The threat of new entrants in the oil industry is strong. BP is a market leader, but the strong growth of the industry, combined with the low costs and easy access to buyers are tempting for new comers.
Buyer Bargaining Power (Moderate)
Needs of consumers are high and there are no substitutes of motor fuels. That indicates a low degree of buyer power. Even though the brand awareness is high, because of the extreme budgets for marketing and advertisement of oil companies, brand loyalty is low. Product differentiation is low. Considering the many existing players on the market, this makes the buyer bargaining power moderate.
Supplier power (high)
Considering the large size of suppliers, the number of suppliers, and the switching costs for the independent retailers, we indicated that supplier power is strong. The leading corporations are large and they do everything from the fuel supply chain. There is a high degree of forward integration within the industry.
Threat of substitutes (low)
Threat of substitutes of oil at the current moment is really weak mainly due to the high prices of such. Solar panels and other alternative energy include high switching costs and long waiting time, which makes them unattractive to the consumer. Although bloodies and bioethanol also exist, availability is low. Even though the threat of substitutes is weak, BP has already taken it under consideration and, as we mentioned, entered the market of alternative energy. BP is investing huge amounts into developing new technologies.
Even though there is a strong rate of growth within the industry, rivalry remains moderate due to the switching costs, size of competitors (oil companies) and similarity of those competitors. There is a high price competition, as well as any other industry. Nevertheless, there are few major market leaders and there is no place for small companies, which can not offer the same low prices....