Enbridge is a Canadian multinational company, doing business in the energy sector, primary operations of the company is generating energy and distribution of energy. Company headquartered in Alberta. It was started in April-1949 as a pipeline company. Enbridge mainly deals in Oil and Gas industry. It has total net assets of C$57.6 billion and a net income of C$629 million. The company is doing its operations in Canada and the USA. Al-Monaco Is the CEO of a company. Enbridge is listed in the Toronto stock exchange and New York stock exchange in 1953 and offered its initial public offerings. Its stock price is $55.33 as per 03-Dec-2019. [3] The company’s main subsidiaries are Enbridge gas distribution, Enbridge technology, Enbridge pipelines, and Enbridge energy partners. This company has the largest transportation system of oil and hydrocarbons in North America. [1]
Threats of New Entrants
There are high startup cost, long legal procedures for registration of the company, it means that very few companies will be willing to enter into this sector. Different technologies help each company to take competitive advantage, companies that can manage high capital is forced to face operating deprivation which includes cost trouble, high fixed operational cost also creates a barrier for new entrants. Local Government policies regarding environment force new entrants not to enter this market. Enbridge Inc. has built effective barriers to safeguard its competitive edge. So all of these factors shows that it is a mature industry and there is a very low threat of new entrant.
Enbridge can tackle these circumstances by different factors such as economies of scale, it will reduce the expense per unit. By innovation of new commodity or service, it will give a competitive advantage. Spending on developing the capability and R&D will allow the company to be more productive.
Bargaining Power of Suppliers
The supplier in this industry are those companies which are extracting natural resources from different fields. Suppliers have a certain amount of power in the industry. Most of the companies in the oil industry purchase raw material from different extraction companies, if these companies have a good position in the market it can affect the energy companies such as Enbridge, due to bargaining power supplier can demand higher prices from purchasing firms. As a whole, it reduces the profitability of purchasing companies. As there are several competitors in the market and every company needs raw material. It shows that there is a moderate bargaining power of supplier exist in this market.
Enbridge can use a different technique to overcome these issues, by creating an efficient supply chain, vertical integration, Try to use alternative raw material for experiments so that if prices go up company does not get affected, etc.
Bargaining Power of Buyers
In this industry, buyer includes all those individuals purchasing petrol, fuel, and other products to use them in cars, bikes and different vehicles. All of them purchase according to their limited need, there are great number of buyers in the market and prices are in control of petroleum companies. An increase in price can affect the individuals because there is no substitute for this product at this large scale. So, consumers have to purchase it whether it is expensive or cheap, individually they cannot put pressure on companies. All of these factors show that in this industry the bargaining power of buyers is very low.
Threats of Substitute Products or Services
When a new alternative product fulfills the same need differently, it can affect the existing products and their producing companies. In this industry different companies created various vehicles that run on electric energy, this effort was done to create an alternative means of energy. This changed some dynamics of transportation but not all the scenarios. The introduction of such vehicles did not shift the demand for oil products, a large portion of transportation in most of the countries are dependent on fuel. All of these factors show that the threat of substitute products in this industry is very low. Enbridge can overcome this expected issue by; creating a switching cost for its customers, by operating as a service-oriented company instead of the product-oriented company.
Rivalry among the Existing Competitors
Several big oil companies have major market share globally, such companies include Shell, Total, Saudi Aramco, BP, etc. All of them have influential power due to a large market share, all of them have to meet the pricing strategy of other companies to remain competitive. All of these factors show that there is a high level of competitive rivalry in this industry. [2] Enbridge can ignore such competition by; creating differentiation in a market, collaboration can help them to be stronger.
References
1 Enbridge, 2018, Sustainability report, [online], Available at: https://www.enbridge.com/Sustainability-Reports/sustainability-report/
2 CNN Money, 2019, GLOBAL 500, [online], Available at: https://money.cnn.com/magazines/fortune/global500/2012/full_list/index.html
3 Yahoo Finance, 2019, Enbridge Inc. (ENB), [online], Available at: https://finance.yahoo.com/quote/ENB/