Porter’s Five Forces Analysis of Chevron
|Industry||Construction, Oil & Gas Operations, Mining and Chemicals|
|Headquarters||California, United States|
|CEOs||Michael K. Wirth|
|Profit||US$15.62 billion, 2021|
|Competitors||Exxon Mobil, Shell, BP Plc|
The Upstream and Downstream segments are how Chevron Corp. operates. The Upstream section includes natural gas processing, transportation, storage, and marketing, as well as a plant that converts gas into liquids. It also includes the exploration, development, and production of crude oil and natural gas. The downstream segment includes the following activities: refining crude oil into petroleum products; marketing of crude oil and refined products; transporting crude oil and refined products via pipeline, marine vessel, motor vehicle, and rail car; and producing and marketing industrial plastics, fuel and lubricant additives, and commodity petrochemicals. San Ramon, California, in the United States, serves as the company’s headquarters. It is ranked 26th on Forbes’ list of the Global 2000 firms and 16th on the Fortune 500.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis is a widely used model to evaluate companies’ strategies in reference to its industry for neutralizing the competition and increase the margins, it is developed by Professor Micheal E. Porter in 1979,at Harvard Business School.
Chevron Rivalry among Existing Competitor
- Chevron Corp: Chevron Corp. is involved in the discovery and production of natural gas and crude oil. Additionally, it involves the production and selling of industrial plastics and petrochemicals as well as the transportation, storage, and marketing of natural gas as well as a facility that transforms gas into liquids.
Its revenue progressively climbed to US$244.37 billion in 2011 as a result of growing oil prices and demand. From an average of US$25.98 per barrel in 2001 to US$98.88 per barrel in 2011, oil prices soared. Due to the outbreak, revenue decreased to US$110.26 billion in 2016, US$94.47 billion in 2020, and US$155.61 billion in 2021 before increasing once more. In 2021, Chevron’s finances began to recover in a much-needed way as a result of a rebound in consumer demand for its goods and a subsequent rise in hydrocarbon prices. In contrast to a loss of US$5.5 billion in 2020, the oil and gas company posted earnings for the entire year of US$15.6 billion.
Chevron Corporation produced daily averages of almost 1.8 million barrels of oil and natural gas liquids in 2021. The company’s main market, the United States, produced 858,000 barrels of this total.
- ExxonMobil: It is one among the major producers of gas and oil in the globe. More than 8 billion cubic feet of natural gas and about 2 million barrels of liquids are produced daily by ExxonMobil’s upstream division. Despite a net loss of roughly 35% since 2011, natural gas is still the most commonly used fossil fuel type for the company. In 2021, the proved reserves of ExxonMobil reached more than 18 billion barrels of oil equivalent.
Its revenue significantly increased from US$208.71 billion in 2001 to US$467.03 billion in 2011, primarily as a result of rising oil prices and increased global demand for the commodity. Oil prices increased from an average of US$25.98 per barrel in 2001 to US$98.88 per barrel in 2011 and then continued to rise before dropping to US$39.68 per barrel in 2020, which was the lowest due to a pandemic.
If we examine earnings over decades for ExxonMobil, 2020 was the least profitable year following its 1999 merger. In 2020, ExxonMobil’s sales decreased to US$181.50 while its net income fell to a historic loss of $22.4 billion. These figures did, however, rise to US$285.64 billion in 2021 and US$413.68 billion in 2022 as a result of higher oil prices and margins brought on by reviving demand and a shortage of supply in the latter year. The average OPEC oil price for 2022 is US$102.97 per barrel as of October. This price per barrel has climbed from US$69.72 the previous year due to a shortage of energy supplies and sanctions against Russia as a result of the Russia-Ukraine war.
- Shell Plc: Oil and natural gas production is ongoing. Its operating segments include Integrated Gas, Upstream, Downstream, and Corporate. The Integrated Gas branch oversees liquefied natural gas operations. The upstream section is responsible for managing the exploration and extraction of crude oil, natural gas, and natural gas liquids. The trade of oil products and chemicals, which transform crude oil and other feedstock into a variety of goods that are exported and sold abroad, is managed by the Downstream business unit. Corporate is made up of the holdings, treasury, and self-insurance parts. The company’s headquarters, which were formed in February 1907, are located in The Hague, Netherlands.
Its revenue increased steadily to US$459.60 billion in 2013 before dropping to US$311.87 billion in 2017 due to the above-mentioned dip in oil prices. Revenue also decreased to US$183.20 in 2020 as a result of the pandemic before increasing to US$272.66 billion in 2021.
- BP Plc It entails crude oil processing, field development and production, and oil and gas exploration. Additionally, it promotes, moves, provides, and exchanges these goods. It was established in 1909. The company ranks 35 on the Fortune 500.
Its sales peaked in 2013 at US$379.14 billion, fell to US$183.01 billion in 2016, then to US$105.20 billion in 2020 before rising to US$157.7 billion in 2021. It recorded a profit of US$8.49 in 2021 vs a loss of US$(20.73) in 2020. Global oil demand and pricing have been a major factor in revenue change.
Chevron Threat of New Entrants
Chances of new entrants in industry very low due to following reasons
- Majority share of market: As they control the majority of the market, Big Oil refers to BP, Chevron, Eni, ExxonMobil, Shell, and TotalEnergies. The Seven Sisters, which have undergone numerous mergers, today make up four of the six Big Oil firms and are among the biggest businesses in the world. Big Oil is not the same as Oil Majors. Heavyweight producers of oil and gas like Saudi Aramco, Gazprom, and Sinopec are examples of state-owned firms that compete with Big Oil.
- Capital Investment: Huge capital investment to enter the industry is greatest barrier in this industry, If we analyze worldwide industries ,Shell total assets are US$404.38 billion in 2021 ranked at number three across all industry after AT&T US$551.67 billion and SoftBank Group Corporation US$413.94 billion at number one and two respectively. Chevron total assets at US$ 239.53 billion in 2021, BP Plc Total assets US$287.27 in 2021, Exxon Mobil total assets are US$369.06 billion in 2022.
Chevron Bargaining Power of Suppliers
- Purchase Volume: Due to their purchase volume, these companies can negotiate favorable terms globally; Chevron purchased crude oil and products amounts to US$89.37 billion in 2021.
- Diversity of Suppliers: Oil and gas firms have a much diversified range of suppliers due to their size and global operations. More than 26,000 vendors are associated with Chevron globally.
Chevron Bargaining Power of Buyers
- Customer Loyalty: Chevron ranks 7TH among all oil and gas firms with operations in more than 180 nations and a brand value of close to US$16 billion.
- Controlling complete Supply Chain: Chevron participates in every facet of the oil and natural gas industries as an integrated energy corporation. This covers electricity production, marketing, refinery, chemical production, exploration and production, and refinery. As a result, Chevron gains ground and loses some of its purchasing power.
Chevron Threat of Substitute Products or Services
- Renewable energy market size: The market for renewable energy is predicted to continue expanding, reaching US$ 2,025.94 billion by 2030. It has the greatest potential to replace conventional oil and gas. In order to increase its capacity to create renewable fuels to 100,000 barrels per day by 2030, Chevron purchased Renewable Energy Group, Inc., a strategy adopted by other major oil producers.
- Electric Vehicle market Size: In 2023, it is anticipated that the market for electric vehicles would generate US$457.60 billion in revenue. Revenue is anticipated to expand at a pace of 17.02% per year (CAGR 2023–2027), with a forecasted market size of US$858.00 billion by 2027.
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