Analyzing BP's Strategic Challenges in the Russian Oil Market

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

HI6006 Business Strategy
1

Executive Summary
This assessment provides the information in accordance with developing the business
strategy which includes the concerns of BP in Russia: Bad Partners or Bad
Partnerships? Which helps in dealing with the high level of competition which are
existing in the market environment. It also concludes the information which determines
about the suitable and effective analysis of the oil industry and as well as also the
external environment of the Russia in which bad practices has been seen in order to
deal with better supervision and also taking necessary steps towards the same.
Furthermore, it also provides the information in regards with the various set of strategies
which can be taken into consideration in regards with the oil industry which helps in
dealing with the partnerships in which business is commencing their work.
2

Table of Contents
Executive Summary......................................................................................................... 2
Introduction...................................................................................................................... 4
Brief Summary of the BP in Russia: Bad Partner or Bad Partnerships?..........................5
Identification of Strategic issues.......................................................................................7
Application of strategy models.......................................................................................10
Conclusion..................................................................................................................... 11
References.....................................................................................................................12
3

Introduction
Oil industry in Russia is facing a huge range of destructions in terms of partner which
tends to affect the working in the desired manner. This report concludes the information
which put great emphasis on developing the understanding which helps in formulating
the numerous business strategies. This helps in dealing with the working operations
which are getting affected by the indulgence of partners and their working patterns
which is creating negative impact on the business. This report has also put emphasis on
using the natural and available which focus on maintaining the sustainability in the
environment. It also helps in attainment of suitable capabilities according to the market
dynamics in relation with the working patterns which are formed by the partners in
Russia and affecting the oil industry in both positive and negative aspects.
4

Brief Summary of the BP in Russia: Bad Partner or Bad Partnerships?
The Company has entered in the Russian oil market with an identity of BP which has
two partners to commence their working operations. The first partner name Rosneft is
having a state-owned oil company in Russia. The second partner was Alpha Access
Renova (AAR) which has one of the Russia’s largest privately owned financial-industry
which has keen interest in oil, gas and banking industry. BP has entered in the business
by purchasing the stake in Russian oil market which was of 10% in Sidanko which is
considered as the one of the privatised oil company in Russia purchased from the
Russian Banking Group. It has been observed that from 1993 to 1999, the oil production
in Russia has achieved heights and considered as the third largest in the world which
shows that they have put USA and Saudi Arabia behind (Verbeke, et.al, 2013).
In the year 2011, partners BP and Rosneft had announced the formation of new
strategic partnerships which has involvement in developing the oil and gas reserves
which will exist in the Russian Arctic and focuses on the covering the area of 125000
square kilometres at the Kara Sea. The indulgence of second partner AAR caused
destructions in the business by dealing with Rosneft which includes court injunctions. It
implies that the major causes which affected the business in bad partners.
The failure in the business due to BP- Rosneft failed alliance which has lesser amount
of conscientiousness on BP’s side which in return shows poor alliance management.
The failures in alliance is in respect with the inter partner conflict and the area of interest
which have affect the goals of the partners and lesser cooperation has given rise to the
conflicts. The area which has given rise to the problems between BP and AAR
shareholders are in relation with the law suits which is through into the face of BP and
created affects in their working (Woodard and Sambamurthy, 2013). The issues are
termed critical as it includes the swap share of BP’s existing partnership in Russia. The
BP has prevailing alliances with the AAR in TNK-BP which exists at the time of BP-
Rosneft alliances which shows that they legit claim in the share of Arctic shelf
development. AAR has claimed that alliance BP- Rosneft has been violated in the year
2009 in accordance with the shareholder’s agreement.
5

