The refinery of Cesar has a complexity of 12. 5 making it a very complex refinery capable of refining all varieties of crude and producing Euro 5 grade fuels. This is also among the largest single location refinery in the world, thus leveraging on economies of scale. Therefore Cesar oil faces minimal threat from new entrants. Bargaining power of suppliers Cesar currently has a 10. 5 meta capacity refinery at Evading, Gujarat and Is expanding the capacity to 34 meta. In Its E&P business It has Interests In Rattan and
Risers blocks in Bombay high India, Means in Gujarat and also at many places in Madagascar, Africa, Nigeria and Vietnam.
As a result the company is vertically integrated. Though there is no substitution of raw material (Oil) the question of bargaining power of supplier is considerably hedged. The location of the refinery is also of strategic importance because it is located Evading is a natural all-weather, deep-draft port that can accommodate very large crude carriers and Is quite close to the gulf region which Is the largest supplier of crude to India.
Because of this the demand supply gap if exists can be catered to by a variety of suppliers giving little or no bargaining power to the suppliers. The bargaining power of suppliers is minimal. Bargaining power of Buyers Cesar Oil serves retail customers through a modern, countrywide network of over 1,000 retail outlets. After the completion of the refinery expansion project the company plans to increase the number of retail outlets to 3000. The company also has product off take agreements with many government Ass’s Like BPCS, HP and
COIL and has also recently gotten approval to sell TAFT to the Indian Air Force.
The number of buyers of these Industrial products are relatively large when compared to the number of sellers hence the buyers do not enjoy any great bargaining power, Apart from industrial products retail fuel products pricing is administered by the government and buyers do not enjoy any leverage over the company. There are also no substitutes for the products. Bargaining power of the buyers Is minimal.
Threats of substitution The company is in the business of supplying energy and oil and gas industry as a hole constantly faces a threat of development of alternate sources of energy but no one for a very long time foresees fossil fuels being substituted. Oil has no substitutes. Cesar in particular doesn’t face the threat of substitution any more than the rest of the Industry. The threat of substitution Is minimal. Competitive rivalry The demand for the product is high, actually more than the supply and there are very limited numbers of players in this sector.
The prices are administered by the government and the cost of crude is almost the same for all companies. Profit minimization in this industry occurs by streamlining ones operations and attaining operational excellence. The higher the net refining margins the higher the profitability. The industry is growing at a tremendous rate and there is no cut throat competition per say. Apart from this the company enjoys the benefits of both forward and backward integrations and also economies of scale giving it a strong competitive advantage. Though the products offered by competitors are similar there is no cut throat competition between competitors.