Coursework Example | Topics and Well Written Essays - 1250 words - 1

Coursework Example The company is involved in geological exploration, storage as well as processing and marketing of hydrocarbons. Demand and supply factors As the chosen company operates in the oil and gas sector the demand side factors that can affect sales and the profitability of the company include weather, demographics, economic growth, fuel consumption, storage and the exports potential. From the supply side, the factors which can affect the sales are capacity of the pipeline, storage, gas drilling, issues on technical grounds and imports. The demand follows the cyclical patterns. It also depends on the time and season factors. The demand for the products rises during the hottest months while the demand takes the declining curve during the winter months ((EIA, 2008). The price of the natural gas affects those consumers who have the potential to switch to the fuel of their dependence. The demand that is created by the retail consumers will get affected by the price of electricity. Storage of the produced products is difficult for the companies in this sector and so excess supply cause a fall in the price level. The price is generally set at the equilibrium level as there are several competitors present in the market. Technological advancements can also play a role in the demand of natural gas. The appliances which can be operated through electricity can now be operated through natural gas and this has caused the demand for the product to shoot up. The other barriers that can impact upon the supply of natural gas are availability of skilled labor and availability of well developed systems of delivery. The financial environment can also affect the supply of natural gas both off-shore and on-shore ((Natural Gas, n.d.). Market Structure The consumers can now enjoy the luxury of choice and competition. The price mechanism is beyond the regulations of the government. The price is set by the market by following the usual demand and supply factors. These factors play its role in se tting the price at the equilibrium level. A straight forward market structure characterized the market for natural gas prior to deregulation and unbundling of pipeline. Bundled products are offered by the less developed countries and they play their role in supplying the products to the end users. Marketers serve the purpose of mobilizing the natural gas to end users. (Natural gas, n.d.). The increased liquidity in the market has called for the emergence of non-contract LNG market. The producer owns the gas at well head and sells to the marketers, and less developed countries and even sometimes to the end users. The market faces a serious constraint as it cannot react to the usual changes in demand and supply and requires sufficient time before the adjustment process takes place ((Soligo and Jaffe, p.2, 2004). Requirements to compete in the market The companies that operate in this sector enjoy monopoly power and that is the reason why they tend to be more profitable. The main requi site for the organizations to maintain the profitable position is to avoid preferential as well as discriminatory service. Inefficient investments in other sectors can be avoided. The strategies of unfair pricing would also not help the company to serve the purpose. There is no substitute to quality and so measures to maintain the quality of the products should be undertaken. The