Question 5
Based on the concept of Porter's five forces Model (existing level of competitive
rivalry in the industry, buyer bargaining power, supplier bargaining power, threat
of substitute products, threat of new entrants), discuss the potential sources of
competitive strength or vulnerability for the businesses. Which company has the
competitive advantage?
a) Porter’s Five Forces Analysis
1. Industry Rivalry (Existing Level of Competitive Rivalry)
Petron is the largest oil refining and marketing company in the Philippines but faces
stiff competition from Shell and Chevron. While its local network is strong, global
players bring innovation and efficiency.
Shell enjoys significant advantages through global scale and technology,
which it applies locally to improve operations and customer loyalty.
Petronas benefits from a state-backed monopoly in upstream operations in
Malaysia, which boosts its control and shields it from foreign competition at
home.
Analysis: Petron is more exposed to aggressive competition due to its limited global
footprint, while Shell leverages its global capabilities, and Petronas is shielded by
national policy.
2. Bargaining Power of Buyers
Petron’s consumers are highly price-sensitive, which limits pricing power.
Competitive fuel pricing is crucial in the Philippine market.
Shell benefits from premium branding and loyalty strategies that reduce
buyer sensitivity slightly, but it still competes in a value-driven market.
Petronas has more control through long-term contracts, especially with
government and industrial buyers, reducing the impact of consumer choice.
Analysis: Petron faces higher buyer pressure, while Shell moderates it
through brand strength, and Petronas experiences the least pressure due to
contractual and institutional relationships.
3. Bargaining Power of Suppliers
Petron owns a refinery (Bataan) but is dependent on imported crude, making it
vulnerable to global price shocks and geopolitical tensions.
Shell manages supplier risks well due to its upstream assets and global
partnerships.
Petronas is least affected, being a major crude producer with full upstream-
to-downstream integration.
Analysis: Petron has the weakest position in this area, Shell performs moderately
due to vertical integration, and Petronas has the strongest supplier control.
4. Threat of Substitute Products
Petron remains focused on fossil fuels, exposing it to risk from the rise of EVs,
biofuels, and clean energy transitions in the Philippines.
Shell is actively investing in energy alternatives such as electric mobility,
hydrogen, and renewables.
Petronas has initiated diversification efforts (e.g., solar energy), but the pace
is slower than Shell’s.
Analysis: Shell is best equipped to face substitute threats, while Petron is the most
vulnerable due to its limited diversification. Petronas lies in between but has
structural backing.
5. Threat of New Entrants
Petron operates in a deregulated market, making it susceptible to new entrants like
Phoenix Petroleum.
Shell maintains strong entry barriers through brand, technology, and financial
strength.
Petronas is protected by national regulation and policy, making market entry
extremely difficult for others.
Analysis: Petron faces more potential disruption from new players, while Shell and
Petronas benefit from high entry barriers and strong market protection.
b. Overall Competitive Advantage
Among the three oil and gas companies Petron, Shell, and Petronas. Petron finds
itself in the most vulnerable competitive position. As the largest oil refining and
marketing company in the Philippines, Petron commands a significant share of the
local market with over 2,400 service stations and the country’s only remaining oil
refinery in Limay, Bataan. However, despite this domestic strength, Petron faces
several strategic limitations that hinder its long-term competitiveness. One of
Petron’s key challenges lies in its limited vertical integration. Unlike Shell and
Petronas, Petron does not own substantial upstream assets, meaning it is heavily
reliant on imported crude oil. This dependence makes it highly susceptible to
fluctuations in global oil prices, foreign exchange volatility, and geopolitical
disruptions. Furthermore, operating in a deregulated and highly competitive
Philippine market, Petron competes with both local firms (e.g., Phoenix Petroleum)
and international players like Shell and Chevron (Caltex), all of which target the same
price-sensitive customer base. This fierce competition reduces Petron's pricing
power and compresses profit margins. Another major concern is Petron’s slow
diversification into renewable and alternative energy sources. While global oil majors
are transitioning towards sustainable energy models, Petron’s strategy remains
heavily focused on fossil fuels. This exposes the company to increasing regulatory
pressure and market shifts as the Philippines intensifies its clean energy
commitments under the Department of Energy’s renewable energy roadmap.
Without significant investments in solar, wind, EV infrastructure, or biofuels, Petron
risks falling behind both in innovation and environmental compliance.
