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Halliburton Is Buying Baker Hughes For $34.6 Billion

760 words - 4 pages

On Monday November 17, the Halliburton Corporation announced that they will be buying Baker Hughes for $34.6 billion dollars. The Halliburton Company is the world’s second largest oil field services and production company, specializing in delivering a wide variety of products and services ranging from exploration, development, and the production of oil and gas, to oil and gas companies the world over, with locations in 80 countries, and over 80,000 employees representing 140 different nationalities Kelley, 2014). Baker Hughes, interestingly enough was Halliburton’s number three ranked competitor.
Halliburton’s SWOT analysis
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Porter’s five forces model of the Halliburton Company

* The threat of new entrants is low; this in turn is caused by the high capital investments needed in building a startup company. Another reason attributes itself to the highly specialized skills of the employees, required to operate a successful oilfield services company (Hughes, 2010 a)

* The bargaining power of buyers is moderate. The demand for products and services provided by the Halliburton Company is dictated by the demand from production and exploration oil and gas companies, when they decide that they are going to drill a well. The opposite is true when operating in foreign countries, due to the fact that the land used for oil production and earnings per share are under the control by their respective foreign governments. In this sense the bargaining power of the buyer is high (Hughes, 2010 b)

* The bargaining power of suppliers is low. The raw materials used in the fracking and oil well drilling procedures are readily available, although there are occurrences that place limitations on the supply of sand , and quality metals due the fluctuations in demand. The Halliburton Corporation uses its tremendous buying power in receiving competitive prices for all raw material inputs (Hughes, 2010 c)

Porter’s five forces model of the Halliburton Company
* The worldwide demand for natural oil and gas is the economic driver behind Halliburton’s business model. Although, there a number of alternative fuel sources are readily available, there are no substitutes for...

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