Global Oil Industry: Challenges & Impacts

This assignment delves into the complex landscape of the global oil industry. Students are tasked with analyzing the industry's major challenges, including fluctuating oil prices, environmental concerns, geopolitical tensions, and technological advancements. The analysis should encompass the economic and environmental impacts of the oil industry, highlighting both positive and negative consequences. Case studies of BP and Saudi Aramco will be used to illustrate key concepts and demonstrate the industry's evolution. Students are encouraged to consider future trends and explore potential solutions for a more sustainable oil sector.

Running head: STRATEGIC MANAGEMENT
Strategic Management
[British Petroleum, BP]
Name of the student:
Name of the university:
Author note:

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Executive Summary
The paper covers a very important topic, which has picked up quite well in recent times. The Oil
& Gas Industry is under severe challenge for various reasons such as its effects on the
environment. An incrementing emission of CO2 in air has drawn enough discussions from the
government and the local people. Customers are now more educated on such thing. This is why
the paper has shown the importance to be flexible with the changing demand of customers. The
paper has suggested the use of better technology to reduce the emission level of CO2.
Additionally, the paper has also provided evidences on the importance of switching over to the
renewable energy resources.

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Table of Contents
Introduction......................................................................................................................................4
Task 1-.............................................................................................................................................4
Identifying the major strengths & weaknesses of BP-.................................................................4
Competitive environment analysis-.............................................................................................6
Macro environmental analysis-....................................................................................................8
Major opportunities & threats for BP-...................................................................................11
Task 2-...........................................................................................................................................12
Organizational purpose & stakeholders of BP-.........................................................................12
Organizational purpose-.........................................................................................................12
Stakeholders of BP-...............................................................................................................13
Identifying the major issues related to stakeholders with justification-....................................15
Organizational culture and the factors that influence those.......................................................16
Major issues related to organizational culture with justification-.............................................16
Task 3-...........................................................................................................................................16
Existing ethical & CSR policies of BP......................................................................................16
Issues related with the ethics & CSR-.......................................................................................17
Recommendations for handling such issues-.............................................................................18
Conclusion-....................................................................................................................................18
References-....................................................................................................................................19

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Introduction
British Petroleum (BP) is a multinational company headquartered at London. It is one of
the largest in world in the Oil & Gas industry. It serves the global countries including the country
in interest the Kingdom of Saudi Arabia. It is primarily listed on the London Stock Exchange. It
is also listed on Frankfurt Stock Exchange and the New York Stock Exchange (Driver and
Guedes 2012). Producing a sustainable environment has now become the biggest challenge for
the Oil & Gas companies. BP has so far failed in responding to the urgency felt. The main
purpose of this assignment is to analyze the strategic business management of British Petroleum
(BP). The purpose covers many significant aspects such as the strengths & weaknesses of the
firm and also the opportunities & challenges that it has in Saudi Arabia.
Task 1-
Identifying the major strengths & weaknesses of BP-
SWOT analysis-
Strengths
 Does not rely only on energy business,
it rather has a diversified revenue
portfolio, which has become possible
through number of subsidiaries and
retail branding in different parts of
world. Examples include such as BP
Amoco, ARCO, BP Express, Burmah
Weaknesses
 It has failed to avoid oil spills &
disasters on quite a notable occasion.
Such failure is dangerous for
environmental values (Harrell 2016)
 Company’s executives were poor on
handling such challenging situations,
which instead resulted in huge penalties

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Castrol etc (Harrell 2016).
 Have the resilience to bounce back
from oddest of circumstances such as
the numerous criticisms for its
contribution into the green gas
emission. Examples include an
enhanced focus on corporate social
responsibility. Additionally, they
conduct thoughtful communication
(Harrell 2016)
(Harrell 2016)
Opportunities
 The trend for renewable energy
resources such as wind and solar is now
much in talk. Different global agencies
have concerns for greenhouse gas
emission in air. One of such concern is
Paris Agreement, which is aimed at
reducing an approximate two-thirds of
CO2 content from air. Henceforth,
investing high in producing renewable
energy will be full of opportunities in
the future ahead (Ellabban, Abu-Rub
and Blaabjerg 2014).
Threats
 Environmental threat will continue to
make things worried for BP if it does
not get a proper solution (Oshwofasa,
Anuta and Aiyedogbon John 2012)
 Additionally, other companies have
been found doing well with the
environmental issues. Such companies
are Shell and Chevron
 The volatile price of oil is a threat to
BP. This furthers the need of putting a
significant focus in other energy
resources such as wind and solar

