Oil And Gas Industry Harvard Case Solution & Analysis

Problem Statement:
The downturn price of oOil and gGas has led the industry to a poor condition. The companies are barely able to recover their costs as their revenues are very low. The reason for the oil and gas prices to decrease is because of various causes such as the increase in US dollar value, decline in the demand, oversupply of oil and OPEC against cost cutting.
To analyse the industry of oil and gas, the appropriate tool which will be used in analysing the case is the Porter 5 forces. The Pporter 5 forces consist of the bargaining power of supplier, bargaining power of buyers, competitive rivalry, thethreat of substitute product and thethreat of new entrants. This analysis will help in understanding the oil and gas industry’s as its threats, opportunities, risks and competitors.
Porter’s five model
The threat of substitute products:
The threat of the substitute in the oil and gas industry is high due to the improvement and technological changes. The demand for the crude oil and gases have been started to decline. The substitutes for the oil and gas have been becoming a great threat to the industry. There are wide substitutes as people are switching to more solar energy, wind energy, coal and thermal energy. These sources of energy are not only cheap costs, but most of the energy sources such as solar and wind last much longer. Even though the oil prices are expected to increase in future such as in five to ten years which would be beneficial to the oil and gas companies, people could easily switch to other sources of energy which is a big threat to the oil and gas industry.
Oil And Gas Industry Harvard Case Solution & Analysis

The threat of new entrants:
The tThreat of the new entrants in the oil and gas industry is low as there are many high barriers for a business to enter the oil and gas industry. One of the main reasons is that the potential competitor requires heavy capital in entering the industry, in which it costs about billions of dollars. The other reason for being a low threat is because the oil and gas industry are not performing well due to the constant price volatility in oil. A barrel of oil costs about $50 which makes it is difficult for an oil company to recover its costs. As a result, the investors are looking to invest in different sectors as oil and gas are no longer beneficial. There isis also the government rules and regulation which restricts for some businesses in entering the oil and gas industry.Theindustry. The heavy competition among the industry makes it difficult for a company to enter the market, as most of these companyie’s’ success lies in the innovative approaches and having proper talent, framework, business models and sufficiently flexibilitye.
Bargaining Power of Buyers:
The bargaining power of buyers in the oil and gas industry is high, as they have a strong influence on the demand and price of the oil. The main buyers are usually the refineries, national oil companies, traders, distributor companies and traders...........

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