In accordance with the agreements it states that AAR and BP must have
implementation of the oil and gas projects which are in Russia and the Ukraine in
regards with the TNK-BP. The partners have caused the failures and played the games
which has affected the business overall and at the same it has created negative effects
in the oil industry (Barberá and Stegmaier, 2012).
The alliances which are made in the oil industry comes with the certain amount of
expectations which focuses on lowering the cost and at the same time gaining
efficiencies which are in regards with the customer and other partner technologies
which helps in development or expansion of the business. The partners are acted as the
rivals which shows that they have impacted the business in every manner and at the
same time they have acted as the competitors which focuses on destroying the other
person’s business in every manner.
The oil industry has shown the signs of moving forward in Russia by providing the
access to foreign firms which are prevailing in the market and also they are new in the
market. It has been seen the management of partnerships has become the crucial tasks
which have become the source of destroying the business of BP in the long run. The oil
industry has huge level of requirement which acquires state-owned oil companies. BP
has lack certain amount of skills which requires for the good partnership and at the
same time helps company to grow in proper manner (Verbeke, et.al, 2013).
The business strategy is considered as a set of plans which are designed by the
company and have implementation in order to have competitive advantage in every
other manner present. The strategies are formed with the objectives which helps in
attainment of goals and objectives of the company. The purpose which is in relation with
designing the business strategy is to obtain the effectiveness in the company
operations, focusing on using the existing resources, also focuses on meeting the
expectations of the consumers and utilization of resources in the desired manner which
involves the acceptance of partners and at the same time it focuses on eliminating the
unethical practices which harm the company in any manner. In accordance with this
case study BP has seen the situation in which two of the partners betrayed the BP and
also provided him the lawsuit which has led to the situation of destruction in the
6

company. The company has formed new strategies which can helps in maximizing and
expanding the business which will help in gaining maximum heights. The strategy of the
company is to acquire maximum share in the oil industry in Russia and acquire the
dominance in the market (Boons and Lüdeke, 2013).
Identification of Strategic issues
 Government intervenes in terms of policy and regulations
The policies which are formed by the government can be taken into consideration
as foremost issue which focuses on developing the strategies in accordance with
the organisational structure in relation BP and focus on providing the positive
impact in the market. The workings which have taken place in partnership
become the source which has caused destruction in the oil industry. There are
certain laws which are in accordance with the partnerships and focus on pursuing
the activities in legal manner and following the policies which provides effective
amount of returns (Boons and Lüdeke, 2013).
 Technological Changes
The up gradation in technology and advancements has reaching to the certain
heights in the oil industry which are at an increasing rate. BP is dealing with their
operation in the oil industry and focuses on expanding the business by the
development of gas reserves which will generate high amount of profit in the long
run. In order to work in the oil industry it is recommended option for BP to use the
source of technology advancement which will help in generating the huge
amount of profits by indulgence of newer technologies in the process. It affects
the functioning of the company as it has involvement of different plans which
focuses on changing the strategies of business strategies. The dealing with
partners and to cope up with their unethical issues it is better to use the
technologies which help in tracking the moves which can create affects in the
company.
7

 Vagueness
The uncertainty in every business has become the causes which defines the
uncertainty in the credit market within the global economy. It also has inclusion of
new rules and regulation which holds the power and tends to affect the business
which are in terms with the competitors, uncertainty in terms with the partner’s
working as one wrong will destroy the business in the market. The up gradation
in the technology is also uncertain which shows that there will be changes which
affect in the end. The uncertainty is a period or era which every company and
tends to develop their goals which become the issues and affects companies
long terms goals and objectives (Oestreicher and Zalmanson, 2013).
 Innovations
The new ideas and innovations are considered as the steeping stones for the
company in the market in order to achieve the growth and development of the
company. It tends to create affect in the strategies of the business which are
designed in the format which introduces innovation. This case study is based the
Russia’s oil industry in which company BP has commenced their business with
indulging with two other partners in the economy. The company has decided to
indulge in the business by acquiring the stakes and also forming the new
strategies which will boost the business in long run. Innovation is way important
for the companies as it focus on increasing the market share which considered
as one of the aspect of business strategy which increases the business.
 Globalisation
The oil industry has focused on moving forward by emerging with the foreign
firms which are pursuing their business in the market and have strong hold in
them market. The emergence comes by using the new marketing with their
prevailing products and services which they offer in the market. The issues can
resolve by including the various cultures which helps in enhancing the
information and analysing them in better manner. Every area of business in the
world is dealing with various uncertainties which can arise in the business and
also affect the operations of the business in the market (Drnevich and
Croson,2013).
8

