6.
Industry and Competitive Analysis
6.1. Porter’s Five Forces
6.1.1 Threat of New Entrants
Compared to other businesses, downstream oil industries may be hard to penetrate. The reason behind
this is that in order to establish an oil/petroleum company, it needs massive capital investment. Creating
refineries and developing a supply chain mechanism requires a great deal of investment. Therefore, new
entrants find it very difficult to establish business. Apart from the financial requirement, the new
entrants will also have to deal with the presence of already existing and large-scale oil companies.
According to Hokroh (2018) in his Global Journal of Commerce and Management Perspective, the major
challenges that new comers will have to face is the fluctuating oil prices, this is considered to be a risk
that makes the industry more difficult to enter for new companies.
Therefore, assessment of new entry is LOW
6.1.2 Threat of New Substitute
The substitute product in the field of oil industry is an alternative energy that can be used to run a
vehicle. Due to technological advancements, there have been changes and developments made in the
transportation industry. One which is affecting the Philippines is the introduction of electric vehicles that
are not dependent on oil-based sources of energy. However, the study made by Clemente in 2018 states
that the introduction of such vehicles has not indicate a major shift in the demand and consumption of
fuel as the transportation industry still continues to be largely dependent on gasoline as the key source
of fuel for running vehicles. As far as switching cost are concerned, Clemente also states that price
consumers are hesitant in moving from gasoline to other source of fuel. With this, it is believed that
people are still likely to continue to use gasoline as a prime means of fuel.
Therefore, assessment of new entry is LOW
6.1.3 Bargaining Power of Suppliers
The main supplier of the downstream industry is the crude oil supplier. These suppliers in the oil
industry are companies who are extracting the natural resources of oil from the oil fields. These
companies hold a significant amount of power in the changes being made to the oil industry. However,
in a study made by Hokroh (2018), it states that the contract which are formed with the governments
where the oil is being extracted influences the bargaining power of the oil suppliers. The government
can exert some influence on the corporate decisions and may also affect prices depending on the
regulations.
Therefore, assessment of new entry is MODERATE
6.1.4 Bargaining Power of Buyers
The main buyers of oil in the Philippines are household consumers and industries such as airports and
transportation. There is a difficulty in finding energy sources that has a quantity and quality capable to
be a substitute as oil for fuel. With that, consumers have small alternatives and would leave them to still
buy oil products as it is being used as a major supply and they have a very low influence in affecting and
putting pressure on downstream oil company’s products and prices.
Therefore, assessment of new entry is LOW
6.1.5 Rivalry of Competition
There are some major oil corporations that have a stronghold on the local oil industry. A few of these
are companies like Shell, Petron, Chevron, Phoenix Petroleum, Etc. who have significant stakes involved
in the oil refining regions in the Philippines. The presence of these few large-scale companies make the
oil industry show high level of competitive rivalry and because of that, the margins are difficult to
maintain as the companies have to match their price according to the competitor’s pricing as well as
government regulation being implemented.
Therefore, assessment of competitive rivalry is HIGH
Figure 2: Porter’s Five Forces Analysis
Threat of
New
Entrants
(Low)
Bargaining Threat of
Rivalry of
Power of New
Competition
Buyers Substitute
(High)
(Low) (Low)
Bargaining Over-all Rating:
Power of Highly Attractive
Suppliers
(Moderate)
6.1.6 Conclusion
Given all the data shown above, therefore, it is concluded that the downstream oil industry’s is Highly
Attractive. Thus, there is potential and an opportunity for high profitability when a new player decided
to enter the market.
6.2 Competitor Analysis
Major Players
Currently, the downstream oil industry is being dominated by three major players, Pilipinas Shell, Petron
and Chevron own a large part of market share in industry in the Philippines owning a combined total of
50.18% while the remaining 49.82% are owned by direct importers and end users.
