The Middle East is rich in business opportunities majorly in the business of energy. There are several companies in the industry of energy distribution. One of them is Qatar petroleum.It holds a distinction of being among the top three producers and exporters of oil in the Middle East. It is owned by the government of Qatar and earns plenty of revenue for the country. The company is affected by each of the forces of strategic management. The forces of competition determine the nature and profitability of the business. Considering the nature and state of the Middle East, the main business activities carried out concern energy production and distribution based on the presence of vast amounts of oil fields. Analyzing the forces of competition will enable the company to determine the major variable needed to keep the company at the top with the rest of its competitors.
Buyers are usually very demanding. They want the best of the products and at the minimum price possible. This put pressure on the company on maintaining profitability as a long term goal. When the consumer base is smaller and with higher bargaining power, it is easier for them to demand higher discounts and offers. Buyers affect the company’s sensitivity to prices. All these factors will depend on the product diversity and the total cost of production as well as the competition. To maintain a powerful hand against the buyers, it is essential for the company to maintain a broad customer base. This reduces the bargaining power of the customer and allows the company to streamline its sales and the production processes. Additionally, the company can take charge of the power of the buyers by innovating new products and reduces the chances of the existing consumers from defecting. The buyers of Qatar petroleum are powerful organizations and countries receiving Qatar’s oil for domestic consumption.
Most energy companies get their products from many different sources. When suppliers are in dominant positions, they can decrease the margins Qatar petroleum can earn from the market. Dominant suppliers in the energy industry use their strong bargaining power to extort the energy companies of plenty of money. Higher bargaining power among the suppliers overall reduces the profitability of the energy business. These challenges can be dealt with by developing a supply chain with multiple actors. It also has to expand the options that the company has so that if the suppliers increase their prices if those particular raw materials, the company can venture into the production of other products. Additionally,it helps to have suppliers whose loyalty is with the company.
Qatar Petroleum has several suppliers. The nature of the energy industry is that there are many suppliers. Several companies involve themselves with the mining of crude oil and as such the supply chain is expanded to include more suppliers. Additionally, the company takes part in activities that widen the scope of their market. They produce different kinds of products that also demand different types of suppliers.
Competition from substitutes affects the market forces. The price that consumers are willing to pay for a product partly depends on the availability of substitute products. Conversely, the absence of alternative products for petroleum products means that consumers will be ignorant of the exorbitant prices by the companies holding the monopoly to the market. The existence of alternatives means that customers can purchase products from other suppliers. Companies can encounter losses if they are not careful to deal with the substitutes appropriately. The company should have a good relationship with their clients to reduce their chances of losing clients to the existing alternatives. It means the company should be in touch with the specific needs of the company and make it less advantageous for the customers to take up new products. Qatar Petroleum is in a hazardous business considering a large number of other companies in the same market. Many of these substitutes are powerful and capable of taking the company out of business. However, the company should be careful to keep their customers.
Barriers to entry
When an industry earns a return on capital much higher than the cost of money, it is bound to attract more people into the industry. If the entry of new firms into the industry is not restricted, there is bound to be plenty of companies in that industry thereby reducing the likelihood of the industry being productive. The petroleum is industry is very attractive to investors thus the need to cement the industry. The petroleum industry has made it difficult to enter into the business. The barriers already established are hard to penetrate although some investors still penetrate the barriers. It helps that the petroleum industry requires plenty of money to get into and only a few people can manage.
The petroleum industry is full of rival companies. Competition is constant. When the rivalry is intense, it will pull down the market prices of the products and reduce the profitability of the company. Qatar Petroleum is ina very competitive and operates on long term profitability. The best ways to tackle among the competitors is to build sustainable differentiation and to work together with competitors. The rivalry in the industry threatens the dynamics of the market.
Forces with the biggest effect
The most influential force in the energy market towards Qatar Petroleum Company is a rivalry. There are several options available to all consumers of petroleum products including the use of renewable energy. All the other companies that also transact in petroleum products create stiff competition with Qatar Petroleum Company. The rivalry created by the need to gain more customers and to make more money pushes the companies to put their rivals in jeopardy for the benefit of their investments. The firm is affected by the presence of markets outside of the country and also the presence of competitors within the country. The government has taken the initiative to strategize on how the petroleum industry will be used to fuel the agenda to the country’s vision 2030.
The positioning of the company.
The company is strategically positioned to make a profit in the petroleum business. The suppliers of the product are well within reach of the company. Many oil fields are located within the same region as Qatar Petroleum Company while others are even within the country. This makes the production cost low and manageable. The presence of a vast market within the country makes it profitable and cheap for the country to meet its energy needs. The company also manages to circumvent the challenges of rivalry from competitors by providing energy to the citizens of Qatar at a lower price than most of the other providers of energy. The company is also owned by the government hence the added advantage of controlling from within regulations on petroleum production and distribution. The power associated with the company allows it to deal appropriately with problems of entries into the industry. The government tackles from inside the hindrances that are linked with unwelcome entries into the industry. The company should consider widening the scope of their production to improve their position in the market and to achieve optimum productivity.
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