Critical Analysis of British Petroleum: Industry, Sector and Competitive Environment

This report provides a critical analysis of British Petroleum (BP) which is among the largest energy companies in the world. It includes an analysis of the oil production industry and sector, as well as the competitive environment of BP. The report covers SWOT analysis, PESTLE analysis, Porter's five forces analysis, and the industry life cycle of BP.

British Petroleum

Table of Contents
INTRODUCTION ..........................................................................................................................1
Overview of the Case ......................................................................................................................1
MAIN BODY...................................................................................................................................1
Critical Analysis of Industry as well as the Sector ................................................................2
Competitive Environment of British Petroleum.....................................................................5
CONCLUSION................................................................................................................................9
REFERENCES .............................................................................................................................10

INTRODUCTION
Strategic management involves a process of monitoring, planning and analysing and
assessing the requirements of an organisation in order to achieve and meet their objectives and
goals. Constant changes in business and its environment will require companies to pervasively
alter their strategies for maintaining growth. It involves leading ways and making efforts in order
to improving the environmental and social impacts of human activities. The company British
Petroleum (BP) is among the largest energy companies in the world established in the year 1909
and headquartered in Westminster, London. This report involves the analysis of oil production
industry as well as the sector. In addition to that it involves an analysis of competitive
environment of British Petroleum limited in order to study its competitive status in the industry.
Overview of the Case
In the year 2021, the petrol stations were halted after the nationwide shortage of supplies
for heavy goods vehicles (HGV). The British Petroleum apologised for the current scenario of
lacking in the supply of fuel in their supply shops in UK. The company explained that some of
their supply sites are temporary being closed due to lack of diesel suppliers and crude oil. It was
found that this situations arise after the meeting among the executives and government from
huge companies about the Britain's supply chain crisis. Another statement which was added by
Downing Street was that there isn't shortage of fuels(Morrison, 2022). This has put more
political pressure regarding the growing demand to take actions to ease shortage of labour and
supply chain during Brexit and pandemic. The companies are planning to create visa schemes
and outsourcing in order to attract workers on farm industries and road haulage firms. But the
situations are threatened by Rod McKenzie of Road Haulage Association, that accused ministers
by dramatic opposition regarding the start of visa schemes in order to attract workforce.
MAIN BODY
Sustainability strategic management process helps an business to accumulate stats of their
prevailing scenarios, planning new strategies and formulating them in to order to analyse and
apply its impact on management strategies. The external and internal environment factors helps
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in providing imperatives for a firm's strategic management approach to sustainability into its
external and internal management aspects(Najib and et. al., 2021)
Critical Analysis of Industry as well as the Sector
British Petroleum Ltd is basically a petro-chemical company which is indulged in
supplying power and fuel across many nations globally. It is among the major companies which
is indulged in world's oil and gas operations and supplying power across many countries in the
world.
SWOT Analysis
It involves the interior and internal review and analysis of an organisation's strengths,
weakness, threats from the external environment and opportunities that have a major influence
on the strategic decisions in the company.
 Strengths : As the company operates in oil business in various multiple places in the
world. It has a string of various subsidiaries and retail brands which are suited at various
parts across the world. The company has various extensions such as BP Express, BP
connect and Burma Control. According to the UK's economy it represents approximately
thirteen to fourteen percent of its exchange index. The British Petroleum in the UK is one
of the major contributors in Lucrative sector which is considered as the barometer
companies in its failure or success of the country's economy. The company has a strong
brand image and customer loyalty and its product covers large market share. Even though
the company has been experiencing rise in its revenue because of increase in gas prices
and oil(Nedumaran, 2020).
 Weaknesses : The company has been in a controversy since a long time due to
collaborative oil pipelines construction in volatile areas which are highly prone to
conflicts, political and environmental concerns. The company has been portrayed as the
criminals of environment and are convicted of harming people's lives. The company has
also faced challenges in relation to harm which caused due to explosions in various
accidents and pipelines in refineries causing a threat to people's life. The company's
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image was highly deteriorated due to consequences of deep water horizon and oil spills.
