Business Strategy Report: BP Oil's Strategic Planning and Analysis

This report provides a comprehensive analysis of BP Oil's business strategy. It begins with an introduction to business strategy and its role in achieving organizational objectives. The report then delves into the macro environment of BP Oil using SWOT and PESTLE analyses, examining political, economic, social, technological, legal, and environmental factors. The internal environment is assessed using the McKinsey 7S model and VRIO framework to evaluate the company's capabilities. Industry competition is analyzed using Porter’s Five Forces, and strategic recommendations are made using the Ansoff Matrix. Finally, the report applies Porter’s Generic Model and concludes with a strategic management plan for BP Oil. The report covers various aspects of BP Oil's operations, including its strengths, weaknesses, opportunities, and threats, as well as its competitive position within the oil and gas sector.

UNIT 32:
BUSINESS STRATEGY

Table of Contents
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
P1. (a) Meaning of Strategy....................................................................................................1
(b) Role of strategy to achieve business objectives................................................................1
(c) Strategic Planning Techniques..........................................................................................2
M1. (a) Macro Environment of BP Oil..................................................................................2
(b) Critical Analysis of Macro Environment using SWOT Analysis.....................................2
D1. (a) PESTLE......................................................................................................................4
LO 2.................................................................................................................................................5
P2. (a) Meaning of internal environment and capabilities.....................................................5
(b) McKinsey 7S Model applied to BP Oil............................................................................5
M2. (a) Critical analysis of McKinsey 7S Model...................................................................6
(b) VRIO Framework.............................................................................................................6
LO 3.................................................................................................................................................8
P3. (a) Analysis of industry competition using Porter’s Five Force Model...........................8
M3. (a) Recommending strategy using Ansoff Matrix..........................................................9
LO 4...............................................................................................................................................10
P4. (a) Porter’s Generic Model applied to BP Oil................................................................10
M4. (a) Meaning of Strategic Management Plan.................................................................11
(b) Strategic Management Plan for BP Oil...........................................................................12
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................14

INTRODUCTION
Business strategy is defined as the set of actions taken by a company with a view to attain
a competitive advantage in marketplace (Bell, Bryman and Harley, 2018). The primary motive of
enforcing an effective business strategy is that it provides assistance in accomplishing the
organisational goals and objectives in the stipulated course of time. The emphasis of devising
such a strategy is to enhance the sales and profitability of business by undertaking measures
which are aimed at gaining the attention of population.
The present report is based on the business strategy and the strategic planning of British
Petroleum Oil Company. BP Oil is a multinational corporation functioning within oil and gas
sector and has its headquarters within London, UK. This assignment provides knowledge about
the influence of macro environment on business and its strategies. Also, it includes an analysis of
the internal environment of organisation and its capabilities by making use of McKinsey 7S
Model and VRIO framework. Additionally, the assignment gains an insight into the application
of Porter’s Five Force Model to evaluate industry rivalry along with the selection of appropriate
strategy by using Ansoff Matrix. Lastly, a strategic plan is devised by analysing Porter’s Generic
Strategies.
LO 1
P1. (a) Meaning of Strategy
Strategy can be defined as “the set of actions that are taken with a view to attain the long
term objectives of a company” (Brewster, 2017).
In other words, it can be said that “Strategy refers to the alignment of people and their
behaviour towards accomplishment of a desired state in future.
Both the definitions state that strategy is future-oriented and provides assistance in
accomplishment of long term business objectives.
While the former definition states that strategy is a course of action, the latter depicts that
it is directing the behaviour of people towards the long term objective.
(b) Role of strategy to achieve business objectives
Strategy is the course of action by which companies aim to achieve a competitive
advantage in marketplace so that they can override rivals operating within the same industry and
enhance the overall sales and profitability. Thus, strategy provides assistance to an organisation
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in accomplishing the organisational goals and objectives, thereby attaining the strategic intent by
directing the behavioural characteristics of individuals towards the vision of company. Also,
business strategy aids an organisation to undertake such activities and processes which provide
strategic directions to various units and departments of an entity so that long term goals can be
timely attained.
(c) Strategic Planning Techniques
There are a number of strategic planning techniques that are available to a business in
order to take tactical decisions aimed at improving the position of company at marketplace and
enhancing its overall sales as well as profitability. Some of the techniques that are widely used
by the business organisations are BCG Matrix, SWOT analysis, PESTLE analysis, Stakeholder
analysis etc. (Chang, 2016). These techniques provide assistance to an organisation to take
decisions for the entity based upon the analysis and evaluation of macro and micro environment.
