Need a perfect paper? Place your first order and save 5% with this code:   SAVE5NOW

Food Versus Oil and Gas Sectors via Porter’s Model

Porter’s five forces of competition framework often determine the industry’s profitability based on how the five sources of competitive pressure integrate the rate of return on capital and cost of capital. According to Grant (2022), five forces of competitiveness comprise the three “horizontal” competition sources: competition from entrants, substitutes, and established competitors. The others are two vertical competition sources: the power of buyers and suppliers (Grant, 2022). These competition sources have many key structural variables that determine the strength of each competitive force. Thus, applying this model to the food industry and oil and gas sector could help determine which of the two is more profitable.

Competition from Substitutes

Research on the food sector using Porter’s five forces to examine how substitutes affect this industry showed that the substitute threat occurs because of stiff competition. When restaurants want to sustain their average checked pricing, they will likely retain loyal customers. However, this pattern changes when customers prefer or choose an alternative fast-food restaurant or eat home-made food (Grant, 2022). Likewise, switching to low costs could motivate customers to choose other restaurants or producers. More so, a high performance-to-cost ratio could signify that substitutes may intrigue its customers with less money. Unfortunately, when more customers shift to local cafeterias, bakeries, and home food, leading fast-food restaurants will decline in their bottom line. The food sector could mitigate substitute threats by emphasizing customer preferences (Adamkasi, 2022). Either rapid technological innovation, particularly in service delivery, such as wireless charging and table service, could efficiently attract kiosk customers and optimize their value.

On the other hand, the direct substitutes for producing energy for transportation, electricity, and heating are coal, hydrogen, nuclear energy and biofuels, and many other renewable energy sources. These substitutes could replace a significant measure of hydrocarbons in the global energy mix based on their quality, price, and performance (Adamkasi, 2017). Such an approach needs vast investments in the producing procedures and R&D. As a result; substitutes have little chance of controlling the energy mix until 2040.

Competition from New Entrants

The chances of new entrants entering the fast-food industry are high. According to studies, the fast-food sector has limited entry barriers and cheaper start-up costs for potential fast-food entrants. In this regard, the start-up cost in the fast-food sector is lower than what is required in other sectors (Gregory, 2022). Likewise, experience plays a more critical role in the fast-food sector than in the food itself. Thus, the fast food sector should identify new entrants that could pose a future threat. Contrastingly, the oil and gas sector has many entry barriers for new entrants. Besides colossal capital, the sector has stiff internal competition. The national oil firms manage 90% of the known oil and gas reserves. Likewise, oil and gas have volatile prices, and most of the sector’s reserves are in war or conflict-prone zones. Many national and international regulations could negatively impact new entrants (Adamkasi, 2018). Finally, the leading oil and gas firms could optimize their R&D expenditure and gain a competitive advantage. These and many other barriers prevent new entrants from accessing this sector.

Competitive Rivalry

A competitive approach with strong rivals could elevate the company’s competitiveness over its peers. The fast food sector has relatively high competition. This sector’s companies increase competitiveness through price adjustments, product differentiation, and quality improvements. More so, these firms capitalize on creative distribution elements and refine their relationship with their suppliers (Gregory, 2022). Whereas competing for the same customers increase rivalry, market expansion optimizes revenue. The oil and gas sector is competitive, particularly in the upstream section. This section comprises companies with the highest revenues and market capitalization. They include Royal Dutch Shell, Exxon Mobil, BP, Total, and others. In the mainstream, large-scale oil and gas firms increase competitive rivalry over small-scale firms in this sector (Adamkasi, 2018). As a result, companies struggle to maintain their profit margins because each firm matches its price based on the rivals’ prices and government regulations. Finally, accessing the oil and gas deposits increases competition among this sector’s firms and causes high competitor rivalry.

Buyers’ Bargaining Power

Influential customers increase their bargaining authority, forcing producers and retailers to reduce prices. In most cases, price-sensitive customers bring about this phenomenon. If clients have authority in the backward integration, they will get the bargaining authority and cause the reduction of food products. Unfortunately, this trend poses a significant threat to the company (Adamkasi, 2017). Therefore, the purchase decision could increase the bargaining authority because it stimulates buying. Customers with enhanced bargaining power can demand high-quality products, reasonable pricing, and great experiences. If the company refuses to reduce prices, customers may threaten to seek alternatives.

