BP Oil and Gas: A Case Study in Strategic Management

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BUSINESS STRATEGY
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Executive summary
The following report has been focussing over the business strategy set up of BP Oil Company.
The business strategy holds concept as to determine the future direction of an organisation and to
help in understanding its positioning within a stipulated market segment. In context of case
scenario, the goals and objectives aspect has been mentioned to have impedance over employee
retention, implementing an industrial waste treatment plan, implementation of technological
support and management of resources. From the SWOT analysis, it has been evident that BP oil
Company is with favourable revenue strengths along with wider networks over the globe
however with ethical issues such as employee remuneration disparity. There has been assessment
of BP oil internal environment and capabilities. The concept of internal environment has been
concluded to be an organisation's own strengths and weakness and the pertaining opportunities
and threats. Further there has been evaluation of porter’s five forces model. Few
recommendations of appropriate strategies for improving competitive edges have been
mentioned. It has been recommended through achieving a combined force of competitive pricing
strategies along with sales promotion and dedications of franchising sales. Market research has
been beneficial to produce their customer requirements. On an additional context, there has been
applied porter’s generic strategy and bowman’s strategic clock model to chalk out business
aesthetics.
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Table of Contents
Introduction......................................................................................................................................5
LO1: Impact and influence of macroeconomic factors...................................................................5
P1: Application of frameworks for analysis of macro economy.................................................5
a. Defining and explanation of strategy....................................................................................5
b. Strategy role for achievement of business objectives..........................................................5
c. Identification and explanation of various planning techniques............................................5
M1: Critical analysis of macroeconomic factors.........................................................................6
a. Identification and explanation of organizational macro environment..................................6
b. Critical analysis of macro environment................................................................................6
D1: Conduction of PESTLE analysis...........................................................................................7
a. PESTLE analysis..................................................................................................................7
LO2: Assessment of BP oil internal environment and capabilities.................................................9
P2: Analysis of BP Oil’s internal environment and capabilities..................................................9
a. Meaning of internal environment and capabilities...............................................................9
b. Examination of strategic capabilities...................................................................................9
M2: Critical evaluation of internal environment for assessment of strengths and weaknesses. 10
a. Critical analysis of 7s model outcomes..............................................................................10
b. Application of VRIO..........................................................................................................11
LO3: Evaluation and application of Porter’s five forces model....................................................11
P3: Evaluation of Porter’s five forces model.............................................................................11
a. Identification of competitive forces....................................................................................12
M3: Recommendation of appropriate strategies for improving competitive edges...................13
a. Recommendation of strategies............................................................................................13
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LO4: Theoretical application for strategic planning......................................................................15
P4: Application of porter’s generic model, Bowman’s strategic clock model..........................15
a. Theoretical application of porter’s generic model, Bowman’s strategic clock model.......15
M4: Strategic management plan................................................................................................17
a. Meaning of strategic management plan..............................................................................18
b. Production of strategic management plan..........................................................................18
Conclusion.....................................................................................................................................20
Reference list.................................................................................................................................21
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Introduction
The business strategy holds concept as to determine the future direction of an organisation and to
help in understanding its positioning within a stipulated market segment. The key assessment
stays in form of analysing an organisation's key strengths weakness in order to leverage
competitive advantage. In light of this, the following content would be highlighting the strategic
business management for BP oil and gas organization, from the fuel industry of UK. The report
would be highlighting sustainability strategies as the company is facing macroeconomic
challenges. There would be analysis of swot, pestle, VRIO and porter’s forces to analysis its
business environment. Lastly, recommendations would be pursued against any available negative
notion.
LO1: Impact and influence of macroeconomic factors
P1: Application of frameworks for analysis of macro economy
a. Defining and explanation of strategy
A business strategy is defined to be the future direction which the organization can pursue for
gaining their business sustainability and thus would produce them their competitive advantage
(Kim and Mauborgne, 2015). In this regards, BP Oil Company is with suffering from meeting
demands of stakeholders and losing their employees. In this regards, the strategy would be to
have impedance over their managerial concerns. There can be facilitated competitive
remuneration strategy from the organizational side. Proper use of technology and to have a waste
treatment plant can be strategy to eliminate dismissal of wastes in the sea body thus not harming
the aquatic life.