Moreover, Petron’s operations are closely tied to the Philippine economy and
regulatory environment, which presents both operational and reputational risks. Any
major shifts in national energy policy, taxation, or environmental standards could
directly affect Petron’s performance. Its relatively limited geographic diversification
also means that negative local economic conditions—such as inflation, high fuel
taxes, or recession—could significantly impact its business. In summary, while Petron
has a solid domestic presence and refining capability, it remains competitively
vulnerable due to its dependence on imported crude, lack of upstream integration,
limited renewable energy investment, and overexposure to the Philippine market. To
remain viable and strengthen its position, Petron must diversify its energy portfolio,
explore upstream partnerships, and align more closely with regional and global
sustainability trends. In contrast, Shell maintains a significantly stronger position
from a global strategic standpoint. As one of the world’s leading integrated energy
companies, Shell benefits from global economies of scale, upstream oil and gas
assets, advanced technology, and a strong international brand. These advantages
allow Shell to efficiently manage risks across markets, adapt to global price
dynamics, and maintain profitability across business segments. Moreover, Shell is a
frontrunner in the energy transition. It is actively investing in electric vehicle
charging networks, hydrogen fuel, biofuels, and offshore wind energy. This forward-
looking strategy not only enhances its resilience against substitute products but also
meets evolving regulatory and consumer demands for clean energy. Petronas, on the
other hand, holds a powerful regional position due to its full vertical integration and
state-owned status. As Malaysia’s national oil company, Petronas enjoys privileged
access to upstream reserves, government backing, and preferential policy
environments. It controls a substantial portion of Malaysia’s oil and gas
infrastructure and benefits from strong domestic brand loyalty. Although less
diversified globally compared to Shell, Petronas has begun venturing into solar
energy and green hydrogen, such as through its acquisition of Amplus Energy. Its
transition has been more measured but is supported by a strong foundation of
government support and operational integration.
Question 4
How do the companies compete with each other? (what is (are) the business
strategy(ies)?)
1. Petron Corporation: Integrated Operations and Market Penetration
Petron Corporation is the largest oil refining and marketing company in the
Philippines. Its core strategy centers around vertical integration, cost efficiency, and
market dominance in the local industry. Petron owns and operates the Bataan
Refinery, the only remaining oil refinery in the Philippines after Shell ceased refining
operations in 2020. This gives Petron a strategic edge by reducing reliance on
imported refined products and gaining more control over supply chain costs (Petron
Annual Report, 2023).Petron's vertical integration allows it to engage in refining,
logistics, and retail through its extensive network of over 2,400 service stations. This
helps maintain product quality and pricing competitiveness. In addition, Petron has
invested in expanding its logistics and storage capacities, including terminals in the
Philippines and Malaysia. The company operates over 10 depots and terminals,
which allows it to optimize distribution and reduce bottlenecks (Petron Corporation,
2023).Another key strategy is regional expansion, particularly in Malaysia, where it
operates over 600 stations. Petron uses brand localization and pricing flexibility to
compete with established players like Shell and Petronas. While not a global giant,
Petron emphasizes cost leadership and operational efficiency over premium
positioning. This approach targets price-sensitive consumers in emerging markets.
However, one of Petron’s major challenges is its exposure to local regulatory risks
and volatile global oil prices. To counter this, Petron has started investing in
renewable energy and sustainability initiatives, although still at a nascent stage. For
example, Petron aims to reduce its carbon footprint through cleaner fuel production
and modernization of its refinery facilities.
2. Shell: Innovation, Sustainability, and Premium Positioning
In contrast, Shell a global energy company headquartered in the UK and Netherlands
adopts a multi-pronged strategy built on innovation, energy transition, and global
diversification. Shell exited its Philippine refining business in 2020, converting its
Tabangao refinery into an import terminal to cut losses and improve agility
(Philippine Daily Inquirer, 2020). This shows Shell’s focus on asset optimization and
aligning its operations with market conditions.Shell’s business strategy is driven by
its "Powering Progress" agenda, which aims to lead the transition to net-zero
emissions. Shell invests significantly in renewable energy, hydrogen, carbon capture
and storage (CCS), and electric vehicle (EV) infrastructure. The company is building a
strong non-fuel retail presence and developing digital platforms to enhance
customer engagement.Unlike Petron, Shell focuses on premium branding and
technological innovation. For instance, its Shell V-Power fuel is marketed as a high-
performance product that protects engine efficiency. Shell also leverages AI and
blockchain in supply chain management and predictive maintenance.Furthermore,
Shell’s geographic diversification allows it to spread risk across upstream, midstream,
and downstream sectors globally. Its strong financial reserves enable significant
investments in low-carbon technologies, positioning Shell as a leader in the energy
transition.
3. Petronas: National Champion with Global Ambitions
Petronas, Malaysia’s national oil company, combines state-backed growth with
global exploration and production (E&P) activities. Its strategy is rooted in securing
energy security for Malaysia while expanding internationally to ensure
profitability.Unlike Petron’s domestic focus, Petronas operates in over 50 countries.
It is highly active in upstream ventures, liquefied natural gas (LNG), and
petrochemical production. A core part of its strategy is leveraging Malaysia’s natural
gas reserves through the Petronas LNG Complex in Bintulu, one of the world's largest
LNG production facilities (Petronas Sustainability Report, 2023).Petronas balances its
commercial and public responsibilities by investing in sustainability, technology, and
talent development. It aims to achieve net-zero carbon emissions by 2050, with
significant R&D in green hydrogen and carbon mitigation technologies. One strategic
advantage Petronas holds is state backing, providing it with regulatory support and
easier access to capital compared to private companies like Petron. However, it also
faces political expectations to maintain fuel subsidies and domestic employment,
which can limit profit maximization.
