Porter's Five Force Model

P Porter's five force modal-
Porter's five force modal refers as very important tool to understand competition exist in business
environment and identify relative strategies to obtain maximise their profitability.
 Bargaining power of buyers- Bargaining power of Chevron Corporation is very low
because price and cost of oil and gas industry is set by Government. High quality
products are available in low cost and there is switching cost is very low. There are a
numbers of buyers for Chevron in the market so there is no threat of competition to
company. The company, creates a large number of customers who help it to increase
profitability and reduce the level of risk. It is clear that the higher number of customer
are involve with organisation, the lower bargaining power will become.
 Bargaining power of supplier- Bargaining power is high in oil industry because
companies have a number of suppliers of raw material. Supplier are not in position to
bargain to company. there are high competition exist among suppliers, this will be
helpful for supplier to decrease cost of production. To reduce the power of supplier there
various level of distribution channels should be adopted by the company. The company,
order their raw material in bulk in very high volume, because of that suppliers have less
bargaining power when they are dealing with that type of companies. They are able to
cut the profit and quantity of supplier.
 Threat of new entrants- There is less threat of new entrants in oil and gas industry. This
is the most important factor which effects Chevron Corporation but there area number of
barrier for entry in market and it also need to invest high amount in oil and gas industry.
Government forces a number of rules and regulations for organisation to entry, so it will
more difficult. For new entrants, it will become more important to make strong
distribution channel because low distribution make process expensive. Strong name of
brand make easy in entrance in that industry.
 Threats from substitute product- In oil and gas company there is high level of threats
fro m substitute product. In market, various substitute are available which increase the
competition level also. When a company do not have close substitute, it has advantage
to increase price of their product. It will be beneficial for the customers when there are
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