Strategic Management in Oil & Gas Industry

This assignment delves into the complex world of strategic management within the oil and gas industry. It examines the challenges faced by companies like British Petroleum, Shell, and BP amidst a volatile market environment. The analysis incorporates real-world examples and case studies to illustrate key concepts such as strategic planning, competitive advantage, and risk management in this sector. Students are encouraged to explore the impact of global events on industry strategies and the importance of sustainable practices in the long term.

STRATEGIC
MANAGEMENT

TABLE OF CONTENTS
EXECUTIVE SUMMARY.............................................................................................................5
INTRODUCTION...........................................................................................................................6
INDUSTRY ANALYSIS................................................................................................................6
ENVIRONMENTAL SCAN...........................................................................................................9
BRITISH PETROLEUM COMPANY STRENGTH/ WEAKNESS............................................11
CHANGES REQUIRED IN STRATEGIES.................................................................................14
REFERENCES..............................................................................................................................16

INDEX OF TABLES
Table 1: Table 1: Threats and opportunities of British petroleum...................................................9
Table 2: Strength and Weakness of British petroleum..................................................................11

ILLUSTRATION INDEX
Illustration 1: British petroleum financial conditions....................................................................14

EXECUTIVE SUMMARY
The present report is based on strategic management of British petroleum (BP) company.
This report includes different kind of strategies for the better development of organization.
Further, it also explains the strength and weakness of company and how organization can expand
their business into the international market. By analyzing the external forces, firm can easily
develop their market strategies. Furthermore, company open their website and by using this, they
increase their profit margin in petroleum and refining oil by 28%.for better development,
organization manager time to time take a feedback from their customers and as per their reviews
change their services. This report also include the financial condition of company and how
planning and development department set their new strategies for company. For better
relationship with customers it is necessary for firm to understand their need and desire.

INTRODUCTION
Strategic management is linked with the aspect of setting objectives of the business
keeping in view all the resources which are required in order to operate efficiently in the market.
Further, with the motive to operate efficiently in the market it is necessary for every enterprise to
analyze the overall industry in which it operates so that overall actions can be taken accordingly
(Njeru, Stephen and Wambui, 2014). Apart from this, to enhance market performance firm has to
carry out internal along with external analysis as through this accomplishment of desired aims
and objectives becomes easy and it is fruitful for the business in every possible manner
(Chernev, 2012). Further, environmental scanning directly provides base to company in
identifying the range of challenges being present in the external environment and how it
influences productivity of the company (British petroleum crisis, 2016). For conducting the
present study organization chosen is British petroleum (BP), it is one of the world’s super major
oil and Gas Company. Headquarter of this organisation is located in London, England. Major
activities of the business also include gas production, refining, distribution and marketing work.
(Das, 2011). Business is having high presence at global level and majority of the customers
prefer to access its services. Various tasks have been covered in the report which involves
industry structure, environmental scan etc.
INDUSTRY ANALYSIS
1) Industry structure
British Petroleum operates in petroleum and gas sector where market size is quite wide
and this in turn allows business to operate on wider platform. In the year 2014 the oil and gas
industry of UK produced 1.42 million boepd of which 59% was oil and liquid. Further, 98% of
the production comes from the offshore fields. Oil and gas members of UK expect between eight
and 14 exploratory wells to be drilled. From the survey carried out it has been determined that it
will increase due to rise in level of cost along with projects over run (Kunnanatt, 2011). Overall
the annual investment can be low as £2.5bn within three years. During the year 2014 production
of oil and gas fell by 1% and the opportunity cost has risen by 1% in the same year. Apart from
this, the worldoil prices has been fairly stable (Allison and Kaye, 2011). On yearly basis overall
size of industry is increasing at faster pace and this is contributing in development of the
companies operating in this sector. Apart from this, large numbers of companies are expanding
operations in this sector as there are able to identify the range of opportunities present in the

