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8/17/2019 Porter 5 force final.pptx
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Porter’s 5 Force Analysis
of Oil & Gas Industry
November 12, 2013
Rajesh KumarTirthankar GhoshTriti Pandey
!rishali "a#ena $amini !alety
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A%enda
5 Forces Analysis of Oil & Gas Industry
ase study' RI(
Golden RulesO)er)ie* of Porters 5 Forces
"tructure of Porters 5 Forces
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A%enda
5 Forces Analysis of Oil & Gas Industry
ase study' RI(
Golden RulesO)er)ie* of Porters 5 Forces
"tructure of Porters 5 Forces
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Porter’s Fi)e Forces +odel,
Ori%in and +eanin%
• Porter -)e forces analysis is a framework
for industry analysis and business strategy
development formed by Michael ! "orter
of #arvard $usiness %chool in 1&'&!
• (t is a business unit strategy tool that is used to
make an analysis of the attractiveness
)value!!!* of an industry structure!
• (t captures the key elements of industrycompetition!
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A%enda
5 Forces Analysis of Oil & Gas Industry
ase study' RI(
Golden RulesO)er)ie* of Porters 5 Forces
"tructure of Porters 5 Forces
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Golden Rules
• +ften model is adusted with -th
.orce
"ublic/uthorities
• $ecause the aws and Norms can inuenceporters forces
• -th .orce "ublic authorities
• overnment, 4egulators, 5udiciary etc
• 6ey .actors for %uccess
• (denti7cation of 6ey %uccess factors ofnvironment
• 8o have competitive advantage some strategicelements needs to be controlled
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A%enda
5 Forces Analysis of Oil & Gas Industry
ase study' RI(
Golden RulesO)er)ie* of Porters 5 Forces
"tructure of Porters 5 Forces
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.uyers .ar%ainin% Po*er
9etermines how much pressure a customer canplace
on a business!
8hey e:ert power in the industry by ;
• $argaining down prices
• .orcing higher
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.uyers .ar%ainin% Po*er ontd//
.actors determining buyers power ;• $uyers are concentrated!
:ample; 9=9>s
• "urchases large volumes!
:ample; laptop dealers
• %witching to another product is simple!
:ample; %amsung mobile ? Nokia headset
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.uyers .ar%ainin% Po*er ontd//
.actors determining buyers power ;• "roduct di@erentiation
:ample; Aadbury $ournville
• "resence of substitutes!
• %igni7cance of the product to buyer!
:ample; (ntel
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Threat of su0stitutes
•
"roducts with improving priceBperformancetradeo@s relative to e:isting industry products!
• "roducts with similar function limits the price that
7rms can change!
• Aomes from a product outside the industry!
• :ample;
– (f price of co@ee rises, a co@ee
drinker may switch to tea
– 8ire retreads in place of new tires!
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ometiti)e Ri)alry
+ccurs when a 7rm is pressured or sees anopportunity!
(ntense rivalry often plays out in the following ways;
• Csing price competition; often leaves the entire
industry worse o@!• %taging advertising battles
• "roduct di@erentiation!
• Ahannels of distribution!
• (ncreasing consumer warranties and services!
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ometiti)e Ri)alry contd//
(ntensity of rivalry is inuenced by following industrycharacteristics;
• arge number of 7rms
• %low market growth
• #igh 7:ed costs and storage costs
• ow switching costs
• ow levels of product di@erentiation
• #igh e:it barriers
• (ndustry shakeout
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"uliers .ar%ainin% Po*er
• 9etermine how much pressure a supplier canplace on business!
• 8hey e:ert power in the industry by;
8hreatening to raise the price
4educe the
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Po*erful "uliers
• %upplier industry is dominated by few 7rms
• %upplier>s product have few substitutes
• $uyer is not an important customer to the supplier
• %upplier>s product is an important input to th
buyers product• %upplier>s product have high switching cost
• Austomers are powerful
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1eak "uliers
• Many competitive suppliers E product isstandardiDed
• "urchase commodity products
• Aoncentrated purchasers
• Austomer>s are weak!
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Threats of 2e* 3ntrants & 3ntry.arriers
• (t is not only incumbent rivals that pose a threatto 7rms in an industryF the possibility that new7rms may enter the industry also a@ectscompletion!
• $arriers to entry are more than the normale
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"ources
overnment policies
"atents ? "roprietaryknowledge
/ssets %peci7city
+rganiDational economies of%cale
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A%enda
5 Forces Analysis of Oil & Gas Industry
ase study , RI(
Golden RulesO)er)ie* of Porters 5 Forces
"tructure of Porters 5 Forces
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• 8he (ndian +il and as )+?* sector is one of the si:core industries of (ndia and contributes over 1G to theross 9omestic "roduct )9"*!
•+il and as accounts for HG of "rimary nergy Mi: in
(ndia where +il contributes 3-Gand Natural as has &Gcontribution!
•(ndia has 0!3 per cent of oil and gas resources of theworld and 1I per cent of the world>s population!
•(ndia is e:pected to remain an energy de7cit countrywith imports accounting for '-E''G of total domesticcrude oil demand!
Oil & Gas in India
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Players in Oil "ector
23
Key upstream players Key downstream players
Note: Prorated installed capacity MMTPA
Key upstream players Key downstream players
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rude Oil Imort data
24
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Oil and Gas !alue hains
Exploration
Using technology to
find new oil resources
Production
Bringing oil to the surface
using natural and artificial
methods
TransportationMoving oil to refineries and
consumers with tankers,
trucks
and pipelines
Refining
onverting
crude oil into finished
products
Marketing
!istri"uting and selling
refined products
rude Oil Value hain
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Processing
Natural Gas Value hain
Exploration
Using technology to
find new gas resources
Production
Bringing gas to the surface
Treating gas to "e sent to
markets
Transportation
Moving gas with
pipelines and tankers
Marketing
!istri"uting and selling
natural gas
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BuyersSuppliers
Substitute
products
Potential
entrants
Industry competitors
Rivalry among
existing firms
Bargaining power
of suppliers
Threat of
substitutes
"+484>s .(= .+4A% M+9
Bargaining power of suppliers
Threat of
new entrants
Bargaining power
of buyers
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A%enda
5 Forces Analysis of Oil & Gas Industry
ase study ' RI(
Golden Rules
O)er)ie* of Porters 5 Forces
"tructure of Porters 5 Forces
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Aase study; 4eliance (ndustries td
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Threat of 2e* 3ntrants
• Aompetition in this sector is very lowbecause of few players present in this sector!
• "%C playersE (+A, #"A,$"A!
• "rivate "layersE 4(, ssar +il, Arain
(ndia
• +il e:ploration and re7ning is a capitalintensive business!
• Need specialiDed worker!
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"ulier’so*er
• Jhile there are very few of oil companies in(ndia, much of the oil and gas business isdominated by a small handful of powerfulcompanies!
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.uyer’s o*er• $uyer>s )end users* have
no power in case ofpetroleum products!"etroleum products suchas "etrol, 9iesel , " ,6erosene etc become thebasic needs of day to day
life! veryone are eitherdirectly or indirectlydependent on theseproducts!
• 8he only bene7t the enduser>s are getting is thesubsidiDed petroleumproducts!
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A)aila0ility of su0stitutes
/vailability ofsubstitutes arevery less and innear future alsowe are not seeingany productwhich can replace
petroleumproducts!
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O+P3TITI!3 RI!A(R$
• %low industry growth rates and high e:it
barriers are a particularly troublesomesituation faced by 7rms!
• /t the same time, e:it barriers in there7nery business are
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