Strategic Management and Sustainability Assessment 1

This report provides a critical analysis of British Petroleum using PESTLE analysis, Industry Life Cycle, SWOT analysis, and Porter Five Force model. It covers the external environment, competitive environment, and internal factors affecting the company's growth and development.

STRATEGIC
MANAGEMENT AND
SUSTAINABILITY
ASSESSMENT -1

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Critical analysis of the British Petroleum company....................................................................3
PESTLE Analysis........................................................................................................................3
Industry Life Cycle......................................................................................................................5
SWOT Analysis...........................................................................................................................6
Porter Five Force..........................................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES................................................................................................................................1

INTRODUCTION
Strategy is defined as the action taken by the management in order to attain the objectives
of the organization. With the changing business environment it is important for the company to
make modifications inn its strategies and adopt the strategies which can help the company to
achieve its long term goals(Ruck, 2019). It provides the managers about the overall vision and
mission to maximize the strength and also to compete in the market.
Strategic management is defined as the description and evaluating the strategies that the
managers of the company carries in order to achieve the objectives of the company. For the
effective functioning of the organization, the manager should have knowledge about the
organizational structure and environment. Strategic management is the process of planning for
the future uncertainties a risk which can impact the organization and helps in implementing the
right strategies for the long term sustainability in the competitive environment(de Waal, 2021).
The report covers PESTLE analysis and Industry Life Cycle of the British Petroleum and also
the competitive environment using SWOT Analysis ans industry five force model.
MAIN BODY
Critical analysis of the British Petroleum company
British Petroleum is the world's third largest energy company headquartered in London. It
was founded in 1990 as the Anglo-Persian Oil company and has evolved as the multinational oil
company. It is also listed in the London Stock Exchange. The evaluation of the British Petroleum
is done with the help of ascertaining its external environment that is through Pestle analysis and
industry Life Cycle.
PESTLE Analysis
PESTLE analysis is one of the strategic tools and gives the idea about the various
operating challenges the oil and gas industries face. It includes various political, economic,
social, environmental and legal factors that affects the industry.
 Political factors:Political factors plays a very important role which determines the long
term profitability in a market. The oil and gas company operates in many countries and
are exposed to different political policies, regulations taxation laws strict employment
regulations and competitive rules in the country(Capobianco, et.al, 2021). The success of
the industry and related company depends upon its political environment prevailing in the

country. In the give case study, it was observed that the industry was facing the issue of
supply chain and the government was fully supporting the industry and also the Road
Haulage industry in order to control the crisis. Brexit has also forced the government to
various changes in the regulations as various sectors was affected due to the Brexit.
 Economic factors:The various macro economic factors includes the inflation rate,
Interest rate, foreign exchange rates of the economy. The recession phase affects the
profit margin of the company and the cost of capital is affected by the fluctuation in the
interest rates. The overall development and expansion of the company is affected by the
fluctuations in the economy(Naime, and Bisson, ). The economic system differs form
country to country and on the hand the government intervention hinders the functioning
of the oil and gas market. During the inflationary phase the prices of the products
increases which will result into increases in the expenses of the worker, so the workers
will demand increased compensation, This will led to higher operational cost for the
company which will affect the revenues of the company.
 Social factors: The culture of the organization is affected due to changing culture in the
society. With the increase in the population of the country results in the increase in the
demand of the company oil products but due to the supply chain crisis, the industry id not
able to fulfil the demands of the consumers which can impact the industry.
 Technological factors: Technological factors is considered as an important factor for the
long term sustainability of the industry. The company should use the latest and upgraded
technology for providing better services to its customers and also to reduce the crisis the
industry faces. The oil and gas company has faced various issues such as developing
global energy innovative products and many companies use the new and advanced
systems to monitor and movement of the oil in the pipelines. The effective and upgraded
use of systems can increase the efficiency of the company to deliver its oil products in the
countries. The company has also developed their website to resolve the customer related
issues and are also focused on investing in research and aims at adopting new and
appropriate technology for the effective functioning of the company.
 Environmental factors:Every country has its own environmental laws which focus on
protecting of the environment. The various norms and environmental standards affects
the profitability of the industry. The various environment factors such as climatic change,

