Competitive Strategy Assignment : BP Plc

COMPETITIVE STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................3
MAIN BODY...................................................................................................................................3
History of BP and previous Blasts and Oil Spill Cases..............................................................3
Effectiveness of the competitive follow-up strategies adopted by the company in the past.......4
Oil Spill in Deepwater Horizon, 2010.........................................................................................5
Impact on Competitors and Competitive Strategies Adopted.....................................................6
Porter's Five Force Analysis of BP for analysing competitive dynamics...................................7
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
BP Plc is a British multinational oil and gas company founded in the year 1909 by
William Knox D'Arcy. It is having its headquarter in London, UK. It is the world's seven oil and
gas super majors. Report will include the case of 2010 related to Deep water Horizon oil spill
that brought huge loss for the company and nation as it damaged the marine life and wildlife
habitat. Further report will include Competitive Dynamic strategy using porters 5 force analysis
that tells about the Threat of new entrants, Threat of substitute products, Bargaining Power of
Buyers, bargaining power of suppliers and at last about Competitive rivalry(Mathooko and
Ogutu, 2015). Previously such attack were seen in Alaska and Taxes due to their poor strategies,
but BP improved its competitive strategies that helped out the company in long run.
MAIN BODY
History of BP and previous Blasts and Oil Spill Cases.
Despite BP being fifth largest oil and petroleum company in Deepwater Horizon has not
been the only case. In 2005, a BP owned refinery in Texas has a blast which led to death of 15
workers and left around 180 workers severely injured. The second largest refinery which was
acquired by BP when it merged with Amoco was facing a lot of safety issues like thinned and
leaking pipes, broken alarms, defective machinery etc. The workers and supervisors responsible
for daily security checks were found to be extremely careless breaking the protocols and ignoring
the importance of follow up activities (Nyankson, Rodene and Gupta, , 2016). It was found that
due to cost-cutting the necessary improvements and modifications were not made in the
company and this failure of making adequate investment in the company led to this explosion.
Another similar incident occurred in Alaska in 2006 at Prudhoe Bay where the largest
ever oil spill in North Slope region of Alaska was recorded due to spill of 267,000 gallons of
crude oil. This spill occurred due to hole in the corroded pipeline which was used for
transporting oil from the Prudhoe oil field to a pumping station (Prudhoe Bay 2006 Oil Spill,
2015). This spill was accredited to poor corrosion monitoring system and weak detection systems
despite regular warning from inside as well as outside of the organization. The management of
BP promised to replace miles of pipeline and finished it in 2008 replacing 16 miles of transit
pipelines in Prudhoe Bay. But in 2009, a subsequent spill occurred form the similar transit
pipelines in greater Prudhoe Bay area which led to a lawsuit being filed of BP claiming that they
were still negligent.
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Therefore, it can be concluded that there is a history of oil spill and explosion cases with
BP but still the company has managed to remain in the top sphere of oil and natural gas
companies due to the extremely efficient competitive strategies that have been adopted by the
comp[any overtime and a strong PR game.
Effectiveness of the competitive follow-up strategies adopted by the company in the past.
After the Texas Blast in 2005, the very first thing that the CEO did was to submit to the
evaluation of the incident and subsequent report preparation by Occupational safety and Health
Administration (OSHA) which ultimately fined them with $21 million. The Baker Panel Report
which proved to be the most prominent one stated that the incident could have been avoided and
lives saved if BP had upgraded the refinery and its processes and installed a flare (BP to pay
$50m fine for safety violations after Texas City explosion, 2017). It would have led to zero deaths
and nobody would have even found out that there was a blast if it had been installed. In a follow
up speech by BP's CEO, it was claimed by him that this blast would act as a watershed for the
company and help in avoiding any future accidents. It was promised that the company would
spend $1.7 billion every year on safety. A memorial service was help for the 15 workers who
died at the factory and BP gained a sympathy spot in the residents of Texas despite such a major
blast by emphasizing the fact that if BP was not there, survival of Texas would be extremely
difficult. It was also emphasized that it is crucial for America to have their own refineries and
production units reducing their dependency on outside of America.
