Macro and Micro Environment Analysis for British Petroleum

This report provides a comprehensive analysis of British Petroleum's (BP) business environment. It begins with an executive summary and introduction, followed by a detailed examination of the macro and micro environments impacting BP's operations. The PESTEL analysis evaluates political, economic, social, technological, environmental, and legal factors. The Five Forces framework assesses the competitive dynamics within the oil and gas industry. The report then delves into a resource audit and SWOT analysis, identifying BP's strengths, weaknesses, opportunities, and threats. Stakeholder mapping is used to understand the influence of various stakeholders. The report concludes by summarizing the key findings and offering recommendations for BP to navigate the challenges and opportunities within its business environment. The report utilizes various tools to provide a comprehensive overview of the internal and external factors that influence the oil and gas industry.

INTRODUCTION TO THE
BUSINESS ENVIRONMENT

EXECUTIVE SUMMARY
British Petroleum is a UK based oil and gas provider having operations at global level.
The firm can face various issues related to the macro and micro environmental factors which are
capable of negatively impacting the business operations of the company. For eliminating such
issues, the company is using various tools such as swot analysis, pestle analysis etc. so that
proper strategies can be developed in order to eliminate the impact of micro and macro
environmental factors. Also the company can determine their stakeholders by using the
stakeholder mapping so that the power and interest of these stakeholders can be identified.

Table of Contents
EXECUTIVE SUMMARY.............................................................................................................2
INTRODUCTION...........................................................................................................................4
TASK 1............................................................................................................................................4
PESTEL Analysis (Macro environmental analysis)...................................................................4
Five Forces Framework (Micro environmental analysis)...........................................................6
Resource Audit..........................................................................................................................10
SWOT Analysis........................................................................................................................10
CONCLUSION..............................................................................................................................11
REFERENCES..............................................................................................................................12

INTRODUCTION
Business environment is the sum of different external and internal factors which can
influence the operations and activities of business organisation. These external as well as internal
factors should be considered by the management of the business firms in order to eliminate or
reduce their impact on the performance and productivity of the business. Through this
consideration, the management can also develop effective strategies for handling these factors so
that the growth of the firm can be enhanced. Taken company for this assessment is British
Petroleum which is a key player of Gas and Oil industry in UK. This report will cover the
analysis of macro UK environment and its impact on performance of company. Further this
report will analyse the micro environment of oil and gas industry. This report will also conduct
the analysis of internal environment of British Petroleum along with the SWOT analysis.
TASK 1
PESTEL Analysis (Macro environmental analysis)
It refers to a strategic tool and technique which can be used by the management of the
company to determine the current market condition of a business and understanding market
development and decline (Tavitiyaman, Qu and Zhang, 2011). Also by using this model, British
Petroleum can develop effective strategies and policies so as to eliminate the negative impact of
the various macro environmental factors on the business operations of the company. This
analysis ensure that the performance of the organisation is aligned positively with the powerful
forces of change that are influencing business atmosphere. PESTEL analysis of British
Petroleum is as following:
Political- This factor includes trade regulations, antitrust laws, legal framework for
contract enforcement etc. In UK, the government authorities make change in the government
policy time to time as well as due to the changes going on in the UK market due to the Brexit.
Currently, the government have maximized the import tax by 3% which is influencing the
offshore oil industry in UK as the inflation has effected the various industries in UK. Cause of
global warming problems and climate change, the government generate strong barriers on oil
diggings which affect negatively to the business of this organisation (Adeoye and Elegunde,
2012).