weather,laws regarding environment pollution affects the business. The changed attitude
of the customers towards the climate change can impact the overall performance of the
company. The industry is more focused on minimizing the environmental pollution and
making eco- friendly environment.
 Legal factors:Laws are the set of rules and regulation enacted by the government for the
welfares and protecting of the society. These laws are enforceable by the court of law and
are binding on the citizens of the country(Tsangas, et.al, 2018). The provisions of the
laws are mandatory for every company to follow. The various Employment Laws and
Equality Act has affected the operations of the industry. Various health and safety laws
have been enacted for the protection of the rights of the employees working in the
industry.
Industry Life Cycle
An industry cycle defines the different stages where the company operates and also
picture the duration of the company in an industry from beginning to the end. It shows hoe the
company came into the market and experienced growth, its success and when the company faced
decline in its sale and profit. It helps the business to forecast its growth and also helps in
differentiating the services from their competitors. The industry life cycle is divided into 5
stages:
 Introduction
 Growth
 Shakeout
 Maturity
 Decline
The stage of the industry life cycle: Introduction stage:This stage is called the start-up stage where the business has been
established and emerged in the market. Due to the new brand, the customers are not
aware about the products and services the company offers in the market which results
into low demand for the products and services of the particular company(Xu, and
Liu,2019.). The management of the company should focus on spreading the information
about the brand to its target market by using the strategies such as advertising and

promoting about the products and services offered by the company. Companies at this
stage tends to generate low revenue and profits in the beginning.
 Growth stage:At this stage the growth of the company tends to increase as more and
people are getting aware about the products and services offered by the company. The
company focuses on improving the products of the company and also provide
complementary products are also made available in the market so that people gain more
benefits from the products of the company(Roberts, et.al, 2020). At this stage, the
companies tends to notice rise in the profits and positive cash flows. The number of
competitors also increases in the market. The oil ans gas industry is currently is at this
stage where the demand for the product is high in the market.
 Shakeout stage: During the shakeout stage, the growth of the company slows down. In
this stage, the efficiency of the company decreases as the organization are unable to grow
such as use of former technology, not making modifications in the management process
etc. This results in negative cash flows generated by the firm. The other reason for the
closure of the business that the companies merge with their competitors. The high
intensity of the competitors also reduces the profitability of many companies as they cut
the prices of their products and provide better services.
 Maturity stage: At this stage, the number of companies in the industry are well-
established and reaches its peak and the market structure tends to be dominated by the
few dominant firms in the market(Kleinekorte, et.al, 2020). The company focuses on
increasing its sales and use the strategy to either attract the customers of their
competitors. Companies after reaching to their saturation point try to acquire their
competitors to maximize and strengthen their market position.
 Decline stage:It is the last stage in the Industry Life Cycle in which the growth of the
company decreases as result of the changes in the external factors such as competitors,
technological changes etc. In this stage, the company focus on acquiring the weak
companies in order to become dominant player in the market.
SWOT Analysis
This tools is a part of strategic analysis that help the organization in identifying the external
and internal factor that can affect the overall growth and development of the firm. Along
with this, it helps in analysis the strengths and weakness and opportunity as well as threat.