(O’Brien, Wellbrock and Kleer, 2020).
 Opportunities: The company has various unexplored opportunities as the company has
shifted and moved ways of producing energy since years. The company has focused
towards production of energy through sustainable ways which involves wind power,
hydro power, natural gas and various other ways. The company also comes up with
flexible price policies which will help in competing with its rivals such as Shell, Downing
Street, Shell and Chevron etc. The other opportunities involves expansion into frontier
regions where it could increase strategic crude acquisition and future reserves in other
regions.
 Threats : The company has been affected by various threats that involves changing
behaviour of political outbreaks, people and social changes. All these changes may arise
from various factors such as political dilemmas, accidents and explosions, oil spills,
environmental consciousness, spread destructions, constant lawsuits, gas leakages and
social changes. The company has also indulged in constant competition because of its
competitors such as Shell, Chevron and Downing Street. The company is also facing
severe challenges from Rod McKenzie that is leading to the tensions among the
government policies and corporations regarding the trade activities(Skok, 2020).
Strengths
 Global Presence
 Strong Operational Performance
 Technological Advancements
Weakness
 Harmful for environment
 Life causing accidents
 Oil spills
Opportunities Increase in demand for power and fuel Growth In new locations and regions
Threats
 Concern for safety and security of
people
 Responsible for global emissions
Pestle Analysis
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It is a framework that helps organisation to study the extrinsic and external factors that
prevails in a sector or industry. It involves legal, technological , political, economic and
technological factors that influence the operations in the sector or industry. This tool is important
in order to determine the changes in order to prepare for the purpose to stay in competitive
market.
 Political : The progress of BP and growth of lucrative business depends upon various
political decisions. It involves various factors such as employment regulations, tax laws,
terrorism, global emission, life threatening explosions and other factors. All these
political factors have majorly influenced the operating activities of business(Soeters,
2020).
 Economic : It involves various economic factors that determine how the British
Petroleum operates and arrives at various strategic decisions according to a particular
economic situation. For example, the global market degradation due to COVID has lead
to decrease in company's profit margin. The cost of capital also keeps on fluctuating with
rise in cost of importing exporting energy products and rise in interest rates along with
the changes in economic conditions.
 Social: The changes in awareness and social behaviour has been seen in recent years in
relation to their awareness in terms of environmental awareness. The increase in demand
for allocation of employee pension funds has raised the cost of company as workers are
likely to live longer. This means that the challenges to tackle rapid environment will also
rise along the coming years(Wei and Khachatryan, 2021).
 Technological : The company has adopted various technologies in business operations.
It has the opportunities and challenges in order to develop renewable, sustainable and
global energy outputs. The company has also adopted digital media and IT for movement
and monitoring of fuel through its long pipelines. The company has a website that
communicates easily with customers in order to solve various issues and crucial
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information towards production of alternate energy sources and adoption of appropriate
technology.
 Legal : It involves those factors which are related to allegations and severe cases on the
company regarding gulf of accidental explosions and Mexico spills which are life
threatening. Moreover, the company has violated certain regulations and norms regarding
its total commissions and not withstanding the pledge towards Net Zero 2050. Along with
these various other countries has imposed minimum wages that has increased strict
employment laws, health and safety laws causing a rise in the company's expenses.
 Environmental : The tremendous rise in the population of human beings on planet has
aroused the needs for more supply of fuel and energy. Various environmental groups are
continuously rising concerns of environmental degradation that the company is causing.
The company is oppressed with the aligation of violating major human rights and shifting
tribal people from their areas to extend its pipelines in indigenous areas.
Political
 Gulf and EU States supply deals
 Suspected to collaborate with UK
Government
Social
 Contribution to values of society
 Social awareness and growing climate
concerns.
