PETRON CORPORATION

Background of the Company

Petron Corporation is one of the biggest, most well-known oil refining companies in the

Philippines, with a combined refining capacity of 268,000 barrels-per-day, producing full-

range, world-class fuels and petrochemicals to fuel the lives of millions of Filipinos.

In the Philippines, the company supplies nearly 40% of the country’s total fuel

requirements through the operation of their 180,000 barrel-per-day oil refinery in Bataan,

being their main supply branch. Revered as one of the most advanced facilities in the

region, their refinery processes crude oil into a wide variety of petroleum products

including gasoline, diesel, LPG, jet fuel, kerosene and petrochemicals.

Petron traces its roots back to 1933 when Socony Vacuum Oil Company of New York

and the Standard Oil Company of New Jersey merged to create the Standard Vacuum

Oil Company (Stanvac). Having to suspend operations during the events of WWII,

Stanvac promptly re-opened its business in 1945 and helped rebuild a newly-independent

nation.

Standard Oil and Socony Vacuum’s partnership ended in 1962, which gave birth to Esso

Philippines and introduced the country’s first bottled LPG Esso Gasul and first high-

octane gasoline, Esso Extra. In 1973, the Philippine National Oil Company (PNOC)

acquired Esso Philippines at the height of the first oil crisis and renamed it Petrophil

Corporation, and in 1988, Petrophil was rechristened to Petron Corporation.

Porter’s Competitive Framework

Competitive Rivalry High

 Supplier Power Low

Buyer Power Low

Threat of New Entrants Low

Threat of Substitution Low

Competitive Rivalry

Petron has been going at it for years with the likes of Caltex and Shell, as well as the

smaller, emerging ones such as Total, Phoenix and Seaoil. Competition has always been

present in the industry, and it has been close knit between the heavy hitters to the point

wherein back in 2000, the big 3 gas companies: Petron, Shell, and Caltex, were accused

of predatory pricing, the act of lowering prices below the average cost in order to scare

off new players, by the smaller companies as to keep the competition to themselves.

Supplier Power

In the fuel business, gas companies mostly own the oil and fuel they sell, so Petron

themselves have their own supply stock, wherein the main branch of it is situated in

Bataan, as well as numerous other areas situated near their designated gas stations. This

means that they handle their own supply distribution, and expenses are at their own

discretion. They will not have to worry about external companies having to raise supply

pricing and such.

Buyer Power

Buyers have virtually no say on the prices offered for gas. The pricing for gas varies on

each rollback or price hike that will happen, which usually depends on the seasons

wherein fuel consumption is in demand, or via other reasons inside and/or outside the
companies’ power. It is in these situations wherein the consumers can only depend on

when it comes to loading gas.

Threat of New Entrants

Starting up a gas company is subject to a huge investment in the project, it is expensive

and time consuming as you have to apply for numerous other things before actually

getting on with your business. With that said, Petron, as well as other fuel companies,

have been in the market for a long while now, so their experience with competitors and

cutting costs have surely been refined over the years, making new entrants feel

threatened by their strategies and their built-up cartels. Not to mention the

aforementioned accusations of predatory pricing to increase the entry barrier.

Threat of Substitution

Petron essentially offers almost all the products their company has to offer for the market

they are in, with items such as LPG, kerosene, and the like available as substitutes for

the common fuel. Consumers have no reason to look at other companies for alternatives,

and it only goes down to which gas station consumers prefer, or in some cases, which

ones their car is more efficient running on.

Market Type Analysis

As evidenced by previous statements, we can conclude that the massive fuel industry is

an Oligopoly type of market. Despite a few, smaller entrants being present in the game,

the market is obviously dominated by the big 3 fuel companies, due to them being in the

industry for the longest, and consumers having gotten accustomed to their services. The

smaller companies have little to no improvement and development, in terms of getting

their name out there, and it may only be through new innovations and findings, where
they can actually make a dent in the big 3’s control over the market. Overall, the industry

is a tight competition, and entering in it may get you nowhere.

RAPPLER

Background of the Company

Rappler is a social news network where stories inspire community engagement and

digitally fuelled actions for social change. The word “Rappler” comes from the root words

of "rap" - to discuss and "ripple" - to make waves. As stated by Maria A. Ressa, one of

Rappler’s founders, It's a new world of limitless collaboration enabled by new technology

and connected by social media.

Rappler started out as a Facebook page by the name of Move.ph. The idea came about

when one day, the founders started brainstorming questions with regards to the country’s

political problems, societal changes, with technology and journalism overall. They wanted

to innovate social discussions and smart conversations and promote change through the

use of multimedia.