Comparative Analysis
Company Strategy Type Key Strengths Challenges
Local dominance, control Vulnerable to local regulation,
Petron Cost leadership, integration
over supply chain limited R&D
Innovation, sustainability, Technological edge, High exposure to regulatory
Shell
global diversification strong brand pressure in developed markets
State-supported expansion Global upstream assets, Balancing commercial and
Petronas
and energy security LNG leadership national interests
While Petron prioritizes operational efficiency and market penetration in price-
sensitive markets, Shell invests heavily in energy transition and digital innovation.
Petronas, on the other hand, leverages state support to expand globally while
maintaining national energy interests.
Question 5
Does the company's product(s)/service(s) differ from that of their competitors and,
if so, how?
1. Product Quality and Fuel Formulations
Petron offers premium fuels under its “Blaze” series—Blaze 95, Blaze 97, and
Blaze 100 Euro 6. The introduction of Euro 6 fuel puts Petron ahead in
meeting stringent environmental standards. Customers have reported
positive experiences with Petron fuels, noting improved mileage and
smoother engine performance. For example, Blaze 100 is particularly popular
among drivers of high-performance vehicles, offering higher octane levels
with significant engine-cleaning additives. Petron achieves higher margins
through these premium fuels, which suggests a focus on quality and
profitability.
Shell, on the other hand, provides FuelSave 95, V-Power 97, and V-Power
Racing (RON 100). Shell emphasizes its proprietary Techron cleaning
technology, which claims to reduce engine deposits and improve fuel
efficiency. Many consumers report better mileage and noticeable
improvements in engine responsiveness when using Shell fuels. Shell’s V-
Power Racing, in particular, targets performance-driven motorists and is
strongly associated with the brand’s global image of innovation and
motorsport excellence.
Petronas, the national oil company of Malaysia, markets RON 95, RON 97,
and Euro 5 diesel. Its fuels are formulated locally, with some users praising
their smooth combustion and engine performance. However, customer
feedback on Petronas fuels is mixed. While some drivers appreciate the
performance and price competitiveness, others report less satisfying mileage
compared to Petron or Shell fuels. As a government-owned entity, Petronas
benefits from its integration with upstream resources but has not focused as
aggressively on premium differentiation in retail fuel additives.
2. Station Services and Network
Petron took over Esso and Mobil’s retail network in Malaysia and currently
operates around 750 stations. Petron is known for its clean and well-
maintained stations, particularly its air-conditioned restrooms and
comfortable facilities. It has won recognition from local authorities for its
clean toilets and station upkeep. Petron also offers unique features such as
allowing customers to preset fuel amounts and avoiding large ATM debit card
blocks at the pump features appreciated especially by motorcycle riders.
Shell boasts over 950 stations across Malaysia. It maintains a high-quality
service experience, with many locations featuring Shell Select convenience
stores and clean facilities. Shell places heavy emphasis on branding and
marketing, supported by its association with global motorsport events like
Formula 1. While the physical station experience is generally positive, Shell’s
advantage lies more in global consistency and innovation than in localized
service.
Petronas operates approximately 1,000 stations nationwide. It focuses on
digital convenience through its Setel app, which allows users to pay for fuel,
earn points, and redeem rewards via their mobile phones. While some
Petronas stations are modern and well-maintained, public feedback is
inconsistent ranging from praise for technological convenience to criticism of
station cleanliness. Petronas’ station services are improving but often vary in
quality depending on location and franchisee.
3. Loyalty Programs
Petron offers the “Miles” loyalty program, which has gained popularity for its
generous rewards and user-friendly structure. Points do not expire, and
customers can redeem them directly for fuel. This makes the program
appealing to value-conscious consumers and frequent drivers, including many
from Singapore who cross the border for fuel.
Shell uses the BonusLink program, which is more traditional but versatile.
Customers earn points per litre of fuel purchased and can redeem them for a
variety of retail items or fuel. While effective, the program is somewhat less
generous than Petron’s Miles in terms of direct fuel savings.
Petronas runs the Mesra card program and integrates rewards into the Setel
app. While tech-savvy drivers appreciate the seamless experience, the major
drawback is that points expire within a short period, reducing long-term
benefits for casual users. Still, Setel has become a market leader in digital fuel
payments in Malaysia, enhancing customer convenience.
4. Brand Strategy and Positioning
Petron positions itself as a value-oriented, customer-focused alternative in
the premium fuel market. The company balances high-quality offerings with
localized customer service and efficient station management. Its strategic
expansion, especially near the Singapore border, is designed to attract cross-
border fuel consumers looking for good value and clean facilities.
Shell differentiates itself through global branding, advanced fuel technology,
and heavy investment in advertising. Its alignment with high-performance
motorsports and its international reputation give it an edge in consumer trust
and brand prestige. Shell targets both mainstream and high-performance
markets by offering a wide range of fuels backed by consistent service
quality.
Petronas focuses on national pride and vertical integration from upstream to
downstream. The brand emphasizes technological development and energy
sustainability. While it has a strong presence and is trusted for its national
identity, it lags slightly in retail innovation and service consistency compared
to its rivals.
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