Reliance Business IntegrationPresentation Transcript
Barriers to Entry—High The capital costs are high. The gestation/growth period is long. Developing a customer base takes a long time. Bargaining Power of Buyers—Low Buyers of most products belong to the small-scale industry which has low entry barriers. Also, these buyers are dependent on large petrochemical companies for technological support. Threat of Substitutes—Moderate Polymers allow better performance than substitutes in most applications. However, polymers are non-biodegradable. So, environmental concerns persist. Fiber intermediates are used for manufacture of fibers and polymers (which have better properties than substitutes). Bargaining Power of Suppliers—Medium Degree of fragmentation more in suppliers. Extent of overcapacity lower in the supplier industry (i.e.hydrocarbons). Inter-Firm Rivalry—Medium Fragmentation low in the domestic industry. Rivalry is cyclical in nature. It was high in the polymer industry when it was in overcapacity. But is reducing now with reduction in extent of overcapacity. Apart from prices, players compete on quality of product, credit terms, and technological support provided to the buyer (processor). Michael Porter’s Five Force Model for analyzing Petrochemical industry
Eliminated Bargaining Power of Customers
- Forward integration by setting up textile manufacturing unit from Polyester Fiber Yarn and
being in competition with its own customers
Eliminated Bargaining Power of Suppliers
- Backward integration into petrochemical production units for Purified Teraphthalic Acid
then gained market leadership by adding up facilities to produce
Linear Alkyl Benzene, Paraxylene, Vinyl Chloride Monomer, PVC, etc.
- Still further backward integration to set up refineries to produce raw materials to be used
down the line. Now also retailing the petroleum products.
Also started Oil & Gas Exploration Units
Reduced Threat of New Entrants
- By using the power of volumes. Acquired German company Trevira to become world’s
leading Polyester manufacturer
Also Capital requirements are very high.
Defeating Threats of Substitute Products
Volume defies cost.
Minimized Competition in Industry
- Textile : Bombay Dyeing- Out paced due to continuous integration and expansion strategies.
Refinery : ONGC- In collaboration with world class technical & oilfield services such as
Halliburton & Schlumberger.
Petrochemical : IOCL, HPCL, BPCL- Dominated by continuous expansion and acquisitions