British Petroleum Internal Analysis

This report provides an internal analysis of British Petroleum (BP), covering its key business strategies, resources and capabilities, and implementation of environmental sustainability. It discusses Porter's Generic Strategies, VRIO, RVB Model, and more. The report also highlights BP's focus on low carbon electricity and energy, convenience and mobility, and resilient and focused hydrocarbons. It further examines the company's value chain and support activities, including its financial resources and technology.

British Petroleum
Internal analysis

Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
Key business strategies of the organisation............................................................................3
Resources and capabilities of the case study..........................................................................5
Implementation of environmental sustainability on British Petroleum (BP).........................8
CONCLUSION................................................................................................................................9
References:.....................................................................................................................................11

INTRODUCTION
Business sustainability is also known as the corporate sustainability as it refers to the
coordination of management with the several environmental factors in order to enhancing the
success. In simple words, the sustainability is defined as the performance of business activities
without any negative impact of environment, society or community. COVID-19 has bring several
of changes in the business world and disturb their sustainability as the organisations are effected
negatively. British Petroleum is the selected organisation for this report which is a multinational
oil and gas company having headquarters in London, England, United Kingdom. It was founded
by William Knox D'Arcy Charles Greenway in 1909. BP is performing their business operations
with approximately 18700 service stations all over the world (Lin and et. al., 2018). This report
deals with the key business strategies of organisation with related frameworks of changing
strategy, resources and capabilities of organisation. Furthermore, it also cover the
implementation of environmental sustainability theories and science.
MAIN BODY
Key business strategies of the organisation
Low carbon electricity and energy – building scale in renewable and bio energy, seeking
early positions in hydrogen and CCUS, and building out a customer gas portfolio to complement
these low carbon energies.
Convenience and mobility – putting customers at the heart of what bp does, helping
accelerate the global revolution in mobility, redefining the experience of convenience retail, and
scaling BP’s presence and fuel sales in growth markets.
Resilient and focused hydrocarbons – maintaining an absolute focus on safety and
operational reliability, we intend to continue to high-grade the portfolio, resulting in significantly
lower and more competitive production and refining throughput. British Petroleum will not seek
to explore in countries where it does not already have upstream activities.

Porter's Generic Strategies
In order to achieving the organisational goals and objectives, the management is required
to develop effective strategies. There are several of strategies which are develop on the basis of
needs of business. It has been found that Porter's generic competitive strategies is a tool which
leads to the growth and profitability of organisation. It include three strategies and the
organisation have to select any one to take the advantage of competition. Below mentioned are
several strategies which comes under Porter's generic strategies:
 Cost leadership: It refers to the strategy under which the organisation work for the
purpose of decreasing their costs. The main purpose of this strategy is to maintain the
same prices as their competitors have (Lin and Wu 2021). It result in the increase in
earning of profit without doing investment of more money. Another option of
maximizing the cost leadership is to lowering the selling point. In this case, the cost of
prices are already low which state that the company is earning a decent profit.
 Differentiation: The adoption of this strategy means the business organisation wants to
find out something different in their products or services which can make them
different from their competitors. Under this, several of organisation rebrand or develop
new products with specialization for the purpose of offering the products top the
customers with their existing brand. By introducing the attractive products which are as
per the demand of customers, the organisations can charge the premium prices for the
same products which are found as higher than their competitors (Lei and et. al., 2019).
 Focus: It refers to the strategy which provide the options of using cost leadership or
differentiation within the specific market. It means that the business organisation wants
to develop the value of product along with generating the loyalty of products on the
basis of specific customers. In order to gaining the profit and making a positive brand
image in the future, it is necessary for the organisation to develop a base of clients
which remain loyal to the business organisation.
Differentiation strategy can be applied in an organisation by developing the product or services
unique into the industry. Such products have been viewed by the target market to make the
product more superior and higher quality as compared to the competitors available in the market.