Source: (DOE Website)
Based on the market share data available from DOE – PSPC has about 18% market share
of the total demand of petroleum products in the country in 2020, the other two major oil players
Petron and Chevron account for almost 32% of the market while the balance is made up of
various small players. PSPC holds around 33% of the total retail fuels market in the Philippines.
The market share is maintained and protected through PSPC’s integrated, competitive and
reliable supply chain, highly efficient retail network and differentiated product offerings and
superior services. The technological advantage of its differentiated fuels portfolio providing both
economy and performance driven formulas combined with innovative and highly competitive
and targeted marketing assures PSPC’s momentum for growth in a competitive fuels market.
Competitor 1: Petron Corporation
Petron Corporation (Petron) is a Philippines-based company is engaged in the refining of crude oil
and the marketing and distribution of refined petroleum products. The Company sells a range of refined
petroleum products, including gasoline, liquefied petroleum gas (LPG), diesel, jet fuel, kerosene,
asphalts and petrochemicals (benzene, toluene, mixed xylene, propylene and polypropylene). It exports
naphtha and petrochemicals. Petron sells its products through an across the nation network of service
stations, LPG dealerships and lube outlets, and to industrial end-users and bulk off-takers. It holds
franchises of local food chains, leases space to other consumer services, food kiosks and restaurants.
The Company has developed various specially formulated products, such as Petron Fully Synthetic 5W-
40 API CJ-4/SN and Petron Dual Clutch Transmission Fluid. Petron's bulk petroleum products are refined
from crude oil at the Petron Bataan Refinery in Limay, Bataan. (Source: Petron Website)
Competitor 2: Chevron (A.K.A CALTEX)
Chevron is a multinational energy corporation. One of the successor companies of standard oil,
it is headquartered in San Ramon, California and active in more than 180 countries. Chevron is engaged
in every aspect of the oil, natural gas, and geothermal energy industries such as hydrocarbon
exploration and production; refining, marketing and transport; chemicals manufacturing and sales; and
power generation. Chevron is one of the world’s largest oil companies; as of 2017, it ranked nineteenth
in the fortune 500 list of the top US closely held and public corporations and sixteenth on the fortune
global 500 list of the top 500 corporation worldwide. It was also one of the seven sisters that dominated
the global petroleum industry from the mid- 1940s to the 1970s. Chevron’s downstream operations
manufacture and sell products such as fuels, lubricants, additives and petrochemicals. The company’s
most significant areas of operation are the west coast of North America, the US. Gulf Coast, Southeast
Asia, South Korea, Australia and South Africa. In 2010, chevron sold an average 3.1 million barrels per
day (490*103/d) of refined product like gasoline, diesel and jet fuel. Chevron alternative energy
operations include geothermal, solar, wind, power, biofuel, fuel cells, and hydrogen. In 2011-2013, the
company planned to spend at least 2 billion on research and acquisition of renewable power ventures.
Chevron has claimed to be the world’s largest producer of geothermal energy. In October 2010, chevron
launched a 29-Megawatt (MW) thermal solar-to – steam facility in the Coalinga field in California to
produce the steam for enhanced oil recovery. The project is the largest of its kind in the world. (Source:
Chevron Website)
6.3. Competitive Profile Matrix
6.3.1 Key Success Factors (Each Identified and Discussed)
Advertisement
Importance Weight (25%):
Ads plays a big role in the in every aspect of the industry. As a business, your brand image and products
must be well known in the environment you are in. Advertisements helps the brand to be easily noticed
by consumers and when is a product available and where to buy them. This also helps to increase the
number of touchpoints to be able to reach the new target audiences. According to DeRosa (2017),
Advertisement impacts your marketability as consumers want to feel emotionally “bought in” to the
brands they engage with. Connecting with the buyer on emotions such as excitement, fear, or pride is an
effective tool to drive higher brand appeal and favorability.
