Oil and Gas Joshua Feira Robin Groce Donald

Oil and Gas Joshua Feira, Robin Groce Donald Hoag, Yimin Jiang, Eungsang Kim

End to End Suppliers and Intermediaries End to End Suppliers n n n BP Exxon Shell Sunoco Texaco Intermediaries n n B 2 BNow Energyprism Freemarkets Oil. And. Gas. Online

Illustration of Contrast n End to End Suppliers n n “We're in all aspects of the energy business - from exploration and production to distribution, refining and marketing. ” (Texaco) Intermediaries n “We conduct online auctions for industrial parts, raw materials, commodities and services. ” (Free. Markets)

Contrasting Screenshots Instance of Variable Price Sale by Intermediary (Free. Markets) Instance of Fixed Price Sale by End to End Supplier (Texaco)

Defining The Market n n n Oil and Gas industry projected to employ 255, 000 by 2008 (Bureau of Labor Statistics) Oil and Gas extraction was $90. 1 billion industry in 1997 (Department of Commerce) Sunoco produces 730, 000 barrels of crude oil per day “We operate in 100 countries, on six continents, and serving 10 million customers every day. ” (BP Amoco) “We auctioned nearly $1 billion worth of purchase orders in 1998. ” (Freemarkets)

Basics n Visitor browses product catalog n n n Visitor purchases items n n n End to end suppliers are fixed price Intermediaries tend to be auctions At intermediaries, visitor can sell items n n Texaco has around 600 products on-line Freemarkets has over 3000 suppliers Freemarkets has no charge to register or list items At intermediaries visitor provided more informational services n Consulting, industry news, updated pricing

Who Are the Customers? n Aviation community n n n Driving fleet managers Franchisees hoping to open gas station n Texaco details Star Mart opportunities Shareholders and investors Process management consultants n n Texaco has subsite devoted to aviation customers Oil. And. Gas. Online has Consulting Services product center Oil exploration companies n Energy. Prism offers Exploration Center

Attracting Customers n Net events n n Sponsoring sporting events n n n Texaco Foundation awarded $500, 000 to music education Energy Industry Career Center (Energy. Prism) n n US Olympic Team Texaco/Havoline Racing Team Establish grants and foundations n n Ricky Rudd chat at Texaco’s site Post resumes and browse opportunities Few consumer incentives n No gasoline coupons or discounts

Network Externalities n n Value of intermediaries increases as number of suppliers and buyers increases Especially valuable to small to mid sized buyers and sellers n n Lack the brand name recognition of largest companies Achieve inexpensive distribution channel

Value Proposition n Value proposition of end to end supplier web site is to educate customer about products n n Texaco offers Kern River environmental case study Value proposition of intermediary is to unite buyers and suppliers n n Free. Markets “saved buyers an estimated 2% to 25%” in 1999 Intermediaries give suppliers a global reach

Value Added n Case studies on environmental issues n n News stories relevant to target customers n n Soothe consumer fears of oil & gas companies destroying environment Texaco offers NASCAR results and standings Relevant industry information n n Advice on acquiring industry consulting (Energy. Prism) Real time market pricing information Environmental news Suppliers directory

Customer Retention n Loyalty programs n n Privileges for customers n n Texaco Star Faire Program gives aviation community Star Cheques for every 50 gallons of fuel purchased Texaco “Prop and Goggles” newsletter for aviation customers Sunoco Direct web pages for registered customers Credit cards for driving fleets Personalization of web pages n Energy. Prism offers Eprism company homepages

Sample of Site Privileges Members only site adds online value to being Sunoco customer

Future Directions n Decrease startup costs n n n End to end suppliers transition to web based systems n n Free. Markets has large customization process Offer less customized interface that customer can immediately use Challenge is switching from legacy EDI systems Sites must reduce complexity of interfaces