Similarly, after the oil spill in Alaska in 2006, BP was fined with $25 million which the
company implied with without any qualms. Further, the company spent billions in building up
the pipeline which was the reason behind spill (BP: The inside story, 2016). The CEO of the
company, Tony Hayward agreed to implement a system wide integrity management program
which would ensure that spill could happen to any other company operating in the industry as
well.
The officials of BP further countered that since the incident in Alaska, they have vastly improved
their safety protocols as opposed to their competitors i.e. Exxon Mobil, Valero etc. They state
that approximately in USA, 58 refinery workers have died and not a single one of them have
been employed under BP or its subsidiaries. They further state that there have been at-least 350
fires in refineries located at USA and none of them has been under USA including sites of
Valero as well. The oil spill of Chevron in Californian Canyon of 800,000 gallons in 2019 which
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has been a much more disastrous incident than the oil spill of BP. Apart from highlighting these
facts, there is also the strong PR activities that have been adopted by the company like
conducting employee welfare programmes and implementing those techniques, working for
society welfare, keeping open and wide communication channels with the public and
maintaining good relations. All of these has helped the BP company in maintaining the
reputation of the oil company giant that it has created.
Oil Spill in Deepwater Horizon, 2010.
The Deep water Horizon oil spill was an oil leak or we can say oil disaster that began in the year
2010 on 20th April in the Gulf of Mexico on the BP-operated Macondo Prospect. It was the
largest marine oil spill in the petroleum industry and it was approx 8 to 31% larger in volume as
compared with Ixtoc I oil spill that was previous largest oil spill. Several efforts were put to
contain the flow and at last it was declared to be sealed on 19 September 2010. it was the largest
environmental disasters in America and extensive damage to marine and wildlife habitats was
seen.
The BP oil spill damaged the shorelines of four major Gulf states that were Louisiana,
Alabama, Mississippi and Florida. It almost took three months to rebuild the relief well in order
to stop the flow(Starbird and et.al., 2015). Almost 65,000 acres in four national wildlife refuges
got threatened. Not only this many food chains were effected and many microbes and fish died
due to lack of oxygen.
This further resulted in huge loss for fishing and tourism industries. Various clean-up
activities were their and Oil clean-up crew worked for about four days a week on 55 miles
Louisiana Shoreline throughout the year 2013. It was seen that Dolphins and many marine life
was continuing to die and life shortening of many organism were common. Investigation was
done to know the cause of such huge disaster by US government and the reason that came out
was the defective use of cement on the well, faulting mostly BP (BP oil spill report – as it
happened, 2019).
White house commission blamed BP was this disaster and found that their cost cutting
decision and inadequate safety systems were the cause of this loss. In the year 2012, BP and US
department of Justice settled the federal criminal charges and company felt guilty. BP also
cleared out that government was monitoring from 4 years on its safety practices and also ethics.
BP was temporarily banned for new contracts by the Environmental protection Agency and they
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agreed to settle fine of about $4.545 billion. The total cleaning and penalties had costed more
than $65 billion(Incardona and Scholz, 2018).
Impact on Competitors and Competitive Strategies Adopted.
When the very much controversial and debated oil spill which happened in 2010, there
were many fingers which were being pointed at the CEO Tony Hayward due to his blunt
speeches and transferring the blame by making rash statements in the public like “ Gulf is a very
big ocean and the amount of oil spilled is minimal as compared to the volume of water”, “not our
accident” etc. which made him the most hated man in America. The PR of BP immediately
formulated numerous follow up strategies that they would use in order to build-up the fallen
image of the company. Although, company previously had a Facebook page, a Twitter account
and a LinkedIn profile, but it was inactive (BP oil spill report – as it happened, 2019). They
decided to issue a public statement for the controversy and added a Gulf of Mexico response
page on its official website and began to regularly update whatever were the findings of BP
trying to present their point of view amidst all the chaos and hatred that was being spread
(Fleeger and et.al., 2018.). The CEO, Hayward's trip to the Gulf was also appreciated and people
wanted him to genuinely take efforts and get dirty by digging in to determine the actual causes.
