MKG final papers

Company’s Product Market

ConocoPhillips Company has the aim of powering civilization. The company explores, produce, transport, and market natural gas, crude oil, bitumen, liquefied natural gas, and natural gas liquid. The products of the company are marketed on a worldwide basis. The energy being marketed in different parts of the world play a significant role when it comes to making possible human progress together with economic development (Miller, 2012). ConocoPhillips has the ability to supply and market its products to different parts of the world due to the presence of six operating segments. The segments are defined by regions. These segments are the Middle East and Asian Pacific, Europe, Canada, Lower 48 and Latin America, Alaska, Other Internationals.

Porter’s Five Forces Analysis for INDUSTRY (include competitive intensity)

Porter’s Five Force Analysis for ConocoPhillips quantities competitive force through means, such as bargaining power of buyers, bargaining power of suppliers, the threat of substitutes, barrier to entry, and degree of rivalry.

· Bargaining power of buyer – is low. The buyers of gas and oil products are governments, large corporations, and individual users. The demand for oil and gas products is now very high. The worldwide consumption rate is 31 billion barrels of crude annually. Buyers have little control in this industry since prices are driven market factors. Buyers have no other alternative since there are no substitutes.

· Bargaining power of suppliers – is medium. Supplies that provide technical equipment and services are many. On the other hand, demand for technical supplies is high. Due to this high demand, suppliers have certain leverage with regards t technical support and hardware. Examples of some of the suppliers in this industry are Halliburton and Schlumberger among others. The influence of these suppliers is medium.

· The threat of substitutes – is low. There are very few substitutes for oil. Although, there is a shift to renewable energy. There is the entry of bio-fuel in the market. Bio-fuel is producing some kind of competition when it comes to traditional means of energy. However, biofuel is not a big threat to gas and oil products. No immediate threat is evident in the market for the products of the company. This means that there is no ready replacement for oil.

· The barrier to entry – is very high. This is because capital required to start this form of business is very high. Entry and competing with existing companies required large access to finance. Looking at ConocoPhillips, it spent about $143 billion with regard to the total cost of goods. Exploration together with production cost is very capital intensive.

· The degree of rivalry – is medium. The degree of rivalry is medium since there are many competitors, especially looking at vertically integrated gas and oil industry

Major Competitors (and Company) Market Share

In the entire gas and oil industry, Saudi Aramco is the largest company. There are also other largest publicly owned companies competing with ConocoPhillips, such as Total SA, BP PLC, Royal Dutch Shell PLC, Chevron, and Exxon Mobil (Miller, 2012). Of these competitors market their products globally. Competition is very stiff since the company competes with state-owned, public, and private organization in the facets of the E&P business. ConocoPhillips has had that 3rd largest worldwide natural gas and liquid reserves. Even with revenue deterioration, the company has increased its market share. It has increased its market share to 55.87 percent.

Overall Demand Forecast for the Industry

The demand for oil in 2016 and 2016 will be higher compared to the previous year. The production of oil has been going down in the United States and other parts of the world. With this, there is going to be an increased demand for in the market. The steep decline in production will increase demand hence increase sales of the company's products. “ConocoPhillips is expected to benefit since for each $1 increase in Brent prices, Conoco's net income will improve in the range of $100 million-$120 million, while for each $1 increase in WTI prices, its net income will go up by $35 million-$45 million" (Attri, Pahwa, & Singh, 2012, p. 30).

Industry Market Structure/Competitive Dynamics

Entry to the oil and gas industry is not easy due to the large capital investment that is required. This makes the industry have a small number of firms. These firms among them ConcoPhillips, Total SA, BP PLC, Royal Dutch Shell PLC, Chevron, and Exxon Mobil, work together so as to have control to the majority of market share. Therefore, the type of market structure that is evident in this case is an oligopoly.

Industry Competitive Trends

The total oil and gas demand keeps on growing throughout the world. This is as a result of low fuel prices. Dimension for a competition is going to change for companies operating in the industry (Kelland, 2014). Competitors are going to be forced to reduce their production costs so as to remain competitive in the market. The competition will continue to be stiff among the existing companies since there is no entry of new firms in this industry.

References

Miller, M. (2012). Strategic decisions and shareholder value: an analysis of ConocoPhillips.

Attri, R., Pahwa, D., & Singh, M. (2012). Learning for Public Sector Oil Marketing Companies in India to Manage Business in Turbulent Times. Prabandhan & Taqniki, Management Research Journal, 6, 29-36.

Kelland, M. A. (2014). Production chemicals for the oil and gas industry. New York, NY: CRC press.