Premier Oil and Trends in the Oil Industry - Essay Example

?PREMIER OIL al Affiliation) Premier Oil is a self-governing British oil corporation with oil and gas interests within UK, Africa and Asia. It is dedicated exclusively to the industry’s upstream sector - the gas and oil exploitation – as contrasted with the retail and refining 'downstream' sector (Financial Times 2013).Premier Oil’s strategic group is the stakeholders. Porter's five forces outline is employed for strategic business assessment (Victor 2008). Porter’s five forces business evaluation does beyond looking at a corporation’s direct rivals, it examines at multiple characteristics of the business’s competitive organization as well as the economic environment, together with the negotiating influence of purchasers, the bargaining influence of contractors, the new entrants’ threat, as well as the substitute products’ threat. This paper will use the Porter’s forces to analyze Premier Oil environment. Force One: Buyer Bargaining Power The negotiating power of purchasers for Premier Oil is fairly moderate but projected to increase due to high demand from emerging nations in Africa and Asia and their energy demands will have to be met. Crude oil, therefore, is extremely crucial as these emerging nations use a projected 20% of energy supplied from oil. Intrinsically, in the present day world, oil has grown more into a commodity rather than a necessity owing to the underscoring of greener, alternate energy such as hydrogen-cell power-driven vehicles (Financial Times 2013). Force Two: Threat of Substitutes The lure of alternate energy has inflicted a bigger problem to the crude oil business today than it has ever had. Alternatives for bio-fuel or hydrogen cell driven vehicles are easily available to the people. Even nowadays, homes are fitted with solar-energy panels plus they are subsidized by government subventions to counterbalance the huge startup costs required. The implications of automobile to the environment have rendered to the innovation of ‘bridge technologies’ or techno-fixes. This is because crude oil products such petroleum when used in automobile they release harmful gases into the environment. The availability of these techno-fixes is to offer an alternative for petroleum; such include hydrogen gas as energy. In respect to industrial life cycle, these techno-fixes represent the decline phase in which the industry may be supplemented by a new substitutes. However, while oil is even now a main energy fabricator, the premier oil company must study and develop fresh product, which can contend with these options. This is crucial for sustainability as well as for the productivity and development of the firm (History 2009). Force Three: Supplier Power The suppliers’ bargaining influence is low owing to the many corporations, which are frontrunnerswithin the oil business. The multinational companies, which entirely regulate the integration system forward and backward, power the immense bargaining influence of suppliers. The oligarchy system operates in favor of oil corporations, which provide distinct and exclusive products, which are ‘green friendly’ too to the surroundings. This alternative or ‘green friendly’ energy also poses a risk to the market-share since it generates future rivals to obtain market-share through their eco-friendly alternatives. Lastly, the multinational companies like premier oil hold a well-recognized brand image, which generates customer loyalty as well as similar familiarities for the contractors (Financial Times 2013). In respect to industrial life cycle, the phase where a company has established the dominant design is the innovation phase. Premier oil is always striving to acquire innovations and technologies to meet the consumer needs. Force Four: Rivalry amid Existing Businesses The competitiveness within the business is very great and the bantam room for growth goes unmerited. The total number of other multinational oil companies vertically incorporated throughout diverse regions from the continent to continent is large. Specially, Exxon Mobil, centered out of US, as well as Royal Dutch Shell, centered out of Netherlands, both have the mainstream of market portion in Africa and Asia, reducing Premier Oil’s market share. This aggressive rivalry has steered to competitive fee changes as well as campaign shared within the oligarchic atmosphere. Subsequently, the business has bantam room for development within its mature phase in respect to industrial life cycle; however, it is becoming progressively hard to find opportunity for development as sources of oil are turning out to be less accessible (Financial Times 2013). In addition, the “green” crusade has sent the industry development to the point of the deteriorating stage since cleaner energy bases are becoming obtainable to customers. This “green” awareness has developed into a huge threat towards the oil business in the now highly competitive business (History 2009). Force Five: Threat to Entry The development of the crude oil business has rendered the risk of entry small for fresh companies. The premier oil possesses great economies of scales for manufacturing and distribution rendering new firms most probably unable to generate this type of product upon a worldwide scale (North Country 2006). In respect to industrial life cycle, this stage is referred to the shakeout phase. Premier oil has already settled upon the dominant design, resulting in large scales. This forces new entrants to exit as the business has reached its maturity phase rendering to the industry life cycle. Along with the huge capital required to generate the manufacture and supply of oil as well as oil products within this business, the huge switching prices has rendered new as well as existing consumers ‘locked’ in. These kinds of obstacles to entry challenge fresh entrants to discover new methods of singling out their pricing and products. The premier oil is involved within an aggressive competitive business. The prevailing and accessible distribution networks are well founded by the oil corporations in existence rendering distribution and production for fresh entrants tremendously difficult. The exit walls are merely as problematic owing to the multiplicity of produces these oil firms offer to their clienteles. Owing to these logics, the risk of fresh entry is very low(North Country 2006). Force Six: Power of Complementors Complementors are corporations or entities, which sell or provide services or goods, which are complementary to or compatible with, the services or goods produced as well as sold within a given business. Complementary merchandises provide more significance to the customer together than separately. When one service or product supplements another there occurs a situation termed as complementarity a type of commercial interdependence. Complementors can hurt or benefit the company in a business, depending upon the situations. If the industry is thriving for the complementary industry, this might positively influence the trade of the corporations within the given business (Victor 2008). Conversely, if trade is sluggish for the complementary industry, this could unfavorably affect the trade of the corporations within the given trade. Therefore, complementary goods and complementors do not certainly upsurge or reduce the rivalry of a business; they simply add another stratum to the physical complexity of the rivaling environment. In the premier oil case, its complementary industry is the automobile industry where the automobile manufactures vehicles, which in turn use products from the oil business (North Country 2006). Other complimentors are crude oil miners, where premier oil has vertically integrated with crude oil mining companies in North America such as frac sand miners. This move is intended to secure its supply of crude oil. Conclusively, the trend in the oil industry is that petroleum continues to be backbone of the most countries’ economies. Petroleum industry has contributed a great deal to the growth of most countries’ economies and it has been a major provision of employment to most people across the world. The oil business has been extremely lucrative from 2000 to 2008; however, the selling of hybrid as well as other alternate fuel functioned automobiles has augmented, thereby reducing demand for oil. Premier oil needs to rethink and plan its business strategies that will aid it in coping with the external environmental aspects affecting it. For instance, Premier oil can stretch its market share by venturing into new territories (Wheelen & Hunger 2010). References Financial Times 2013, Premier Oil PLCPMO, LSE, Financial Times, Retrieved on February 13, 2013 from http://markets.ft.com/research/Markets/Tearsheets/Summary?s=PMO:LSE History of Oil Use, 2009, History of Oil Use Overview. Retrieved on February 13, 2013from http://www.bydesign.com/fossilfuels/links/html/oil/oil_history.html North Country Bioenergy, 2006, Crude Oil vs. Alternative Energy, Which is Really Better, Retrieved on February 13 2013 from http://www.articlesbase.com/environment- articles/crude-oil-vs-alternative-energy-which-is-really-better-52061.html Vector Study 2008, Porter’s Five Forces, Retrieved on February 13 2013 from http://www.vectorstudy.com/management_theories/ Wheelen, T & Hunger, J 2010, Strategic Audit of a Corporation. Concepts in Strategic Read More