Strategic Analysis of BP Oil Company: A Business Strategy Report

This report provides a comprehensive analysis of BP Oil's business strategy, examining the impact of the macro environment, the company's internal capabilities, and the competitive forces it faces. It begins with an introduction to the challenges faced by multinational corporations and the importance of adapting to changing environmental factors. The report then delves into a detailed PESTLE analysis to assess the political, economic, social, technological, legal, and environmental factors influencing BP Oil's operations. It also explores the company's mission, vision, and objectives, and how they are implemented through strategic decision-making. Furthermore, the report evaluates BP Oil's internal environment and capabilities, including its resources and competitive advantages. It applies Porter's Five Forces model to assess the competitive landscape and examines the use of various theories and models for strategic planning. Overall, the report offers insights into BP Oil's strategies and provides recommendations for future strategic options.

Business
Strategy
1

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................4
Impact and influence of the macro environment on BP Oil Company and its strategy.........4
TASK 2 ...........................................................................................................................................8
Internal environment and capabilities of BP Oil....................................................................8
TASK 3 .........................................................................................................................................13
Porter’s Five Forces Model to evaluate the competitive forces...........................................13
TASK 4 .........................................................................................................................................15
Theories, concepts and models to interpret strategic planning for a BP Oil company........15
CONCLUSION..............................................................................................................................16
REFERENCES..............................................................................................................................18
2

INTRODUCTION
Multinational corporations operating in complex and diverse political, economic,
social and cultural environments have to improve, adjust and develop their marketing
strategies on a regular basis (Bamberg, 2009:46). Changing environmental factors
create new conditions for their operating, which often require considerable and serious
changes in strategic decision-making and positioning of companies. Inflexible and rigid
firms will cease to be competitive in the market every time changes occur (Fight,
2006:85). The aim of the present report is to identify the past and present changes in
marketing strategy of British Petroleum, which have occurred under the pressure of
environmental factors. It is evaluated whether these changes were necessary, and
future strategic options for British Petroleum are recommended.
As per today's scenario wide factors are present within market which will affect business
operations directly or indirectly. Business Strategies refers to working plan of
organisation to achieve its vision and give priority to objectives for successfully
completing and optimal fiscal execution with its business model (Buckley, P. J. and
Ghauri, P. eds., 2015). British multinational oil and gas company (BP oil) is is world's
major oil and gas company which is present in London. It operates in around 70
countries with around 3.6 million barrels per day. But due to safety and environmental
incidents some workers died and also due to oil spills number of marine species have
died which resulted in health, economic and environmental consequences. For this they
have made various strategies which have been discussed in following report. This
report is structured into four task. Task one consist of frameworks and impacts that
influence macro environment and its strategy as well as critically analysing strategic
3

management decision. Moreover, Task two will consist on internal environment and
capabilities of an organisation and critically analysing McKinsey's 7 model. Additionally,
Task 3 will cover, competitive forces of a given marketplace of an organisation with
adoption of appropriate strategics to improve competitive edge in market position.
Furthermore, task 4 will cover theories and models to devise strategic planning for an
organisation.
TASK 1
Impact and influence of the macro environment on BP Oil Company and its strategy
Strategy refers to action taken by manager to achieve organisation's objectives and
goals. It can also be defined as set of directions made by organisation for its employees
to meet desired goal. Within BP Oil company it refers to utilizing and allocating effective
resources within organisation to address present needs (Chu, KrishnaKumar and
Khosla, 2014). It also considers actual and likely behaviour of resources to remove any
kind of uncertain events which can have adverse impact on organisation. BP Oil have
made strategies in such a way that they can:
 Handle any kind of uncertain activities if they happen in future.
 Focus on long term operations, that includes new methods of production or
enhancing business in other countries.
 Predict behaviour of customers, employees and competitors.
Strategies are made in such a way that they provide roadmap to organisation. BP Oil
has defined its vision, mission and objectives and this is done by usage of effective
strategies. They have ensured that strengths are maximised, and strengths of
competition is minimised.
Mission of BP Oil: They focus on their activities to display fundamental, unchanging
qualities- honest dealing, integrity, striving for mutual advantage, treating everyone with
dignity and respect and contributing to human progress. They want to be recognised as
great company in terms of competition and progress successfully. They have a belief
that they can create a difference in world. BP Oil can achieve this by producing energy
that is inexpensive, do not have negative impact on environment and is secure.
4