Legal
 Greenhouse gas policy and emission
standards
 Gulf and Mexico oil spills
Environmental
 Renewable energy operations
 Crucial developments needs to lower
carbon emissions.
Economic
 More utilisation of north sea areas
 Offshore investments needs to rise
Technological
 Geographical mapping
 Advancements in Seismic Imagination
Technology.
Competitive Environment of British Petroleum
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Porter's five forces of British Petroleum
Porter's five forces basically includes five forces which include new market entrants,
competitive rivals, power of suppliers, buyer power, threat of substitution.
 Competitive rivals: There are lots of major competitors of British Petroleum which
include Shell, Total, Gulf Coast and many more are major players in this industry. In the
energy industry competitors compete with each other which is based on different factors
which includes product differentiation, economies of scale and fixed and variable costs
for the resources(Alola., 2019). When its about the renewable resources, these
companies are basically in competition with in order to build up the best possible ways
for creating their ways of renewing resources.
 Threat of new entrants: This particular industry is very attractive due to major profits
in the business and due to certain reasons so there will be less threats of new entrants into
this industry because of the high barriers to entry which includes the fixed costs and it is
involved in the investment of establishing an energy resource company. So its not easy
for companies to enter in this industry and compete with big names.
 Threat of substitutes: Substitutes which are present in any industry basically affects the
profitability of a company and in an oil industry biofuels and other resources can also be
substitute for the company. It has been observed that threat from substitutes is kind of
moderate in the case of British Petroleum. Government policies which oppose the use of
fossil duels are threat for any company working in the oil industry.
 Bargaining power of suppliers: There are certain suppliers of British Petroleum which
include suppliers from oil fields, other management, technicians and engineers who are
working on it(Beer and et.al., 2018). Under this case, there are certain big names like
British Petroleum who have an edge over their suppliers as they can bargain with
suppliers because suppliers will not be willing to lose such kind of business. The
countries who possess these oil fields are also the suppliers so in that case countries have
bargaining power over their buyers in terms of their policies.
 Bargaining power of buyers: In the industry of oil, the price of oil totally depends on
the global demand for it. There are certain countries who possess high power and also
developed bargaining power over their supplier. There are certain examples of countries
like USA, China and Japan can use the power to bargain even with its suppliers like
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British Petroleum. When its about daily consumers then buyers have also power too
because its easy for them to switch to another oil supplier that depends on their own
requirements.
Industry life cycle of British Petroleum
Industry life cycle basically consist of four stages which are used in determining the
extent that an industry can produce a range of products. It includes introduction stage, growth
stage, maturity stage and decline stage.
 Introduction Stage: Under this stage, customers demand is limited due to limited
awareness about the new product features and performance as well. There is also lack of
complimentary products which add value for the customers which is limited through the
profitability of new product(Gao and et.al., 2019). Companies at this stage generally
likely to generate very low revenue and also experiences negative cash flows and profits
as well. In context to British Petroleum, it has not operated in various countries and also
customers are also not aware about it in well mannered way.
 Growth Stage: Under this stage, products start slowly getting its attraction from a bigger
market segment and industry starts to move on their growth stage where profitability
starts to rise. When there is improvement in product features then it increases the value to
its customers. In this stage, complimentary products are also available into the market so
now people have greater benefits from purchasing the complements and the products as
well (Peres and et.al., 2016). With context to British Petroleum, it was adopted in the
year of 1982 and it got merged in the year of 1998 with Amoco and this corporation took
the name BP Amoco.
 Shake out Stage: It refers to the consolidation of an industry and there are some business
which got naturally eliminated because they are unable to grow along with industry. In
context to British Petroleum, they have to take certain strong steps in order to grow into
positive manner under this industry.