Economical- It consist interest rate, taxation changes, inflation rate and economic
development etc. In UK, the economy has come out of the recession so all the banks are
confronting funding in higher resources. This higher inflation and recession has created major
impact on the income of the people and the result of it is that they are avoiding their own
transport and use common transportation which affect the business of British Petroleum.
Social- This factor includes taste and preference, culture and others but income
distribution is very essential because when income distribution make improvement in the
demand for oil maximize cause of middle class people who purchase a car and motorcycle or
utilize more energy. In this manner this factor highly affects business of British Petroleum. Due
to ageing population, the population structure and energy consumption in UK will have a great
impact to the oil and gas industry or specially British Petroleum cause of larger market share
(Boons and Lüdeke-Freund, 2013).
Technological- It is a factor which is the major driver of change in the international
global energy market and include various technological factor for the agonistical and
unconventional energy market. For example, in North Sea, to recover oil from complex
resources, BP use innovative technologies like AETs which help in the business development of
it. There are various technological problems that are clashed by British Petroleum which need to
improve, diagnose, administer and market oil and gas (Scanning the environment: Pestle
analysis, 2016).
Environmental- This factor contains climate changes, weather and various factor like
environmental laws, pollution act, carbon emission etc. In British Petroleum, the management of
company properly follow all these rules so that they can reduce and minimize harmful gases that
are inflow cause of refining, extracting and producing petroleum that create negative impact on
the environment. To cut the greenhouse emissions of about 40% British Petroleum has set a
mental object by boosting the usages of nuclear power which is positively impacting the firm as
the brand image of the firm is enhancing among the customers and other stakeholders (Cadle,
Paul and Turner, 2014).
Legal- This factor consist several rules and regulations that are developed by the
government like employment law, Health and safety law and various others. In British
Petroleum, the management of the company properly follows the acts and laws of UK
government so that they can provide basic rights to their employees. Taxation and fuel duty of

the UK authorities create impact on the price of oil which is negatively impacting the
productivity and sales of the firm in the market. Also the firm is following the employment laws
such as health and safety at work, equality act, anti discrimination act, fair compensation act etc.
so that the firm can provide the basic rights and necessities to the employees for improving their
satisfaction and morale. Also by following these laws, company is improving its brand image in
the market as well as getting the support from the government due to adherence to the
employment laws.
Five Forces Framework (Micro environmental analysis)
Porter five forces model was given by the Michael Porter in the year 1980. This model
states the forces which can impact the competitiveness of an organisations in the industry as well
as assist the firms in developing the suitable strategies for enhancing their competitive advantage
as well as to protect themselves from the threats ((Porter five forces, 2013). This model consist
of five forces which are discussed below in context of British Petroleum: Threat of entrants: Threat of new entrant in the Oil and gas industry is low as high
barrier exist in the industry for new firms. This is because of the fact that major players
such as British Petroleum are using heavy and expensive machines and equipments at
their sites such as pumping trucks and loading trucks and other material carrying
equipments. Apart from this, also huge amount of investment is needed for infrastructure
and other expenses such as pipeline, road access in fields, land acquisition etc. Also the
availability of workers in the field of subsurface reservoir engineer and geologist are less
in number due to which it also possess threat for new entrant to enter into the industry
(Cheng, 2013). Bargaining power of suppliers: Bargaining power of the suppliers is usually high in the
UK oil and gas industry. This is because of the reason that there are less number of
suppliers providing energy and alternative of energy and also the switching cost is high
when switching between the suppliers. But the key player such as British Petroleum is
vertically integrated company due to which the firm does not need the services and
products provided by suppliers. This states that bargaining power of the suppliers is
medium in UK industry in context of British Petroleum (Paul, Yeates and Cadle, 2014). Bargaining power of buyers: Bargaining power of buyers in UK oil and gas industry is
high as customers can switch to another firm in case they are not satisfied with the

