Business Environment Analysis: British Petroleum in Norway

Desklib provides solved assignments and past papers to help students succeed.

BUSINESS ENVIRONMENT ANALYSIS
Name of the Student:
Name of the University:
Author’s Note:

BUSINESS ENVIRONMENT ANALYSIS
Table of Contents
Introduction......................................................................................................................................3
Background of the organisation.......................................................................................................3
PESTLE analysis.............................................................................................................................4
Identification of threats for British petroleum in Norway...............................................................6
Porter’s Five Forces Analysis..........................................................................................................7
Opportunities for British Petroleum................................................................................................9
Strategy for overcoming the threats...............................................................................................10
Conclusion.....................................................................................................................................11
Reflection.......................................................................................................................................11
References......................................................................................................................................13
2

BUSINESS ENVIRONMENT ANALYSIS
Introduction
It can be noted that oil and gas is considered as the most valuable and important commodity in
this globalised world. This oil and gas commodity is the main factor behind the stable economic
growth, which is helping to bring the much needed sustainability. This industry is providing the
much needed energy related product to the other industries so that the industry could develop in a
more sustainable manner (Kinnari et al., 2017). The sector is helping to convert those materials
into usable petroleum products, which are very essential for the existence of life on earth. On the
other hand, there are certain types of risks that are being associated with this sector, which is
dangerous in nature and can have a great threat to the existence of life on earth. Further, this
makes many companies to shift their office base to some other countries for growth purpose and
derive other opportunities. Based on this, the research shall focus on the expansion of British
Petroleum in the markets of Norway. It shall contain threats and opportunities that British
Petroleum may derive from that market through the help of conducting a PESTLE analysis.
Further, five force analysis shall provide an insight into the opportunities and threats that British
Petroleum will be facing in the Norway market. Lastly, strategies will be formulated to overcome
the threats.
Background of the organisation
British Petroleum or BP PLC is referred as the British multinational oil and Gas Company,
which is headquartered in London, United Kingdom. British Petroleum is considered as the
“super major” company and is one recognised as the top most company in the oil and gas sector
of the world. By market capitalisaton, the company is considered as the sixth largest oil, Gas, and
energy producing company (BP global. 2019). In terms of revenue, British Petroleum is
3

BUSINESS ENVIRONMENT ANALYSIS
recognised as the twelfth largest company in the world. The company was founded on 14th April
1909 by William Knox D’Arcy. British Petroleum is operating on a global basis and is more of
vertically integrated in nature. They product line of the company is comprising of exploration
and production, refining, distributing and marketing of petrochemical products and generating
power. Further, they are also dealing in renewable energy and have strong interest in production
of biofuels and wind power. The company is operating in more than 70 countries and is
producing around 3.6 millions of barrels per day. They have more than 19000 service stations,
which is being looked after by 74,000 employees who are working under British Petroleum. The
net income of British Petroleum is around 9.8 billion dollars.
PESTLE analysis
It is an essential part of the management of British Petroleum to analyse the macro-environment
of Norway. This shall help in deriving the opportunities and the threats for conducting business
in Norway. The analysis is conducted below:
Political factors
It is important for British Petroleum management to analyse the political factors in a good
manner. Norway has a good stability in terms of political factors and has no pressure of the
opposition party. This helps to stabilize the political condition, which helps in the growth of the
country (Blindheim, 2015). The country is listed among good economies for ease of doing
business, registering property, and closing any unauthorized business. Norway is the member of
the European free trade association and grants special tariffs to companies doing business.
Further, they maintain a liberal trade and investment opportunity for industrial products.
Economic factors
4

BUSINESS ENVIRONMENT ANALYSIS
The economic condition of Norway is stable in nature with good fiscal policies for the
development of the economy. The banking system is very much sound in nature with a sizeable
boost in the petroleum products and a healthy development of the stock exchanges. The oil and
gas companies are continuing to boost the economy and are offering an employment opportunity
to more than 2.5 million people (Munkejord, 2017). The GDP boosted around 1.5%, which
helped in the growth of 2.3%. This is due to the increase of oil prices. However, the prices fell
down due to recession during 2008. Thus, world Economic forum listed 15th most competitive
economy in the world.
Social factors
The living standard of Norway is quite high due to higher economic conditions and has a large
reserve of natural resources. There are many immigrants who have settled in Norway and more
than 80% of the residents have immigrant background (Krumsvik, Kvale and Pedersen, 2017).
The child rate per family is around 2.1; however, it is stable over the last ten years. In addition,
the people of Norway are strongly contributing to the working life and the people have a strong
understanding of modern social life.
Technological factors
Technological changes have helped Norway to grow in a formidable manner. This is mainly
because surfing the internet has become an integral part of common person in their daily lives.
The main role is being played by the Information and communication technology, which has
evolved drastically and is helping the new organisations to evolve (Angell and Mordhorst, 2015).
It can be seen that every third person residing in Norway is using the internet and is quiet evident
among 15-19 years age group. Companies are using internet for increasing the efficiency of the
5

