Business Environment Analysis: British Petroleum's Canada Expansion

This report provides a comprehensive analysis of British Petroleum's (BP) potential expansion into the Canadian market. It begins with an introduction to BP, its global operations, and the context of the Canadian oil and gas industry. The report then delves into BP's background, including its market structure, products, overseas operations, and financial performance. A PESTLE analysis of Canada is conducted, evaluating political, economic, social, technological, environmental, and legal factors. The report further examines the business scenario, identifying opportunities and threats associated with BP's expansion, along with their potential impacts. The analysis utilizes tools like SWOT and Porter's Five Forces to assess the competitive landscape and strategic implications. Finally, the report concludes with recommendations for BP's expansion strategy, considering the factors discussed throughout the analysis. The reflective summary and references are also included for further understanding.

Business Organizations and
Environments in a Global Context

TABLE OF CONTENTS
1. INTRODUCTION ......................................................................................................................4
Organization and country............................................................................................................4
Objectives and analytical tools....................................................................................................4
2. BACKGROUND OF ORGANIZATION ...................................................................................4
Headquarters and Legal Form.....................................................................................................4
Market Structure and market share.............................................................................................5
Products or Services....................................................................................................................5
Overseas Operations....................................................................................................................5
Major competitors.......................................................................................................................5
Financial Performance of past 3 years and 1 year projection.....................................................5
3. BACKGROUND OF COUNTRY ..............................................................................................6
Pestle analysis.............................................................................................................................6
4. ANALYSIS OF BUSINESS SCENARIO...................................................................................8
4.1 Opportunities, threats and their impacts................................................................................8
4.2 Level of threat and organization strategies...........................................................................9
5. CONCLUSION & RECOMMENDATIONS............................................................................12
REFLECTIVE SUMMARY..........................................................................................................12
REFERENCES .............................................................................................................................14
BIBLIOGRAPHY..........................................................................................................................16

Illustration Index
Illustration 1: statistical profit data .................................................................................................6
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1. INTRODUCTION
British Petroleum is an organisation that supplies oil and gas across the world. It is the
seventh biggest company in this industry and has world's 12th largest revenue generation. BP is
known for exploring, producing and refining products that are used for fuel purposes (Kirton and
Trebilcock, 2017). They produce over 3.6 million barrels per day and have reserves of 18.4
billion barrels. British Petroleum has made major investments in green energy and have shut
down solar energy units, so they can produce oils for different nations as well as conserve the
environment.
Canada is a country that is present in the northern region of North America and is noted
to have 3rd largest oil reserves in the world. It has many divisions and units across the country,
which would be favourable for any petroleum organisation to set up their business (Khalifa and
et.al., 2018). There are multiple regulatory agencies that provide regulations that Canada has to
abide and this helps them in effectively dealing with trade on an international level.
Some organisations are set up for operations in the global environment and it is pivotal to
analyse various external factors so that business can function smoothly. This assignment will
focus on British Petroleum and their expansion towards Canada (Atighechian and et.al., 2016). It
will assess various environmental aspects, opportunities, threats and competition that is
prevailing in this industry. The analytical tools that will be utilised to examine British
Petroleum and the industry in which it operates are PESTLE, SWOT and Porter's 5 forces
analysis.
2. BACKGROUND OF ORGANIZATION
Headquarters and Legal Form
British Petroleum is a public company and has multiple shareholders from different parts
of the world. It was founded in 1909, with its headquarters in London, England. It is a corporate
company that abides to rules and regulations of Company's Act, 2006. They have state permits
and licenses that are required for operating in UK and different countries, which include Canada.
Market Structure and market share
British Petroleum's market structure is considered to be very dynamic. There are always
changes in present in the supply and demand of oil and gas, due to many fluctuations in this
industry (Yunna and Yisheng, 2014). The analysis of its market structure helps in determining
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prices of their market share. As of 2018, their share in the oil and fuel industry is the highest and
has been consistent during recent years. British petroleum deals with oligopoly market under
which all dealers set pricing with concern of each others.
Products or Services
British Petroleum offers a wide range of products which include petroleum, natural gas,
motor, aviation fuels and petrochemicals are oil, gas and petroleum products. Organization has
multiple brands such as Castrol that provides motor oil and specialist’s lubricants. They have
fuel tanks and stations with Aral, across different countries as well.
Overseas Operations
British Petroleum operates in various parts of United States with sales of over 713,000
barrels of petroleum per day. They run operations in Mexico's gulf, Egypt, South China, Iraq and
Australia as well as across Europe (Barak, 2016). There are fuel tanks and stations present in
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Illustration 1: How BP contributes to Britain's
Economy
Source : BP economic impact extends across
the UK. 2015.