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 The alternative option to energy such as
power production from solar and wind
is a potential option for BP to enter a
new geographic territories (Ellabban,
Abu-Rub and Blaabjerg 2014)
(Baumeister and Peersman 2013)
Figure 1: SWOT analysis of BP
(Source: Created by author)
Resilience to bounce back from challenging circumstances is one of the major strengths of BP.
Innovativeness is the other major strength that the company had already shown by having
subsidiaries and retail brands in the different parts of world. One of the major weaknesses is to
get caught in criticism for numerous oil spills & disasters cases. Another major weakness is its
executives who are not competent. This was one of the causes behind huge penalty cases for the
different oil spills disaster cases.
Competitive environment analysis-
Porter’s Five Forces-
Competitive rivalry
 Competition is high at
the global platform
 The United States of
America has
progressed further with
the use of advance
Supplier power
 It is very low
 They have influence
over smaller support &
drilling companies
Buyer power
 This is high
 There is a continuous
demand for reduction
in oil prices
 This has become more
threatening with the

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technologies in the
drilling process
 Competition is very
high to drill out much
oils & gases and to be
least contributor in
environmental causes
Saudi Arabia now
aimed at switching to
renewable energy
resources by 2030
 Oil & Gas industry
will no longer be the
single largest
economic contributor
for the Kingdom of
Saudi Arabia
Threat of substitution
 It is high
 The different resources
of renewable energy
such as solar power
and wind power is a
threat because Saudi
Arabia has already
made its intentions
clear to become a Post-
Oil Economy
Threat of new entry
 It is low in the Oil &
Gas industry in the
Kingdom of Saudi
Arabia
 The business require
much more
investments
 It requires professional
and skilled workers
 Both the factors are
challenging for a new
entrant but the existing

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companies
Figure 2: Porter’s Five Forces
(Source: Created by author)
Macro environmental analysis-
Political-
It is indeed has a very dominating effect on the global oil industry. The reduction in oil
process has no sign of stopping. This has impacted the economy of Saudi Arabia as well. The
geopolitical issues have no stoppages. Iran is set to re-enter into the business. It has little interest
in cooperating with the Kingdom of Saudi Arabia on oils. A revival looks uncertain for the
OPEC countries (World Economic Forum 2017). Such an unstable political situation will really
test the business of BP in Saudi Arabia.
Economic-

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Figure 3: Saudi Surplus from IMF
(Source: Elliott 2017)
The IMF report clearly states that a rise in oil prices in the year 2003 and onwards had solidified
the public finances in the Kingdom of Saudi Arabia. The country was experiencing a budget
surplus of 12% of GDP in the year 2012. However, it had turned into a deficit of 3.4% of Gross
Domestic Product in 2014. It is expected to pick in coming years and is expected to be at 14% of
Gross Domestic Product by 2020 (Elliott 2017). However, the present situation is expected to be
a bit stable in the near future. The prices had been low due to oversupply. A balanced relation of
supply & demand is expected. This will help in increase the oil prices, which is good for those
countries that depend much on oil industry. Consequently, this is also good for BP operations in
Saudi Arabia. Additionally, the demand for renewable energy has picked up. The Kingdom of
Saudi Arabia has aimed at becoming more diverse and innovative in producing the renewable

