Eni S.p.A is a multinational company of oil and gas in Italy, headquartered in Rome. It is ranked among supermajors oil and gas companies across the globe. The company is operating in 67 countries across the globe. The company is currently employing 30,000 employees. The preview of the company is gas and oil exploration, refining, production, selling operations, chemistry and electricity. The company is listed in Stock exchange of Italy. The company is listed in the fortune global 500 among top 100 companies (Eni, 2019).
It is necessary for the Eni to have complete knowledge of industrial competition level at both local and international level. The industrial competition and detailed analysis can be done by using Porter five forces model. This model helps in identifying the opportunities for the company and its threats which are needed to be mitigated. Here is the detailed Porter five forces analysis of Eni S.p.A;
Bargaining Power of Buyers
Bargaining power plays a major role for the company in setting prices of products. The lower the bargaining power of consumers, higher will be the benefit for the company. In the LNG, gas, oil, chemical, and petroleum industry, the bargaining power of the consumers is low. The company is getting high demand from the people for chemical and energy products as it has become necessity. They need chemicals and energy in transportation, agriculture, production of other materials etc. The consumers are dependent on the chemical, oil, and gas suppliers. Moreover, prices of oil and gas are set in accordance with government. Hence, Eni has to maintain its quality and brand image in order to retain the customer base (Duncan, 2016).
Bargaining Power of Suppliers
Eni S.p.A is vertically integrated company, which means, the supplies for distribution and production are provided by the company itself. This makes the bargaining power of the suppliers very low. As major raw material provider is company itself. However, Eni does need other supplies like drills, machines, etc. which are purchases by suppliers. The bargaining power of suppliers here can be low to moderate. This is due to the efforts made by Eni in maintain good relationship with its suppliers. Moreover, the suppliers are more as compare to the energy companies, which makes their power weak. However, Eni supports its suppliers right of bargaining to great extent. The company takes good care of its suppliers across the globe and manage its supply chain efficiently (Eni, 2019).
Threats of New Entrants
Threats of the new entrants in the industry are low, because of the intense competition among big firms in the local and global market of oil and gas. The new firms cannot compete with them until and unless they are not high capitalized. There are strict rules and regulations in the industry by the government. Moreover, huge part of the reserves is owned by the government. The prices of the oil and gas are volatile. Big companies work hard on technical side, marketing tactics, and R&D, which do not allow the new firm to grab the market share in the industry. Thus, the barriers to entry for new firms are high in the oil and gas industry (Pitatzis, 2016).
Threats from the Substitute Products
Threats from the substitute products in the oil and gas industry are high. As many companies are working towards producing alternatives of energy like solar power, fuel energy, or wind energy etc. because of the limited reserves of oil. People are moving towards solar and electricity power. This makes the Eni to think more towards substitute energy production. However, the company is doing great in chemical industry (UK essays, 2018).
Rivalry of Existing Players
The competition in the industry of oil and gas is very intense. Eni is facing the fierce rivalry from the competitors in both local and international market. The existing rivals are competing strongly by increasing the threats of entry. It has been estimated that around 25 companies in Oil and gas sector owns market capitalization of around $1 billion. Some of them are BP, Total, Chevron, etc. Regardless of this, Eni has invested on its R&D and technical divisions to be ahead then rivals in the industry. Eni has also established loyal consumer base, which helps the company in expanding. The company has also diversified its risk in other geographical segments (Duncan, 2016).
References
Duncan, W. 2016. Eni spa case analysis. [Online], Available at: https://www.slideshare.net/WilliamDuncan13/eni-spa-case-analysis, [Accessed on: 25th November, 2019].
Eni, 2019. Our company profile. [Online], Available at: https://www.eni.com/en_IT/company/company-profile.page, [Accessed on: 25th November, 2019].
Eni, 2019. Suppliers must share Eni’s values. [Online], Available at: https://www.eni.com/en_IT/sustainability/our-strategy/stakeholder/suppliers.page, [Accessed on: 25th November, 2019].
Pitatzis, A. 2016. Porter’s Five Forces Model for Oil and Gas Industry. [Online], Available at: https://energyroutes.eu/2016/05/23/porters-five-forces-model-for-oil-and-gas-industry/, [Accessed on: 25th November, 2019].
UKEssays. 2018. Oil Gas Industry Attractiveness. [Online]. Available at: https://www.ukessays.com/essays/management/oil-gas-industry-attractiveness-management-essay.php?vref=1, [Accessed on: 25th November 2019].