It has been found that BP has successfully achieved the strategy of differentiation as its product
development strategy as it use the
Resources and capabilities of the case study
The strategies that are used by a company in achieving its goals, objectives and mission are
usually formulated from matching the company’s resources and capabilities to the opportunities
in the external environment. A company’s resources and capabilities therefore play an important
role in formulating the business strategies that will be used by the company. Since the external
environment of a business is usually unstable and uncertain, the internal resources and
capabilities of a company are usually considered when formulating business strategies. The
resources of a company are different from the capabilities of a company in that resources are the
productive assets owned by the company while the capabilities of a company are what the
company can be able to do. The resources of a company are divided into three categories which
include the tangible resources, intangible resources and human resources (Keramatikerman,
Chegenizadeh and Nikraz 2018). Tangible resources include financial assets such as cash
securities, capital, and borrowing capacities as well as physical assets that include equipment,
land, and mineral resources. Intangible resources include aspects such as brands, corporate logos,
patents, trade secrets, trademarks while human resources refer to the skills and knowledge
needed to perform business operations. The capabilities of an organization are the capacity and
ability of the organization to use its tangible, intangible and human resources to achieve a desired
outcome. “The approaches that are used in knowing a company’s capabilities include practical
analysis where ability are identified according to the principal functional areas of the business
and the value chain analysis where the activities of the firm are divided into a sequential chain”.
The resources of BP have been divided into the threshold resources and the unique resources.
The threshold resources that are owned by the company include its strong financial resources
which include its ordinary shares that have a value of $136.20 as of 2008 and its American
depositary shares which have a value of $8.17 as of 2008.
VRIO
The aim of this analysis is to examine how the competitive structure of the energy industry
affects the actions of oil companies in their attempt to achieve sustainability (Roles Yarnold and
et. al., 2020).

 Threat of new entrants:The threat of new entrants highlights the fact that the
profitability of an established firm within an industry sector can be influenced by new
competitors. The extent of this threat relies upon the barriers to entry and the responses of
existing competitors. Despite the attractiveness of the energy industry, the threat of new
entities coming in is very low (Rugman and Kudina 2017). This is mainly due to high
barriers to entry, such as fixed up-front cost of investments linked to the activities
performed by the oil industry, cost disadvantages for new entrants in production and
transport of oil, and inability to control the production costs at each stage of the chain .
 Bargaining power of buyers: The bargaining power of buyers refers to the power of
buyers in forcing down prices, high quality product demand and struggle among
competitors. In the energy industry the price of oil is fixed internationally and relies upon
the economic relationship within global demand and supply. A degree of power can be
exerted only from high-consuming countries, such as USA, Japan or China, with their
significant demand. The standard and undifferentiated product and the impossibility of
switching costs lock buyers into a relationship with just a few sellers.
 Threats of substitute products: The substitute products restrain the profitability of the
industry inasmuch they influence product pricing. Substitutes in the oil industry include
biofuels and renewable resources. The threat from these alternative sources is quite low
since they are still in an expansion process. However, oil is an overriding and
predominant source of energy in many sectors such as transportation and industry.
Compared to other fuels, the price of oil is low (Buckingham-Howes and et. al., 2019).
As both drilling and exploitation technology develop apace, there is reduction in costs,
and oil is set to remain one of the cheapest sources of energy in the near future. However,
governments around the world are adopting polices that seek to protect the planet by
discouraging the use of fossil fuels. This of course represents a threat for the oil industry.
However, it is evident that the threat from substitute products is currently at medium
level.
 Bargaining power of suppliers: Suppliers can influence the future of firms by
increasing prices or reducing the quality of the product or the services they offer. The
power of the suppliers increases when they are small in terms of numbers, when they are
more concentrated than the industry to which they sell, and when they provide crucial

input to different industries for which substitutes exist. Energy companies are surrounded
by a complex chain of suppliers, such as oil fields suppliers, engineers, field development
management, organisational management, pipeline installers, researchers, and quality
specialists. Oil producing countries also possess a relevant bargaining power since
without permits to exploit national territory the survival of these industries would not be
feasible (Santoso Hoteit and Vahrenkamp 2019). The nature of this complex number of
suppliers provides the energy companies with a choice from a wide range of dealers,
which drastically reduces their bargaining power.
 Rivalry between established competitors: Competition among single firms determines
the general level of profitability and the overall state of competition of the whole
industry. The degree of competition between firms revolves around the interplay of five
factors: seller concentration, diversity of competitors, product differentiation, excess
capacity and exit barriers, scale economies and ratio of fixed to variable costs.
RVB Model
The alignment or use of resources and capabilities to shape business strategies of the
company shows that BP placed a great emphasis on infrastructure and profit growth by building
its resources and through partnering and strategic alliances. BP has built its larger base by
organizing around the smaller business units and the company has several smaller business units
that work together and the resources are available easily and quickly. The company follows a
decentralization strategy with its various units having independent operations although there are
differing views on whether this has been particularly helpful or led to original thinking. New
approaches to BP business showed how the BP business could successfully steer through crises
although the recent focus has been on BP’s strategy towards climate change (Azzuni and Guzey
2018).
Considering the changes in BP strategy, it has been noted that BP had a politicized bureaucracy
managed matrix structure and with the complexity performance declined and the company faced
financial crisis. In recent years however BP has reported highest profits $4 billion in the third
quarter of 2004 alone. The high prices of crude oil added to the profits although the company’s
cost efficient operations were key to strong performance. The company also absorbed two oil
companies Amoco and Arco and other companies and the acquisitions helped in the expanse and
scope and several strategic and organizational changes added to the remarkable turnaround in the