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energy by 2030 (World Economic Forum 2017). This is a real opportunity for BP in Saudi
Arabia. It is more advisable to have an alternate option other than the Oils. The volatile behavior
of oil prices does not hold any guarantee of revival. The increasing demand for renewable energy
is indeed a good opportunity for a stable business in Saudi Arabia.
Social-
The trend for energy is shifting significantly towards the renewable energy resources. As
already discussed above, the demand for energy is expected to pick up. Additionally, demand for
a more friendly environment is further required. The behavior of people across the globe is
driving a change in trend, which is more focused on diversified energy resources than only the
Oils (Akhakpe 2012).
Technology-
Technology is a key to compete in the Oil & Gas industry. The success of United States
is because of extensive drilling technologies in the US shale. Technology has helped the United
States to produce oils at lower prices. It looks certain because of the production of oils at lower
prices that America is heading towards self-sufficiency in the production of Oil & Gas (World
Economic Forum 2017).
Environmental-
British Petroleum (BP) has always been in environmental related criticisms. They have
not been able to dislodge the challenges yet. This is not feasible indeed. However, they have
suggested few steps to reduce the increasing content of CO2 from air. According to the
company, carbon pricing from government can be the most beneficent move to fight this issue. It

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is already in plan to switch to the renewable energy resources by approximately around 10%
(Bp.com 2017). This is indeed a very effective and responsive call to the rising issue. Time will
tell how much the company has applied the thought plan.
Legal-
An extensive use of technology has benefitted the US shale much than it was anticipated.
It was indeed a three years of average performance that has affected the economy of Saudi as
well. However, the local government has now taken a very responding action to mitigate the
losses that happened. The Kingdom of Saudi Arabia along with other OPEC & Non-OPEC
countries and Russia have planned to slash significant supplies to Asia. This will consequently
put pressures on the United States to produce much oil. On the other hand, Saudi Arabia is in a
continual practice of slashing its shipments to the United States. This is causing the Oil
inventories in the United States to decline. This has brought the Oil inventories down to even
lower than the average of the last five years (Paraschos 2015).
Major opportunities & threats for BP-
Following are the major opportunities for BP in Saudi:
 The local government has also planned for a non-dependent oil economy by 2030 (World
Economic Forum 2017)
 An average performance in the last three years is about to get a salvation because of an
efficient local government move as discussed above
 BP is most certain to get the benefits on both the aspects of energy such as the Oil & Gas
and renewable energy resources
Following are the major challenges for BP in Saudi:

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 Environmental challenges need a quick repairing as the Kingdom of Saudi Arabia has
planned to become a non-dependent oil economy by 2030 (World Economic Forum
2017). This means that the environmental related measures will be in the scrutiny by the
local government of Saudi
 Streamlining the performance of company’s executives is another challenge for the
company
Task 2-
Organizational purpose & stakeholders of BP-
Organizational purpose-
“The organizational purpose of BP is to get identified as a great company, which is competitive
as well as progressive. They are also purposeful to bring differences to the world around”
(Bp.com 2017).
This does not appear inappropriate as well. They have been one of the most recognized oil & gas
companies across the globe. Other names include such as Saudi Aramco, Royal Dutch Shell,
Exxon Mobil and Petrochina. Despite the severe challenges from the mentioned competitors BP
has been able to establish its own identity in the oil & gas industry. The country has its biggest
challenge in the form of Saudi Aramco in the Kingdom of Saudi Arabia. Saudi Aramco is the
one company, which is helping the Saudis to defy the threats from the United States. Saudi
Aramco is already in plan to set up a shale gas production in the domestic region. This is perhaps
the replication of what the United States has attained with its shale (Ramady 2017).
According to the figures of Joint Organization Data Initiative, Bloomberg has reported
that Russia is at the first position in terms of producing oils a day. It was followed by Saudi