BUSINESS ENVIRONMENT ANALYSIS
distribution channels and there is a strong increase of using internet for business, which stands to
4%. Further, the companies are using their own pages to promote their businesses globally and
are also helping them to increase the brand awareness.
Legal factors
The legal system is very much trust worthy. The government has formed several laws and
regulations for the betterment of both for the companies and employees. Further, the banking
system is quite regulated in a well manner so that a fair wage system prevails.
Environmental factors
The government has formed some strict policies to use clean technology so that there is less
impact on the environment (Angell and Mordhorst, 2015). Norway is shifting the use of power
from hydro generated electricity to more of renewable use of energy. For this, they have
developed several models, which are providing energy, and have less impact on the environment.
Further, laws were published to protect the coastline from oil spills and hazardous industrial
wastes.
Identification of threats for British petroleum in Norway
There are certain problems or threats that British Petroleum may face. These are:
- The human resource policy is very much strict in nature where labour unions dictate the
policies that need to be followed. This will make British Petroleum to face strict
problems to hire local people as their employees. The fixed wage rate will also add more
problems and British Petroleum might face problems related to balancing the work
culture effectively (Polanco and Bjorndal, 2018)
6

BUSINESS ENVIRONMENT ANALYSIS
- Since Norway has a strong reserve of Natural gas and oil, the competition level could be
very much high. This will certainly decrease profit margin drastically and they motive of
the business will not be served effectively
- The government of Norway has a strict policy in terms of conducting oil and gas
business. This will certainly make the management of British Petroleum to adjust their
business styles effectively. Thus, it may take time for British Petroleum to adjust with the
policies and conduct business
- Lastly, Norway has a complex tax structure. This will certainly increase their cost
operation. Failing to compile with the tax system will result in bad business.
Porter’s Five Forces Analysis
Porter’s Five Forces Analysis is a business environment analysis tool which helps to critically
analyse and evaluate the competitive factors in the environment for any industry. In the context
of this study, the porter’s five forces of the oil industry of Norway would be analysed so that the
expansion for British Petroleum can be safely assessed.
 Threat of Existing Rivalry: The threat of rivalry for the oil industry in Norway is high.
The main reason for this is due to the fact that Norway is one of the largest global
exporters of oil and such, many oil companies are present in there. British Petroleum can
face stiff competition from the different oil extracting and exporting companies such as
Aker Groups, Altinex, Awilco Offshore, and many more during their expansion in the
country (Noreng, 2016).
 Threat of New Entrants: The threat of new entrants for the oil industry in Norway is
low. This is due to the fact that huge capital is required for the companies to start their
7

BUSINESS ENVIRONMENT ANALYSIS
own business in the oil industry in the country. While there is an abundance of oil in
Norway, however, there is stiff competition from the different oil extracting and
exporting companies such as Aker Groups, Altinex, Awilco Offshore, and many more in
the country. As such, British Petroleum, during their expansion in the country, would be
safe from new entrants.
 Threat of Substitutes: The threat of substitutes for the oil industry in Norway is
moderate. This is due to the fact that there are other sources of energy such as coal,
hydrogen, nuclear energy, bio-fuels, and many other energy sources such as solar energy
and wind energy. However, to replace the usage of oil in the everyday life, it would
require high amount of investments in R&D as well as time. As such, for British
Petroleum, during their expansion in Norway, the company would likely to face little
issues from alternative sources suppliers (Karlsson and Dale, 2019).
 Bargaining Power of the Suppliers: The bargaining power of the suppliers is low in
Norway for the oil industry. This is due to the fact that due to the abundance of suppliers
within the country, the bargaining power of the suppliers is low. For British Petroleum,
during their expansion in Norway, the company would face little to no issues pertaining
to the bargaining power of the suppliers.
 Bargaining Power of the Customers: The bargaining power of the customers is low in
Norway for the oil industry. This is due to the fact that the oil has high value and demand
in the global market and Norway exports high grade oil to different refineries, national
and international oil & gas companies, traders, and many more. As such, the customers
are unable to bargain. For British Petroleum, during their expansion in Norway, the
8

