Rosneft is a leading company in the petroleum industry of Russia and known to be the world’s biggest public limited company. Its man activities are exploration and prospecting of the hydrocarbon deposits, gas-condensate production, oil and gas production, processing, upstream offshore projects, and marketing of the oil and gas products in the foreign and Russia market. The company is mentioned in a list of the strategic organizations and companies of the Russia. The largest shareholder of the company is about (50.00000001% of equity) is “JSC ROSNEFTEGAZ, which is completely owned by the government of Russia, whereas BP holds about 19.75% of the shares, LLC holds about 18.93% of shares, and one share is owned by the state represented by the Federal Agency for State Property Management, while remaining shares are free for floating in the market (Rosneft, 2019).
Porter five forces model identify the structure of the industry and competition level among rivals in the industry. If the competitive forces in industry are strong, the profit level will be low. The Porter five forces analysis helps the company in determining the need of the strategic decision making and strategies for the betterment of the company (Jurevicius, 2013). Here is the detailed Porter five forces analysis of the Rosneft;
Bargaining Power of Buyers
The bargaining power of the buyers in the oil and gas sector is generally low because of the nature of the industry, customers are interested in high quality and low price of the product. It is widely known that the global benchmarks of oil industry determine the prices of oil, which are; WTI- West Texas Intermediate, Brent Blend, and Oman/Dubai. Thus, buyers cannot affect the prices of oil in Russia, and hence Rosneft is not facing any threat from them. However, the country who are loyal customers of the company like China, Japan, USA, etc have relative power on bargaining, but still that depends on the quality of the oil Rosneft is selling (Pitatzis, 2016).
Bargaining Power of Suppliers
This competitive force refers to the ability of the supplier for decreasing and increasing the prices of the raw materials. If Rosneft is having fewer sources of suppliers for the products, then suppliers have high bargaining power, however in case of Rosneft, because of effective supply chain, it has numerous suppliers for the raw materials and as being the market leader, the suppliers want to work with the company on their set prices which are relatively low. Hence, Rosneft, does not have to face any threat form the suppliers (B3Globe, 2016).
Threats of New Entrants
The oil and gas industry are having big giants in both domestic market of Russia and in foreign market too. Starting up the company in this sector of Russia is relatively difficult for the new entrant, because of the saturated market. The leading companies are ruling the industry, and new entrants require high capitalization for not only start-up but also for developing the brand name, attracting the customers, marketing and promotions, etc. Threats of the new entrants are low for the Rosneft (Pitatzis, 2016).
Threats from the Substitute Products
Many companies are working towards substitute methods of the oil and gas, which are biofuel, windmills, solar energies, etc. threats from the substitute products are relatively high for the Rosneft, as it needs to diversify its risk and innovate in new alternatives. However, still it is in the limelight, because oil and gas will never be out from the market, and its customers will need it eventually no matter how many substitutes will be available (Jurevicius, 2013).
Rivalry of Existing Players
Rosneft is facing immense competition from both domestic and international market, as there are many companies who are controlling the 90% reserves of oil and gas and are known to be the national companies like, Saudi Aramco, Rosneft, Gazprom, CNPC- China National Petroleum Company etc. It needs to maintain the prices and quality for retaining the customers and the quality. It is necessary for Rosneft to differentiate its products in both international and domestic market so that it would be able to attract new customers and become the market leader (B3Globe, 2016).
References
B3Globe, 2016. Industry Research. [Online], Available at: file:///C:/Users/CC/Dropbox/Business%20Law/Russia%20-%20B3G%20Petrochemical%20Industry%20Report%202016.pdf, [Accessed on: 21st June, 2019].
Jurevicius, O. 2013. Porter’s five forces. [Online], Available at: https://www.strategicmanagementinsight.com/tools/porters-five-forces.html, [Accessed on: 21st June, 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: 21st June, 2019].
Rosneft, 2019. About us. [Online], Available at: https://www.rosneft.com/about/Rosneft_today/, [Accessed on: 21st June, 2019].