Porter Diamond Model In The Context Of Oil And Petroleum Industry :

Factor conditions:
The Pakistani oil and gas industry's factor conditions, which include labor, capital,
infrastructure, land, and natural resources, may be divided into two categories: KEY elements
like skilled labor, and NON-KEY factors like raw materials and land. According to Porter,
Key-Factors are created rather than inherited, and they can help to create and sustain
Competitive Advantage for a longer period of time because they are more difficult to imitate.
The Pakistani government creates Key-Factors such as Skilled People through various
Training and Education programs, intervening through the Ministry of Education for the
formation of a new generation of skilled professionals trained in the latest technologies,
because Technology plays the most important role. When applied to Pakistan's lack of oil
resources, Porter's Factor Disadvantage forces companies to become more competitive,
cutting waste and developing more innovative processes, gaining more profit from process
innovation rather than product innovation, while maintaining the same given and limited
resources. In terms of global competitiveness, Porter's factor-conditions teach us that nations
succeed in industries where they excel in creating Key-Factors, thus they first establish
specialized factors, then update them to maintain and extend the organization's competitive
edge.

Related and supporting industries:

Another important factor to consider is how related and supporting industries in the oil and
gas industry contribute to competitiveness. For example, when suppliers are competitive with
their product range and are located close to the firm, they help to provide better quality
through high interaction, which the geographical proximity makes faster and more effective,
breaking any language or time barriers that may exist. Geographical proximity can help you
compete more effectively with your clients. For example, the shorter the Fuel/Gas
distribution channel, the cheaper the delivery costs, and this "reduced cost" might be a barrier
to entry for international suppliers who will have to bring their product in from abroad,
incurring additional transportation and import duties.
Government:
From the foregoing, we can see how Porter's diamond model works in the Pakistani "oil and
gas" industry. The Pakistani government acts as a catalyst and challenger to the organizations
in its oil industry, encouraging them to innovate more and expand their activities. To do so,
the government takes various approaches, one of which is to avoid government intervention
in factors and currency markets, where government intervention should be limited. In
addition, the Pakistani government enacted a number of rules and regulations concerning
worker safety and environmental concerns. The government has also limited cooperation
between Shell and ENI Pakistan, among others, in order to keep innovation powered by
competition and save on resources waste and lowering R&D costs, as well as cooperation in
resource optimization. On the other hand, the government has deregulated competition in
order to avoid monopoly power and keep competition, as well as prevent any fusion or
merger between firms, by enforcing strict anti-trust laws and limiting firm power and political
influence.

Firm Strategy, Structure and Rivalry

The organization's strategy, structure, and rivalry are the final elements to consider in Porter's
Diamond; strategy in Capital Markets refers to the type of investment, whether it's short or
long run outlook; in the case of Oil, it's always Long-Run Outlook, which means it's distinct
from short-run types such as equities. While in the computer industry, you can produce, sell,
and profit in a short period of time, in the oil and gas industry in Pakistan, you must first
conduct a geological search, then quantify the underground oil/gas to determine whether it is
worth extracting or not, because the cost of doing so is a significant portion of the
government's overall budget, The extraction plants must then be erected, which involves
significant upfront expenditures, after which the extraction will begin, the product will be
refined, and finally the product will be sold, resulting in a considerably delayed profit cycle.
The local competition among oil companies forces each company to improve its products,
selling more quality at the best prices in order to sell more in the national economy, as
demonstrated by Shell Pakistan's V-power petrol, which is one of the top fuels in the world
and is also used by Ferrari. These improvements will also be beneficial when selling globally,
as innovative products can be appealing to the global market. For example: High-octane fuel
designed for supercars that may be used in any vehicle, such as a Honda or Toyota... Also,
the development of special formulas for engine lubricants that will work on any car model
and in any country was made possible by national rivalry, which acts as an engine for
innovation, so that firms can become very efficient, especially in the case of our local oil
market in Pakistan, and can be innovative using the best and newest technologies in order to
compete.
Demand Condition
Moving on to Demand Conditions, we will see how the local sophisticated demand market
for oil causes companies to deliver higher quality and innovative types of products. An
example can be seen with car-engine lubricants, which generate a sophisticated market
demand due to the variety of weather conditions "from snow in northern Pakistan to hot
summer in the interior side," and in response to this demand, big national companies such as
Total, BHP, and others deliver higher quality and innovative types of products, we deduce
that the sophisticated market demand had contributed to the creation of a competitive
advantage effective in playing an important role in the global competition of local companies
with foreign companies across borders, such as northern Europe and the countries where we
have such similar weather conditions.