I need well and professional respond on this post. (discussion board)
I born and raised in Dhahran Saudi Arabia; a city surrounded by oil wells, flare stacks, and tank farms, and has the headquarter office of the biggest oil company in the world Saudi Aramco. Being living in Dhahran along with so many other factors such as the thought of my experience with the oil business moves me most of the time to write about oil companies.
Since I chose ExxonMobil Corporation for my term papers, I will continue analyzing this giant company by conducting the Porter’s 5 forces analysis.
Rozier, C., Smith, R., Flynn, C., Reason, C., & Wampler, B. (2015), indicate that one of the most well-known analysis tools to do an industry analysis of the environment of a company is Porter’s five forces model. The Porter’s five are barriers to entry, supplier power, buyer power, threat of substitutes, and rivalry.
Barriers to entry:
• Government policy:
- Strict Lows.
- License is difficult to obtain.
- Great amount of fines for polluting the environment.
- The Cleanup cost for oil spills is tremendously high.
• Economies of scale
• Huge capital requirement. It is not an easy task to enter to the oil business in large scale.
• Access to oil owners, countries in global business, and distribution
Supplier power:
ExxonMobil is an integrated oil company, so they dig for the oil, process it, and ship part of it and refine the others. So, supply will be regarding spare parts for oil rigs and industrial facilities. It may result in the following:
• Changing the supplier: if they have to change, they have to switch to a well-known manufacturer, which produce good quality parts. A deficiency in any material will affect on the production. For example, a deficiency in the drill collar alloys will cause a long shutdown in the drilling process which certainly affect negatively on the productivity and hence the profit.
Buyer power:
• Bargaining power exists especially with those who buy in high volume.
• Oversupply of crude oil in the market: it gives the downstream companies (buyers) more power to bargain.
Threat of substitutes
• Switching costs
• Sensitized fuel or biofuel: so far, this is costly to produce. Also, it will not substitute all kind of products that can be refined from crude oil such as kerosene, gasoline, diesel, and natural gas including butane, propane, ethylene, and methane. So talking about a substitute is still under research. Also, all cars and machines have to be manufactured to suit the new fuel, which is not an easy process.
Rivalry
Diversity of rivals: There are many oil companies that are very competitive:
• CVX Chevron
• Royal Dutch Shell
• Sinopec
• Saudi Aramco
• BP
• Valero Energy
• Petronas
• Conoco Philip
And many other companies
Most of those named above are very innovative companies, which makes the competition to be very high. Brand identity is important.
In conclusion, ExxonMobil is not threatened by new entrants, nor by product substitutes. Supplier and buyer power forces are similar to some extent to other rivals. So, the only force left is the rivalry. ExxonMobil has to study its position compared to the existing big companies, to review their strategic plans, and to do frequent SWOT analysis to stay competitive and take as much possible of the market share
