A decision analysis of an oil company's retail strategy in the face of electric vehicle penetration uncertainty

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Date

2012-05

Authors

Jo, Dohyun

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Abstract

This thesis evaluates emerging electric vehicle technology and estimates what effect it might have on how an oil company decides on its gas station network. It is conducted using data from South Korea, a country poised for a fast adoption of electric vehicles. The study first reviews the literature to gather reasonable cases of electric vehicle penetration. Also, after researching technology-diffusion theories, the study selects a model that can well explain the literature review data. The scenarios induced by this function are utilized as the main uncertainties confronting an oil company’s network decision model. Based on a probabilistic simulation, the study finds that the effects of technology diffusion alter the priority order of an oil company’s network decision alternatives. Namely, after the overall uncertainty level rises, directly owning gas station, with its heavy initial investment, is not preferred for an oil company’s network strategy. From the result, the study also estimates the scale of the new technology’s effect. Such effect is found to be significant enough to alter a part of an oil company’s retail strategy. Nevertheless, such effect cannot be shown to be so great as to change the current retail oil market structures.

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