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Porter Five (5) Forces Analysis is a strategic management tool to analyze industry and understand the underlying levers of profitability in an industry. Zeta Petroleum Plc managers can use Porter Five Forces to understand how the five competitive forces influence profitability and develop a strategy for enhancing Zeta Petroleum Plc competitive advantage and long term profitability in Energy industry.
Zeta Petroleum Plc is one of the leading Australian firms in the Energy sector. Over the years Zeta Petroleum Plc has redefined the ways of doing business in Energy industry. Zeta Petroleum Plc is listed on the Australian Securities Exchange (ASX) and have the stock market ticker " ZTA ".
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In his revolutionary article in Harvard Business Review (HBR) - "Five Forces that Shape Strategy", Michael Porter observed the five forces that have significant impact on a firm's profitability in the industry it operates in. The Porter Five (5) Forces are -
Porter Five Forces is a holistic strategy framework that took strategic decision away from just analyzing the present competition. Porter Five Forces focuses on - how Zeta Petroleum Plc can build a sustainable competitive advantage in Energy industry. Managers at Zeta Petroleum Plc can not only use Porter Five Forces to develop a strategic position with in Energy industry but also can explore profitable opportunities in whole Energy sector.
New entrants in Energy brings innovation, new ways of doing things and put pressure on Zeta Petroleum Plc through lower pricing strategy, reducing costs, and providing new value propositions to the customers. Zeta Petroleum Plc has to manage all these challenges and build effective barriers to safeguard its competitive edge.
All most all the companies in the Energy industry buy their raw material from numerous suppliers. Suppliers in dominant position can decrease the margins Zeta Petroleum Plc can earn in the market. Powerful suppliers in Energy sector use their negotiating power to extract higher prices from the firms in Energy field. The overall impact of higher supplier bargaining power is that it lowers the overall profitability of Energy.
Buyers are often a demanding lot. They want to buy the best offerings available by paying the minimum price as possible. This put pressure on Zeta Petroleum Plc profitability in the long run. The smaller and more powerful the customer base is of Zeta Petroleum Plc the higher the bargaining power of the customers and higher their ability to seek increasing discounts and offers.
When a new product or service meets a similar customer needs in different ways, industry profitability suffers. For example services like Dropbox and Google Drive are substitute to storage hardware drives. The threat of a substitute product or service is high if it offers a value proposition that is uniquely different from present offerings of the industry.
If the rivalry among the existing players in an industry is intense then it will drive down prices and decrease the overall profitability of the industry. Zeta Petroleum Plc operates in a very competitive Energy industry. This competition does take toll on the overall long term profitability of the organization.
By analyzing all the five competitive forces Zeta Petroleum Plc strategists can gain a complete picture of what impacts the profitability of the organization in Energy industry. They can identify game changing trends early on and can swiftly respond to exploit the emerging opportunity. By understanding the Porter Five Forces in great detail Zeta Petroleum Plc 's managers can shape those forces in their favor.