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 Maturity Stage: Under this stage, majority of companies in the industry are in well-
established state and industry has to reach out to its saturation-point. These companies
collectively attempt to moderate the intensity of industry competition to protect
themselves and to maintain profitability by adopting strategies to deter the entry of new
competitors into the industry(Shavarani and et.al., 2018). Companies also develop
strategies in order to become dominant player and reduce rivalry as well. In context to
British Petroleum, they have passed many stages in terms of growth and development
they have involved in many projects and faced many challenges in order to reach this
stage into positive manner.
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Illustration : Industry Life Cycle
Source : iEdu Note

 Decline Stage: It is basically the last stage of industry life cycle where the intensity of
competition in declining industry depends on certain factors which include speed of
decline, height of exit barriers, and the level of fixed costs as well(Topcu and Payne.,
2018). In order to deal with decline, there are certain companies who might choose to
focus on the most profitable products and services in order to maximise the profits. In
context to British Petroleum, there are lots of competitors of this company so in order to
stand competitively into the market or do not reach to declining stage they have to
perform into out of box manner so that they can give tough competition into the market.
CONCLUSION
It has been conclude in the above report about the strategic management and
sustainability practices that helps an organisation to continuous plan, analyse, monitor and assess
the requirements of an organisation to meet and achieve their goals and objectives. The report
has been presenting an lucrative organisation that is dealing with the challenges from exterior
environment forces. The reports has presented an critical analysis of sector or industry in which
the company operates. With the help of strategic tools such as SWOT and PESTLE the analysis
of company's interior and exterior forces affecting its business are presented. The report had also
been covering an competitor analysis of British Petroleum with the help of Porter's Five Forces
and industry life cycle.
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REFERENCES
Books and Journals
Alola, A. A., 2019. The trilemma of trade, monetary and immigration policies in the United
States: accounting for environmental sustainability. Science of The Total Environment,
658, pp.260-267.
Beer and et.al., 2018. Renewable energy sources as an attractive element of industrial tourism.
Current Issues in Tourism, 21(18), pp.2139-2151.
Gao and et.al., 2019. A hybrid strategy combining minimized leading-edge electric-heating and
superhydro-/ice-phobic surface coating for wind turbine icing mitigation. Renewable
Energy, 140, pp.943-956.
Morrison, A.M., 2022. Marketing. In Encyclopedia of Tourism Management and Marketing.
Edward Elgar Publishing.
Najib, M. and et. al., 2021. Application of SWOT-AHP to develop organic food marketing
strategy. Academy of Strategic Management Journal, 20(1). pp.1-8.
Nedumaran, D.G., 2020. Consumer Perception and SWOT Analysis of Organic Food Products.
O’Brien, D., Wellbrock, C. M. and Kleer, N., 2020. Content for free? Drivers of past payment,
paying intent and willingness to pay for digital journalism–a systematic literature
review. Digital Journalism, 8(5). pp.643-672.
Peres and et.al., 2016. The deepwater horizon oil spill and physical health among adult women
in Southern Louisiana: the women and their children’s health (WaTCH) study.
Environmental health perspectives, 124(8), pp.1208-1213.
Shavarani and et.al., 2018. Application of hierarchical facility location problem for optimization
of a drone delivery system: a case study of Amazon prime air in the city of San
Francisco. The International Journal of Advanced Manufacturing Technology, 95(9),
pp.3141-3153.
Skok, N., 2020. INTERNACIONALIZACIJA PODJETJA KOZMETIKA AFRODITA doo NA TRG
NEMČIJE (Doctoral dissertation, Univerza v Mariboru, Ekonomsko-poslovna fakulteta).
Soeters, J., 2020. Management and military studies: Classical and current foundations.
Routledge.
Topcu, M. and Payne, J. E., 2018. Further evidence on the trade-energy consumption nexus in
OECD countries. Energy Policy, 117, pp.160-165.
Wei, X. and Khachatryan, H., 2021. Analyzing growers’ pest management decisions in the US
ornamental horticulture industry. Journal of Cleaner Production. p.127788.
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