products and services provided by British Petroleum. Oil is a commodity and when the
quality of oil or oil drilling services are not good then it will influence the decision of the
buyers to go in favour of low prices and or better contract terms. However, for tacking
the high bargaining power, British petroleum has integrated with several companies in
order to provide the products to the customers in an effective manner so as to ensure their
satisfaction. Threat of substitutes: Threat of substitute is medium in oil and gas industry of UK as
huge cost of production is required. These substitutes includes biofuels and renewable
resources which are currently in development phase. However, oil is the essential source
of energy for various sector due to which chances of utilisation is more. The government
are discouraging the use of fossil fuels due to which British Petroleum can face issues in
future in this industry (Erasmus, Strydom and Rudansky-Kloppers, 2016).
 Competitors/rivalry: all adopt similar strategy and competing on similar bases which is
adaptation of a vertical integration to an extent and they also produces similar range of
products. Competitive rivalry in this industry is high as the industry consist of players
which are focused on low differentiated products and also the threat of new entrant and
substitute is low. British Petroleum belong to oil and gas industry in which various major
players like Royal Dutch shell, Bp, Exxon Mobil, Total, chevron, and Conoco Phillips are
adopting similar strategies by adapting to vertical integration as well as these firms
produces similar products. Due to this, British Petroleum is focused on developing
quality based products for staying ahead of the rivals.
Firms like British Petroleum are using the porter five forces model for determining the
competitiveness of the industry and can determine the factors or forces which can influence the
business operations and activities of an organisation. From the above done analysis, it is evident
that the Threat of new entrant in the Oil and gas industry is low as high barrier exist in the
industry for new firms (Hamilton and Webster, 2018). Bargaining power of the suppliers is
usually high in the UK oil and gas industry. Bargaining power of buyers in UK oil and gas
industry is high as customers can switch to another firm in case they are not satisfied with the
products and services provided by British Petroleum. Threat of substitute is medium in oil and
gas industry of UK as huge cost of production is required. Competitive rivalry in this industry is
high as a large number of firms are present which are having required resources and funds. This

tool is very beneficial for firm in determining the influence of these factors on the organisation
which are essential for better strategy development.
Key stakeholder of oil and gas industry
Stakeholder are those entities which can influence the company and its objectives. For
determining the key stakeholders and their interest and power in the oil and gas industry,
stakeholder mapping has been done which is as follows:
Stakeholders are very important for an organisation as they provides their continuous
efforts for accomplishing the desired goals of the companies. These stakeholders also impacts the
business firms of oil and gas industry as without their support, development and growth of the
organisation can hinder (Hansen, 2018). Also by determining the stakeholders, business firms of
the oil and gas industry of UK can satisfy them so that proper support can be taken in time of
need. Stakeholder mapping consist of 3 steps which are discussed below:
Identify the Stakeholders: It is the fist step in which organisations needs to determine the
stakeholders which can be impacted by the business operations. These stakeholders includes
shareholders, customers, suppliers, investors, etc. which are contributing their efforts to the
organisational success (Quinlan and et. al., 2019).
Prioritize the Stakeholders: It is the second step in which the stakeholders are prioritised
according to their interest and power. This step divided into four parts as given below: Satisfy: These do not involved in the work of organisation but can influence the working
of the organisation. Such stakeholders are Employees, Board of Directors etc. Manage: These stakeholders are interested in the obtained organisational results and can
influence the process of firms. The firms needs to develop close bonds with such
stakeholders. Examples includes investors, government etc. Monitor: These does not influence the operations but are interested in the work of
organisation such as Leaders, managers etc. Inform: These stakeholders are having strong interest in operations of companies as well
as are capable of influencing the business activities. These should be considered by the
management of the firms for ensuring their support. Example of such stakeholder are
Customers, suppliers etc.

Understand the Key Stakeholders: It is the last stage in which firms should identify the
expectations and needs of their stakeholder so that these can be fulfilled by the management for
ensuring their continuous support and effort to organisation (Hilton and Platt, 2013).
Different identified stakeholder of oil and gas industry are as follows: Customers: These can influence the firms of oil and gas industry as They purchases the
products provided by the oil companies. These have high power and interest in the
business as they are getting products for fulfilling their needs and demand. Employees: These can also impact the objectives of the firms of oil and gas industry as
they perform their work at the workplace and if they fails in their work, company could
not achieve its objectives. Suppliers: These can also impact the businesses in achieving their goals as these provides
the raw and other materials to the firm so that company can produce the final product.
These have high power as if they do not provide their products properly then business
operations could not be performed (Morrison, 2011).
 Local communities: These are interested in the results obtained by the organisation.
These can influence the company in achieve their objectives as these are directly
impacted by the operations performed by the oil and gas firms such as mining, drilling
etc. However these have less power to influence the business operations.
The stakeholder mapping is used by firms for determining the various internal and
external stakeholders which can influence the performance of the company. Through the
stakeholder mapping, Company can determine the different types of stakeholders of the oil and
gas industry of UK which are having influence and power to impact the business operations of
firm. These identified stakeholders are customers, employees, local communities and suppliers
which are either directly or indirectly influencing the business firms such as British Petroleum.
However, the issues associated with stakeholder mapping is that it is not possible to accurately
determine the interest of stakeholders as their mindset varies due to which there are chances that
these stakeholders may not get satisfied with the result obtained from the organisation which will
influence their mentality towards the organisation.

