part will give a brief explanation about the intensity of competition among all
the companies that now exist in the industry. The rivalry is common in all
industries. To make their position strong in the market, companies try to excel
and gain opportunities (Dess et al., 2006 pg.61). The oil and gas industry is a
commodity market. Generally, they try to achieve operational efficiencies with
a lower production cost, which derives competitive advantage in their industry
(Eduardo Calixto, 2016 pg.667). Consumers will undeniably choose the product
that cost them less with better terms as in the oil and gas industry, companies
produce similar products.
general, the more similar the companies are, the more competition they are
likely to have (Tony Grundy, 2006). In addition, deep commitment to business
also increase the rivalry. According to Grundy (2006) the rivalry among the
companies in oil and gas industry is from medium to high. Depending on the
company’s intensity and basis, high rivalry can limit the industry
profitability (Porter, 2008). The Rivalry may increase the bargaining power of
the buyer besides; discourage entrance of any new company in their industry. So
we can roughly say, though Porter’s five forces are very much independent from
each other but this high rivalry can easily affect other forces.
rivalry among the competitors is due to the following reasons-
Numerous companies in this
industry are equally balanced in terms of strength, leadership, and size.
Deep and higher commitment to
the business and market.
A very little growth in the
industry is one of the main reasons for this amplified rivalry. The little
growth of this industry is happening because in such mature industry firms can
only grow by stealing customers from others1.
There is a high fixed and
storage cost in oil and gas industry. This situation pressurizes them to fill
their capacity always that sometimes creates a situation for them when they
excess capacity; they need to cut prices.
Diverse strategies, deposition,
origins, personalities, goals, and relationships;
To achieve success, companies
with high stakes may sacrifice profitability for expansion. Sometimes,
companies with low market share feel threatened because of holding high shares
by their competitors2.
There are a high number of
exit barriers in this industry. Even though companies are earning low or
negative returns on investments, various factors such as economic, strategic
and emotional prevent them to leave the industry2. Some of them are2:
and social reaction
cost of exit
the oil and gas industry, the products are not so different from their
competitors; it is highly recommended to them to strengthen their market
position by increasing output, production efficiency and market share. They
should also take care of their research, development, and new explorations so
that they can derive benefits from the government’s support. This can help to
gain a key advantage compared to their competitors, regarding extraction rights