Chevron Corporation is one the leading and biggest integrated energy company, as it transports and explores the natural gas and crude oil and refines the market. It is also dealing in transporting the lubricants and fuels, sells and manufactures the petrochemical items, produce and generates the power and geothermal energies, provides energy efficiency and renewable energy solution. It also develops energy resources for future, which includes biofuels. It continuously looks forward for innovative products to retain the market position and compete in the industry better (Chevron, 2019). Porter five forces analysis helps the company in dealing with the external forces like competition and rivals to retain the market position and share. Here is the detailed porter five forces analysis of the Chevron Corporation;
Bargaining Power of Buyers
The bargaining power of the Chevron consumers are low because of the fact that prices and costs involved in the oil and gas industry are fixed by the government. Therefore, the fact of requiring high quality in low prices will be irrational. Moreover, the switching cost to the other company is low, and there are numerous buyers in the market, which means Chevron has no threat if any consumers switches to other competitors. Chevron is able to successfully build the large customer base, which helps it in diversifying the profit level to high level and reduces the risks. Higher the consumer base, the lower will be the bargaining power of consumers (Chowdhury, 2014).
Bargaining Power of Suppliers
The companies in Major integrated gas and oil industry buy the raw materials and items from different suppliers. This proves that suppliers are not in the dominant position and hence increases the profitability level of Chevron Corporation. There is high competition level among the suppliers’ market, as this will help in decreasing the prices of the producers. Moreover, there is a diverse distribution channel required for lowering the bargaining power of the suppliers, as no single distributor will be able to satisfy the needs of every company. Companies like Chevron usually order in bulk and have high volumes, which means suppliers will have less bargaining power in dealing with high volumes due to the threat of cutting the supplier’s profit and quantity (Fernfort, 2019).
Threats of New Entrants
Threats of new entry is one of the most important force for the Chevron to consider and barriers of entry is high for the new entrants because of the high capitalization requirement in the oil and gas industry. Moreover, there are heavy rules and regulation by the government and the environmental public and health safety organization in order to make less entry due to difficult maneuver in industry. It is necessary for the new entrants to build the strong distribution network, as the weak distribution channels means products are expensive for moving around. Strong brand name is necessary for the new firm to develop, as there are customers who are loyal to their current brands and prefer to use them (Umar, 2019).
Threats from the Substitute Products
The threats of the substitute products are high because of the presence of big giants like BP, ExxonMobil, XTO Energy etc. in the market, and their developmental threat to solar energy, biofuel, and wind power products. However, Chevron is successfully able to develop the large consumer base who are loyal to the products and avoid switching to the competitors. There are limited substitutes available in the industry and consumers do not able to find exact product according to their needs and up to their utility. Chevron often tries to be more innovative according to the advanced technology to retain the consumers (Chowdhury, 2014).
Rivalry of Existing Players
The competition level from the existing firms in the industry like BP, XTO Energy, etc. is very intense to the limited competition level from the government, as it dictates the regulations and policies to the firms and companies. The industry size is large as it allows the multiple companies and suppliers to prosper irrespective of stealing the market share and position from each other. However, the exit barriers are low, as the weaker firms leave the market as it increases the profit margin for other remaining companies (Umar, 2019).
References
Chevron, 2019. About us. [Online], Available at: https://www.chevron.com/about, [Accessed on: 2nd May, 2019].
Chowdhury, S. 2019. Chevron. [Online], Available at: https://www.academia.edu/9624415/Chevron, [Accessed on: 2nd May, 2019].
Fernfort university, 2019. Chevron Corporation Porter Five Forces Analysis. [Online], Available at: http://fernfortuniversity.com/term-papers/porter5/analysis/120-chevron-corporation.php, [Accessed on: 2nd May, 2019].
Umar, U. 2019. Strategic analysis of Chevron Corporation. [Online], Available at: https://www.academia.edu/6226821/Strategic_analysis_of_Chevron_Corporation, [Accessed on: 2nd May, 2019].