They reached out to numerous companies in hopes of helping them create this idea they

envisioned; They went to Hatchd, a company that helps put promising businesses out

into the world, Newsbreak, an award winning online news network turned investigative

and research department of Rappler, and Dolphin Fire, a holding company with extensive

knowledge on media locally and internationally. Together, they create a truly independent

news group and crowdsourcing platform free of vested interests, with the focus of editorial

independence.

Porter’s Competitive Framework

 Competitive Rivalry High

Supplier Power Moderate

Buyer Power Low

Threat of New Entrants Moderate

Threat of Substitution High

Competitive Rivalry

There are already numerous social news networks around the globe, ranging from local

to international, with the goal of delivering news to the masses. Rappler competes with

the likes of Inquirer.net, Manila Bulletin, The Manila Times, and more locally. Although

not their main source and focus, the network also provides international news and

updates, essentially competing against other big-named news networks all across the

world. Most networks often compete to publish news articles faster and accurately than

their competitors, in order to gain notoriety and profit first.

Supplier Power

There would be some instances wherein news comes at a price, and usually offered the

same for every news outlet attempting to acquire it, even Rappler. Even then, news

networks should still thoroughly consider first the validity of the information offered, as

well as its importance in the overall scope of the community. Suppliers of information may

raise the price of the piece they are willing to put out there, but if the initial information

and the given cost does not equate to the impact it might have on the society, it might be

best to skip out on it.

Buyer Power
Considering Rappler is a news network, it is hard for buyers to actually bargain news

stories as they are as advertised. In some cases, some may try and buy out stories to

either keep them from coming out or make them fake or misleading, but considering the

integrity of the network, this act is ill-advised, and should never be done by a credible

source or network.

Threat of New Entrants

The threat of new entrants for a company like Rappler would be moderate because

honestly, anyone can deliver news to anyone and everyone, it is just a matter of how

people will believe the validity of your words or your network on the information you

spread. Consumers will tend to focus on those networks with a well known image and

reputation for their daily news intake, and for a new news network to come into the foray

would be challenging as they have to attract these people towards their own network and

build up to gain the same fame and reputation as Rappler has.

Threat of Substitution

As stated above in Competitive Rivalry, there are already numerous news outlets around

the world that serve the same purpose as Rappler: to deliver truthful news to the public.

With that said, in the case of a news outlet delivering misinformation or "fake news",

people would often resort to looking to other news networks to see if the information

delivered was accurate or not. These events can damage the people’s trust on the

network, as well as their integrity and reputation, and despite promises of objective and

accurate delivery of information, Rappler would still be of no exception.

In the case of consumer preference, if people want their news shown to them how they

want it, they would go for a network suited for that outlet preference, like with visual
preference, television has networks like ABS-CBN or GMA that offer the same news as

Rappler. For verbal preference, radio has DZRM, and with materialistic types,

newspapers are offered through a variety of establishments.

Market Type Analysis

Rappler, being considered as a news network-type of market, would fall under the

category of Monopolistic Competition. As I have mentioned earlier, numerous news

networks are already available to the public and are in a variety of forms, from visual to

verbal outlets, offering both similar, accurate news articles and differing news categories.

News nowadays is not hard to get, but the main factors on which news networks should

consumers choose as their main source would essentially boil down to consumer

preferences, and the objectivity and validity of the network. Since the generation in the

present day prefers to acquire news through the internet, the networks mainly residing

there have a bigger advantage now, evident with Rappler being the Philippines’s third top

news website, as stated by web information company Alexa.

REFERENCES

Petron

https://www.petron.com/who-we-are/

https://www.petron.com/who-we-are/our-history/

https://www.philstar.com/business/2000/11/30/98090/smaller-oil-firms-accuse-petron-

shell-caltex-145predatory-pricing146
Rappler

https://www.rappler.com/about-rappler/about-us/385-about-rappler

https://www.rappler.com/about-rappler/about-us/184707-rappler-story-independent-

journalism-impact

https://www.rappler.com/nation/38290-rappler-third-top-news-site-alexa

http://citeseerx.ist.psu.edu/viewdoc/download?doi=10.1.1.689.4348&rep=rep1&type=pdf

Managerial Economics

Economic Report

Petron Corporation

Rappler
 Submitted by:

Josh David

BSLM 1A

Submitted to:

Miss Farah Reyes

Managerial Economics

06/11/19