Conoco phillips Essay Example | Topics and Well Written Essays - 500 words

Conoco phillips - Essay Example Furthermore the company is vertically integrated and is actively engaged in operations from upstream (oil exploration and production) to downstream (oil refining and marketing). From its vast operations base ConocoPhillips has seen its revenues steadily increase over the past few years as shown in Figure 1 below: The energy industry – in particular oil – has been experiencing slow growth which has led to intense competition among the existing companies. Also, due to its capital intensive nature and the limited options of converting existing equipment to other use implies that even where a company is facing difficult times, there are high exit barriers to overcome. Probably the only viable alternative for companies in this industry is to merge or acquire others so as to derive economies of scale. Nevertheless, in spite of the intense competitive rivalry, ConocoPhillips and its competitors are in an industry with minimal threat of new entrants to either its upstream business – which requires huge investment in equipment, research and technology, and strategic sites – or its downstream business – that requires huge investment in distribution, logistics and marketing. The fact that the major players (ConocoPhillips, ExxonMobil and BP) are vertically integrated increases the barriers to entry further. Another great advantage of the vertical integration to these three major players is that it gives them great bargaining power over both their suppliers and buyers. However, the latter may be significantly better placed than the former in the sense that oil is now considered a commodity. This means that oil products from BP or ConocoPhillips of ExxonMobil do not significantly differ thus the buyer has some leverage to seek lower prices and better contract terms (â€Å"The Industry Handbook: The Oil Services Industry†). Finally, although renewable energy sources have