Businessmodel of Kinder Morgan

Customer Segments

Kinder Morgan has a niche market business model, with a specialized customer segment. The company targets its offerings at firms in the energy industry, including oil companies, energy producers and shippers, and local distribution companies.

Value Proposition

Kinder Morgan offers three primary value propositions: accessibility, risk reduction, and brand/status.

The company creates accessibility by providing a wide variety of options. Its pipelines transport natural gas, refined petroleum products, crude oil, carbon dioxide, and more. It handles a variety of materials at its terminals, including gasoline, jet fuel, ethanol, coal, petroleum coke, and steel.

The company reduces risk by maintaining high safety standards. It spends hundreds of millions of dollars per year on integrity management and maintenance programs to operate its assets safely and to protect the public, its employees, contractors, and the environment. Operationally, it claims to perform better than its industry peers regarding environmental, health, and safety measures.

The company has established a strong brand due to its success. It is the largest energy infrastructure company in the U.S. It operates or owns an interest in 84,000 miles of pipelines and 180 terminals. It also claims to be a market leader in each of its businesses – Natural Gas Pipelines, Products Pipelines, CO2, Terminals, and Kinder Morgan Canada. Other rankings include the following:

• Largest natural gas network with 69,000 miles of pipelines. The firm is connected to every major U.S. natural gas resource play, and moves one-third of the natural gas consumed in the U.S.
• Largest independent transporter of petroleum products, transporting 2.1 million barrels of product per day.
• Largest transporter of carbon dioxide, transporting 1.2 billion cubic feet per day.
• Largest independent terminal operator. Its liquids terminals can hold 152 million barrels. Kinder Morgan has also won many honors, including recognition by Fortune magazine as one of the Most Admired Companies in America and as the top firm among all industries for “Quality of Management.”

Channels

Kinder Morgan’s main channel is its business development team. The company promotes its offerings through its website, social media pages, and participation in conferences.

Customer Relationships

Kinder Morgan’s customer relationship is primarily of a personal assistance nature. The company operates its pipelines and transports energy products to its customers.

Key Activities

Kinder Morgan’s business model entails developing energy products and transporting them to its customers.

Key Partners

Kinder Morgan’s key partners are the suppliers that provide it with the materials and equipment it needs to manage its operations.

Key Resources

Kinder Morgan’s main resources are its physical resources, which include the 84,000 miles of pipelines and 180 terminals it operates. It also maintains important human resources in the form of the employees who develop and transport its energy products.

Cost Structure

Kinder Morgan has a cost-driven structure, aiming to minimize expenses through significant automation. Its biggest cost driver is cost of sales, a variable expense. Other major drivers are in the areas of operations/maintenance and administration, both fixed costs.

Revenue Streams

Kinder Morgan has two revenue streams: revenues it generates from sales of natural gas and other products and revenues it generates from sales of related services to customers.