BP Oil Company Business Strategy: A Comprehensive Analysis

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BUSINESS STRATEGY
BP OIL COMPANY

Table of Contents
INTRODUCTION...........................................................................................................................2
TASK 1............................................................................................................................................3
P1 APPLYING APPROPRIATE FRAMEWORKS TO ANALYZE THE IMPACT AND
INFLUENCE OF THE MACRO ENVIRONMENT ON BP OIL COMPANY AS AN
ORGANIZATION AND ITS STRATEGY................................................................................3
M1 CRITICALLY ANALYSE THE MACRO ENVIRONMENT TO DETERMINE AND
INFORM STRATEGIC MANAGEMENT DECISIONS...........................................................4
D1 CRITIQUE AND INTERPRET INFORMATION AND DATA APPLYING
ENVIRONMENTAL AND COMPETITIVE ANALYSIS TO PRODUCE A SET OF VALID
STRATEGIC DIRECTIONS, OBJECTIVE AND TACTICAL ACTIONS FOR BP OIL........7
TASK 2..........................................................................................................................................10
P2 ANALYSE THE INTERNAL ENVIRONMENT AND CAPABILITIES OF BP OIL
USING APPROPRIATE FRAMEWORKS..............................................................................10
M2 CRITICALLY EVALUATE THE INTERNAL ENVIRONMENT TO ASSESS
STRENGTHS AND WEAKNESSES OF AN ORGANISATION’S INTERNAL
CAPABILITIES, STRUCTURE AND SKILL SET USING BP OIL COMPANY AS AN
EXAMPLE................................................................................................................................11
TASK 3..........................................................................................................................................14
P3 APPLYING PORTER’S FIVE FORCES MODEL, EVALUATE THE COMPETITIVE
FORCES OF A GIVEN MARKET SECTOR FOR AN ORGANISATION USING BP OIL
COMPANY...............................................................................................................................14
M3 DEVISE APPROPRIATE STRATEGIES TO IMPROVE COMPETITIVE EDGE AND
MARKET POSITION BASED ON THE OUTCOMES...........................................................16
TASK 4..........................................................................................................................................18
P4 APPLYING A RANGE OF THEORIES, CONCEPTS AND MODELS, INTERPRET
AND DEVISE STRATEGIC PLANNING FOR A GIVEN ORGANIZATION SUCH AS BP
OIL COMPANY........................................................................................................................18
M4 PRODUCE A STRATEGIC MANAGEMENT PLAN THAT HAS TANGIBLE AND
TACTICAL STRATEGIC PRIORITIES AND OBJECTIVES FOR BP OIL COMPANY.. . .20
CONCLUSION..............................................................................................................................24
REFERENCES..............................................................................................................................25
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INTRODUCTION
BP Oil Company is among the world leaders in the energy sector. UK based Oil
Company BP is the world's seventh largest oil company in terms of Revenue (WA,
2018). Its revenue stood at $299 billion at the end of the year 2018 (BP, 2018). BP Oil
Company has its operations in 6 continents and 78 countries with 73,000 employees.
BP Oil Company produces nearly around 3.7 million barrels per day and holds reserves
of 19,945 million barrels of oil equivalent (BP, 2018). BP Oil Company also has
substantial stakes in Alternate energy sources like Wind energy, solar energy, Biofuels,
Bio powers etc. for future prospects. The journey of BP Oil Company started in 1901
and currently, it has 5 more brands under its umbrella, namely Castrol, Amoco, Arco,
Aral and Sohio.. This assignment will try to formulate a business strategy for BP Oil
Company which can help it to retain the trust of stakeholders, decrease the number of
accidents and prevent competitor’s to pouch its employees.
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TASK 1
P1 APPLYING APPROPRIATE FRAMEWORKS TO ANALYZE THE IMPACT AND
INFLUENCE OF THE MACRO ENVIRONMENT ON BP OIL COMPANY AS AN
ORGANIZATION AND ITS STRATEGY
A strategy is a set of actions for approaching towards a set goal or objective. A Strategy
is developed to increase the chances of success or reaching a goal. A business
strategy is designed with precautions keeping the current objectives and ultimate goals
of the business in the centre. A strategy with many loopholes not only decreases the
chances of success but also affects the goodwill of the company and sometimes also
attracts legal consequences.
A strategy plays a major role in achieving business goals and objectives. Like, it helps in
gaining competitive advantages by effectively utilizing the resources against the market
forces. It helps in directing employees, their actions and business activities towards the
achievement of business goals. It guides every activity of business so that every
resource is contributing to the same goal. A strategy also helps in setting short term and
long term goals for a business or an activity. It increases the efficiency of a process by
setting strategic standards for attaining the desired goals. A strategy helps in finding
and selecting the best possible solution for a problem by deciding the priority of a
problem and by helping to eliminate the solutions which go against the current strategy
in place. A strategy helps to deal with uncertainties, as it mostly has contingency plans
ready. It can guide in quickly deciding the courses of actions even if contingency plans
are not ready. A strategy helps in decision making and it even increases the speed of
decision making. It is done by having certain values, principles and goals in
consideration before proceeding with any action.