BUSINESS ENVIRONMENT ANALYSIS
company would likely to face little issues pertaining to the bargaining power of the
customers (Thune, Engen, and Wicken, 2018).
Opportunities for British Petroleum
Norway is considered to be the most safest and easy country to conduct business. This is mainly
because of the fact that Norway holds the key to conduct business in an easy manner. The
purchasing powers of the consumers are relatively high which will increase the sales of British
Petroleum in an effective manner (Freel, 2016). It is happening as the Norwegians have a
standard of living and the wealth is distributed evenly. Further, there is a strong increase of
regulatory system, which tends to control the industries and their working patterns. The
industries working there have a strong connection with the research and development wing so
that innovation could be set in for further developments of the businesses. This shall help British
Petroleum to increase their interest of manufacturing biofuels that are not harmful for the
environmental and to increase the sales in Norway. This is mainly because of the fact that
Norway government has strict policies for protecting the environment. In addition to this,
Norway always participates in the various programs conducted by the EU commissions for the
betterment of the trade facilities (Wagner, 2017). This will genuinely help British Petroleum to
increase their trade with other European countries in an efficient manner. Lastly, the business
culture is well developed where they focus on equality and providing work values. Thus, the
employees of British Petroleum can enjoy a less hierarchy pressure and strong informal
communication allows the worker to work in a free manner. This is because of the flat working
structures in the region of the Norway so that businesses can develop in an effective manner.
9

BUSINESS ENVIRONMENT ANALYSIS
Strategy for overcoming the threats
In Norway, one of the major threats is the business culture of Norway in the Oil and gas industry.
The value of the workers is very high in the country and their unions for the workers so the
British Petroleum has to formulate comprehensive human resource policy. It should balance with
the business and working culture of Norway so that efficient employees may be taken to work
for the British Petroleum. At first, if the conflict is there between the workers and the employers
than the expansion will not be done in a proper way (Kirat, 2015). In human resource policy, the
social security tax of the employers should be included by the British Petroleum which is almost
14.1%. This should help in creating effective relationship which the employee forums.
It is observed that the Norway government stresses on the usage of the domestic natural resource.
Norway is one of the largest producers of natural gas so there is always a threat for the British
petroleum to get substituted in the Norway Market. In the words of Ablo, and Overå, (2015),
one of the major strategies is that performing compliance with the government so that there
might be a balance between the requirement of natural gas and the petroleum. This should help
British petroleum to effectively perform business in Norway. On the other hand, the tax and the
revenue should collaborate so that the revenue of the Norway government may get enhanced.
This should help in developing the economic strengths of the country by a huge margin. The
major threat is competitors in the Norway market for British petroleum if the relations with the
government are good it should help the corporation to establish itself in the market (Baaziz, and
Quoniam, 2014). There is a complex tax registration system and the tax rate in Norway is high
compared to the other countries in Europe. Local employees who know the taxation process in
detail should be employed to take care of the tax registration system in a smooth manner. It is
observed that Norway has a sound environmental policy so to protect its environment. British
10

BUSINESS ENVIRONMENT ANALYSIS
Petroleum being a chemical organisation should make effective strategies like Minimizing
wastage reduction and recycling products and minimizing waste dumping to effectively nullify
the detrimental effect on the environment. These are the main strategies required to fight the
threats of performing business in Norway.
Conclusion
In this world of globalisation, the expansion in a foreign market is very important for the
organisations. This study explains in detail the organisational background of British Petroleum.
The different macro parameters like the political, economic, social, technological and
environmental aspects of Norway is being analyzed in the study that should help in assessing the
situation of the business in Norway for British Petroleum. The major threats for the organisation
in the Norway market have been identified in the Study those are stringent human resource and
environmental policy. There is a fare share of natural gas companies who are potential rivals.
The strategies like compliance worth Norway government and effective policy formulation has
been depicted.
Reflection
At first I would like to thank my module convener for giving me the opportunity to resubmit my
assignment so that mistakes in my previous submission can be corrected. It can be said that there
were a lot of weak points in my assignments that resulted in the report not being up to the mark.
Firstly, there was too much focus on markets of particular nations and thus it can be said that the
data produced in the report could not be generalized. Thus, it can be said that the main activity
11

BUSINESS ENVIRONMENT ANALYSIS
for me in terms of resubmission will be to make sure that I gather data that is more relevant to
the topic of the report.
I also needed to make sure that tools that can be used to execute analysis of external and internal
conditions are used. Therefore, I used the PESTLE analysis and thus, I understood how such
tools can be used to understand the macro factors that can have impacts on the organizational
operations. Another tool that is known for providing information regarding the competitive
factors was also used and I understood that any organization has a lot of obstacles to face in case
of penetrating a new market.
The organizational strategies to counter adverse conditions in the external market have been also
discussed in this copy and as a result I understood how organizations alter their operations to
penetrate a new market or survive in a market that is competitive. In this case, I also used some
real life examples which increased my general knowledge.
For my resubmission, I made sure that I use appropriate structure mentioned in the assignment
brief which gave me good chance to manage my workload and create a schedule. I made sure
that there is constant flow of information throughout the report as well. I hope that the above
mentioned steps have given my assignment the required amount of credibility that it needs.
12