market which is fruitful for them in long term (Oil and gas industry in 'bleak' 2014, finds survey.,
2015). No doubt, challenges are also present which prevents businesses from accomplishing
desired aims and objectives (Mathur, 2011). Therefore, with the help of this it can be stated that
structure of UK oil and Gas industry is quite favourable and it is contributing in success and
growth of companies like British Petroleum etc in the market.
1. Strategic group map
Above shown is the strategic group map which highlights position of different companies
operating in Oil and gas sector (Ferrell and Hartline, 2010). The major competitors of British
Petroleum are Shell, OMP, Z energy, Dolphin drilling etc. British Petroleum is having the largest
market share in Oil and gas sector and its main competitor is shell. Further, majority of the
businesses focuses on product development as a strategy and due to this basic reason they are
able to survive in the market for longer period of time. Apart from this, due to rise in level of
competition British Petroleum has to modify its product range timely and additional benefits are
provided to the customers who prefer to purchase services along with products of British
pertroleum (Flander, 2014). So, this also contributes in the growth of organization and directly
leads to accomplishment of desired aims and objectives. Without employing this type of strategy
it is not at all possible for British Petroleum to operate efficiently in the market and it can
directly lead to decline in level of overall performance (Carlson, Harris and McLeskey, 2013).
Apart from this, British Petroleum considers other attributes such as quality of the oil etc at the
time of offering products to its target market and this leads to higher satisfaction level which is
Z energy
OMP
Shell
British
petroleum
Halliburton

also considered to be one of the main target of business. British Petroleum analyzes strategy of
each and every competitor such as Shell etc so that its market performance can be easily
enhanced with the help of this (Hyde, 2014). Moreover, product development along with other
type of strategies undertaken also contributes in enhancing market share of the business up to
extent (Kiptoo and Mwirigi, 2014). Therefore, strategic group analysis has shown favorable
results and it can be easily said that British Petroleum is efficient enough to meet with the
requirement of target market and this is supporting business to sustain in the market.
2) Firm’s competitive position in the market
In order to operate efficiently in the market it is necessary for business to know its
competitive position and on the basis of same strategies are developed by company (Njeru,
Stephen and Wambui, 2014). At present British Petroleum is having the highest market share in
the oil and gas sector as compared with its competitors in the market. Further, the market where
British Petroleum operates is highly challenging and various hurdles are present which prevents
business from accomplishing overall aims and objectives. Competitive position of business can
be easily identified through actions of its competitors and it can be said that strategies of British
Petroleum is much more effective as compared with its competitors in the market (Parnell,
2010). Company compares its performance with those of competitors on continuous basis and
their weaknesses acts as strength of the business. In short, British Petroleum is able to take
advantage of opportunities present in the business environment and due to this reason company
is considered to be leader in the Oil and gas sector. Apart from this, the changes taking place in
the external environment sometimes acts as hurdle (Rumelt, 2010). Competitive position of
British Petroleum in the market highlights that internal strength of the company is allowing
operating efficiently where business is able to meet with the expectations of the target market in
efficient manner. Due to rise in level of competition it is necessary for enterprise to focus on the
key operations being carried out and large number of strategies being developed supports
business in accomplishing its desired objectives (Abraham, 2012). Due to this basic reason
presence of British Petroleum at global level has enhanced rapidly in the market and its products
are purchased by every individual in the market. At present business is having strong customer
base and its profitability level supports to indulge into practices of product development in the
market (Allison and Kaye, 2011).

ENVIRONMENTAL SCAN
It is one of the most essential component of global market analysis. It includes
monitoring, forecasting and environmental assessment in it. This scanning divided into two parts
where first one is knows as macro and second one is knows as micro. In macro environment all
marker, companies, client and competitors are included. Further, in micro environment suppliers,
customers and competitors are included (Carlson, Harris and McLeskey, 2013). It also defined as
a study where company analyze the social, economical and political factor in it.
External factors of British Petroleum
There are so many kinds of factor that affect the external environment of organization
and they are as follows:
Political- Due to threats of geopolitical instability energy market of British petroleum becoming
more volatile (Abraham, 2012). Further, the requirement of oil and refining gas is going so high
due to this, energy market of the UK becoming more volatile.
Economy- Economy is one of the major external factor that affect the performance of business.
In economy, market fluctuation, politics factors, terrorist attacks and wars all are included in the
economy (Conduit and Mavondo, 2015). The reason behind this is, these factors change the
structure of organization and also create lots of issues. On other hand, by energy supply the
economy condition of country is changing into underpinned and the alternative sources of
petroleum and energy are increasing. British petroleum, every year increase their profit
marketing by 6%.
Finance- For better development of business it is important for their department to manage their
financial system. British Petroleum company is well established gas and oil firm and the major
reason behind this is, management of BP time to time check their financial sources and as per the
final report they introduce their new services and products into the market (Dameron and
Durand, 2013).
Competition-For British Petroleum, Europe oil company and Z energy, shell are major
competitors. The main reason behind this is, they all providing the same oil products and
services to the UK customers. So for best the comparative environment it is important for
organization to launch new and innovative products into the marker. Further, by taking feedback
from the customers maintain their brand image into the customers mind (Ferrell and Hartline,
2012).