M1. (a) Macro Environment of BP Oil
BP Oil is a well renowned multinational company which is following vertical integration
and successfully functioning within all the areas of oil and gas industry, inclusive of refining,
marketing and distribution, exploration and manufacturing, petrochemicals, trading and power
generation. By the end of 2017, this organisation was operating within 70 nations producing
approximately 3.6 million barrels per day of oil equivalents and had overall proved reserve of
18.441 billions of barrels of equivalent (Cavusgil and et. al., 2014). Thus, it becomes necessary
to examine and assess the macro environmental factors of this company such as stakeholders,
PESTLE factors, strengths, weaknesses, opportunities and threats in order to improve the overall
market position.
(b) Critical Analysis of Macro Environment using SWOT Analysis
It is essential to evaluate the macro environment of an organisation as it assists an entity
to take adequate and relevant decision which will aid in gaining a strategic edge over rivals and
enhancing the overall profitability. BP Oil has experienced major challenges in last some years,
inclusive of costly as well as brand shattering accidents along with the pressure to take into
account targets of global climate change and emphasize upon CSR. In this regard, being one of
the world’s largest energy companies of the world, BP Oil has examined the macro environment
by making use of SWOT analysis as follows:-
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STRENGTHS WEAKNESSES
 BP has several retail brands as well
as subsidiaries such as ARCO, BP
Express, Amoco, BP Connect,
Burmah Castrol, which depicts the
diverse portfolio of organisation
thereby enhancing the potential to
earn revenue and profits.
 The customers of BP Oil possess
extreme loyalty towards the brand
and are not easily keen on shifting to
alternative brands (Goffee and
Scase, 2015).
 BP Oil has taken extensive efforts to
rebuild its brand image in the wake
of recent mishandling by executives
as well as accidents. Also, the
organisation is now increasingly
focussing upon CSR to gain
worldwide customer satisfaction.
 BP Oil has faced a number of oil
spills and disasters recently leading
to fatalities and environmental
damage across the globe which has
brought bad name to the company.
 Further, the dishonest and poor
management and conduct of
executives completely tarnished
entity’s brand image and leading to
huge fines and penalties.
 BP has closed several oil wells
leading to a number of layoff which
have resulted in poor economic
cycles and further damaging the
company’s reputation in market.
OPPORTUNITIES THREATS
 BP Oil possesses a prominent
presence within the energy sector
owing to which it has the potential
to explore alternate energy choices
such as wind or tidal energy.
 Environmental issues will constantly
act as threat for this organisation if
BP Oil does not undertake effective
CSR initiatives and revise workplace
safety and security issues (Chen and
Jermias, 2014).
 BP Oil faces immense competition
from Shell and Chevron as both
these companies are dealing with
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safety concerns in an appropriate
manner to reduce oil spills and
leakages, refinery explosions and
pipeline corrosion.
D1. (a) PESTLE
It is essential for an organisation to analyse the external factors of business environment
so as to set its strategies accordingly. In this regard, BP Oil is making use of a strategic tool for
analysing the macro environment prevailing within the organization. PESTLE analysis has been
used to identify the impact of external factors upon the functioning of company, as follows:-
Political factors: This factor comprises of trading policies, lobbying, inter-countries
relations and many other. Energy market within the world is becoming unstable due to
alterations in changing needs of oil and variability of Chinese economy, unpredictability arises
among different countries. As BP Oil and Gas is operating in different countries, they have to
acknowledge various types of political environment and political system risks involved in this.
BP Oil needs to take into consideration factors like risk of military invasion, level of corruption,
political stability, interference and bureaucracy in Oil and Gas sector in which they are carrying
out their services (Laudon and Traver, 2016).
Economic factors: The economy of different countries is dependent on British
Petroleum which is assisted by energy supply. There are different sources of energy that are
enhancing and growth is predictable within less time, this will create threat to BP. These factors
include savings rate, foreign exchange rate, interest rates as well as economic cycle which
combine demand and investment within economy. Economic factors which BP Oil must consider
while conducting their services are economic system in the country in which they are rendering
their services and their stability, government intervention related with oil and gas, stability of
host country currency, exchange rates and many other (Klettner, Clarke and Boersma, 2014).
Social factors: The view of world is altering in front of people which are responsible for
spreading uncertainties associated with sustainability. Shared attitudes as well as beliefs play an
important role to analyse customers of market of BP Oil and the ways in which marketing
designs are formulated. They need to identify demographics and level of skills of population,
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hierarchy, power structure and class structure, entrepreneurial spirit, broader nature of society
and many other factors must be considered by BP Oil to furnish services.
Technological factors: It is one of the most important factors which impact the
procedures of company. By making use of technology they have refined, distributed and
explored the market of oil and gas. BP Oil must conduct technological analysis and identify the
speed at which technology is evolving. BP Oil needs to analyse different factors they includes
product offerings, rate of technological diffusion, impact of value chain, cost structure and many
other factors.
