Global Oil and Gas

In terms of global industries, the oil and gas industry is arguably the largest. Given the versatility of its products, oil and gas goods have the capability of unique product positioning in almost every sub-industry. Over time, dominant organizations have changed dramatically creating a unique industry structure. Often, structure predictably determines competition. However, the threat of competition can seemingly reshape the structure especially considering the likelihood of innovation and adaptation. With that being said, the oil and gas industries structure is one that is a product of firms' strategies.

The oil and gas industry can be broken down into four segments: Integrated Oil Companies (IOC), National Oil Companies (NOC), Independents, and others. IOCs operate in a variety of segments ranging from refining to retail. NOCs are the largest oil and gas firms based on reserves. Controlling approximately 90% of the world's oil and gas, NOCs do, however, have a mixed reputation. Independent and other firms are the additional organizations that perform important functions.

To reiterate, a firm's creative strategy can alter the structure of an industry. One approach may be to establish a form of an alliance or agreement with competitors in order to increase value by expanding the size of the market and strengthening against potential threat of entrants. IOCs provide evidence to this theory as they are commonly involved with mergers and acquisitions. Further evidence of change in the industry structure is that it has become much less concentrated compared to 50 years ago. As the recent trend of mergers and acquisitions continues to grow, there may be less major players in the industry.

Additionally, the industry has adopted a vertically integrated structure. Meaning that firms are active along the entire supply chain, this adoption has become critical for all oil companies. The industry is essentially divided into three major categories: upstream, downstream, and midstream. Upstream refers to the search and recovery of crude oil and natural gas while downstream and midstream involve refining, selling, and distributing. As major oil companies began this integration it eventually became an industry norm. This trend has become the only means for survival. Again, evidence of creative strategy ultimately altering the structure of the industry is depicted.

A firm's creative strategy, deliberate or not, has the power to change the structure of an industry. Regardless, it comes as no surprise that the organizations that have dominated the industry for over a century have changed significantly over time. More importantly, as industry dominance moves from organization to organization, the structure of the industry fluctuates at the same rate.

1. What is the basis for competitive advantage?

A competitive advantage is when one business entity possesses several strategic