Understanding the Business Environtment of Chevron

Chevron Corporation is an American multinational energy corporation, headquartered in San Ramon, California, and active in more than 180 countries. Chevron is an integrated oil and gas company which mean they participate in every aspect of the oil or gas business, which includes the discovering, obtaining, producing, refining, and distributing oil and gas and power generation. With approximately 62,000 employees, it has more than 32,000 service stations worldwide.

5 Forces Analysis of Chevron

1.      Competitive Rivalry

The main competitors of Chevron are Exxon Mobil, Royal Dutch Shell and Conoco Philips. The table below is the comparison between Chevrons with its competitor in term of the company size, market share / capitalization, revenue, their product and services positioning and strategy.

	Market Capitalization	Annual Revenue	Number of Employee	Positioning	Strategy
Chevron	$240,150,704	$257.3 billion	62,000	Cost leadership; Differentiation	Focused on upstream and downstream strategy. Upstream strategy is focused on their energy production, while downstream strategy is used in their refining and chemicals sector. While Chevron is more focused on the exploration and production of energy, they also remain committed towards the marketing of electricity and natural gas; and shipping or transportation of chemicals and oil products.
Exxon Mobil	$361,313,345	$453.123 billion	69,600	Cost leadership; Differentiation	Focus on delivering operational excellence and building technology leadership. Invest with intelligence and discipline.
Royal Dutch Shell	$192,175,309	$451.235 billion	90,000	Differentiation	Aims to improve energy efficiency in operations, support customers in managing their energy demands and continue to research and develop technologies in the production of liquid products and natural gas.
Conoco Philips	$91,096,627	$62.004 billion.	16,900	Focused low cost	Collaboration with key stakeholders to increase capacity for biodiversity protection, internally and in related institutions and communities.

2.      Threat of potential entrants:

Due to the cost of entry is very high (huge capital required) and specialist knowledge and advanced technology is needed, the barrier to entry for new entrants are high. Besides, the economics of scales advantages by the existing big IOCs which drives the whole value chain and the heavy regulations by government makes it harder to enter this industry. Other factor is national oil companies control more than 90% of the proven oil and gas reserves in the country.

3.      Threat of substitutes:

The main alternatives sources to oil and gas for producing energy are nuclear energy, coal, hydrogen, biofuels and other renewables sources such as solar and wind energy. The rising of the society awareness toward the environment; such as air pollution, emission converted using oil and gas (fossil fuels) might encourage the switching. However, the substitution is uneconomic. It is less efficient (hard to find) and usually more expensive. Hence, the limited number of substitution and high switching cost lead to low threat of substitutes.

4.      Power of suppliers:

Great player in the side of the suppliers are the oil rich countries or else OPEC has a significant bargaining power. OPEC nations own at least 70% or the world's oil proven reserves. The limited crude oil supplies which can be find on certain strategic location and government permission needed create a high supplier power. Besides, the supply of the advance technology such as the drilling machine, refining machine, and others is only supply by limited suppliers. 

5.      Power of buyers:

The main buyers of oil and gas products are refineries, both national and international oil companies, distribution companies, traders and to be exported to another countries. The buyer’s power is less because oil and gas cost is similar and fixed by government (there is a benchmark). And also the inelastic demand for energy will cause the price insensitivity. With lower buyer price insensitivity, price can increase and buyers will still buy the product.