Strategic Management Report: BP, Steel Industry, BCG Matrix Analysis

This report delves into the strategic management of two case studies: BP, a major oil and gas company, and the steel industry. The analysis of BP includes a PESTLE analysis to identify opportunities and threats, considering factors like government regulations, economic fluctuations, social trends, technological advancements, and legal frameworks. The steel industry is evaluated using Porter's Five Forces model, assessing industry rivalry, the threat of substitutes, the threat of new entrants, the bargaining power of buyers, and the bargaining power of suppliers. Furthermore, the report applies the BCG matrix to Apple Inc., categorizing its products into stars, cash cows, dogs, and question marks based on market share and growth rate, while also critically analyzing the limitations of the BCG matrix. The report offers a comprehensive overview of strategic management tools and their application in evaluating business environments and making informed decisions.

Strategic
Management

Table of Contents
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
PESTLE Analysis to offer significant opportunities & threats to BP.........................................1
TASK 2 ...........................................................................................................................................3
Porter's five force analysis to determine attractiveness of steel industry....................................3
TASK 3............................................................................................................................................4
a) Analysis of market share by using BCG matrix.....................................................................4
b) Critical analysis of potential issues with BCG matrix............................................................5
CONCLUSION................................................................................................................................6
REFERENCES................................................................................................................................7

INTRODUCTION
Strategic Management is one of an essential process that is adopted by every business
concern in which plans and policies are formulated & necessary actions are taken in order to
attain targeted goals of firm (Eden and Ackermann, 2013). It provides directions and helps in
taking major decisions regarding future course of actions. In the present report, 2 case studies are
given. One is related to BP which is largest oil and gas company and other is Steel Industry in
which its significance & role play by it in different countries are defined. The assignment
includes PESTLE analysis from which opportunities and threats for BP are describe. Apart from
this, five force analysis of steel industry is also included in the project.
TASK 1
PESTLE Analysis to offer significant opportunities & threats to BP
PESTLE analysis is an important tool which is user by firm in order to assess the forces
that are exist in business environment and influence working of an organisation. Analysis of
these factors assists company in taking major decisions regarding operations of firm. BP is a
largest oil and gas industry which has approximately 21000 service stations located at
worldwide. PESTLE analysis of BP is defined below:
Opportunities
`BP have 18% of shares at the time when oil business of Russia was aligned with Rosneft
in partnership. Under this, influence of government rules and legislations on policies of firm is
included. BP is the largest petroleum company whose policies are influenced by this factor.
Economics factors includes decisions related to prices of goods, inflation, economic growth,
exchange rates etc. Several fluctuations in prices of oil are faced by BP between 2012 to 2020.
As per the predicted reports of Forbes Magazine, economic growth between 2012 and 2020 is
7% for china, 1% for Europe and 2% for United States. It depicts about sustainable economic
growth in market. To run operations smoothly, there are various social factors that should be
considered by BP. Other favourable condition for firm is that oil prices is at peak in 2008, i.e.,
$120 a barrel.Some legislations should be introduced by BP regarding health and safety of
employees who are working in firm (Gregorini, 2012). BP needs to consider various
environmental factors in order to attain high market share. Various activities are performed by
firm that includes oil and gas extraction from natural gas. Technology related aspects are
included in it. It is necessary for firm to adopt high end technology in order to enhance business
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operations. New technologies are used by BP involves exploitation of “fire ice” &
“fracking”.Adoption of these technologies assist to increase natural gas supply worldwide by
year 2020. Use of these innovative technologies results in fall of gas price by 30% between 2011
to 2013. Legal factors involves various laws and regulations framed by government and
necessary to be implemented by firms.It is required by firm to follow all the regulations and
policies made by government of United Kingdom so that, operations can be carried out in an
effective manner (Hill, Jones and Schilling, 2014).Complying with legislations and regulations
formulated by legal authorities allow them to run their operations smoothly and effectively.