Legal factors: The government controls health and safety policies which are related with
oil and gas organizations which will create an impact on health of employees who are part of BP
Oil. They might be working in disposal, distribution, exploration and oil drilling (Davies, 2016).
A firm needs to identify market and legal framework of countries to ensure intellectual property
rights. BP Oil needs to adhere to discrimination law, copyrights, patents, anti-trust laws,
employment laws must be considered by them.
Environment factors: When it comes to business, environment is one of the most
critical factors which must be considered by an organisation. This is so because harmful gases
which are emitted while producing, extracting and refining petroleum creates a great negative
impact on environment. It is necessary for BP Oil to identify the environmental factors in which
they are rendering their services. This includes climate change, laws regulating environment
pollution, recycling, waste management and their attitude towards ecological or green products.
LO 2
P2. (a) Meaning of internal environment and capabilities
Internal environment of an organisation is made up of components such as management,
employees, corporate culture, strategies, tactics and employees’ behaviour. This internal
environment of a company keeps on changing depending upon the situations arising within the
business environment and market place (Mittal and Dhar, 2015). Further, organisational
capabilities refer to the potential of entity to manage and allocate its resources in an effective and
efficient manner with a view to gain a competitive advantage in market.
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(b) McKinsey 7S Model applied to BP Oil
Mckinsey model is considered as the strategic framework which is used by businesses
when they are not working well in the company. With reference to BP oils, it can be said that the
company can use this model in order to improve its internal factors which are not going well in
the company and also influencing their work in negative manner. It includes total seven
independent factors that are categorised into two types that is Hard elements and soft elements.
All the factors belonging to this are specified as below:
Hard elements
Strategy: In this element, management team of BP Oils develops effective strategy by
which they can easily gain competitive advantage and enhance their profitability.
Structure: The top management team of BP oils are using flat organisational structure
for enhancing their size of team effectively (McCahery, Sautner and Starks, 2016).
Systems: The company is specifically using latest updated systems and also uses best
communication processes in order to make sure that work is going to be done in effective manner
without facing any barrier.
Soft elements
Shared value: The core value of this company is to deliver best services to the customers
for the purpose of developing their brand name at market place.
Skills: Management team of BP oils is conducting regular based training sessions for its
employees in order to enhance their skills. This development is helpful for them in maximising
their productivity.
Style: Management team of BP oils is using democratic leadership style for improve their
value of decision making. It can be said that with the help of this style they will easily be able to
improve their business performance with better support of customers
Staff: BP oils owns around 74000 employees who are capable of performing their work
effectively in the company (Lawton, 2017).
M2. (a) Critical analysis of McKinsey 7S Model
Although BP Oil put a lot of efforts in effectively managing the 7 elements of this model,
it can be seen that this organisation has been suffering from mishandling and mismanagement
issues of executives. This has largely damaged the organisational goodwill of BP Oil within the
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global market and thus, it is essential that the management of this entity pays more attention to
all these 7 aspects so that work takes place in an orderly manner.
(b) VRIO Framework
For determination of internal resources as well as capabilities of company, VRIO
Framework has been used by BP Oil, as follows:-
Factors Valuable Rarity Inimitable Organized What is the
result?
Global
presence
Global
presence
- - - Competitive
Disadvantage
Products Products Products - - Partially
competitive
Software Software Software Software - Competitive
advantage for
temporary
basis
Employees Employees Employees Employees Employees Competitive
advantage
To identify the capabilities of BP Oil, four resources have been considered such as
products, global presence, software and employees.
Valuable: These are the resources which provide assistance to an entity in accomplishing
its organisational goals and objectives within stipulated course of time. Valuable elements of BP
Oil are:-
Global presence: This company has a prominent presence in global market owing to
which it has a strong customer base. This provides competitive advantage to the organisation.
Products: This organisation provides products of high quality which makes them a
valuable resource for entity.
Software: BP Oil makes use of SAP GRC software to effectively manage its operations
for the attainment of goals and objectives of entity (Peng, 2017).
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Employees: The personnel of BP Oil are given training sessions so as to ensure that there
is no mismanagement or mishandling within the organisational premises.
Rarity: These refer to the aspects which are unique to an enterprise and provides a
competitive edge to the enterprise in marketplace (Jeston, 2014). In context of BP Oil, global
presence is not rare as several large scale organisations have global presence. The rare resources
of this organisation are:-
Products: The offerings of company are of high quality and in accordance with the needs
and requirements of consumers or oil consuming countries, thus, it is difficult to copy them.
Software: The software taken in use by BP Oil is rare as it is developed as per the
requirements of the organisation.