Further, the company appointed a separate spokesperson for the company, Admiral Thad Allen
so that the image of the company could be improved and statements could be made in a more
calm and composed manner.
The reputation repair strategies adopted by the company also included running of
apologetic ads and running a million dollar public relations building program under which
Hayward could be seen apologizing and taking full responsibility for the oil spill. They also
introduced print ad campaigns in New York Times, USA Today, Wall Street Journal etc. through
which they increased the awareness (Hester and et.al., 2016. Although this stint was criticized by
many including the president Barack Obama stating that alternatively this money could have
been spent on cleaning-up the oil spread but initially he had also shown support to the company
at the time of digging up of the Deepwater Horizon rig.
Amidst all this, the voice of the major competitor's of the company like Chevron, Exxon
Mobil, Royal Dutch Shell, Total etc. rose and they began issuing statements against the activities
of BP and questioned the processes and tools that have been implemented in the company.
Exxon Mobil even claimed that the oil spill that they had in 1984 pales in comparison to the oil
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spill of BP and they even claimed that there was no loss of lives or any after effects of the spill
on both the natural wildlife and humans. Even Total S.A. Claimed that their sinking of the tanker
Erika in 1999 which was termed as France's worst ever disaster leading to crippling of many
industries in France could not be compared with the widespread devastation that Deepwater
Horizon oil spill had caused and whose impact in the nature and humans would be ascertained
only in the upcoming future (Gutierrez and et.al., 2018).
Despite such rigorous claims, the competitive strategy adopted by BP was brilliant since
they played out media and its projection in a phased manner of three different stages which
ultimately helped them in regaining the lost reputation. In initial stages of reporting, the BP, by
strong PR comments influenced media to hold BP responsible for the oil spill in Gulf of Mexico
(Hu, Dubinsky and et.al., 2017). This initial phase increased the outrage of Americans but this
was then followed up by second stage in which media gave wide coverage to the strategies that
were adopted by the company in order to solve the problems that they were facing. They
extensively used the images of damaged wildlife and other natural resources claiming that the
impact is extremely extensive and can lead to a catastrophic situation. However, despite so much
negative coverage, the company was indirectly developing a positive impact because whatever
actions were adopted by BP, they were extremely worthy and were improving their image that
BP was at least taking some strong actions (Johnson, Chhin and Zhang, 2017). Then came the
third stage when the company was able to successfully cap the well. The management of BP
knew all along that their engineers would be able to cap the well and throughout the reporting of
media they were able to manipulate the journalist and the public without them knowing. This led
to media houses changing their tone and when the natural wildlife was found to be unaffected,
they reversed their statement claiming that they probably exaggerated the impact of oil spill. This
was the final nail in the coffin which ensured that BP has repositioned themselves and reclaimed
the lost reputation therefore shutting down the mouth of their competitors as well.
Porter's Five Force Analysis of BP for analysing competitive dynamics.
Competitive Dynamics can be defined as a series of actions and reactions that firms in a
competitive business environment adopt so that they can manipulate their competitors and try ton
overpower them. This whole case study has been focusing on the competitive strategies that were
adopted by BP in critical situations and Porter's Five Force Model is the best method of
studying competitive Dynamics:-
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Porter's Five Forces will help in analysing the industrial framework in which the company is
operating :-
Existing Rivalry (Medium to Low)- The oil and natural gas industry is very vast and there are
many existing competitors of BP such as Chevron, Royal Dutch Shell, Exxon Mobil and Total
S.A. These are the major competitors of the company and due to the regularly occurring
incidents of oil spill or blasts, the fellow competitors understand that these incidents occur
(Radford and Montgomery, 2016). Therefore, they avoid competing with each other due to
limited scope as well and hence competition is lower.
Supplier's Bargaining Power (High): In order to supply oil, the reservoirs and countries that
are major suppliers, exercise a huge amount of control over the companies like BP that import oil
for them. Therefore, their power is high but BP is regularly identifying newer sites form which
they can extract oil which might minimize the risk in the future.
Buyer's Bargaining Power (Medium): Although there are many competitive firms in the
industry, the bargaining power of the buyers is still limited and depends heavily ion the prices
that are being charged which are usually similar with only a minor difference.