Customers in oil and gas buy petrol, fuel, and other related products. Oil producers control the pricing of petroleum and fuel products, leaving consumers with significant bargaining power. A slight factor can alter oil and gas product prices globally. For instance, increasing the cost of crude oil structure can increase gasoline prices globally and, in turn, impact all oil and gas customers (Adamkasi, 2017). That means consumers will pay suppliers’ prices because they lack the bargaining power to control them. This pattern means the oil and gas sector’s customers have limited bargaining power, thus leaving oil producers to influence pricing decisions.

Suppliers’ Bargaining Power

Suppliers’ bargaining authority is the opposite of the buyers’ bargaining authority. According to studies, suppliers’ bargaining power is the cost of a particular product or service. This force is significant in the food sector because suppliers influence its core operations. In most cases, meat-selling restaurants obtain raw materials from outside sources such as butchers, farmers, and packing firms instead of making their own (Gregory, 2022). In such a situation, food firms would choose suppliers based on their selling prices. As a result, some industries consider this force weak but can be beneficial. Chipotle distributes organic goods and meat free from antibiotics, charging product supply prices. Besides, the oil and gas suppliers have moderate bargaining authority. They comprise companies that extract crude oil and other valuables from the oil fields. The nature of their work gives them considerable bargaining authority in the sector’s dynamics (Grant, 2022). The contracts between local government agencies and suppliers give the latter robust bargaining power. However, the government influences few corporate decisions because the oil economies depend on the corporations’ operations.

Industrial Structural Features

Analyzing the food sector’s structural features using the five forces model revealed that classifying consumers based on demographics, psychographics, and behavior helps maximize sales and profitability. This approach allows primary fast-food firms to attract target consumers from their global outlets (Thomason, 2020). That may include investing in target customer segments and community initiatives to stimulate purchases and increase profits.

Significance of Industrial Structural Features

Based on Porter’s five forces, changing industrial structural features could disrupt the food and oil sectors’ distribution networks severely. This change could increase production costs and reduce the sector’s competitiveness and revenue generation. For instance, if the oil and gas sector disrupts its structural features, such as exploration, production distribution, and storage, it will disrupt its technical development (Thomason, 2020). That could reduce the demand while increasing the supply. Simultaneously, the food sector could increase its production cost and harm its competitive advantage alongside its economies.

Profitability determinants

The food sector drives 5% of America’s total GDP and employs 11% of the country’s population. More so, this sector contributes 10% of the consumer discretionary revenue. According to studies, the food sector’s 2023 revenue is $9.43 trillion, $ 700 billion more than in 2022. This sector’s revenue market growth projection is 10.60% CAGR between 2023 and 2040. In contrast, the oil and gas industry revenue will be $ 5 trillion in 2023. Despite the sector’s recent market growth, it derails the food sector by nearly $ 4 trillion in revenue. As a result, I consider the food sector more profitable than its counterpart.


The food and oil and gas sectors drive all the global economies. While examining the sectors’ environmental forces and performance indicators, Porter’s five forces model revealed that the food sector is more profitable than the oil and gas sector. Therefore, I believe the food sector is the best investment destination.


Adamkasi (2018). Porter’s five forces of the oil industry. Porter Analysis, December 15.

Adamkasi (2017). Porter’s five forces model on the food industry. Porter Analysis, June 1.

Grant, M. R. (2022). Contemporary strategy analysis (11th Edition). Wiley Library, July 12.,+11th+Edition-p-9781119815211

Gregory, L. (2022). McDonald’s Five forces analysis (Porter’s Model) and Recommendations. Panmore Institute, June 22.

Statista (2023). Revenue of the worldwide food market between 2014-2017. Statista, March 2.

Thomason, J. (2020). The importance of industry structure for determination of a firm’s profitability. Chron, October 5.


Don't have time to write this essay on your own?
Use our essay writing service and save your time. We guarantee high quality, on-time delivery and 100% confidentiality. All our papers are written from scratch according to your instructions and are plagiarism free.
Place an order

Cite This Work

To export a reference to this article please select a referencing style below:

Copy to clipboard
Copy to clipboard
Copy to clipboard
Copy to clipboard
Copy to clipboard
Copy to clipboard
Copy to clipboard
Copy to clipboard
Need a plagiarism free essay written by an educator?
Order it today

Popular Essay Topics