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Arabia, which produced 10.46 million barrels a day in December. The United States of America
stood at the third position with 8.8 million barrels daily (Fortune 2017). The report suggests the
country, which is leading in producing oils on a daily basis. The major contribution in the oil
production in Saudi Arabia comes from the largest oil companies in the world the Saudi Aramco.
This fact also suggests that there is huge competition in the Kingdom of Saudi Arabia. British
Petroleum (BP) is there in the competition; however, it is behind to its biggest rival the Saudi
Aramco in the country (Westphal, Overhaus and Steinberg 2014).
They have the purpose to be progressive; however, they have been caught in
environmental related challenges in many occasions. This is quite evident in the accident, which
happened in the year 2010 in the Gulf of Mexico. It all happened when the oil drilling rig such as
the Deepwater Horizon exploded. It also sank resulting in huge casualties. Reportedly, 11
workers died because of the accident. It was termed as the largest ever oil spill in the history of
oil drilling. 4 million barrels of oil flowed away. The loss was that much severe that BP could
not escape away from the legal proceedings yet (US EPA 2017). This was one of such accidents.
BP has remained in criticism for environmental related violation at many occasions. This does
hamper their purpose to be progressive to a significant extent.
Stakeholders of BP-
Following are the list of stakeholders of BP:
Internal stakeholders External stakeholders
 Shareholders- They play a very higher
role in providing the much needed
capital support to the British Petroleum
 Customers- One of the main priorities
of the company is to understand its
customer’s demand and to serve them

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Company
 Employees- They are another integral
part of the company. Company prefers
committed professionals for their
projects. Additionally, company has its
strategy to take care of the safety issues
of the employees
 Suppliers- Suppliers do also play a very
vital role in its operation. The company
tries to have a good relationship with its
suppliers; however, the degree of
dependency on its suppliers is less
accordingly. In recent years, customers
have become more environmental
centric, which is a huge concern for BP
 Competitors- There are many
competitors of BP at both the global
platform and in Saudi Arabia. Some of
the competitors are Exxon Mobil,
Royal Dutch Shell, Saudi Aramco etc.
 Local communities- Local communities
have raised their concerns for safety
related issues. Nevertheless, the
company has responded to the calling
and has supported the fact by managing
the plants in a safer way
 Interest groups- There are various
interest groups as well such as the
government, academics, NGOs and
media. The government has the higher
degree of influence on the company as
it approves the license needed to
operate at the global platform
Figure 4: Stakeholders of BP

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(Source: Created by author)
Identifying the major issues related to stakeholders with justification-
There are ample numbers of stakeholder related issues in BP; however, the local
communities, the customers and the government are its major concerns. British Petroleum
engages to the stakeholders in their issues throughout the year, mainly investors, non-
governmental organizations (NGO), business partners, industry associations. The organisation
wants to be the sustainable and they want to solve the issues of stakeholders. However, the oil
spill over case in the Gulf of Mexico in 2010 was a historical disaster in many respects such as
the move of the government. The communities of the organisation faced the issue of non-
renewable energy issue when BP does not maintain the safety measures in low oil price
environment. Moreover, the effect of natural gas and methane create impact on environment and
the organisation makes issues in water-stressed area. The investors of BP face the issue of
supplying of gas as the prices fluctuate in different occasions. In case of employees, the
managing human resources, the organisation is facing the problem of labor rights.
The company still faces strong legal proceedings against the accident (Bp.com 2017).
The local customers and the local communities are the other challenges that it face. There is an
increasing demand for environmental friendly production of energy. Despite the fact that BP has
planned a switch over to renewable energy resources by 10% it is still a matter of concern for the
surrounding people (Bp.com 2017). This is simply because the projected plan is not yet
implemented.
Organizational culture and the factors that influence those

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The organizational culture is necessary to motivate the employees and the management.
This is rightly understood at the British Petroleum as well. However, some of the environmental
related challenges have explored the loopholes in their organizational culture. The historical
accident case of oil spill over in 2010 in the Gulf of Mexico has explored the incapability of its
executives. They failed in handling the case. Consequently, it turned out like many other such
cases when BP has to bear a historic penalty of $4.5bn (Goldenberg and Rushe 2017).
Factors that drive the organizational culture in BP are as follows (Heller 2012):
 Nature of the business
 The values and policies of company
 External parties & clients
Major issues related to organizational culture with justification-
As mentioned above, the executives are not competitive. They could not handle the oil
spillover crisis in the Gulf of Mexico in 2010. Consequently, BP has to bear a historic penalty of
$4.5bn (Goldenberg and Rushe 2017).
Task 3-
Existing ethical & CSR policies of BP
BP has high values to ethics and corporate social responsibility. They have considered
this as their priority to take care of the casualties if it is there any oil spill over cases. They are
aimed at responding to the emergency with an utmost use of technology.
Issues related with the ethics & CSR

