Competitive Strategy for British Petroleum in Russia

The aim of this report is to discuss about the current strategies and business approaches of British petroleum and the extent to which they are effective enough. In this report, the Russian operation of British petroleum is considered and further analysis is being done accordingly. It is identified that b British petroleum is facing lawsuits and other complexities in managing their joint venture in Russia and thus their average production from the country is getting hampered. This also caused barriers in the Arctic project of British petroleum. In Russia, they are having joint venture with that of Roseneft and AAR. Different strategic models such as SWOT, PESTLE and Porter five forces are used to identify the key issues for British petroleum and on the basis of them, it is recommended that British petroleum should follow international strategy. In addition, it is also recommended that British petroleum should follow diversification strategy.

Running head: COMPETITIVE STRATEGY
Competitive strategy
Name of the student
Name of the university
Author note

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Executive summary
The aim of this report is to discuss about the current strategies and business approaches of British
petroleum and the extent to which they are effective enough. In this report, the Russian operation
of British petroleum is considered and further analysis is being done accordingly. It is identified
that b British petroleum is facing lawsuits and other complexities in managing their joint venture
in Russia and thus their average production from the country is getting hampered. This also
caused barriers in the Arctic project of British petroleum. In Russia, they are having joint venture
with that of Roseneft and AAR. Different strategic models such as SWOT, PESTLE and Porter
five forces are used to identify the key issues for British petroleum and on the basis of them, it is
recommended that British petroleum should follow international strategy. In addition, it is also
recommended that British petroleum should follow diversification strategy.

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Table of Contents
1. Introduction..................................................................................................................................3
2. Case background..........................................................................................................................3
3. Identification of the strategic issues............................................................................................4
3.1 SWOT analysis......................................................................................................................5
3.2 PESTLE analysis...................................................................................................................6
3.3 Competitive analysis..............................................................................................................8
4. Application of strategy model...................................................................................................10
5. Conclusion.................................................................................................................................11
6. Reference...................................................................................................................................13

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1. Introduction
In the current business scenario, it is important for the contemporary business entities to
have the access and expertise for initiating different business strategies. This is due to the reason
that the current business scenario is highly challenging for the business and more diverse factors
are getting involved. This is same in the case of British petroleum because they are one of the
leading players in the global oil and gas sector and are having their presence across the world.
Thus, the business factors of British petroleum are also diverse in nature. In this case, it is
important for British petroleum to have proper strategic intent in dealing with the issues
(Kapustin and Grushevenko 2018). This is due to the reason that effective and suitable strategic
intent will ensure that British petroleum is gaining the maximum return from the market. In the
given case study, it is identified that there are multiple challenges being faced by British
petroleum in their business in Russia in terms of different factors. It is important to review the
current strategic intent of British petroleum in view to their problems. On the basis of their
current strategies, gaps should be identified and new practices should be recommended
(Klimovets 2015).
This report will discuss about the current strategies being followed by British petroleum
along with the challenges they are facing. These issues will be identified on the basis of the
strategic concepts and suitable strategies will be recommended for British petroleum.
2. Case background
It is reported that British petroleum first started their business operation in Russia in 1997
and they went for partnership with two of the leading oil and gas companies of Russia, Rosneft
and AAR. However, the joint venture with two competitors from the same market caused

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challenges for British petroleum in managing their rivalry. This caused facing lawsuits and legal
consequences by British petroleum, which further affected their foreign business operation. It is
identified that British petroleum planned shelling of the Russian Arctic region in association with
Rosneft, which was challenged by AAR because the competitive advantage between them and
British petroleum will get reduced. The major challenge being faced by British petroleum in
operating in Russia is managing the partnerships with two entities (Kelanic 2016). Domestic
companies are partnered with the investing companies in order to gain the competitive
advantages in the market but if their competitors in the same market are having partnership with
the same foreign entity, their competitive advantages will get lowered. Thus, British petroleum
faced the same challenge in managing both Rosneft and AAR in their Russian operation.
From the case analysis, it is identified that British petroleum is following business level
strategy due to the reason that under the business level strategy, they are following horizontal
growth approach. In line to their growth strategy, British petroleum partnered and went to joint
venture with the domestic companies in Russia. Moreover, it is also identified and under the
business level strategy of British petroleum, they entered in the Russian market and tried to
increase their operation across the world. However, due to their over concentration towards the
business growth, sustainability is given the least focus, which led to the issues for British
petroleum in Russia.
3. Identification of the strategic issues
Strategic issues of British petroleum will be based on different strategic models. SWOT
analysis will be used to identify the internal strategic issues and PESTLE will be used to identify

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the external strategic issues. In addition, Porter five forces will also be implemented to identify
the competitive issues.
3.1 SWOT analysis
Strengths  One of the major strengths for British petroleum is their global presence
in terms of mergers and acquisitions
 British petroleum is also a pioneer in the global oil and gas sector,
which helps them to identify the key trends and patterns in the market
(Wickman 2014)
 Having partnerships with different companies is ensuring British
petroleum in having lower dependency on their partners
Weaknesses  One of the major weaknesses identified is the lack of Greenfield
investments. They are majorly having joint ventures
 Having huge investment in Russia is also their weakness because return
on investment is involved
 Facing number of legal files and lawsuits in operating in Russia
Opportunitie
s
 One of the major opportunities for British petroleum is the tapping
Arctic region
 Russia having huge oil reserves, which can be profitable for British
petroleum (Modarress, Ansari and Thies 2016)
 Joint venture with the leading Russian oil company, Rosneft will help
British petroleum to gain the maximum presence in the country
Threats  Barriers in international business with Russia will pose threat for British