Every advertisement must align with the identity of the brand in order to successfully build a strong,
consistent brand image. A clear identity is a brand’s most valuable competitive advantage.
Customer Loyalty and Preference
Importance Weight (15%):
Customer preferences are expectations, likes, dislikes, motivations and inclinations that drive customer
purchasing decisions. They are complementary to customer needs while customer loyalty is the act of
supporting and patronizing a business’ goods and services. Oil companies should try to appeal to the
preference of customers as this is one of the effective marketing techniques that is useful for branding,
product development and customer experience. One of the best types of customer preference that the
industry should focus is convenience. Consumers would want to go gas station that has more to offer
other than gas fuels maybe it a food, water or a rest room. Loyalty also plays a huge factor as they will
be committed in purchasing your products and will not easily be persuaded by a competitor’s pricing
and other schemes. Loyal customers will still patronize your products despite a higher price in order to
maintain the same quality of products and service rather than selecting a cheaper alternative that will
give them the opposite experience. Loyalty is normally achieved through a company’s efforts in
constantly providing satisfaction and exceeding expectations in terms of product and services.
Expansion
Importance Weight (25%):
Expansion happens when a rapidly-expanding business ventures its operations into more profitable
markets. Aside from focusing on locations with more developed technologies and machineries,
companies of the downstream oil industry will expand their market by building more refineries in
different places in the Philippines specifically outside Luzon Areas, this will allow them to increase their
capacity in terms of creating more stations with lesser risk of having the lack of supply. With creations of
more refineries, companies can allocate importations from different location and it will enable easy
access to fuel supply. This factor allows companies to take a step forward in gaining more competitive
advantage, introducing its product to new audience and acquiring more in terms of market share.
Market Share
Importance Weight (15%):
A significant indicator of the industry’s competitiveness is through what is called as market share. This
shows the company’s total market growth or decline which would enable the management to evaluate
the trends and patterns in terms of consumer behavior, preference and any opportunities for potential
market/audience. Having a large share of market share in the industry is a great deal and would
definitely give a competitive edge among its competition.
Product Quality
Importance Weight (20%):
When it comes to the questioning of whether the quality of a product is important, almost everyone
would agree to the answer that it is. But not everyone has the same mindset and idea over what
constitute a product that is regarded as high quality. The quality of a product means that it embodies
features that has the ability to meet the needs and demands of the consumers, satisfy them through the
continuous innovation of the product, and omit any deficiency or defect.
6.3.2 Competitive Profile Matrix (CPM)
Table 3: CPM Analysis
PSPC Petron Chevron
Key Success Factors Weight Rating Score Rating Score Rating Score
Advertisement .25 2 .50 4 1 2 .50
Customer Loyalty and .15 3 .45 4 .60 3 .45
Preference
Expansion .25 3 .75 4 1 2 .50
Market Share .15 4 .60 4 .60 2 .30
Product Quality .20 4 .80 3 .60 3 .80
Total 1.00 3.15 3.80 2.55
Rating is as follows: 1 = Major weakness; 2 = Minor weakness; 3 = Minor Strength and 4 = Major
Strength
6.3.3 Conclusion
The Matrix shows that PSPC places second in the strongest among the competition with a total weighted
score of 3.15. The company’s major strength is in terms of market share, together with Petron, the two
major companies own 43% of the market while the rest only own a small percentage. Petron have good
strong points in advertisement and getting customer loyalty and preference, the major reason for this is
its relation with the San Miguel Corporation (SMC), with the help of SMC, Petron was able to be heavily
involved in advertisement spreading its brand image all over the Philippines and also plays a big factor in
providing consumer more convenience by establishing food markets that connects to what other food
products SMC owns in some of its gas station. Although Shell is obviously more dominant in terms of
global expansion, a data acquired from both Petron’s and PSPC’s website shows that Shell only places
second in terms of local expansion and distribution in the Philippines having only a number of 1,118 gas
stations compared to Petron’s 2,400. This also provides more convenience to consumers as it has more
availability of gas stations near their place. Shell has an advantage in terms of product quality, since it is
based on its international counterpart, it has more advanced equipment in terms of refinery. Its fuel
normally contains more cleaning agents than other major brands to keep vehicles running more
smoothly but an improve more improve quality can some have drawbacks when it comes to prices. As of
January 27, 2022, Shell is still the most expensive fuel per product among its competitors.