Furthermore, it plays important role in making appropriate strategic business plan that
contributes in sustaining in the competitive market.
Strengths: The British Gas company has good brand image in the market and due to that it
attracts large customer that contributes in increasing the overall sales of the firm in the
market. Along with this, it major strengths is that it has taken advantage of innovative
technology and it was one of the first company to introduce mobile controlled heating and
electricity generating boilers in the market of UK. Due to making use of innovative
technology it has attracted large customer and stayed head from the competition. Moreover,
the company has also taken initiative like consultant advices for energy management with
help of efficient invoice billing system (Abdel-Basset, Mohamed and Smarandache, 2018).
That has contributed in saving the operational cost of the firm as it was a very cost effective
method. In addition to this, for building brand awareness organization has been involved in
sports programme and support British team. Due to participating in various event across
country has helped the firm in building good brand image. Along with this, it manufacture
multiple products such as home appliances , gas and electricity boilers. Because of variety in
product development organization was able to increase their sales and has cover large area of
market.
Weakness:
The organization major weakness is that it is mainly depended on wholesale market an due to
that it is not able to cover large area of market as well as it has to spend more in purchasing
the raw material. However, if organization has its own manufacturing department it will cost
effective for company (Longhurst and et.al., 2020.). Along with this, the brand image of the
company was damaged as British government has raised the tariff prices this has result in
losing the potential customer and affected the overall growth of organization. In addition to
this, due to raise in price of residential energy it has lead to slump in customer base.
Opportunity:
The British Gas organization has an opportunity to expand its business in market of UK in
both residential and commercial market for electricity and gas. Along with this, there is a
huge need for smart app likewise Hive. However, firm can make use of advance
technology in order to develop product and services (Leiber, Stensaker and Harvey, 2018). If it
use digital marketing it can cover local markets of UK and increase its potential of serving

large customer as well as across the market of Europe. In addition to this, it can develop
optimistic energy policies in the forthcoming years to come.
Threats:
The major threat of British Gas is the rising power cost in the north sea area and the weak
economic for the gas generation and storage in UK. This can affect the overall growth of the
firm and organization has to search for new market area in order to sustain. Another threat
that company can faced is increase in prices of wholesale gas and electricity prices and due
to that firm has to increase their own selling price because of that organization will lose
the potential customer (Falcone and et.al., 2020.). In addition to this, the existing government
regulation on the retail energy sector has also affected the growth of the firm such as due to
BREXIT organization was not able to trade in that area. Furthermore, the organization has
faced the threat of COVID 19 and because of this there was huge loss as government has
banned the trade as well as there was shift in taste and demands of the customer while
purchasing it was only purchasing essential goods and services.
Porter Five Force
This model helps in identifying and analysing five competitive forces that shapes every
industry as well as helps in determining an industry weakness and strengths. Moreover, it is
mainly used to analysis the industry structure so that organization can implement corporate
strategy (Kamran, Fazal and Mudassar, 2020). Along with this, it can apply to any segment of
the economy to understand the level of competition within the industry and enhance a
company long term profitability. In addition to this, it is consist of five force such as
competition in industry, potential of new entrants into the industry, power of supplier, power
of customer, threat of substitute products.
Competition in the industry: This is the first of five force that refers to the number of
competitors and their ability to undercut a company. The larger the number of competitors
there will be equivalent products and services they offer. However, if there will be more
number of product then the power of company will decline (Wang and et.al., 2019). The
supplier and buyer measure the product with the other competitor and adopt for the offer
related to lower price. On the other hand, of the competition is low then British Gas will be
selling the product at higher price in order to earn large profit.
Power of supplier:

It can also affect the inputs and cost a company to switch to another supplier (Wati, 2018).
Along with this, if there is few supplier to an industry the more organization has to depend
on supplier. However, if there is more suppliers then there will low cost switching between
rival suppliers.
Power of customer:
The ability of the customer can drive the price of the product and services. Along with this,
if there is smaller and more powerful client base means British Company has to negotiate for
lower prices and better deals (Culot, Orzes, Sartor and Nassimbeni, 2020). In addition to this,
the organization with small customer base has to charge higher prices to increase their
revenue.
Threat substitute:
This is the last stage of five force that focus on substitute. This can be major threat for the
organization as it can reduce the sales and profit of the company. Along with this, the British
Gas has to lower the price of their product in order to run their business.

CONCLUSION
From the above report , it can be concluded that it is very important for the company to
make proper plans and strategies according to the changing environment in order to achieve the
goals and objective of the company. It also helps in segregation of the organizational activities
for the long term sustainability of the organization in the market. The strategies deal with the
long term development of the company rather than daily operations of the business. Strategic
management helps the company to improve its performance and also to gain competitive
advantage in the market industry. The report summarizes the various external factors such as
political, economical, social, environmental and legal factors that affects the company, Industry
life cycle is done. SWOT analysis, Industry Five Forces model is also used to analyse the
competitive environment of the industry.

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