Employees: The staff of BP Oil is rare as they have their own skill set owing to which
they are able to handle and manage the operations within refineries and thus, they can not be
imitated by any entity.
Inimitable: These refer to the resources which can not be copied by competitors. For BP
Oil, products do not hold this characteristic as these can be produced by rival entities by making
use of technologies and software.
Software: The software taken in use by company is designed as well as developed as per
the needs and requirements of enterprise, thus, it can not be copied.
Employees: The skill set as well as knowledge of employees are unique to individuals
and the organisation owing to the training sessions given to them and thus, can not be easily
imitated by rival firms (Jocovic and et. al., 2014).
Organized: These are the elements which need to be organised in an orderly manner to
achieve goals and objectives of organisation. The software of BP Oil has to be updated at
frequent time intervals so as to meet the requirements of entity and thus does not fit into this
criterion.
Employees: The personnel of this organisation mostly have to be organised only when a
change occurs within organisational premises.
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LO 3
P3. (a) Analysis of industry competition using Porter’s Five Force Model
In today’s modern and hyper competitive era, organisations face immense competition
from rival firms operating within the same business sector. Thus, it becomes essential for
companies to constantly analyse and evaluate the industrial environment so as to devise and
develop strategies accordingly. In this regard, the manager of BP Oil has used Porter Five Force
analysis to evaluate industry rivalry and its impact over the operations of entity, as follows:-
Industry Rivalry: High
The competitive rivalry in oil and gas sector is high. BP Oil faces threat in this regard
from the presence of companies such as Shell, Texaco, Gulf Coast, Total, Chevron, OMP etc.
(Scholes, 2015). The players in this industry compete on the basis of factors such as economies
of scale, product differentiation and fixed and variable cost. With a view to capture large share in
market, BP Oil can move towards merger with small companies.
Threat of New Entrants: Low
The threat of new entrants within oil and gas sector is low owing to the high barriers to
entry that are noticed within this sector due to high fixed cost being involved. Further, it is not
easy for new companies to enter this sector and sustain due to the large market share that is held
by companies such as BP Oil, Shell and Chevron etc.
Threat of Substitutes: Moderate
The threat of substitution within this sector is found to be moderate because there is no
such large organisation available that is dealing in substitute energy resources such as biofuels.
Further, there are many governmental regulations against the use of fossil fuel which pose threat
to the companies which come up with alternative solutions to oil.
Bargaining Power of Buyers: High
Within oil and gas industry, bargaining power of purchasers is found to be high as the
price of oil varies in accordance with global demand. Countries which are developed and have
high power such as US, China or Japan can use their power to negotiate with BP (Spender,
2014). Everyday consumers also have high bargaining power as they can easily switch to other
brands.
Bargaining Power of Suppliers: Low
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The bargaining power of suppliers in oil and gas sector is found to be low. This is
because large scale companies such as British Petroleum can easily negotiate prices with vendors
as suppliers who transact with such entities on a regular basis are not willing to lose such
business opportunities.
M3. (a) Recommending strategy using Ansoff Matrix
Owing to the recent oil spills and other disasters taking place due to the mishandling and
carelessness of executives, BP Oil is now looking for an adequate strategy through which it can
regain its lost brand image as well as enhance its existing market position. For this, the manager
of this organisation is making use of Ansoff Matrix, as follows:-
Market Penetration: This growth strategy focuses upon delivering existing products into
existing markets. In relation to BP Oil, company has been constantly making use of this strategy
over years and offering diversified products like motor oil and lubricants (Veit and et. al., 2014).
This strategy will further assist the entity to enhance its sales and profitability in dominant
revenue generating countries.
Market expansion: Here, a company offers its current products in new markets. BP Oil
has already been operating in 80 countries. However, this organisation has the potential as well
as scope to expand more in locations such as Europe, Africa and Russia.
Product expansion: This strategy of organisation is keen on providing its new offerings
in existing locations. Owing to the global fuel crisis, it has become essential for companies to
now look for alternate energy options such as bio fuels in order to ensure sustainability within
marketplace. BP Oil can look forward to this opportunity to gain a competitive edge and enhance
its overall market share.
Diversification: Although this strategy is risky, it is one of the most effective strategies if
it works out in the favour of an organisation. In this regard, BP has invested $8 million in
development of economical ways to produce alternate and renewable energies owing to the
global environmental pressure.
As per the analysis and evaluation done of the above mentioned growth strategies of
Ansoff Matrix, it can be recommended that diversification will serve as the best marketing
strategy for BP Oil. This will assist the company to regain its lost brand image due to oil spills,
leakages and refinery explosions by gaining expertise in renewable energy sources and becoming
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