Porter's Five Forces In The Oil And Gas Industry

External Analysis: Microenvironment

Introduction
The two major competitive factors controlling the external environment are the Macro and the Micro environments. While the Macro deals with the PESTLE affects, the Micro environment deals with the current structure of the industry and the effect of the roles played by the giants of the industry. Figure A-1

The Microenvironment includes the effect of rivalry, suppliers, buyers, distributors and the general public towards the strategy formulation by the company. These factors are a big game changer towards the success and failure of a particular organization. These factors can be further evaluated using the widely used industry analysis approach, Porter’s Five Forces Model.
In the Oil & Gas

Threat of Substitutes
4. Bargaining Power of Buyers
5. Power vested by Suppliers

1. Competitive Rivalry:
According to Porter the competitiveness in any sector is significantly increased by the number of players operating in the field and their major competencies. In the Oil & Gas Industry the competition is significantly intensive, with the market being ruled by big giants such as Exxon Mobil, Total, ConocoPhillips, British Petroleum, Chevron and the Royal Dutch Shell etc. Appendix A shows the market values of these super majors.
The market is over ruled by three different types of players.
1. The Integrated Oil and Gas Companies: These are private owned companies which bid for respective Oil & Gas fields in different regions of the world. (E.g. Chevron
2. The National Oil Companies: These are semi-private companies which control over 90% of the Oil & Gas reserves of the world. (E.g. SSGC etc.)
3. Private Oil Companies operating in exploration and production: Solely dedicated in the process of exploring and refining of the oil and gas, contributing to the major player’s strength. They are usually off shoots of the super majors. (ENI

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