Vision of BP Oil: Their vision includes
 To be accessible, diverse, inclusive and improve.
 To have high-grade competitive corporate, financial and operating
performance.
Objectives of BP Oil: Main organisational and strategic objective of BP Oil is to create
long-term value for investors and communities in which they operate (De Massis, A. and
Kotlar, J., 2014). They have objectives as specific, measurable, achievable, realistic,
timed which stands for SMART means they are particular of achieving what they want
and quantify their objectives. They focus on increasing production, profitability by 20%,
create brand value that was affected by certain incidents and meet accelerative
demands to enhance financial gain. PESTLE Analysis () is shown below:
PESTLE Analysis of BP Oil: It analyse tools used by organizations to monitor and
analyse external marketing environment factors which have impact on organization.
Alteration in macro environment has direct impact on organisation. Various operating
challenging issues are faced by BP Oil in present macro environment. Pestle analysis is
provided below:
Political Factors: As per view point of Krzysztof Wozniak, It refers to extent to
which government interferes in economy. This includes government policies, foreign
trade policy, tax policy and so on of UK government. It helps to determine factors which
have impact on profitability of BP Oil in certain country. They have been operating in
multiple countries due to which they are exposed to different political environment. They
have analysed different factors before entering in specific market:
Positive impact: Government of different nation are imposing subsidiaries and other
sustainable as well as eco friendly energy in order to have benefit for an economy.
Thus, with such purpose an respective organisation is able to attain sustainability for
longer duration of time with high loyal brand image.
Negative impact: The need to maintain high safety and security for their
employees as well as their customer's. Herein, due to high tariffs and trade regulations,
interference and bureaucracy, antitrust laws in oil and gas industry are evaluated by BP
Oil before entering into any country so that they do not have any adverse impacts.
5

Economic Factors: According to Dr. Karam Pal, These factors are determinant of
performance of economy that have long term impact on any organization. Macro
environment factors like saving rates, interest rates, inflation rates and foreign exchange
rate determine investment and demand in economy can be used to predict growth such
as:
Positive impact: Many counties have supported BP oil by reducing tax and
inflation rate so that an country can develop its economy in an appropriate manner.
Productivity and labour cost, skilfulness of fiscal environment, quality of infrastructure,
interest rates, unemployment rate, economic growth rate. UK government can increase
rate for some business while decrease for some due to any specific reasons.
Negative impact: Herein, British Petroleum has faced many issues in entering
new marketplace. Borrowing rate and interest rates of banks need to be significantly
considered by BP Oil before deciding the prices of fuel as both are the major factors
that influence the purchasing power of consumers in an economy. Such as huge norms
and regulation, need to reduce carbon emission trading and effected by high tax,
interest and inflation rate.
Social Factors: As per Jack Onyisi Abebe, social factor have great impact on
organisation's working environment. Attitude of population and shared beliefs will help
BP Oil to develop marketing message for oil and gas industry.
Positive impact: BP oil are production or designing their product and services
in such a manner that help them to reduce carbon emission which leads to create
positive impact on environment as well as society. Moreover, due to high education
level, leisure interest, attitude, broader nature of society and entrepreneurial spirit of
people of UK must be evaluated by BP Oil so that they can provide services as per that.
Negative impact: In many countries BP oil have faced may social issues such
as buying and consuming pattern of people differ from nation to nation. For such
purpose they need to observe needs and wants of customer's as per the requirement
which will lead to increase productivity of an organisation. Thus,Skill level and
demographics of population, hierarchy, power and class structure, culture of UK should
be known to BP Oil so that differences or conflicts between employees do not arise.
6