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petroleum
 Emergence of new legal issues will further intensify the challenges for
British petroleum in smooth business operation
 Lack of diversification of the business of British petroleum will pose
challenges in terms of market viability of the oil and gas sector
Thus, from the above analysis, it is identified that there are number of strategic issues
faced by British petroleum. The major internal issue for British petroleum is higher dependency
on the joint ventures. This is due to the reason that in majority of the foreign countries, British
petroleum is having joint ventures rather than having Greenfield investments. This is a major
issue because much of the extensive global business of British petroleum is depended on the
partnered firms (Baev 2014). For example, the Russian operations of British petroleum are based
on the partnerships with Roseneft and AAR and issues with them are affecting the business.
3.2 PESTLE analysis
Political factors  Political relations between the western nations and Russia are
not favorable and posing challenges for British petroleum
 There are more barriers in operating in Russia in terms of
political factors (Morozov 2014)
 Higher preferences for the state owned entities in the oil and gas
sector
Economical factors  Economic sanctions over Russia posing challenges for British
petroleum in trading their production

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 Russia is having abundant supply of natural oil and gas and this
barriers in exporting will reduce the viability for British
petroleum (Lane 2018)
 High capital involvement in the oil and gas sector is also causing
issues for British petroleum from winding up business from
Russia
Social factors  Social factors include the association of the communities with
the business.
 The proposed arctic region shelling will not have any social
consequences as habitats are not there
Technological
factors
 British petroleum being the leading oil and gas company in the
world is having the access to latest technologies
 However, the risks of breach of confidentiality in terms of
technologies are high because of the joint ventures of British
petroleum
 Access to the latest technologies by the partnered firms will
determine the extent to which, British petroleum will be a
successful firm
Legal factors  Legal issues are broader for British petroleum because already
they are facing different lawsuits in Russia
 The more will be the legal issues, the more will be challenging
for British petroleum to continue with their business
 Legal challenges faced by British petroleum are also creating

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issues in their joint ventures
Environmental
factors
 Oil and gas sector is directly linked with the impacts on the
environments
 British petroleum is also facing issues of environmental
degradation in their existing locations and upcoming locations.
 Regulations related to the environment will also to be adhered by
British petroleum
The above external business factors identified for British petroleum denoting both the
opportunities and challenges for them. One of the major strategic issues identified for them is the
political issues between Russia and the western nations. Home country of British petroleum is
the United Kingdom and political differences between their home country and Russia are posing
challenges for British petroleum (Veebel and Markus 2015). For instance, the production from
the Russian facility of British petroleum should be exported in the global markets and sanctions
in the country will create barriers in the trading process. This is one of their major strategic
issues identified for British petroleum. Furthermore, it is also identified that Russia is having
socialist type of government and thus the interference of the government in business is more. In
the case of Russia, state owned entities are given the maximum preferences such as Gazprom
(Tuzova and Qayum 2016). Hence, British petroleum is facing the challenge of managing and
retaining their market viability in Russia.
3.3 Competitive analysis
Bargaining power of  Bargaining power of the buyers of British petroleum is

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buyers high due to availability of different other options
 Buyers will sources from the areas or locations with low
barriers and challenges (Rutland 2015)
 Russia itself is having number of private and state owned
players in the oil and gas sector
Bargaining power of
suppliers
 Bargaining power of the suppliers is low
 This is due to the reason that British petroleum is having
own backward integration process (Eder et al. 2017)
 Availability of the natural resources will determine the
production level of British petroleum
Threat of new entrants  Threat of new entrants is low for British petroleum
 This is due to the reason that huge capital investment is
associated with the entrance in oil and gas sector (Thurner
and Proskuryakova 2014)
 It is difficult for the new entrants to match the worldwide
operations and economies of scale of British petroleum
Threat of substitutes  Threat of substitutes is high for British petroleum
 This is due to the reason that there are number of players
operating in the oil and gas sector offering the same
propositions (Sabitova and Shavaleyeva 2015)
 British petroleum is having number substitute competitors
within the national boundary of Russia
Competitive rivalry  Competitive rivalry is high