over 70 countries and due to large operational and business activities, British Petroleum is
divided into 2 segments, which are upstream and downstream.
Major competitors
Petroleum industry has many companies that operate at a large scale, making BP
vulnerable to competition. These include Valero, Conoco Phillips, Andeavor, China & Petroleum
& Chemical Corporation. Apart from the petroleum industry, there are new products that have
been created that do not require use of oil and gas. This has created even more competition as
customers may reduce in the future.
Financial Performance of past 3 years and 1 year projection
British Petroleum has been earning good amounts of profits through revenues from
across the globe. As of 2017, their profits amount to $3.4 billion, $4.1 billion in 2016 and $2.2
billion in 2015. This shows that there has been fluctuations in their sales, but they have
maintained consistency in profits. Overall, their financial performance has been good in the past
3 years (Rhebergen and et.al., 2018). Organisation's one year projection shows that they are
aiming to earn more profits in 2018, by implementing new strategies after analysis of their
performance as well as expansion in Canada. They will keep costs low and focus on safety as
well as create new manufacturing units.
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Illustration 2: statistical profit data
(Source: First quarter 2018 results, 2018)

3. BACKGROUND OF COUNTRY
Pestle analysis
Illustration 2: PESTLE Analysis. 2014
(Sources: PESTLE Analysis, 2014)
Canada can be analysed by utilising an analytical tool of PESTLE. This will help in
ascertaining whether or not it is beneficial for the country to operate in fuel and gas industry.
Political factors:
Canada has a political structure that consists of many regulations and federal plans that
are created by government. After 2015, there have been many changes with regard to taxation
and other policies (Blonigen and Piger, 2014). There are many political issues which are faced
by the country whether it is related to humanitarian issues or economic downfalls. For example:
Canadian also facing issues which affect the people of the city. Due to economic changes. It
directly affect the society and the changes into effective manner. The federal government has
created plans to invest up to 280,000 for a new study on Canada's competitive in the oil and gas
industry. This can significantly help the country in setting up British Petroleum in Canada .
There are some political policies through which company get affected such as trading policies,
inter countries relations, lobbying and many others (Zoogah, Peng and Woldu, 2015).
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Economic factors:
Canada's economic conditions are not very good when compared to other countries.
Petroleum industry is partially dominated by the service which contributes 70.2% to total GDP in
2015. Current interest rates of the country is about 1.25% and inflation rate is near of 2% (Kirton
and Trebilcock, 2017). This can reduce the scope for British Petroleum due to changing interest
rates and economic fluctuations. Economy of many countries has been depends on the BP by
supported its energy supply.
Social factors:
The society of Canada is considered to have upper, which is 3-5%, middle is 40-50% and
remaining consists of working class (Zoogah, Peng and Woldu, 2015).. One third of this society
comprises of lower class individuals. This suggests that there is a high population of people that
are able to spend money on products that require the use of fuel and gas. The lifestyle of a
Canadian is more different and better in terms of investment and this can be beneficial for British
Petroleum, to expand their operations in the country (Porter and Heppelmann, 2014). so that,
company can easily profit and maximize the sales return. To attract the interest of Ottawa and
Vancouver, companies have to provide good public image in front of their customers.
Technological factors
Technological factor is the most important factor that helps to develop innovations and
this aids company to make innovative ideas into the business activities. Canada is developed in
the field of technology and can easily adapt to dynamic changes in innovations (Burns and
Dewhurst, 2016). This can be helpful for oil and gas industry such as they can use new
technology to optimize programs that will lead to improvement of different processes. There are
high availability of technology and machines through company can easily make its process fast
and developing. Petroleum has led to refine, explore, distribute and market oil and gas (Zoogah,
Peng and Woldu, 2015).
Environmental factor
The environment of Canada is not very healthy and the government has to ensure that
industries have to abide to certain regulations that will help protect their environment which
include minimum utilisation of natural resources and chemical substances (Dobbs, 2014). British
Petroleum has adopted environmental protection acts such as Arctic waters pollution Prevention
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Act, Canada Foundation for sustainable development technology act, oil and gas occupational
safety and health regulations. This will help in their growth and expansion in Canada. Harmful
gases that are emitted due to refining, extracting, and producing petroleum's which affect the
overall environment in negative manner. This might be the factor which affect business
profitability (Burns and Dewhurst, 2016).
Legal factors
Canada has many legal regulations that have been created by the government, with regard
to business operations. There are many law which include employment, equity and financial acts
and these have to be adhered to by every industry (Mathooko and Ogutu, 2015). British
Petroleum will have to register themselves in Canada by abiding to these laws, so that there are
no issues faced in the future.
PESTLE analysis of Canada shows that political, social, legal and technological factors
provide a positive impact towards oil and gas industry as they are favourable in terms of British
Petroleum's expansion (Marquis and Raynard, 2015). While economic factors may not positively
impact organisation due to fluctuations in rates of interest and environmental factors can be
affected due to setting up of more plants in the oil industry as this may damage the environment
even more. Overall, Canada is a good country to bring investments of British Petroleum. They
will have to create certain plans and actions so provision of their products can be effectively
done.
4. ANALYSIS OF BUSINESS SCENARIO