b. Strategy role for achievement of business objectives
In context of case scenario, the goals and objectives would be to have impedance over their
employee retention, implementing an industrial waste treatment plan, implementation of
technological support and management of resources. The business strategies mentioned are
eligible to highlight progress of company through implementing them and thus leads them
reduce their resources wastage reduction. According to Johnson et al. (2011), this would directly
lead them to their competitive advantage and thus fulfil their goals and objectives. The strategy
would be showcasing guidance and structured outcome for implementing their plans which
would lead to business success of BP Oil Company.
c. Identification and explanation of various planning techniques
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Figure 1: Planning techniques
(Source: created by researcher)
With reference to the case scenario, there can be leveraged a few strategic planning techniques
such as benchmarking along with budget planning, competitive intelligence analysis and
structured planning. Benchmarking would be showing a comparative analysis of competition
metrics thus helping BP Company to have analytics of their requirements. On other hand, budget
planning would be helpful for chalking out their business resources and financial conditions. A
gain of knowledge through analysis of markets, competitors and trends by virtue of competitive
analytics would be beneficial for gaining sustainability insights (Broman and Robèrt, 2017). The
structured decision planning through use of SWOT and PESTLE analysis can produce an
analysis of their competitive business environment.
M1: Critical analysis of macroeconomic factors
a. Identification and explanation of organizational macro environment
On a macroeconomic level, there are majorly the competitive threats to BP Oil Company with
respect to rise of various trading policies of UK which are affecting their business sustainability.
Major threats are from the growth of alternative energy sources which are attracting the
consumers as well as the energy market thus switching targets from oil firms. The advent of
green energy firms are the major competitors along with market leaders within current industry
trends (De Carvalho et al. 2018). Being green energy, there are less adherence to the
environmental degradation while on other hand, BP Oil Company’s poor waste treatment is
leading to environmental degradation thus violating the environmental sustainability.
b. Critical analysis of macro environment
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Strengths
● Revenue strength of $303.73 billion
dollars
● Wider network coverage by 11850
station around UK with subsidiaries in
US, Asia pacific and Africa
Weakness
● Inability for penetrating in green
market
● Ethical issues pertaining to dishonesty
in employee remunerations
Opportunities
● Implementation of alternative energy
● Expansion towards sector of
infrastructure
Threats
● Industrial rivalry and competitive
threats from Shell and Chevron
Table 1: BP Oil SWOT analysis
(Source: created by researcher)
From the SWOT analysis, it is evident that BP oil Company is with favourable revenue strengths
along with wider networks over the globe however with ethical issues such as employee
remuneration disparity. Here the macroeconomic factor highlighting competitive threat stays
evident on account of disrupting their management decision. With less employee strength and
financial disparities, BP is likely to stay behind the rising industrial trends. Rise of political
trends and alternative energy sources are taken to be changing the social behaviour of oil and gas
industry there sustainability of BP is hampered. However, this can be treated as an opportunity
for BP to assess to green energy sources production on small scale though within their other
subsidiaries on global contexts (Dijkman et al. 2015). An incarnation of both energy sources can
lead to better revenue structures thus eliminating their financial biases and gain of employee
satisfactions.
D1: Conduction of PESTLE analysis
a. PESTLE analysis
Politics ● Presence of democratic constitutional
monarchy
● Advent of labour, conservative and
liberal democrats parties
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● Effect of Brexit
Economics ● Growth of GDP rate by 0.5%
(Ons.gov.uk, 2019)
● Marginal taxation rate on fuel by 40%
(Cwenergy.co.uk, 2019)
● Corporate taxation rate by 19%
(Gov.uk, 2019)
Social ● Multilingual society
● Hindrance in operations of exploratory
drilling in Australia
● Investment of $1 billion to social
activities (Bp.com, 2019)
Technology ● Advent of oil and gas industry trends
such as energy transition, green
energy, inventories and output of
OPEC
● Advent of seismic imaging technology
Legal ● Follow up of employment rights act
1996
● Minimum wage of £7.83 for working
per hour (Gov.uk, 2019)
Environmental ● Follow up of Waste Minimisation Act
1998 (Legislation.gov.uk, 2019)
● Follow up of Pollution prevention
and control act 1999
(Legislation.gov.uk, 2019)
Table 2: PESTLE factors
(Source: created by researcher)
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Brexit is likely to have negative impedance over the supply of raw material from the EU which is
going to hamper their profitability rates. In terms of economic viewpoint, GDP growth has been
found increased which can be contested positive for BP as for lowering down poverty level and
raising their employment bar (Fatoki, 2016). However the raise of fuel taxation rate by 40% are
liable to increase their production cost rate which is likely to raise their product rate thus
leveraging limited consumers and decreasing competitive advantage.
