porter 5 force final.pptx

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


ase study' RI(




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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


ase study' RI(




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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


ase study' RI(




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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


ase study , RI(




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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


ase study ' RI(

Golden Rules

O)er)ie* 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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porter 5 force final.pptx

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