Resource Audit
Resource audit is done for determining the various internal capabilities, skills, resources,
core competencies of an organisation so that firm can achieve competitive advantage over the
competitors. The resource audit for the British Petroleum is as follows: Resources: British Petroleum is using various types of resources in performing their
business functions. These resources includes, financial resources, human resources,
infrastructure etc. which are acquired by the British Petroleum through the support from
investors and other stakeholders of the organisation. Also the company purchased
unconventional assets from BHP for getting access to some of the best basins in the
onshore US. Skills: The employees of the British Petroleum are selected mostly based on their
technical skills, communication skills, innovative skills, problem solving skills. These
skills are essential among the employees of firm so that they can perform their business
function properly in the dynamic oil and gas industry (Noe and et. al., 2017). Capabilities: The capabilities of the British Petroleum includes various strategies of the
organisation which are developed for improving the competitive edge and profit. These
strategies includes pricing strategies, marketing strategies, value and supply chain
strategies through which company is achieving strong brand image. Differentiation
strategy is also followed by the firm for operating the business at global level.
 Core competencies: The core competencies of British Petroleum includes the quality
based products and services which are provided to the customers. Also the balanced
portfolio of products, competitive downstream, low carbon emission activities, flexible
strategies of British Petroleum are included in the core competencies of the organisation.
SWOT Analysis
SWOT analysis is used by the firms for determining their internal strengths and weakness
as well as external threats and opportunities (SWOT analysis, 2017). The SWOT analysis for
British Petroleum is as follows:
Strengths Weakness
 British Petroleum is a global firm
having operations is several countries
 The company was involved in some
incidents such as Oil spill in the Gulf of

due to which company is having
dominant position in the industry
 The operations of the company are
vertically integrated due to which
company less relies on their suppliers.
Mexico, Explosion in the Texas
refinery which leads to criticism of
company.
 The company also violated the tax laws
in Turkey due to which company had to
face huge penalty and fine from the
Turkish government.
Opportunities Threats
 Company has acquired the assets of
Devon Energy in Brazil, Azerbaijan,
and the US deepwater due to which
company has opportunities to grow
more.
 Also the company is investing in the oil
and gas exploration projects due to
which company has expansion
opportunities for improving the profit.
 British Petroleum can face threats due
to the saturation of resources in the
North Sea which can reduce the profit.
 Instability in some oil-producing
regions such as Nigeria and Africa and
Environmental regulations can pose
threat for the company in the market.
Through the analysis of macro, micro and internal environment, British Petroleum can
take uniformed and better decisions as the different factors which can negatively impact the
business are identified and considered in the decision making process of the organisation. Due to
this consideration, company can taken better decisions for developing proper strategies so that
the negative impact of these factors can be eliminated for improving the profit and productivity
of the company.
CONCLUSION
From the above report, It has been concluded that the organisation can use the pestle and
swot analysis for determining the macro and micro environmental factors which can impact the
business operations. The companies can also use the stakeholder mapping in order to determine
their stakeholders. Porter five forces can be used by the firms for identifying the forces which
can assist the firm in enhancing the competitive edge over the competitors.

REFERENCES
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Online
Scanning the environment: Pestle analysis. 2016. [Online]. Available Through:
<https://www.business-to-you.com/scanning-the-environment-pestel-analysis/>.
SWOT analysis. 2017. [Online]. Available Through:
<https://www.business-to-you.com/swot-analysis/>.
Porter five forces. 2013. [Online]. Available Through:
<https://www.cgma.org/resources/tools/essential-tools/porters-five-forces.html>.