Porter 5 forces model n value chain

1. ASSIGNMENT #2
Describe Porter’s Five Forces Model and
Porter’s Value Change using real
organization example (s)
PETRONAS OIL & GAS
Prepared by:
Nor Azura Bt Pandi | GP02155

2. Outline
• Who is Petronas?
• What is Porter 5 forces Model?
• What is Porter’s Approach to Industry Analysis?
i. The threat of entry of new competitors (new entrants)
ii. - The threat of substitutes
iii. - The bargaining power of buyers
iv. - The bargaining power of suppliers
v. - The degree of rivalry between existing competitors
• What is Porter’s Value Change
• Conclusion

3. Who is Petronas
• PETRONAS, short for Petroliam Nasional Berhad, is a
Malaysian oil and gas company that was founded on 17 August
1974.
• Core Business are vested with the entire oil and gas resources
in Malaysia and is entrusted with the responsibility of developing
and adding value to these resources.
• Subsidiaries are PETRONAS Dagangan Berhad, PETRONAS Gas
Berhad, MISC Berhad, KLCC Properties Berhad, PETRONAS
Chemicals, Malaysian Marine and Heavy Engineering and Other
principal subsidiaries.
• PETRONAS provides a substantial source of income for the
Malaysian government, with 45% of the government's budget
dependent on PETRONAS' dividend.

4. • PETRONAS Gas Berhad
• Involved in the provision of gas processing and
transmission services to PETRONAS and its
customers as a throughput company. Owns
and operates the Peninsular Gas
Pipeline which is 2,550 kilometres in length
and runs from Kerteh in Terengganu to Johor
Bahru in the South and Kangar in the North of
Peninsular Malaysia.

5. Porter 5 forces
• The most influential analytical model for assessing the
nature of competition in an industry is Michael Porter’s
Five Forces Model. Porter, a Professor from Harvard
University, explains that there are five forces that
determine industry attractiveness and long-run
industry profitability.
• These five “competitive forces” are: (1) threat of entry
of new competitors (or new entrants); (2) threat of
substitutes; (3) bargaining power of buyers; (4)
bargaining power of suppliers; and (5) degree of rivalry
between existing competitors.

7. Threat of New Entrants
Factors that can limit the threat of new entrants are known
as barrier to entry. Barrier to enter this industry are enough
to scare away. Nowadays, there is no new entrance in
Malaysia.
Rivalry among existing competitors
This describe the intensity of competition between existing
firms in an industry. Those are some of the competitors of
Petronas which are Hess Oil and Gas Sdn Bhd, Genting Oil &
Gas Limited, Syarikat Borcos Shipping Sdn Bhd, Ranhill
Berhad, Mitra Energy Limited, Shell, Caltex, Esso, Petron,
etc

8. Power of Buyer
This is how much pressure customers can place on a
business. Petronas’s buyers include Japan, South
Korea, Taiwan and China.
Threat of Substitutes
What is like the likelihood that someone will switch
to a competitive product or service? If the cost of
switching is low, then this poses a service threat. In
Malaysia, there one substitute of Oil & Gas
industries, which is still new and under
development. It is hybrid electric vehicle.

9. Power of Suppliers
This describe the intensity of competition
between existing firms in an industry. Those are
some of the competitor of Petronas which are
Hess Oil & Gas Sdn Bhd, Genting Oil & Gas
Limited, Syarikat Borcos Shipping Sdn Bhd,
Ranhill Berhad, Mitra Energy Limited, Shell,
Caltex, Esso, Petron etc.

10. Petronas Porter’s Value Chain
• Michael Porter discussed this in 1985 book,
“Competitive Advantage,” in which he first
introduced the concept of the value chain.
• A value chain is a set of activities that an
organization carries out to create value for its
customers.

11. Elements in Porter’s Value Chain
• Primary Activities
– Inbound logistics: Four core operations which are Gas
Processing, Gas Transmission, Utilities and Regasification.

12. • Primary Activities
- Operations: Transformation activities that change inputs
into outputs that are sold to customers

13. • Primary Activities
- Operations: Transformation activities that change inputs
into outputs that are sold to customers

14. • Primary Activities
- Outbound Logistics : Deliver products to customers,
Things like collection, storage and distribution systems ;
may be internal or external to PETRONAS

15. • Primary Activities
- Outbound Logistics : Deliver products to customers,
Things like collection, storage and distribution systems ;
may be internal or external to PETRONAS.
- PETRONAS EP’s Project Management System is a
structured approach to ensuring project delivery is
safe, cost effective and competitive. Regardless of
project complexities, PETRONAS comply with
stringent Health, Safety and Environment (HSE)
standards, PETRONAS technical standards and global
best practices.