Though social concerns are with fewer hindrances over BP’s business aesthetics, it has incurred
issues from the local inhabitants while managing their industrial set up and thus liable for
polluting the environment. This has down grown major of their industrial growths. In terms of
technological viewpoint, positive notions are available in form of opportunities of seismic
imaging technology and energy transition technologies. In views of Khan and Quaddus (2015),
through such prospects, there can be generated alternatives of energy with lower costs and thus
would be beneficial for their financial revenue growths. In terms of legal factors, BP Oil is to
maintain to employment laws in order to leverage its employment issues. Satisfied employees are
likely to entail growth of their organizational management and prospects. Following up of waste
management plans and legislation can lead to lowering of pollution thus giving BP Oil Company
competitive advantage and environment sustainability.
LO2: Assessment of BP oil internal environment and capabilities
P2: Analysis of BP Oil’s internal environment and capabilities
a. Meaning of internal environment and capabilities
The concept of internal environment is concluded to be an organisation's own strengths and
weakness and the pertaining opportunities and threats (Mathooko and Ogutu, 2015). In terms of
BP Oil Company, the internal capabilities can be referenced in form of its strengths such as
appreciable revenue strength and wider business networks. However weaknesses are available
for BP in form of inability to penetrate in green energy source sustaining along with ethical
issues such as employee turnover.
b. Examination of strategic capabilities
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Figure 2: Mckinsey 7S model
(Source: influenced from Nohria, 2017)
In terms of 7 elements of the model, there can be highlighted corporate strategy, strategy of
R&C, functional strategy and business strategy and cultural aspects. In view of corporate
strategy, BP Oil Company can build up of their portfolio with amending of their shared interests
for increasing their production volume per consumer (Nohria, 2017). There can be exploitation
of cost synergies across their production of fuels. Regarding the R&C strategy, there can be
considered their HRM department and financial department with for leveraging their debts/cash
for increment of their operational income. In terms of functional strategy, there are to be
capitalization of synergies of cost factors through vertical integration of their audits. There can
be management of supplies and logistics with enhancing stronger distribution relationships.
Highlighting business strategies, the adherence to quality assurances along with sustaining eco
friendly fuels stay as priority.
M2: Critical evaluation of internal environment for assessment of strengths and
weaknesses
a. Critical analysis of 7s model outcomes
As opined by Papilaya et al. (2015), build up of their portfolio with amending of their shared
interests can leverage competitive advantage for the company while it would be devastated
through highlighting financial pressures in terms of debt equities. In terms of vertical integration,
BP Oil Company is liable to have advantages through lowered transaction costs and advantages
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over their competitors available. However it would be disadvantageous through reduction of
auditing flexibilities and putting up several market entry barriers.
b. Application of VRIO
Resources Valuable Rarity Imitability Organised Competitive
advantage
Financial
resources
such as
business
bonds,
patents and
equities
Yes no Market
liquidity
along with
financial
instruments
are available
to
competitors
nearby
Company is
with
moderate
sustainability
Competitive
advantage on
temporary
basis
Access to
most of raw
materials for
business
executions
Yes Yes because
other
competitors
are unable to
access to
firm’s
financial
domain and
position of
market
(Teece, 2018)
Can be very
well imitated
by
competitors
Yes but on a
medium scale
competitive
advantage
sustainability
Table 3: VRIO analysis
(Source: created by researcher)
LO3: Evaluation and application of Porter’s five forces model
P3: Evaluation of Porter’s five forces model
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a. Identification of competitive forces
Figure 3: Porter’s 5 forces analytical outcome
(Source: created by researcher)
Customer bargaining power (high)
The customer bargaining power can be considered relatively high for BP Oil limited and
evidence can be given in terms of its high competitive rivalries. There are available plenty of
competitions in the fuel market such as Chevron Corporation, ExxonMobil and Valero Energy.
The offerings of green energy substitutes from these competitors are more attractive to
consumer’s majorly automobile companies. In light of this the revenue generation of BP stays
moderately low on account of which there are issues of business sustainability.
Suppliers bargaining power (medium)
The supplier's bargaining power stays medium for BP Oil Company as there are numerous
suppliers of raw materials and where there can be bargained for the offered prices by suppliers.
By virtue of such, the profitability ratio along with financial stresses for BP Oil Company stays
competitive thus producing it competitive advantages. It enables the organization to have
multiple options for sustaining their correct form of raw materials and the adequate rate in order
to entail better business analytics (Šoltés and Štofková, 2016).
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