Social and cultural forces- This forces are based on the structure of organization and buying
behaviour of customers. If company want to increase their profit so it is important for
management to analyze the actual demand of their customers and as per their expectation launch
new products in to the market in the field of oil and gas (Hamilton and Webster, 2015).
Technology changes- By using the latest technology, energy market of the UK will be
underpinned and also adopting alternative energy technology (AETs) at their workplace. For
beating the competitive environment. By using innovative technology, British Petroleum
company can easily reduce their working cost and save their time as well (Kapferer, 2012).
Government policies- Government of the UK time to time change their tax and import export
policies. Due to this, lots of misunderstanding creates among all department. For example, staff
members and manager cannot understand the actual tax rate and due to this the brand image of
organization goes down (Mueller and Naffziger, 2015). Further, government also show their
support to oil and gas company by reducing the percentage of tax and at the time of recession
they also provide all raw material in low price. For better development, UK government provide
all energy and solar equipments in low prices and also show their support by opening
international environment organisation.
Customers base- British Petroleum company put their main target on their customers and for
this they time to time take a feedback from their customers and according to their reviews change
their product design and packing style of refining oil. Customers are the back bone of company,
so it is important for company to create a positive relationship with them and fulfill their all
necessary demand on time (Needle, 2010).
Most important opportunities for British Petroleum
Table 1: Threats and opportunities of British petroleum
Threats
 UK government launch their new
polices which are related to toxic spills
and oil.
 Corrosion in pipelines
 company faces huge competition from
Shell and Chevron
 Lawsuits considering, British petroleum
Opportunities
 To compete with main rivals,
organization launch flexible price
policy.
 In North Sea Ares, company extend
their strategy which are related to oil
and gas.

ecological activities.  Expansion of frontier areas.
In emerging market there is a great opportunity for British Petroleum like; they can easily
expand their business and launch new products and services to their UK customers. For better
customers services management can change the distribution structure of organization and adopt
there level of distribution (Piercy and Morgan, 2015). By doing this they can also reduce the
percentage of unemployment. Apart from this, company also promoted GO GREEN them during
delivering their products. By this they can easily grab the attraction of their customers and
increase their brand value into the customer mind (Stevens and et.al., 2013).
Most important threats for British Petroleum
The major threat behind British Petroleum company is the changing behaviour of
customers and their preference (Chernev, 2012).Further, nowadays people use battery vehicles
more as compare to petroleum cars. Due to this, the selling percentage of organisation goes
down. On other hand, at the time of recession, the demand of customers goes down and suffering
from lots of losses. Even a change in shopping habits also put their negative impact on the brand
image of company. Furthermore, government of the UK time to time change their tax polices due
to this, company faced lots of problems and also face some political challenges as well (Das,
2011). Because of high fluctuation in pricing, oil and gas services has increased the intensity of
competition in this sector. For the same, the brand loyally goes down into the customers mind
and they switch to other petroleum company.
BRITISH PETROLEUM COMPANY STRENGTH/ WEAKNESS
Table 1: Strength and Weakness of British petroleum
Strength Weaknesses
Increasing market shares
mutual advantages
import fuels in Europe
improving operational efficiencies
Insurance
British Petroleum online website
Reliance upon the UK market
Debt reduction
Serial acquisitions (Mathur, 2011)
British petroleum is dependent on small firms
for gas field.
Market of Europe is weak, due to this most of