Technological Factors: As per view point of Jennifer Post,This include factors related
with innovation in technology that affect operations of industry. BP Oil should focus on
technological enhancement but that they should also focus at rate at which technology
has been affecting industry. Rapid speed will denote that it will take some time to come
up with changes and profit will be less.
Positive impact: With the adoption of latest development in terms of technology
in UK and their impact on service offering, extent at which technology will bemust be
analysed and lead to create positive impact.
Negative impact: Herein, BP Oil must focus on impact on cost structure and
value structure in oil and gas sector of UK, so that they do not suffer loss in future
aspect.
Legal Factors: According to Dr. Jack A Onysis, these factors include both internal and
external sides. Like BP Oil have made certain laws or policies which are meant to be
followed by employees are internal sides while some laws are made by government for
oil and gas industry which BP Oil on whole has to follow. Legal institutions and
framework are not robust to secure intellectual property rights. BP Oil should carefully
analyse their secrets so that they are not stolen away, competitive edge can be
maintained.
Positive impact: herein, mangers of BP oil need to ensure that copy rights,
patents and data protection should be ensured by BP Oil to prevent loss of confidential
information.
Negative impact: Due to discrimination, intellectual property, anti-trust laws of oil
and gas industry, health and safety laws and employment laws made by UK
government must be analysed and followed by them so that they do not fell into any
kind of trouble.
Environmental Factors: According to view point of Krzysztof Wozniak,This includes
factors which are examined by surrounding environment. Every state has different
environmental and liability norms. Example: liability clauses in UK for environmental or
mishaps disaster are different (Klettner, A., Clarke, T. and Boersma, M., 2014). BP Oil
should analyse various environmental norms before they expand in some other country.
7

Positive impact: Weather, climate change, laws regarding environment
pollution, air and water pollution rules in UK for oil and gas industry must be ensured by
BP Oil.
Negative impact: Recycling, waste management, attitude towards ecological
products, endangered species and attitude towards renewable energy should be
enhanced by BP Oil so that they do not fail to follow environmental norms.
Analysis of these factors can help BP Oil to stay stable within market and prepare their
strategies and policies in dynamic manner so that if any changes occur in macro
environment then they can cope up with those challenges
TASK 2
Internal environment and capabilities of BP Oil.
Internal environment: It comprises of elements within organisation, they are
employees, corporate culture and management. They have impact on either whole
organisation or on manager only. First question related with internal environment, which
is addressed is whether resources are valuable? Either they defend against threats
(Mellat-Parast and et. al., 2015). For BP Oil, resources are considered valuable if they
enhance customer's value. If these resources do not handle this factor, then it will lead
to competing liability. Valuable and rare resources provide competitive advantage to BP
Oil. Competitive parity occurs in oil industry when different organisations are using
same resources and capabilities in similar manner. Victoria oil and gas industry uses
same resources and deals in same sector as BP Oil.
BP Oil due to casual ambiguity, historical conditions and social complexity it is
difficult to imitate them. Imitation occur either by duplicating resources or substituting
resources. BP Oil offers valuable, rare and cost-effective resources to gain competitive
vantage. BP Oil organises its processes, culture, organisational structure, policies and
management systems in such a way that it can utilize their potential so that enhanced
vantage can be obtained. If resources are not organised, then value cannot be captured
from them. This will help to identify internal capabilities of resources either equipment’s
or employees in terms of their evaluability, rarity, cost and their organisation within oil
and gas sector.
8

McKinsey's 7s model: Strategic capabilities of BP Oil can be analysed using
McKinsey's 7s model. This tool is used for action and analysis. 7 factors help to
organize organisation in effective and holistic way (McKinsey’s 7-S and Pascale’s
Adaption Thereof. 2018). Model is described below:
Strategy: In this method strategy means making strategics with a condition in
which an organisation come in such situation where there is no profit no loss which is
usually referred “federation of assets”. Herein, Organization design plan of action in
anticipation of alteration in external environment. It basically addresses three important
questions they are: ranking of organization at present scenario, future goal like where
they (BP Oil) want to see them in future and how that can be achieved. Strategies are
made by BP Oil to reach to level after incidents (safety and environmental incidents,
leakage of oil in oceans). They tried to make strategies in such a way that they can
reach same position in which they were before incident.
Strength: one of the main strength of this method is that this action plan is
anticipation of alteration in external environment. So the effective and attractive
strategics can be adopted.
Weakness: If managers fail to such strategics than they will not able to achieve
their goals and objectives in an attractive manner.
Structure: In an organisation structure usually represent a way in which business
division and units are organised that includes information which is accountable with
different roles and responsibilities. Business is organised in peculiar manner which is
completely dependent on culture and objective of organisation (Moseley III, G. B.,
2017). Structure is defined in terms of operations and performance of organization. BP
Oil has structured its business in hierarchical manner in such a way that each
department has their own specific role like transportation department is responsible for
effective supply of oil from one country to another while they must ensure contact with
another department.
Strength: the strength of this model is that mangers cam implement it structure
so that they can overcome their poor decision making process.
9