company’s performance. BP’s transformation came as it divested unrelated lines of business and
divided business into units with three basic businesses with upstream oil and gas exploration and
production, downstream petroleum refining and marketing and petrochemicals. There were
different functioning markets and the units were run independently adding to the strategic
advantage of the company.
The company presentations showed that the US refining portfolio was fully operational
and US convenience retail helped in reducing marketing footprint with cash costs down by 15%
in 2008. $4billion was invested by the company for alternative energy since 2006 and employee
count was reduced to 7500 and cash costs were also reduced by billions in 2009, bringing down
the overall expenses of the company (Sasic and et. al., 2020).
Among other strategic directions of the company are using solar energy as alternative
energy and fuel and BP has been successfully developing the solar energy potential as one of the
greener sustainable sources of energy. BP corporate strategy has also been focused on issues of
climate change and there are two directions to this strategy. One is the potential advantage in
corporate reputation and image if BP is projected as green and clean company which controls its
business units and functions according to global climate conditions, and the other is the
possibility of a new business model within which BP could work and using of solar energy as
green energy is already a step towards this motive.
Implementation of environmental sustainability on British Petroleum (BP)
The value chain of the company involves analysing the company’s activities that lead to
the production and manufacture of oil and oil based products and what value has been added the
chain. The activities are performed by BP based on the company’s value chain include the
primary and the support activities. The primary activities of the company include oil exploration
and production which involves the extraction of natural gas and crude oil from the oil fields,
inbound logistics which involves the shipment of the crude oil through pipelines, transit lines or
by transportation (road, rail or ship). Operation refining involves the refining of crude oil into
refined oil which is then transported and distributed through the use of outbound logistical
processes such as pipeline and transportation networks.
The support activities are the elements that are used to carryout the primary activities.

 The support activities of the company include its experienced employees who work in the
various divisions of the company, the infrastructure which involves the distribution and
logistical networks that are used to transport crude or refined oil such as the oil pipelines
and the shipping division of BP, technology that is mostly used in the research and
development division of the company which includes purified terephthalic acid
technology, BP Solar, carbon capture and storage technology (CSS) and Bright Water
Technology.
 The company’s financial resources have also been important in its value chain as they
support the primary activities and supporting technology which is used in oil, natural gas
production and exploration as well as the refining and marketing of the company’s
products and related services.
 The strategic fit of an organization deals with how the company’s resources and
operations complement the goals, objectives and strategies of the company. An
organization that has a good strategic fit will be successful in achieving its goals and
objectives through the optimal use of its resources (Aminjonov 2018). BP has achieved a
strategic fit that has seen most of its strategies meeting the company’s goals and
objectives.
The company has been able to achieve strategic fits that have seen it minimizing its production
and manufacture costs through the use of thin film photo voltaic cells and better operational
safety. BP has also been able to achieve a strategic fit through the minimization of corporate
overheads and investing in alternative energy research and development activities. These
activities have seen the company gaining a competitive advantage over other oil companies
within the industry.
CONCLUSION
From the above report, it has been concluded that the British Petroleum is the major oiul
provider all over the world. Financial, human resource and physical are the several strong factors
which make the strong presence of organization. The margins of company are constantly
increasing. Several of business strategies are developed to analyses the internal and external

environmental factors. BP has been viewed to be one of the major oil producers in the world.
The company’s strong financial, physical and human resources enable it to earning high profits
and revenues. The company’s revenues margins have continued to increase over the years as a
result of industry analysis activities and environmental scanning activities. The analysis of the
industry has also enabled the company to develop business strategies that have enabled it to
maintain its growth over the years. Though it is still the third largest producer of oil and natural
gas, the company is gearing itself to be the dominant player as it continues to invest heavily in
safer energy alternatives and renewable energy technology

References:
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