Figure 4: Petron, Shell & Caltex Fuel Prices as of Jan. 27, 2022 (Prices vary depending on location)
(Source: DOE Website)
7. External Factors Evaluation (EFE) Matrix
7.1 External Opportunities (each identified and discussed)
Opportunity #1 Increase of income and fuel consumption (Importance Weight 20%)
With the increase of income of the Filipinos comes with an improved household consumption, they
would gain more buying power and that expenses for fuels and transportation would be more
affordable. This means that there would be an increase in demand for consumption for fuel as income of
individuals increase.
Rating: 3
Shell has been actively committed in providing sustainability and availability of their products in order to
continuously meet the growing demand of consumers. As published in PSPC’s website, Shell proudly
shows its approach on how to handle sustainability in order to meet current demands as well as future
generation needs.
Running a safe, efficient, responsible and profitable business
Sharing wider benefits where we operate
Helping to shape a more sustainable energy future.
Opportunity #2 Good public image (Importance Weight 15%)
Taking care of the Shell’s brand image is essential as it gives perspective on how consumer views them
as a business. Good public image also gives advertising and help to gain more loyal customers. It should
carefully be monitored and maintained as one error may result the downfall of your entity.
Rating: 3
Shell is fully committed in maintaining its operations run under its core values. This process can be
advertised in order to promote good branding of the company. Current projects such as “Gas Mo Bukas
ko” and the “Coconut project” should be shown more in social media platforms, in order to emphasize
the social culture and values Shell wants to promote. Shell has already had the tools to show good
branding but it lacks the full effort to promote them.
Opportunity #3 Skilled workers’ Engagement and Growth (Importance Weight 10%)
Improving skills and growth of its workers will benefit both side of the coin. Shell must be able to utilize
the development of its workers to improve efficiency and effectiveness of the operations and a
possibility to gain suggestion for improvement as well.
Rating: 3
PSPC’s one of the most known project is “Gas Mo Bukas ko” which is a scholarship program in which the
foundation gives financial assistance for students as well as dependents of transportation workers. One
thing that is important to note in this program is it also includes scholarships for their workers such as
gasoline boys. The program does not include any contract to those who received assistance which will
force them to work for the company in the future but this will be good opportunity to upskill its work
force. Developing an employee who has experience in operations from the very low authority might
have a better view of it and might be able to contribute in determining the possible lapses and how it
can be resolve since they have experienced working in that area.
Opportunity #4 Continuous innovation of vehicles and motorcycles (Importance Weight 15%)
Innovations of vehicles and motorcycles are done to improve performance and to meet the needs of the
people. The result of technological advancement might also require improved fuel or special fuel to
meet its need. This is an opportunity for Shell to continuously develop itself to create and provide more
efficient products in order to satisfy the growing needs of its primary consumers. Research and
development to prepare itself for future advancement would give them a competitive edge to its
competitors as they would be able to be ahead of the game if they are the first one who would be able
to provide the product that people need for the new and improved technologies.
Rating: 4
Shell is very strong committed towards innovation, in their website, they are proudly promoting two
groups that purely relates to improvement. The first is a group called “Shell Techworks” where it
comprises teams that are solely focused on innovating their product to provide more efficient and
healthier fuel for everyone. The other is a group called “Shell Technology Ventures” where they
encourage other people even outside of its firm to present or invent a better way to create fuel. This
group would accept outsiders and try to form a venture with them with the benefit of funding as well as
providing their own laboratory for research and development purposes.