Relevant Theoretical Concepts
In this Business Strategy is used in order to determine the case study. The business
strategy determines the maintenance of business in a proper manner which shows that
it is difficult to manage the business planning by including various strategies and
approaches. The theory of business strategy helps in determination of the benefits
which are in relation with the business structure.
The theory which has been adopted by the company is BP was the three levels of
strategy. Every company has different manner to generate the positive results in the
company and as well as focused on increasing the profitability of the company. The
theory which has been adopted by the company will help in achievement of goals and
objectives in the proper manner (Maté and Mylopoulos,2012).
Three levels of Strategy
The strategies in the business can be understood by using it into other three different
levels- corporate unit level, business unit level and operational level. The main area of
differences in these strategies is their influence in the market and how they are creating
impact in business activities.
 Corporate level Strategy
It focuses on analysing the commonalities of the different business units which
tends to add value to the business instead of individual’s growth (Ghezzi, et.al,
2013). It involves other people in the form of partners, collaboration which
includes overall scope of the organisation and helps in enhancing the partner’s
share and value in the business.
 Business level strategies
It helps the business to secure them and stable a position in the market which
provide them higher amount of returns. The main of the BP is to increase the
business value of oil industry in the market and rise up their stakes by forming
9

new business strategies with their two other partners (Barberá and Stegmaier,
2012).
 Operational level Strategy
The operational level strategy main goal is to implement the decision which
affects the corporate and business units by using different resources which
creates impact in the business and at the same time helps in dealing with
partner’s decision and actions in the business operations.
Application of strategy models
Concrete vs. Abstract Models
Strategy models offer both concrete and abstract plans which are in relation with the
business management. Concrete strategy models help in dealing with the quantifiable
variables which are easily measured analysed and changes have taken place
accordingly. These models work directly with the number of labours, finance and as well
as on the economy. These plans help in generating the decisions which are transparent
in nature and provide the changes which generate more and more amount of money in
the business process of BP (Barberá and Stegmaier, 2012).
Abstract strategy models are focused on the business ethics and availability of
resources which tends to affect the business of BP in long run and created the
destructions with their partners. These plan focuses on existing situations which has
main focus on increasing the profit margins, avoiding conflicts with the partners of BP
which have provided them the lawsuits and destroyed the business of oil in Russia.
10

Conclusion
This report provides the information which helps in determining the issues which have
become the reason of business which has fall due to bad practices of partners in BP
and created destruction in the business environment. It also involves the business
owner of BP and his partners which are focusing on formation of new business
strategies which are in regards with development of oil and gas reserves on the
continental shelf in the Russian Artic. It also includes the information of strategic issues
which tends to create affect in the business environment and bad partner influence
which side lined the BP and also served him lawsuit. The report determines the
workings which are in accordance with the business operations of the company.
11

References
 Baden-Fuller, C. and Haefliger, S., 2013. Business models and technological
innovation. Long range planning, 46(6), pp.419-426.
 Barberá, L., Crespo, A., Viveros, P. and Stegmaier, R., 2012. Advanced model for
maintenance management in a continuous improvement cycle: integration into the
business strategy. International Journal of System Assurance Engineering and
Management, 3(1), pp.47-63.
 Bharadwaj, A., El Sawy, O.A., Pavlou, P.A. and Venkatraman, N., 2013. Digital
business strategy: toward a next generation of insights. MIS quarterly, pp.471-482.
 Boons, F. and Lüdeke-Freund, F., 2013. Business models for sustainable
innovation: state-of-the-art and steps towards a research agenda. Journal of Cleaner
production, 45, pp.9-19.
 Drnevich, P.L. and Croson, D.C., 2013. Information technology and business-level
strategy: toward an integrated theoretical perspective. Mis Quarterly, pp.483-509.
 Ghezzi, A., 2013. Revisiting business strategy under discontinuity. Management
Decision, 51(7), pp.1326-1358.
 Maté, A., Trujillo, J. and Mylopoulos, J., 2012, November. Conceptualizing and
specifying key performance indicators in business strategy models. In Proceedings
of the 2012 conference of the center for advanced studies on collaborative
research (pp. 102-115). IBM Corp..
 Oestreicher-Singer, G. and Zalmanson, L., 2013. Content or community? A digital
business strategy for content providers in the social age. MIS quarterly, pp.591-616.
 Verbeke, A., 2013. International business strategy. Cambridge University Press.
 Woodard, C.J., Ramasubbu, N., Tschang, F.T. and Sambamurthy, V., 2013. Design
capital and design moves: The logic of digital business strategy. Mis Quarterly,
pp.537-564.
12