This 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
In 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.
The 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
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
As in 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 and contracts.