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 Rivalry is high mainly in terms of backward integration
because gaining the access to more reverses will
complement the business growth
Thus, from the above analysis, it is identified that the major strategic issue for British
petroleum is challenges from the presence of number of competitors. This is due to the reason
that competition is high in the Russian oil and gas sector and British petroleum is already having
the partnerships with the two leading entities (Stephenson and Agnew 2016). This is further
creating issues because each of the partnered entities is seeking gain more from the joint venture.
Threat of substitutes is also a major strategic issue for British petroleum because they are
competing with the state owned firms in getting the major market share and access to natural
reserves (Boussens and Locatelli 2013).
4. Application of strategy model
On the basis of above analysis, it is identified that British petroleum should implement
international strategy in their suture course of action. This is due to the reason that in the future
course of action also, majority of the business of British petroleum will come from the global
locations and hence, different approaches of the international strategy will be beneficial. The
recommended vision of British petroleum will be to gain the global market leadership status in
terms of market presence and revenue (Tulung 2017). However, in having the maximum share
from the market, British petroleum should have to fend off the internal challenges in terms of
lawsuits from the partnered firms. In the case of Russian operation, it is recommended that
British petroleum should implement the transnational strategy to gain the high market

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responsiveness and high global integration (Lin 2014). British petroleum is operating in Russia
since 1997 and at present, they have gained extensive market information and are enough for
Greenfield investment. Without the partnership, the resources and capabilities being enjoyed by
British petroleum in their global operation can be followed in Russia as well. It is also
recommended that in line to the international strategy, British petroleum can also follow the
global strategy where the standardization will be of higher intensity and global strategies can be
followed (Holmes et al. 2018). The challenges of British petroleum in relation to the
international trading will get reduced if the process is standardized.
On the other hand, it is also recommended that business level strategies can also be
effective for British petroleum. This is due to the reason that diversification approach under the
business level strategies can be initiated by British petroleum to gain the blue ocean
competiveness. According to the blue ocean strategy, businesses should enter in the business
sector where the competition will be low (Ghezzi 2013). With the help of business
diversification, British petroleum can enter in sector of alternative fuels and can ensure their long
term business viability and sustainability. In addition, this will also help British petroleum Russia
to reduce the dependency from the conventional oil and gas production and increase the
competiveness.
5. Conclusion
This report concludes that there are number of challenges and opportunities being faced
by British petroleum in terms of their business operation in Russia. From the analysis done in
this report, it is identified that British petroleum is currently following business level strategy of
growth in their Russian business. However, in doing so, they are majorly being dependent on the

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partnered firms and thus global strategies of them cannot get implemented in the Russian
operations. In this report, SWOT, PESTLE and Porter five forces are being used to identify the
major strategic issues for British petroleum. This report recommended that British petroleum
should follow international strategy and diversification strategy. Implementation of the
international strategy will help British petroleum in reducing the dependency over the partnered
firms and initiate the Greenfield investments. In addition, implementation of the diversification
strategy will further help British petroleum to gain their presence in new business sectors.

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6. Reference
Baev, P., 2014. Rosneft, Gazprom and the Government: the Decision-Making Triangle on
Russia's Energy Policy. Russia/NIS Center.
Boussena, S. and Locatelli, C., 2013. Energy institutional and organisational changes in EU and
Russia: Revisiting gas relations. Energy Policy, 55, pp.180-189.
Eder, L.V., Filimonova, I.V., Provornaya, I.V. and Nemov, V.Y., 2017, September. The current
state of the petroleum industry and the problems of the development of the Russian economy. In
IOP Conference Series: Earth and Environmental Science (Vol. 84, No. 1, p. 012012). IOP
Publishing.
Ghezzi, A., 2013. Revisiting business strategy under discontinuity. Management Decision, 51(7),
pp.1326-1358.
Holmes Jr, R.M., Hoskisson, R.E., Kim, H., Wan, W.P. and Holcomb, T.R., 2018. International
strategy and business groups: A review and future research agenda. Journal of World Business,
53(2), pp.134-150.
Kapustin, N.O. and Grushevenko, D.A., 2018. Exploring the implications of Russian energy
strategy project for oil refining sector. Energy Policy, 117, pp.198-207.
Kelanic, R.A., 2016. The petroleum paradox: oil, coercive vulnerability, and great power
behavior. Security Studies, 25(2), pp.181-213.
Klimovets, M.V., 2015. Practice of outsourcing for strategic purposes by Russian and foreign
companies. Mediterranean Journal of Social Sciences, 6(3 S6), p.193.

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Lane, D., 2018. The political economy of Russian oil. In Business and State in Contemporary
Russia (pp. 101-128). Routledge.
Lin, L.H., 2014. Subsidiary performance: The contingency of multinational corporation’s
international strategy. European Management Journal, 32(6), pp.928-937.
Modarress, B., Ansari, A. and Thies, E., 2016. Outsourcing in the Persian Gulf petroleum supply
chain. Strategic Outsourcing: An International Journal, 9(1), pp.2-21.
Morozov, I.L., 2014. Information and political security of the democratic state-world experience
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Rutland, P., 2015. Petronation? Oil, gas, and national identity in Russia. Post-Soviet Affairs,
31(1), pp.66-89.
Sabitova, N. and Shavaleyeva, C., 2015. Oil and gas revenues of the Russian federation: Trends
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Stephenson, S.R. and Agnew, J.A., 2016. The work of networks: Embedding firms, transport,
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Thurner, T. and Proskuryakova, L.N., 2014. Out of the cold–the rising importance of
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Tuzova, Y. and Qayum, F., 2016. Global oil glut and sanctions: The impact on Putin’s Russia.
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