7.2 External Threats (each identified and discussed)
Threat #1 Continuous effect of COVID 19 in the Philippines (Importance Weight 15%)
COVID has been the top threat to every industry since it first occurred, all business is affected and it
drastically change the volume of people using transportation due to safety protocols. Not being able to
act to adapt in with the pandemic and to make actions to still make the company visible to the public
may affect public image and loss of its loyal customers.
Rating: 4
Shell has been proactively trying to rise up despite the challenges, they are providing free vaccinations
to its employees to ensure the safety of the workplace as well as its consumers. Shell have also made
bayanihan efforts in order to help the people, providing 3,779,320 liters of discounted gasoline that
fuels the transportation of healthcare workers and front liners of critical goods as of the end of 2020.
Threat #2 Rise of Substitutes (Importance Weight 5%)
Rise of substitute may be considered as a minor threat in the oil industry for now as the rise of electric
vehicles are still under development and a very few consumers and industry use and sell them
respectively. Nevertheless, Shell must continue to improve itself in order to increase its survivability and
that preference of usage of energy still resides with the downstream oil industry.
Rating: 4
Shell opens itself to ideas of innovation supporting and funding ideas that will be suggested either by
their employees or even outside parties. As long as it would create a more efficient and safe way of
providing fuel that can also adapt to the future needs of improve technology, Shell is willing to provide
finances and support for the success of development.
Threat #3 Unwanted increase in price due to compliance in Laws (Importance Weight 10%)
Increasing prices due to mew laws and regulations badly affects the view of the consumer as to the way
they use transportation on a daily basis. Shell, has to comply with these changes as these are
government regulated and must find a way in order to provide cheaper fuels for its consumers.
Rating: 2
Shell cannot avoid to include the taxes in its prices and pass it in its consumers. They haven’t had much
any response as to how they can lower the prices due to these implementations. As of today, prices
have continued to increase with any major roll backs.
Threat #4 Threats of Disaster (Importance Weight 10%)
A major threat of an oil industry is when a disaster hits either its gas stations or worse one of its
refineries. This may heavily affect Shell’s sustainability and distribution of product supply to its market.
Rating: 3
PSPC’s provides business continuity plan (BCP) on how to manage occurring disasters, one sample of its
successful BCPs is its response towards the surge of COVID 19 which all efforts and actions were visually
posted on their site. Shell still reviews its BCP on a minimum of a per year basis to ensure that it is still
viable to be used as an action plan.
7.3 Conclusion
Table 4: EFE Matrix
Key External Factors Weight Rating Weighted Score
OPPORTUNITIES
Increase of income and fuel consumption .20 3 .60
Good Public Image .15 3 .45
Skilled workers’ engagement and growth .10 3 .30
Continuous innovation of vehicles and .15 4 .60
motorcycles
Sub-Total
THREATS
Continuous effect of COVID 19 in the .15 4 .60
Philippines
Rise of Substitutes .05 4 .20
Unwanted increase of price due to .10 2 .20
compliance of Laws
Threats of Disaster .10 3 .30
Sub-Total
Total 1.00 3.05
Rating is as follows: Company’s response to external factor is 1=Poor; 2=average, 3=above average; and
4=superior
Conclusion on EFE
Shell has accumulated a total weight score of 3.05 which indicates that the company is above average in
its effort/actions to pursue its strategies that would be able to capitalize external opportunities, avoid
and handle its threats. The major opportunity for the company is the continuous innovation of vehicles
and motorcycles as this gives them the potential to reach greater heights and be ahead of the curve in
terms of providing more quality and efficient production. A Threat that has the highest weighted score is
the Continuous effect of COVID 19 in the Philippines as this has a long-term effect and has currently
been affecting the industry, this must be actively monitored and strategies must be formed and
improved to be able to sustain its demand or even minimize its loss.
