The five forces model of Porter (1980) is an excellent tool to gauge industry attractiveness. In the following, each of the five competitive forces will be analyzed.
Threat of New Entrants
In order to compete in the industry, much capital is needed. The cheapest option would be a helicopter starting at 200.000 Euros for a smaller aircraft. A differentiated system costs around one million Euro’s, material usage only. Furthermore, in order to operate these systems, specialized knowledge is needed. Finally it can be said that reputation is of crucial importance in the offshore access industry. The result of all of this is a high entrance barrier what leads to a low threat of new entrants.
Threat of substitutes:
Substitutes of the differentiated system like the helicopter and the jack-up platform are still often used in the conservative offshore oil and gas industry. However the offshore access system has a competitive advantage because of its fast installation on location. In this way the offshore access companies can provide longer working hours of engineers on the platform, than helicopters. Therefore it is concluded that threat of new and existing substitutes is medium.
Bargaining position of customers
Clients generally prefer a safe way of offshore access even at higher cost, so price plays a minor role. Most of the clients in the offshore access industry are highly-profitable companies that could afford a vertical integration. Switching costs are low, but customers refer on personal experience. The bargaining position of customers is medium high, mainly because of the very few customers.
Bargaining power of Suppliers
The number of suppliers is limited. Materials are highly customized for systems. Each supplier provides only a few components for the system but do not only rely on this industry. Vertical integration is not interesting for the suppliers. Firstly, they would still have to purchase too many components, which makes it complicated and expensive. Secondly, the offshore access industry is much differentiated to the ones of the suppliers and demands specialized knowledge. All in all, the arguments show that the bargaining power of suppliers is high; the industry depends strongly on their supplier’s performance.
The few companies in the offshore access industry build a structure as oligopoly. However the companies face exit barriers. The service and the products the industry provides are highly specialized. The investments for their products are very specific to this industry. It is unlikely that firms exit the industry in order to gain profit in another industry. Rivalry between similar services or products plays a minor role, due to the fact of the growing market. Therefore it is concluded that competitive rivalry is rather low.
Everything taking into account, the industry currently has high attractiveness. Although it is extremely hard to compete for new entrants because clients are price insensitive and materials are highly customized. It is expected that industry attractiveness will decrease. The reason for this decline is the launch of substitutes like the offshore access system. So the industry serves a growing market although the attractiveness of the industry will decline.