Strong brand value in loylaty
leadership reinforced (Kunnanatt, 2011)
stakeholder are not able to pay the whole
amount of petrol on time.
Strength
BP is ranked as world's largest energy company for this company recently launch their
new company in London. Organisation is having so much strength and they are as follows:
 BP is having strong brand loyalty for oil.
 Brand management driven by 'beyond petroleum' quotes.
 Company recently participated in London stock exchange and listed in the FTSE index.
 British Petroleum hold approximately 14% share of the UK petroleum market. It means,
it will continue grow their shared into the gas and refining industry (Ferrell and Hartline,
2010).
 The general growth of company is based on the strategy of ROI. Further, company
recently open their new petroleum company in London (Flander, 2014).
 The International segment of company growing steadily and is predicted to contribute
their success over the next four years.
Insurance
In fiscal 2004, company reaches the milestone of one million insurance policies into the
monitors of petroleum and gas firm. Further, they also provide insurance services to their
customers. Further, company rewarded in 2003 for providing the best quality of petroleum
(Hyde, 2014).
British Petroleum online
For the better development of organization, company update their online website. By
using this website all customers can book their orders and get all the information of services and
products. By using this website company increase their profit with 78%. Further, they also
increasing their brand image into the customers mind. By using website, company operates more
than 270 petroleum stores around the country and covering approximately 95% people of the
UK.
Brand value
Company change their marketing style and adopt digital marketing. By apply this change,
management increase their brand value and grab the attraction of other competitive organisation
(Kiptoo and Mwirigi, 2014).

UK market leadership reinforced
At workplace, company manager divide the whole work into the teams and allot one team
leader in each team. By doing this, they reduce the work load and also develop the capabilities of
their employees. By using different leadership style, manager gain the trust of their employees
and creates strong position into the domestic market (Njeru, Stephen and Wambui, 2014).
Weakness
 In 2015 British Petroleum had statutory loss of GDP and it was approximately 6.4 billion
due to this, the total leverage debt of company reached to 22 billion.
 Company is facing lots of financial issue from last few years and due to this, their
management cannot manage the expenses of new technology. Due to this, their market
value of company goes down (Parnell, 2010).
 The management system of company is so weak due to this, workers are not able to
handle their clients and solve their queries (Rumelt, 2010).
 The debt ratio is high so the market value of organisation goes down and organisation are
not able to beat the competitive market.
 Company high dependency is based on the UK and Europe country. So at the time of
recession they are not able to do import export and due to this, company cannot fulfil the
demand of their customers (Abraham, 2012).
 The turnover of this organisation is weak as compare to other oil firms.
 UK government increase the tax price in petrol.
 Company close the production of their Alaskan oil.
 Criminal charges decrease the brand value of company.
3 Firm financial condition
As per the last few decades the financial performance of British Petroleum company is
not good. For example, in 2013 the annual turnover of this firm is approximate is 2 billion but
now due to high competitor the turnover of this company is goes down and their manager is not
able to adopt new technology at their workplace (Allison and Kaye, 2011). The current ratio of
asset and liability is less and the total outlet for this organization is 31,2015. Due to this,
company are not able to expand their business into the international market. For the financial
help, firm take help from other financial organization and every-year pay 30% interest on their

borrowing amount. Company want to launch new product and services but due to high
competition they do not have enough money for new services total sale of last year is only
42,552 Crore (Carlson, Harris and McLeskey, 2013).
Further, firm are facing crisis as well, so for better position it is important for company to
manage everything thins into the appropriate manner and by taking feedback from each
department prepare a financial report of each. By doing this, manager can reduce the negative
impact of crises (Conduit and Mavondo, 2015).
CHANGES REQUIRED IN STRATEGIES
From the current position of British Petroleum PLC, it has found that organization needs
to change in its existing foreign market entry strategy. It should require to follow franchising by
which it can be easy to target the large customer (Ferrell and Hartline, 2012). It will deliver
unique and good brand recognition in the market place and develop a positive image in the
consumers mind. On the other hand, with the help of joint venture strategy, British Petroleum
(BP) can lead the oil market and increase the sales of services. It will also keep the control over
the allocation and use of the resources, technology transfer, increase capabilities etc. By doing
this, company will raise the market share and increase investment level in the market (Hamilton
and Webster, 2015). Further, with the application of FDI strategy, it can be easy to grab the
ownership of facilities in the target market. Along with this, it also delivers facilities of transfer
of resources such as capital, technology and human resources. It also assists British Petroleum to
Illustration 1: British petroleum financial
conditions
(Sources: Conduit and Mavondo, 2015)

high level of control over the operations and increase the ability to understand the needs,
requirements of the clients (Kapferer, 2012). In the case of setting of prices of the products,
British Petroleum needs to bring the changes in the existing strategy. With the help of market
penetration, it becomes easy to grab the huge market share by selling the products and services at
lower prices as compare to the competitors. It also helps in increase the cash flow within the firm
and maintained the current level of inventory of the goods (Mueller and Naffziger, 2015).

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