The current business scenario of British Petroleum is that they would like to expand in
Canada by developing fresh advancements goals, so that they can effectively set up operations
(Porter and Heppelmann, 2014). This business expansion would be beneficial for the company in
terms of gaining profit and increasing market share. But this is a complex process and proper
strategic plans are required to be done by management of organization. As per the Canada
scenario and culture, its inflation rate rose to 2.5 percent year on year in June 2018 from 2.2 as
per previous year.
4.1 Opportunities, threats and their impacts
British Petroleum has to analyze various opportunities and threats, so that they can make
decisions in a strategic manner while setting up their business in Canada.
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Opportunities:
This industry provides high range of output return at high cost, It involves high
productive and qualitative services, There is a need of petroleum products in Canada, Expansion
of this industry will contribute towards growth in market share
Threats:
Oil and gas industry involves threat of competitor’s strategies and goals., It involves the
risk of bargaining power of suppliers, Legal and environmental threats are numerous in Canada,
There is lack of stability with regard to oil production
Impact of opportunities and threats on British Petroleum
The opportunity of high returns from products and services has a positive impact on
British Petroleum as they will be able to generate high profits due to expansion in Canada. There
is also need of oil products in the country, which will lead to increase in sales and market share
in oil industry (Murray, Skene and Haynes, 2017). On the other hand, threats have a negative
impact on British Petroleum, as there is extreme competition, which can reduce the chances of
sales and profit growth in Canada. There are many legal regulations that have to be adhered to,
by the company and if not properly done, it can cause harm. Without proper oil production, there
will not be enough supply of petroleum and other products, which will eventually lead to
decrease in profits. Therefore, British Petroleum will have to strategically plan goals for entering
into Canada and setting up their business operations.
4.2 Level of threat and organization strategies
In order to analyze the levels of threat, British Petroleum will be required to examine
Porter's five forces with regard to oil industry (Yunna and Yisheng, 2014). This will enable the
maintenance of the sustainability level in long term and organization can use innovate strategies
by thoroughly analyzing this.
Porter's five forces model
Porter's five forces model is helpful to explore competition within an industry and
business strategies' development goals.
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Illustration 4: Porter's five forces
(Source: Porter's five forces, 2016)
Bargaining power of customers
This force is moderate because customers require fuel as it is a necessity for them. In oil
industry, prices depend upon the demand level (Marquis and Raynard, 2015). For example, USA
and China can use their high power to negotiate to suppliers like British petroleum. It is also very
much helpful to take approachable techniques. Consumers have the power to switch to another
brand. On the other hand, rising prices and production will help the oil industry to gain
profitability at year end. But customers have to face the high prices of oil & gas due to which
company might be facing low sales.
Bargaining power of suppliers
This force is low as suppliers are almost similar in this industry and overlap with many
companies (Yunna and Yisheng, 2014). Powerful suppliers that have scarce raw materials in Oil
& Gas sector use their negotiating power to extract higher prices from these organisations.
Overall, suppliers do not have much bargaining power towards British Petroleum and they will
not face much issues in Canada.
Threat of substitutes
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This force is low as it is not an easy task to set up an organization in the oil and gas
industry (Zoogah, Peng and Woldu, 2015). British Petroleum have threats of substitutes such as
solar energy, wind energy and electric due to which company might be suffer, even if they
expand in Canada as they already sell different varieties of products that other organizations do
not and this gives them an upper hand in the industry (Atighechian and et.al., 2016).
Threat of new Entrants
Oil and petroleum industry have a low threat of new entrants as there are various issues
related to high costing and pressure of competition. It is more challenging for new companies to
come into this industry and compete with other big companies. For example, British petroleum
has expanded their huge market in Canada due to which no other company is interested to deal
with existing ones (Rhebergen and et.al., 2018). By building up new capacities and spending
money on research would helpful for company to compete with any new entrants in the industry.
Industry rivalry
Major competitors of British Petroleum include Shell, Texaco, OMP, Gulf Coast and
Petri China and many more major organisations (Zoogah, Peng and Woldu, 2015). In oil industry
companies compete with each other on the basis of product changes fixed, variable costs for
these companies. Therefore, the rivalry is high for British Petroleum. This can cause issues for
British Petroleum in Canada as they may not be able to attract much customers, because they
already utilise other company's products and might not consider purchasing their fuel.
On the basis of above explaining factors, it has been found that, in terms of revenue
measures BP ranked its position at third level. By opening their two subsidiaries company in
Canada will make it more strong and stable in long term future market. It situated in England and
the United States or work on the global level (Mathooko and Ogutu, 2015). Canadian oil gas
industry has involved moderate rate of competition level.
British Petroleum's organisational strategies
British Petroleum has created various organisational strategies for the purpose of
expanding their business in Canada (Barak, 2016). These include: Implementation of new,
technology for production, Lower carbon future strategies for manufacturing, Proper pricing of,
products and services, Production of products according to customer preferences, Investments in,
Canada's artificial intelligence, Reliable and safe operational management, Solar energy
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