16. • Primary Activities
- Marketing and Sales: Processes PETRONAS use to
Persuade clients to purchase from instead of other
competitors.
- Customer Management
- Order Taking
- Promotion
- Sales Analysis
- Market Research
- Increasing product Value by create demand for the
company by inventing oil which have specialities.

17. • Primary Activities
- Marketing and Sales: Processes to persuade clients to
purchase from PETRONAS instead of others competitors
- Annual General Meeting, which was held on 16 May
2013, coupled with our various engagement with
numerous fund managers and analyst.

18. • Primary Activities
- Service : Maintaining the value of product or service to
customers, once it’s been purchased.
- Innovative Project Delivery
- PETRONAS EP employs innovative workflow and
processes for effective development design and
planning. These efforts have earned significant cost
savings, enabled projects to be delivered ahead of
time, while providing a greater return on investment.
- amongst the world’s first in maximising recovery of
discovered fields with Enhanced Oil Recovery (EOR)
efforts.

19. • Primary Activities
- Service : Maintaining the value of product or service to
customers, once it’s been purchased.
- Cutting-edge technologies are applied alongside new
strategies to rejuvenate brownfields, extracting
maximum value from existing reservoirs.
- In consistently delivering some of the world’s first -
pipelines, platforms and projects, they have brought
oil and gas on-stream ahead of schedule - providing
rapid return on investment for partners, stakeholders
and investors.

20. • Support Activities – also supports marketing
and sales with other activities
- Procurement (purchasing) : What organization does to
get the sources it needs to operate includes finding
vendor and negotiating best price.
- eProcurement process for registered Malaysian-based
contractors and suppliers who are currently
doing business with PETRONAS.
- Consists of Indent Management, eTendering,
eAuctioning, Vendor Management, Catalogue
Management, and Contract Management.
- eProcurement is done with a software application
that includes features for supplier management and
complex auctions for best price

21. • Support Activities
- Human Resource Management: Company Recruit, hires,
trains, motivates, rewards its workers
• 'Chain Effect' initiative which looked into the development of executive
staff, as well as getting the commitment of line managers to assist with their
career path development.
• Line managers are also further empowered through the 'HR in Me'
programme, which exposed them to their various roles and responsibilities
in managing their staffs career and personal growth, as well as the relevant
policies and procedures that govern human resource management within
the PETRONAS Group.

22. • Support Activities
- Technological development: Relate to managing and
processing information, minimizing information
technology costs, staying current with technology
advances and maintaining technical excellence.
• In the short term, Petronas focus on improving operational excellence
through better plant and Health, Safety and Environment (HSE)
performance. For the longer term, Petronas aim to develop niche
technologies to enhance the performance of core businesses.

23. • Support Activities
- Technological development:
- PETRONAS' Research and Technology (R&T) initiatives are aimed at
harnessing new and improved technology that will add value to business,
enhance competitive advantage, and sustain operational excellence.
- Introduction of portable video conferencing devices.
- Enterprise Cloud-Based Storage Service.

24. • Support Activities
- Infrastructure: These are company’s support system and
it is maintain daily operations, Accounting, legal,
administrative, and general management
- Several ICT related solutions introduced in PGB during
the year include:
- Introduction of Electronic Permit to Work (ePTW) at
Utilities Kertih (UK) plant, which allows for a significant
time reduction for permit generation to work at plants,
as well as strengthening overall governance.
- Introduction of portable video conferencing devices.
- Enterprise Cloud-Based Storage Service.

26. Conclusion
• Porter 5 forces is the strategy for analysis and planning in
business. This strategy help organizations and industries to make
long term planning. It works by breaking an organization’s
activities down into strategically relevant pieces, so we can see a
fuller picture of the cost drivers and sources differentiation and
then make changes appropriately.
References:
• https://4sent.wikispaces.com/Porter+5+Forces(Final)
• http://en.wikipedia.org/wiki/Petronas#PETRONAS_Gas_Berhad
• http://marketpublishers.com/report/business_finance_insurance/business_services/pet
ronas_gas_bhd_swot_analysis_bac.html
• http://www.petronasgas.com/Pages/Investor-Relations.aspx
• http://www.petronas.com.my/aboutus/milestones/Pages/year/2011.aspx
• http://www.petronas.com.my/partnering-us/eprocurement/Pages/default.aspx