to its operations.

Cost Structure

Tesoro incurs costs in relation to the development of its technologies and online portal, the maintenance of its IT and communications infrastructure, the procurement of raw materials and equipment, the procurement of services, the operation of its refining and distribution facilities, the management of its partnerships, the implementation of marketing campaigns, and the retention of its personnel.

In 2015 Tesoro recorded total cost of sales in the amount of $22.15 billion, operating expenses in the amount of $2.28 billion, and selling, general, and administration expenses in the amount of $32 million.

Revenue Streams

Tesoro generates revenue through the production and sale of various oil and gas products, as well as the provision of various related services, including revenue derived in the form of fees charged for gathering crude oil and natural gas, processing natural gas, and terminalling, transporting and storing crude oil and refined products.

In 2015 Tesoro generated revenue for the year of $28.71 billion, down considerably on the $40.63 billion recorded by the Company the previous year. Of this revenue, around $26.00 billion was attributed to the sale of refined products.