Assignment 2: The Five Forces that Shape Strategy Zannia S. Carty Dr. Droll JWMI 515: Managerial Economics November 9, 2014
Awareness of the five forces can help a company understand the structure of its industry and stake out a position that is more profitable and less vulnerable to attack. By understanding how the five competitive forces that shape strategy influences profitability in a particular industry, executives can develop a strategy for enhancing their company’s long-term profits (Porter, 2014). Define the relevant industry: The Oil Service Industry The oil/energy industry is one of the largest industries in the United States. According to the Department of Energy (DOE), fossil fuels (including co4tral, The oil industry is easily influenced by economic and political conditions. If a country is in a recession, fewer products are being manufactured, not as many people drive to work, take vacations, etc (Cross, 2014). All of these variables factor into less energy use. The best time to invest in an oil company is when the economy is firing on all cylinders and oil companies are making so much money that using excessive amounts of energy themselves has little effect on their bottom line. Some analysts believe that rather than analyzing energy companies, you should just predict the trend in energy prices. While more analysis is needed for a prudent investment than simply looking at price trends in oil, it's true that there is a strong correlation between the performance of energy companies and the commodity price for energy. Additionally, an aging workforce coupled with a boom in new oil and gas development is creating challenges for energy companies in the areas of recruitment, retention, and training. The oil and gas industry is facing a shrinking talent pool for those with specialized expertise. A large percentage of the individuals who have the institutional and technological “know-how” of their organization’s specific risks and operations are looking toward retirement. Nearly 90 percent of senior human resources executives at 22 top international oil and gas companies believe this problem is one of
