Question

Use Porter’s 5 forces model for PETRO-CANADA to describe the forces that are acting on the industry in which the company operates. Discuss each of the 5 forces in terms of threat (Is the threat from each force high or low? Why? Please explain fully

Answer 1

Porter’s 5 forces model for PETRO-CANADA=

The threat of new entrants=Due to heavy investment and a lot of government and environment regulation, this s seen as low

Bargaining power of customers= This is low as the price of the petroleum products are in control of the producers and there are limited number of producers and suppliers of these products

Bargaining power of supplier= This is moderate. The supplier in the given industry are those which extract the oil from the oil fields and thee are regulated by the government regulations

The threat of substitute product= Although there is some development in the area of renewable energy yet most of the customers still prefer fossil fuel so the threat of substitute product is low

Competitive rivalry= As every company is willing to gain more profit thus this is quite high.

In terms of Threats=

The threat of new entrants= This is low as new entrants will need a lot of investment and at the same time, the oil industry is highly regulated.

Bargaining power of customers= This is not a major threat as the customers do not have any control over the supply and the price of the petro-products

Bargaining power of supplier= This threat is moderate as the suppliers have the expertise of extracting the oil

The threat of substitute product= This threat is also low as customer prefer fossil fuel over another alternative source of energy

Competitive rivalry= This is a quite high threat as most of the companies have competition for the price of the product