Threat of New Entrants (Low): Since the investment in this industry and the technology
required is highly advanced, the threat of entry of new companies is lower.
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Illustration 1: Comparison of BP with its competitors
Source: BP Valuation, 2015

Threat of Substitute Products (Low): This threat holds the lowest risk potential for BP since the
crude oil and its utility cannot be fulfilled by any other resource and therefore the risk is
extremely low despite other emerging sources like natural gas etc.
CONCLUSION
The research conducted in this report concludes that it is extremely necessary to
implement effective competitive strategies in situation of crisis for any company. It was observed
that BP all through its different crisis situation utilised extremely effective competitive strategies
and ultimately Porter's Five Force Model was also implemented to analyse the company.
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REFERENCES
Books and Journals
Fleeger, J. W. and et.al., 2018. Recovery of saltmarsh meiofauna six years after the Deepwater
Horizon oil spill. Journal of Experimental Marine Biology and Ecology. 502. pp.182-190.
Gutierrez, T. and et.al., 2018. Hydrocarbon-degradation and MOS-formation capabilities of the
dominant bacteria enriched in sea surface oil slicks during the Deepwater Horizon oil
spill. Marine pollution bulletin. 135. pp.205-215.
Hester, M. W. and et.al., 2016. Impacts of the Deepwater Horizon oil spill on the salt marsh
vegetation of Louisiana. Environmental pollution. 216. pp.361-370.
Hu, P., Dubinsky, E. A. and et.al., 2017. Simulation of Deepwater Horizon oil plume reveals
substrate specialization within a complex community of hydrocarbon
degraders. Proceedings of the National Academy of Sciences. 114(28). pp.7432-7437.
Incardona, J.P. and Scholz, N.L., 2018. Case study: the 2010 deepwater horizon oil spill and its
environmental developmental impacts. In Development and Environment (pp. 235-283).
Springer, Cham.
Johnson, C., Chhin, S. and Zhang, J., 2017. Effects of climate on competitive dynamics in mixed
conifer forests of the Sierra Nevada. Forest ecology and management. 394. pp.1-12.
Mathooko, F.M. and Ogutu, M., 2015. Porter’s five competitive forces framework and other
factors that influence the choice of response strategies adopted by public universities in
Kenya. International Journal of Educational Management. 29(3). pp.334-354.
Nyankson, E., Rodene, D. and Gupta, R. B., 2016. Advancements in crude oil spill remediation
research after the Deepwater Horizon oil spill. Water, Air, & Soil Pollution. 227(1). p.29.
Radford, C. A. and Montgomery, J. C., 2016. Potential competitive dynamics of acoustic
ecology. In The Effects of Noise on Aquatic Life II (pp. 895-900). Springer, New York,
NY.
Starbird, K. and et.al., 2015. Social media, public participation, and the 2010 BP Deepwater
Horizon oil spill. Human and Ecological Risk Assessment: An International Journal. 21(3).
pp.605-630.
Online
Prudhoe Bay 2006 Oil Spill. 2015. [ONLINE] Available through :<https://corrosion-
doctors.org/Pipeline/Prudhoe-Bay-spill.htm>
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BP to pay $50m fine for safety violations after Texas City explosion. 2017. [ONLINE] Available
through :<https://www.theguardian.com/business/2010/aug/12/bp-texas-city-explosion-
fine>
Blast at BP Texas Refinery in '05 Foreshadowed Gulf Disaster. 2018. [ONLINE] Available
through :<https://www.propublica.org/article/blast-at-bp-texas-refinery-in-05-
foreshadowed-gulf-disaster>
BP: The inside story. 2016. [ONLINE] Available
through :<https://www.ft.com/content/4e228e56-84ae-11df-9cbb-00144feabdc0>
BP oil spill report – as it happened. 2019. [ONLINE] Available
through :<https://www.theguardian.com/environment/blog/2010/sep/08/bp-oil-spill-report-
live>
BP Valuation. 2015. [ONLINE] Available through :<https://marketrealist.com/2017/06/shells-
valuation-compared-to-its-peers/>
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