There are many techniques available which assist in developing strategic planning.
Like:
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1. Budgeting: It guides in formulating a strategy based on the resources which a
company can employ.
2. Competitive Intelligence: A business strategy can also seek inspiration from the
practices and activities of its competitors. A great insight of products, markets
etc. of a competitor can help here.
3. Risk Analysis: A business strategy is always prepared by keeping the estimation
of risk involved in the execution. It guides the business to pre-determine the
probable impact of the strategy on business.
4. SWOT Analysis: It helps in the assessment of strengths, weaknesses, threats
and opportunities for business (Sarsby, 2016).
5. PESTLE Analysis: Pestle Analysis helps in estimating the current state of the
external environment of the business and helps in preparing to withstand those
forces in advance.
M1 CRITICALLY ANALYSE THE MACRO ENVIRONMENT TO DETERMINE AND
INFORM STRATEGIC MANAGEMENT DECISIONS
Macro environment of an organisation involves the forces which do not have any direct
effect on the business but still affects the long term profitability and survival of the
organisation. An organisation like Beyond Petroleum which is operating in multiple
countries, dealing in multiple currencies with such a big size has high impacts of Macro
environment. Its Macro environment includes six categories:
1. Socio-cultural environment: It consists of the cultural and societal beliefs,
practices, values, perspectives etc. It differs from regions to regions and the
success of a business highly depends on the attribute of the people it is targeting
(Cadle et al., 2014).
2. Political environment: It consists of forces like political structure, stability and
policies of a government.
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3. Economic environment: It consists of economic factors like GDP, GNP, Inflation,
rate of interests and subsidies etc. These factors affect the buying behaviour of
people.
4. Demographic environment: It consists of the characteristics of the people in a
region. The demographic environment helps to predict potential buying
behaviours of the masses and helps in product designing an upgrading as well.
Characteristics which defines the demography of a region are age, educational
qualification, gender, race, gender etc.
5. Technological Environment: It consists of the prevalent technology in the market.
Any new technological breakthrough gives competitive advantages to an
organisation. Technology also decides the profitability and quality of the product
of a company.
6. Legal Environment: It consists of the legislation which a company has to follow in
order to legally operate in a jurisdiction. The legal environment is made up of all
the employment laws, environmental laws, quality regulations etc.
SWOT Analysis of BP Oil Company
STRENGTHS
•Present in 6 continents and 78 countries.
•High standard performance and quality products.
•Equipped with high-end technology.
•Established brand name and goodwill.
•A good amount of oil reserves available to help financially and increasing supply.
WEAKNESSES
•Events of accidents attract huge losses.
•Reduction in production.
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•Not reaching maturity due to Performance issues in some countries.
OPPORTUNITIES
•The natural gas market is showing rapid growth.
•Huge potential in growing markets of developing and underdeveloped countries.
•Substantial investment in the alternate energy sources offers promising prospects due
to the increasing shift in consumption of renewable from non-renewable energy.
THREATS
•High Political risk of a new regulation by governments due to operations in multiple
countries.
•Competition is always very close in the petroleum sector which makes the customers
shift to other company very rapidly.
•Environment protection laws in many countries affect the demand of petroleum
products which affects BP Oil Company’s performance.
A swot analysis helps in critical analysis of the macro environment of BP Oil Company.
It also helps in the process of decision making in numerous ways. It helps in realising
the laws and regulations which must be adhered to avoid any legal consequences. At
the same time, it helps in realising the factors which are affecting the performance of the
company like demographic factors or socio-economic factors. Need for technological up
gradations can also be observed with the help of an analysis of macro- environment; It
will help in determining the weakness or threat to the business with the help of SWOT.
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D1 CRITIQUE AND INTERPRET INFORMATION AND DATA APPLYING
ENVIRONMENTAL AND COMPETITIVE ANALYSIS TO PRODUCE A SET OF VALID
STRATEGIC DIRECTIONS, OBJECTIVE AND TACTICAL ACTIONS FOR BP OIL
PESTLE Analysis of BP Oil Company
Political Factors:
The governments are promoting renewable energy resources to reduce carbon
emission and import liabilities. Many governments are formulating policies that lead to a
decrease in the use of fossil fuels which is affecting the demand for petroleum products.
Economic Factors:
With increasing income people are opting for a more eco-friendly source of energy
despite its cost. The rapid growth of those players affects the market share of BP Oil
Company.