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There are instances when their commitments proved wrong. One of such instances is of
the oil spill over incident, which happened in the Gulf of Mexico in 2010. They indeed failed in
delivering a capable ethical & CSR related policies. They failed in responding to the situations
from both the ethical and the CSR perspectives. They failed to justify their point. Consequently,
they have to pay a historic $4.5bn as a penalty (Goldenberg and Rushe 2017). BP must have
community investment, however, they do not do this and however, they follow the stakeholder’s
issues quite significantly. In oil spill matter, the risks are always associated with the society and
community. Negative factors are associated with economically and they do not bear the risks of
the operations in society (Goldenberg and Rushe 2017).
They have still legal proceedings going on for the accident. Reportedly, 11 workers died
in the accident. BP is failure in managing the human rights with labor rights benefits. BP could
do anything to save their lives. It was indeed a failure of technology, which they had promised to
enhance their safety measures. In corporate social responsibility, it is the responsibility of an
organisation to protect the employees and human rights. Irresponsive executives are the other
concern that has significantly contributed in turning the oil spill over accident in 2010 into a
historical accident.
They were incompetent in communicating to the local communities and the local
government. Such a huge penalty could have been prevented; however, it did not happen (Heller
2012). BP must have governance and it must account the impact it make on society as the
organisation is in oil and gas sector (Goldenberg and Rushe, 2017). The governance body
accounts the harm it creates on society and it has strict business ethics to create a framework. It
emits pollution in society and the company is responsible to compensate.

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Recommendations for handling such issues-
1. To improve the ethicality and the CSR activities they need to be responsive as well as
communicable. An appropriate communication can help in prevent the consequences of spill
over accidents to a significant degree.
2. Technological advancement is needed to support a less emission of CO2 from oil & gas
production. This will help in raising their CSR standard. Moreover, this is also required for
switching over to renewable energy resources, which is the current trend in market.
3. Executives are needed to be responsive. They need to have an effective communication with
the local communities and the local government in such a spill over accident as it happened in
2010 in the Gulf of Mexico.
Conclusion-
British Petroleum is one of few companies, which has a very good reputation in the oil &
gas industry across the globe. They have plans to switch over to renewable energy resources by
10%; however, it is yet to happen. BP like others faces the environmental related challenges. The
environmental related failure needs a switching over significantly to the renewable energy. There
are opportunities in Saudi as the country has planned to be a diversified economy by 2030 by
switching over to renewable energy resources on a big note.

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References
Akhakpe, I., 2012. Oil-environmental degradation and human security in the Niger-Delta region
of Nigeria: Challenges and possibilities. European Scientific Journal, ESJ, 8(26).
Baumeister, C. and Peersman, G., 2013. The role of time‐varying price elasticities in accounting
for volatility changes in the crude oil market. Journal of Applied Econometrics, 28(7), pp.1087-
1109.
Bp.com. 2017. Cite a Website - Cite This For Me. [online] Available at:
https://www.bp.com/content/dam/bp/en/corporate/pdf/investors/bp-annual-report-and-form-20f-
2016.pdf [Accessed 14 Nov. 2017].
Driver, C. and Guedes, M.J.C., 2012. Research and development, cash flow, agency and
governance: UK large companies. Research Policy, 41(9), pp.1565-1577.
Ellabban, O., Abu-Rub, H. and Blaabjerg, F., 2014. Renewable energy resources: Current status,
future prospects and their enabling technology. Renewable and Sustainable Energy Reviews, 39,
pp.748-764.
Elliott, L. 2017. Oil price slump turns Saudi surplus into huge deficit, IMF report shows. [online]
the Guardian. Available at: https://www.theguardian.com/world/2015/oct/07/oil-price-slump-
turns-saudi-surplus-into-huge-deficit-imf-report-shows [Accessed 13 Nov. 2017].
Fortune. 2017. This Is the World's New Top Producer of Crude Oil. [online] Available at:
http://fortune.com/2017/02/21/saudi-arabia-russia-top-crude-oil-producer/ [Accessed 14 Nov.
2017].