Chevron Oil Industry Analysis

http// incidentsanddetails. com/world. php? itemid=1541&catid=51&subcatid=326 Chevron Industry Analysis Threat of New Entrants The threat of new entrants is extremely disordered payable to several factors. First, the oil industriousness which consists of thousands of oil and oil service companies throughout the world is an extremely voluminous market. According to the Department of Energy (DOE), Fossil fuels which include coal, oil, and natural gas introduce up more than than 85% of the energy consumed in the U. S. as of 2008 (investopia). The fact that it is such a galactic market, make it genuinely competitive for new entrants.Also, the oil manufacturing is already in the mature stage, dominated by numerous major(ip) players including Chevron that has been around for a long period of time with various locations worldwide. This shows that they have an schematic reputation that is hard to compete with. Also, in that respect are several barriers to entry which make it a v ery competitive market. These challenges include game capital cost, economies of scale, distribution channels, technology, environmental and governmental regulation as thoroughly as high levels of pains expertise.According to the Turnkey Analyst, it is very difficult to build sustainable competitive advantages in the energy industry where oils commodity nature inhibits pricing forcefulness within the industry. foodstuff participants are constantly required to invest capital to maintain cash flows and market share. Therefore, these barriers to entry make it hard for new players to enter the market. http//turnkeyanalyst. com/2012/06/turnkey-research-note-chevron-corporation-nyse-cvx/ Rivalry among Existing Firms The oil industry is different from other imputable to the high conduct for oil.Despite being a national company, Chevron has many competitors including regional as salutary as independent companies. Chevron is among the second largest oil companies in the world. Its co mpetitors are Exxon, Royal Dutch berate and BP. (chevron). Since oil is a commodity, the rivalry among existing firms is low. This is because there is not much of a differentiation. Threat of relievo Products The threat of substitute is low. Substitutes for the oil industry would be alternative energy such as solar spring, wind power, hydro electricity or perhaps atomic energy.However, due to factors such as government regulations and environmental issues, nuclear and hydroelectric energy sources are not a threat within the next. Further, photovoltaic sources are restrict by technological issues and geothermal sources are limited by geographic availability (Miller). These might be a potential threat in the future due to emerging technologies and innovation that may result to less consumption of oil-based fuel. An example would be hybrid cars that will result in less habituation on oil services.However, this shift in a more sustainable deliver chain seems to be in the long te rm due to certain barriers such as high costs such as investments in new facilities. According to Chevron, fossil fuels will refer to have a with child(p) role in the worlds economy for decades to come in both transportation and electricity generation. According to the International Energy Agency, renewable energy will account for less than 20 pct of the energy mix in 2035. They believe that there will always be a demand for their products due to growth of the global economy and alternative energy sources do not seem to be a serious threat.Another factor that shows that alternative energy is not a serious threat is the fact that there is not enough support from the government. Even though governments throughout the world are vowing to widen to green energy, they continue to give far more subsidies to fossil fuel than renewable 10 to 12 times more, according to recent reports (Wood). http//www. chevron. com/documents/pdf/ChevronApproachtoAssessingClimateRegulationImpacts. pdf ht tp//www. renewableenergyworld. com/rea/news/article/2010/12/oil-and-renewables-slicing-up-the-subsidy-pie Bargaining Power of SuppliersWithin the global industry exist many companies but is dominated by a few major players. Due to large capital investment in these companies, they Supplier power is high because OPEC controls 40% of worlds supply of oil and, thus, has a strong influence on the price of oil (Miller). Inspite of its size and scope, the oil industry is one of the most powerful in the world. Large companies such as Chevron control severally aspect of the supply chain such as producing, refining, and drilling. Due to capital investments, it allow for these oil companies to make and own each part of their supply chain.The fact that they are their own customers give them more power allowing them to be more efficient. With all the their capital assets, they are able to obtain the resources such as operational their own macturing facilities, distribution channel giving them more control in this aspect. This shows that they have a high negociate power. Their only supplier would be the oil reserves from oil producing countries. Bargaining Power of Buyers The bargaining power of buyers (individual) is low because oil is a commodity. Despite rise in prices, people will continue to buy it in order to fulfill their needs such as driving.With the lack of substitutes for oil, it gives little power to buyers who rely heavily on this resource. The cost of switching to another energy source is too high. Therefore, there is a high demand for oil which determines the market price. Industrial buyer power is also low because their supply can be limited by upstream suppliers. (Miller) To conclude, the overall attractiveness of the oil industry is high because there is low threat of new entry as well as buyer power and threat of substitutes. Also, the fact that supplier power is high is a favorable since the few major players in the industry are both suppliers and bu yers.