Social Factors:
Society is showing concerns about sustainable development. Factors like this are
changing societal inclination towards petroleum products. With changing attitude and
increasing pollution, more people are shifting towards alternate energy sources and
demand for BP Oil Company is getting affected.
Technological factors:
Technological up gradations are very necessary to keep with the dynamic environment
of the energy sector. It helps in refinement, procurement of oils from oil wells and
transportation. Its main effect is on product quality and cost of the products.
Environmental Factors:
The environment is getting damaged due to increasing pollution and emission of
harmful gases by petroleum products. This alarmed many governments to bring energy
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emission laws which affect the operation of BP Oil Company and other oil companies as
well.
Legal Factors:
Every big accident or causality during the operation attracts legal actions. With recent
accidents and pending claims due to an accident in one of BP's oil fields in the Gulf of
Mexico, BP is at worried about the losses to the investors.
STAKEHOLDER ANALYSIS
This stakeholder analysis shows that the shareholders and employees have the highest
interest and power among other stakeholders (IB, 2016). This is because Shareholders
have invested huge capital in BP. BP employees 73,000 peoples who perform its
operations. Suppliers, competitors and customers are other stakeholders who have high
interest but less power over BP they are in the subject category. The third category of
stakeholders includes local communities, media and NGO’s they have a high power of
influence but low interest in BP, therefore, they can affect BP's business.
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As per the situation presented by PESTLE and Stakeholder Analysis, BP should target
the alternate energy sector. It should invest extensively in R&D about them as well as in
increasing the capacity of their production. Next thing BP can do is increase the interest
of stakeholders like NGO’s and Media with different activities. It can also form strategic
alliances with its competitors and suppliers to help in long term business benefits. It
should improve its ties with the local communities to increase their interest in BP as a
stakeholder.
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TASK 2
P2 ANALYSE THE INTERNAL ENVIRONMENT AND CAPABILITIES OF BP OIL
USING APPROPRIATE FRAMEWORKS
The internal refers to a composition of various factors present inside the organisation
which affect the organisation in many ways. These factors influence the decision
making process, activities, strategic orientation etc. Internal environment consists of
factors like vision, mission and objectives of the organisation, human resources,
organisational culture and value system. Organisational structures, as well as Physical
and technological capabilities, are also among the major elements of the internal
environment.
Capabilities refer to the resources which can be deployed by the firm to achieve
success. It consists of all the tangible and non-tangible resources composed to carry
out tasks effectively. Capabilities of BP include its Human resources, available oil field
reserves, financial support, available technology etc.
Strategic Capabilities refers to the competency and available resources which an
organisation needs to face the competition (SS, 2019). McKinsey’s 7s Model helps to
understand the internal environment and capabilities of BP.
Strategy: BP’s current strategy is to balance its portfolio with oil and gas advantages
and invest in some low carbon activities which could benefit BP in any transition of
energy choices in the future.
Structure: BP is a large multinational organisation with a hierarchical organisational
structure with many layers. Each layer has its own amount of responsibility and
authority.
Systems: Beyond Petroleum has a set of well-designed system in place. Its financial
systems offer timely insights to all the investors and stakeholders with historically
promising returns but currently, investors are hesitating and worried about the potential
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losses due to accidents and oil spills. Its Human resource system ensures the
development and appraisal of its employees to retain them. The Technologies which are
used at BP are highly competitive and offers competitive advantages to it. Its existing
technology is designed to reduce carbon emission and minimize the risk of operations.
Shared Value: BP projects five values at the core of its activities. They are Safety,
Respect, Excellence, Courage, One team. It also has a well-drafted code of conduct
formed in 2014 which guides its operations.
Staff: Currently BP employee 73,000 skilled employees. These employees are provided
with guidance, knowledge sharing culture and personal development activities to ensure
their individual and organisational growth. The number of employees at BP decreased
tremendously due to competitors poaching its workers
Skills: Employees at BP have good hard skills and soft skills. New employees are also
provided with the necessary training before operations to ensure the safety of
operations.
Style: Leadership at BP is highly effective and participative. It ensures employees
cooperation with healthy competition running.
M2 CRITICALLY EVALUATE THE INTERNAL ENVIRONMENT TO ASSESS
STRENGTHS AND WEAKNESSES OF AN ORGANISATION’S INTERNAL
CAPABILITIES, STRUCTURE AND SKILL SET USING BP OIL COMPANY AS AN
EXAMPLE
McKinsey’s 7s model had cleared the hard elements and soft elements at BP’s internal
environment. It presents that the accident and issues of oil spills can't be blamed to its
inner incompetency. BP with the use of advanced technology and skilled workforce is
capable to operate complex operations. It can also be observed that competitors
pouched many of BP’s employees which affected its operation. Investors are also facing
potential losses which are a big concern for BP; they can be assured with future
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