Threats
The incident of 2010, in which Deepwater Horizon oil rig was exploded of BP due to
which 11 deaths took place and for this, $4 billion is charged by US government. Apart from
this, there are many court cases which are still pending (Godoy and Naidich, 2012) The major
threat that company was faced is recession of 2009 due to which prices of oil drop down from
$120 to $30. Exchange rate of different countries is also one of the factor that should be
considered by company. In European countries, car usage has been fall and have shifted towards
train and motor vehicles to travel anywhere. Use of Fracking technology pollutes local water
supplies and trigger small earthquakes. By this, about 8% of gas is extracted and released
directly into atmosphere and it has high contribution in global warming. Oil rig explosion was
the major threat face by company in year 2010 which leads to death of 11 people. Along with
this, adoption of fracking technology proves harmful for environment as the gas is directly
released into atmosphere and contributes highly in global warming. Water bodies are being
polluted and small earthquakes are also generated due to this. Rules and regulations of each
nation is different so, it is necessary for BP to follow these in appropriate way. Firm face major
challenges in formulation of policies regarding health & safety of manpower who are working
within company. These should be framed as per the guidelines given by government. Policy
regarding tax rate of product must be frame. Deepwater horizon disaster has led company to
design new safety regulations that has to be introduced in system (Hodgkinson and Healey,
2011).
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TASK 2
Porter's five force analysis to determine attractiveness of steel industry
Porter's five force analysis is an essential tool that assists firm in evaluating competition
that are existing in surroundings of business. Steel industry was seen as unprofitable and static
one from longer period of time. These are many competitors of this sector are exist in market
which pose high competition in front of steel industry. So, it is analysed by using five force
model which is defined below:
Industry rivalry: In this, it is important to emphasize on competitive rivalries that takes
place in business environment. As per the given case study, China is one of the major player of
world in steel industry and they increase their producing capacity by seven times. It pose major
competition in front of TATA and Mittal steel. They have fear that any slowdown in local
demand would lead towards surge into international market.
Threat of substitutes: Substitutes are those goods which can be used by customers in
place of any other commodity. When there are many substitutions available in market, it is a
condition of increase in competition. As per the given case, there are 3 producers of iron ore i.e.,
BHP Billiton, Vale and Rio Tinto that controls around 70% of internationally traded ore market.
This may lead to increasing competition in steel industry. Customers switch from one firm to
other for buying steel. In similar way, car manufacturers substitute steel material from plastic &
aluminium metal which can be use in packaging (Harrington and Ottenbacher, 2011).
Threat of new entrant: There are many firms that are working in same industry and are
facing huge competition in market. A high threat is posed by China in front of other steel
industries and is largest steel exporter of world. Other companies that exist in market are
European steel Arcelor and Anglo Dutch steel company. There is a condition of overcapacity
exist in European steel industry due to which they tried to close down its plant but, French
government was threatened to nationalize it (Merkert and Hensher, 2011).
Bargaining power of buyers: If goods are purchased in bulk quantity by customers then
it is observed that their bargaining power is high. In steel industry, major customers are
packaging firm and car manufacturers. In North America, General Motors, Chrysler and Ford are
the major car producer firms and if any decline takes place in one of them has meant various new
domestic buyers with enterprises like Nissan, BMW, Honda and Toyota for establishing local
plants of production.
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Bargaining power of suppliers: Suppliers are considered as a vital part of organisation
that provide raw materials to them which are utilized inn the process of manufacturing. So, it is
necessary that a strong relationship is develop and keep maintain between suppliers and buyers
so that raw materials can be supply in proper way and operations are run smoothly. For instance,
3 producers, that is, vale, BHP Billiton and Rio Tinto are the major suppliers of iron ore. They
have about 70% of market share for internationally traded ore.
Conclusion: For steel industry there are many competitors who are there in market.
There are many competitors such as TATA. There are different substitute such as Billiton and
Vale. Etc. Hence steel industries have to create unique strategies to beat these substitutes. Many
new entrants are entering in market as goods are purchase in bulk so hence customers that are
packaging firm and car manufacturers have high bargaining power. Bargaining power of
suppliers are high as they have 70% of market share. Strong relationship is to be maintained so
that they can supply good quality of raw materials.
TASK 3
a) Analysis of market share by using BCG matrix
Apple Inc. is one of the well known company which is known for its advanced and
innovative products that they offer to customers. The matrix, BCG is introduced by Bruce
Henderson. It consists of 4 sections that depicts about interrelationship between growth & market
share. Different components of BCG matrix are defined below:
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Star: In this, both market share and growth are high. It depicts powerful market share but
underlines high market expenditures (Moutinho and Vargas-Sanchez, 2018). Apple Inc is one of
the most innovative company that offers products like I phone. Growth rate of this good is 27%
and it is one of the famous & most demanded product of firm. This leads the company towards
high revenues. If firm will continue to work in same product line, they become successful and
keep creating excellent goodwill in market. They have a high market share and high growth rate
should give high revenues so that they can be equal to investment but not more then investment.
