Phillips 66 Porter’s 5 Five Forces Model: Detailed Analysis (2021)



Company Overview:

Phillips 66 is a diversified energy company, which deals with Petroleum and other Refining activities. It deals with Pipelines, marketing of various products such as gasoline, natural gas liquids (NGLs), petrochemicals, and refining crude oil to produce petroleum products. The main competitors of the company are Chevron Texaco, Shell Oil, BP Amoco, Exxon Mobil, and Murphy Oil Corporation. The company is involved in two types of activities- the Pipelines & Transportation segment deals with transportation of crude oil by pipelines to refineries across the US where it is refined into petroleum products. The refining segment involves the conversion of crude oil into petroleum products which are sold through various types of markets through their marketing system. Today we are going over the company’s Porter’s Five Forces Model




Phillips 66 Competitive Rivalry:



The competition among the competitors is intense, as companies use various strategies to gain more market share and establish themselves in order to fight competition. For this reason, the company is forced to put in its best efforts in order to remain competitive in the market. For example, As of December 31st, 2012, Phillips 66 had a total of 1,724 miles of pipelines with 783 miles being NGL pipelines. The company has strong supplier relationships as it is dependent mainly on crude oil and natural gas for its products. It also works on developing its product base for various products as crude oil is refined into petroleum products. The company has a huge supplier base which helps it in sourcing its products and also helps the company in remaining competitive in the market.




Phillips 66 Bargaining Power of Buyers:



The bargaining power of the buyers is low as the company deals in basic necessities and its products are not luxuries that can be afforded by everyone. The company tries to increase its sales, which ultimately results in a reduction of prices, so it can attract more customers. This increased demand increases their bargaining power.



Phillips 66 Bargaining Power of Suppliers:


Suppliers of the company have more bargaining power due to increased demand for their products as basic necessities cannot be ignored and even a slight increase in price can result in a reduction in sales which ultimately affects the company adversely. The company tries to form long-term relationships with its suppliers as it is dependent on them for its products.




Phillips 66 Threat of New Entrants:



Advancements in technology have reduced the cost of production considerably so new companies are able to enter the market easily. This reduces the bargaining power of existing companies as they now have to face competition from not just established players but also new players. The company has to be innovative and put in the best efforts for its success due to reduced barriers involved in new entrants.




Phillips 66 Threat of Substitutes:


The company’s main products are gasoline, diesel, and kerosene which are also produced by other companies. The substitutes of their products are natural gas, coal, and electricity which provide substitutes for the market of petroleum products that they operate in; this decreases the bargaining power of the company as if customers decide to switch to these substitutes due to any reason, the company has to incur huge costs in order to shift the base of their operations.




Phillips 66 Porters Five Forces Conclusion:


The company has to look for strategies that will help them in remaining competitive in the market. They have to provide products which are of high quality, at a lower price and innovatively designed so they can attract more customers. The company needs to focus on all the five forces involved as these are influential factors affecting their business adversely if not kept under control.

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