8. Internal Analysis/Organizational Diagnosis
8.1.1 Management Audit
Audit Question Assessment Evidence
Did the firm use strategic-
management concepts?
Are the company objectives
and goals measurable and well
communicated?
Do managers at all hierarchical
levels plan effectively
Do managers delegate
authority well?
Is the Organization Structure
appropriate?
Are job descriptions and job
specifications clear?
Is employee morale high?
Are the Organizational reward
and control mechanisms
effective?
8.1.2
Marketing Audit
Audit Question Assessment Evidence
Does the firm conduct market
research?
Are product quality and
customer service good?
Are the firm’s product/Services
priced appropriately?
Does the firm have effective
promotion, advertising, and
publicity strategy?
8.1.3 Financial Audit
Audit Question Assessment Evidence
Where is the firm financially
Strong and weak as indicated
by financial ratio analyses?
Can the firm raise needed
short-term capital
Can the firm raise needed
Long-term capital through debt
and/or equity?
Does the firm have sufficient
working capital?
Are capital budgeting
procedures effective
Are dividend payout policies
reasonable?
Is the firm’s debt situation
excellent?
Analysis of Financial Statement using Financial Using Financial Ratios
Vertical Analysis of Balance Sheet (2019-2020) and Income Statement (2018-2020)
8.1.4 Operations Audit
Audit Question Assessment Evidence
Are supplies of raw materials
parts, and sub-assemblies
reliable and reasonable?
Are facilities, equipment,
machinery, and offices in good
condition?
Are inventory-control policies
and procedures effective?
Are quality-control policies and
procedures effective?
Are facilities, resources, and
markets strategically located?
Does the firm have
technological competencies?
8.1.5 Computer Information Systems Audit
Audit Question Assessment Evidence
Are data in the information
system updated regularly?
Do managers from all functional
areas of the firm contribute
input to the information
system?
Are strategists of the firm
familiar with the information
systems of rival firms?
Is the information system user-
friendly?
Are computer training
workshops provided for users
for the information system?
Is the firm’s information system
continually being improved in
content and user-friendliness?
Section 3 Reference
Hokroh, M.A. (2014) An analysis of oil and gas industry’s competitiveness. Global Journal of Commerce
and Management Perspective 3(2), 76-82.
Clemente J. (2017) the Link between crude Oil and Gasoline prices. Retreived from
https://www.forbes.com/sites/judeclemente/2018/06/27/the-link-between-crude-oil-and-gasoline-
prices/?sh=123f059237db
https://www.porteranalysis.com/porters-five-forces-of-oil-industry/
https://www.longdom.org/articles/an-analysis-of-the-oil-and-gas-industrys-competitiveness-using-
porters-five-forces-framework.pdf
https://www.industrialautomationindia.in/articleitm/11172/Porters-Five-Competitive-Forces-in-the-
Downstream-Industry/articles
Petron information, retrieved February 3, 2022 from https://www.petron.com/who-we-are/our-
history/
Chevron information, retrieved February 3, 2022 from
https://www.chevron.com/worldwide/philippines
Victoria DeRosa, 4 critical success factors for Ad Effectiveness, Retrieved February 4, 2022 from
https://www.b2binternationalusa.com/2017/09/26/4-critical-success-factors-ad-effectiveness/
FUEL Prices. Retrieved February 5, 2022 from
https://www.doe.gov.ph/sites/default/files/pdf/price_watch/petro_ncr_2022-jan-27.pdf
Shell’s approach toward innovation: https://www.shell.com.ph/energy-and-innovation/innovating-
together.html
https://www.shell.com.ph/covid19.html
https://pilipinas.shell.com.ph/sustainability/pilipinas-shell-annual-sustainability-report-2020/
continuity-and-care-in-the-time-of-covid-19.html
https://www.shell.com.ph/media/media-releases/2020-media-releases/shell-response-to-the-covid-
19-situation.html