Cash cows: In this, there is high market share & low growth rate. Mac Books are include
in this section and contributes significantly in high revenues of firm but, there is lack of
significant growth. The major reason behind low growth rate is that mobile is preferred by
customers more than other gadgets. So, product is doing well but growth rate is low because of
some reasons. As growth rate is low hence there is need of less investment. They can provide
funds in question mark category.
Dogs: In this, both growth and market share are low. The product of Apple Inc. fall under
this category is iPods. The major threat of company is its negative growth rate, that is, -5%.
There are very few customers of this product due to which profits and revenues of firm are
highly affected. So, company needs to take decisions over this (Pamfilie, Petcu and Draghici,
2012). Appropriate strategies should be formulate in order to increase its growth and market
share to sustainable level. In this stage low market share and there is low investment. So hence
BCG said that firm can close business.
Question mark: Under this, growth rate is high and market share is low. The product that
comes in question mark category is Apple TV. Its growth is high but not reach to maximum.
This product has relatively low, i.e., 1.05% of market share as compared to other goods of Apple
Inc. Firm have that potential to convert this into star and cash cow by putting their whole efforts.
If it has not increased market share upto higher level then company cannot survive in market. It
give suggestions to corporate parents to nurture several in time.
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b) Critical analysis of potential issues with BCG matrix
There are some limitations of BCG matrix that should be analysed in order to find out the
required areas of improvements. This matrix depicts about the productivity and performance
level of firm. 2 dimensions are considered in this matrix which are growth rate and market share.
According to view point of Wilson, 2015, this matrix develops a framework for resources
allocation among several business units & makes their comparison possible at a glance. There
are some issues associated with BCG matrix are defined below:
 This matrix doesn't formulate any mission and vision available in market place.
 If firm depicts high market share on one direction, it doesn't mean that it earn high market
gains.
 A clear and transparent information or data is not provide by BCG matrix which pose
issues and challenges in front of business organisations.
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 Profitability is not underlined by Boston Consultancy Group in relation to market share.
So, the matrix ignores some other indicators of profitability (Travis and Rekhtman, 2011,
February).
 Business are classified as low and high in this matrix, but they can be medium also. So,
true nature of firm may not be reflected by this.
CONCLUSION
As per the above mentioned report, it has been concluded that strategic management is an
important aspect for every business entity. It allows management to formulate appropriate plans
and strategies that provides them direction for future course of action. Development of effective
strategies leads to attainment of defined goals and objectives on time. PESTLE analysis is
conducted in order to determine the influence of these factor and offer significant opportunities
and threats to firm. BCG matrix is used by firm in order to analyse its growth and share in
market.
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REFERENCES
Books and Journals
Eden, C., and Ackermann, F., 2013. Making strategy: The journey of strategic management.
Sage.
Godoy, M. C., and Naidich, D. P., 2012. Overview and strategic management of subsolid
pulmonary nodules. Journal of thoracic imaging, 27(4), 240-248.
Gregorini, P., 2012. Diurnal grazing pattern: its physiological basis and strategic management.
Animal Production Science,.52(7). 416-430.
Hill, C. W., Jones, G. R. and Schilling, M. A., 2014. Strategic management: theory: an integrated
approach. Cengage Learning.
Hodgkinson, G. P. and Healey, M. P., 2011. Psychological foundations of dynamic capabilities:
reflexion and reflection in strategic management. Strategic Management Journal,
32(13), 1500-1516.
J. Harrington, R. and C. Ottenbacher, M., 2011. Strategic management: An analysis of its
representation and focus in recent hospitality research. International Journal of
Contemporary Hospitality Management, 23(4), 439-462.
Merkert, R. and Hensher, D. A., 2011. The impact of strategic management and fleet planning
on airline efficiency–A random effects Tobit model based on DEA efficiency scores.
Transportation Research Part A: Policy and Practice, 45(7), 686-695.
Moutinho, L. and Vargas-Sanchez, A. Eds., 2018. Strategic Management in Tourism, CABI
Tourism Texts. Cabi.
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Pamfilie, R., Petcu, A. J. and Draghici, M., 2012. The importance of leadership in driving a
strategic Lean Six Sigma management. Procedia-Social and Behavioral Sciences, 58,
187-196.
Travis, W. D. and Rekhtman, N., 2011, February. Pathological diagnosis and classification of
lung cancer in small biopsies and cytology: strategic management of tissue for
molecular testing. In Seminars in respiratory and critical care medicine (Vol. 32, No.
01, pp. 022-031). © Thieme Medical Publishers.
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