What Is Porter's Five Forces In The Oil Industry
Situation Analysis
2.2 Industry Analysis
The industry environment refers to a set of factors that would have a direct influence on a firm’s competitive action or responses. These factors were also known as Porter’s Five Forces Model is a useful strategic tool to evaluate the opportunities and threats for the oil and gas industry which includes the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products and intensity of rivalry among competitors.
Threat of New Entrants (Low)
The British Petroleum (BP) enters Russian oil market and become top five oil and gas companies based on the market value in 2015 (Pitatzis, 2016). This industry is very attractive due to major revenues. For such a profitable industry, it is normally protected by government against foreign companies in order to protect their own country wealth. Besides that, the number of oil companies that can explore the oil field are limited because it required huge capital investment to cover expenses like building pipelines, drilling wells, building access roads and acquiring land. For companies that would like to start up the oil industry in local or in a foreign country, the costs of setting up to make profit is in huge amount and it takes a very long time to make it on …show more content…
Especially after the privatization in the oil industry in Russia, many companies emerged such as BP, Sibneft, TNK, and AAR. The products offered by players in the oil and gas industry are often not much different from those offered by their competitors. As a result, buyers tend to choose products with either lower price or better quality. The large available choices for consumers causes the switching costs very low, which means consumers can change companies to purchase anytime if they are not satisfied of the transactions with one
2.2 Industry Analysis
The industry environment refers to a set of factors that would have a direct influence on a firm’s competitive action or responses. These factors were also known as Porter’s Five Forces Model is a useful strategic tool to evaluate the opportunities and threats for the oil and gas industry which includes the threat of new entrants, bargaining power of suppliers, bargaining power of buyers, threat of substitute products and intensity of rivalry among competitors.
Threat of New Entrants (Low)
The British Petroleum (BP) enters Russian oil market and become top five oil and gas companies based on the market value in 2015 (Pitatzis, 2016). This industry is very attractive due to major revenues. For such a profitable industry, it is normally protected by government against foreign companies in order to protect their own country wealth. Besides that, the number of oil companies that can explore the oil field are limited because it required huge capital investment to cover expenses like building pipelines, drilling wells, building access roads and acquiring land. For companies that would like to start up the oil industry in local or in a foreign country, the costs of setting up to make profit is in huge amount and it takes a very long time to make it on …show more content…
Especially after the privatization in the oil industry in Russia, many companies emerged such as BP, Sibneft, TNK, and AAR. The products offered by players in the oil and gas industry are often not much different from those offered by their competitors. As a result, buyers tend to choose products with either lower price or better quality. The large available choices for consumers causes the switching costs very low, which means consumers can change companies to purchase anytime if they are not satisfied of the transactions with one