Weaknesses: For such instance, if mangers of respective organisation are
not able to use vertically integrated with this structure then they while make decisions
for their teams as well as organisation which is not equivalent.
System: In an organisation system are process and procedures of a company which
usually maintains daily activities and function how business is operated. To handle
internal processes, strategies are built within every organization. Example can be
considered like transportation department of BP Oil has to transport oil from one country
to another for which they require effective plan which includes which way to go, policies
of country, how many employees can go and many more. For this BP Oil has to plan
each and every step so that they do not lay into any kind of problem.
Strength: If an organisation are able to maintained and handle internal
processes, strategies are built within organisation then they will able maintain their
productive in competitive marketplace.
Weaknesses: If mangers main to maintain safety measure than they will not able
to maintain such proper and systematic manner of performing their task and activities.
Culture/Style: It refers to the style or culture which an organization follow in order to
conduct there work in appropriate and specific manner. There are various type of
culture or style which an organization can follow. Every organisation has their own
working culture which is affected by employees present their (Oldman, A. and Tomkins,
C., 2018). As beliefs, norms and values of each individual varies with respect to each
other. BP Oil ensures that managers have good and healthy interaction with employees
so that they can feel open about giving innovative ideas or share any kind of problem
which they face while working.
strength:-
 By this company able to conduct there wok in proper and effective manner and
there is no occurrence of skills gaps and conflict situation. Which make peaceful
and positive working environment.
weakness:-
 The limitation of adopting a particular and specific structure is that adopting a
particular culture for a long time seems as a limitation. Due to this company not
able to adopt new innovation in effectively and quickly.
10

Staff: It is a responsibility of a manager to understand strength and weakness of there
employees or staffs. Which help them in conducting improvement plan accordingly.
Every organization consists of employees who are major factors for leading organization
in ladder of success. Innovative ideas of employees can be used by BP Oil to develop
strategies, policies and solve any kind of problem if arises within organisation. Consider
an example: within BP Oil manager can give an idea to deal with specific problem but
when more people are involved in it then that idea can be modified and can result in
better idea to handle problem. BP Oil considered employees while taking or making
decisions so that they ideas can be utilized in healthy manner.
strength:-
 By understanding staffs in effective manner manger able to develop strategies,
policies, rules and regulation in effective and appropriate manner. Along with this
they able to allot work to right employees in effective manner.
weakness:-
 This is time taking and not possible that employer of organisation able to
understand every employee or staff in effective manner.
Shared Values: It refers to the goal and objective which a company want to achieve
and it is based on organizational culture, values, purpose and many more. In BP Oil
ideas of employees are considered and are thought of when making any important
decision related to any situation. This will help organization to achieve excellence and
enhance their business. It will also provide employees with sense of satisfaction and
value.
strength:-
 Share value develop feeling of cohesiveness and connection with employees as
well as company. If employees understand it in effective manner they able to
conduct work in proper way.
weakness:-
 Not every employees behave same and stretch themselves according to need,
demand and values of company.
Skills: This point is related to staffs or employees of an organisation and it is related to
skills and ability of staff to conduct a work in proper and effective manner. It is also
11

related with employees in terms of capabilities possessed by them. While recruiting
employees HR makes sure that what BP Oil requires and for this what capabilities must
be possessed by individual. They make ensure that employees are utilised till their
complete potential.
This model will help BP Oil to identify competitors and inconsistencies that are present
within working and how they can be aligned in such a way that best strategies can be
developed.
strength:-
 If staff have specific and appropriate skills they able to conduct work or task in
appropriate and effective manner.
weakness:-
 To be effective in team employees has to update and enhance there skills which
seems as limitation for staffs.
VRIO Model:-
Particulars Valuable Rare Inimitable Organized
Resource Resource - - -
Tracking system Tracking system Tracking system - -
Global
presence
Global
presence
Global presence Global
presence
-
Employees Employees Employees Employees Employees
Valuable:- It refers to those factors which is valuable and important for an organisation.
In respect of BP Oil there valuable factors are:-
 Resources which they use for adopting new ideas and innovation. Along with this
it help in conduct work in effective and efficient manner.
 Tracking system which is use by respective company to track there information
and data in effective manner.
 Global presence which help them in gaining and enhancing profitability ratio and
customers base.
12