British
Petroleum Strategic
Management
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Table
of Contents
1.0.
Executive Summary
All organizations have policies, rules, and
philosophies that guide their operations. Without these rules, it becomes
difficult for organizations to fathom whether they are progressing or not;
given that they lack a map and a reference through which they can compare their
alleged progress with. Objectives and
goals are set for the purpose of enabling
companies, governments, and even organizations understand what exactly it is
that they need to accomplish. Furthermore, goals and objectives provide the
means through which organizations can plan on how to achieve their set goals. To remain competitive, of course, it is always
crucial for organizations to adopt strategies containing framework within which
the organization’s goals, aims, and
objectives are formulated. This paper
seeks to analyze British Petroleum (BP),
by looking into its mission and vision statement. Furthermore, it will employ
relevant data from the given case, to conduct a five forces analysis of the
energy industry to ascertain the
industry’s attractiveness. Additionally, this paper endeavors to evaluate BP’s resources and capabilities by utilizing
the value chain framework. This will, in turn,
help in understanding how the company is creating value and also give a hint on
how the company can develop and improve further. Finally, this paper will
strive to suggest to BP’s senior management team ways through which the company
can attain a sustainable competitive
advantage in the rather competitive global energy market.
2.0.
Background Information
British Petroleum otherwise abbreviated as ‘BP plc.’ Alternatively, just ‘BP’ is a British
International Company that specializes in oil and gas (BP,
2013). British
Petroleum is currently among the world’s seven “supermajor” oil and gas
companies. BPs headquarters are in London, England, though its operations are scattered across the globe. In the year
2012, the company’s performance made the world’s sixth-largest oil and Gas
Company, and also the world’s sixth-largest energy company by market
capitalization. Finally, owing to the same 2012 outstanding performance, took
position five basing on that 2012 revenues.
BP is a vertically integrated firm that operates in
all sectors of the oil and gas industry. Its undertakings encompass exploration
and production, petroleum refining, finished products distribution and finally
marketing of the distributed products (BP, 2013). Also, the
company also deals with petrochemicals, generation of power, and trading.
Finally, it has considerable interests in renewable energy and specializes in wind power and biofuels.
By December 2013, BP had establishments in about 80
countries, which cumulatively dispensed oil of around 3.2 million barrels a
day. This establishment were proven be reserving 17.9 billion barrels of oil
equivalent and had about 17,800 service
stations
(Jurevicius, 2013). Of all
its divisions, BP America; operating in the U.S. is the largest. In Russia,
British Petroleum owns a 19.75percent stake in Rosneft, which even today
remains to be the world’s largest public oil and Gas Company. Rosneft owns famously known for its hydrocarbon
reserves and also production.
BP is listed on the London Stock
Exchange and is also a
part of the FTSE 100 Index. As of 2013, the company was worth £85.2 billion
worth market capitalization. It is staggering value regarding worth made it the
fourth-largest company to have ever been listed
on the stock exchange. Finally, the company has a tributary listing on the New York Stock Exchange and the Frankfurt
Stock Exchange.
3.0.
British Petroleum Mission and Vision
Statements
Ever since its inception in 1908, when it used to be
Anglo-Persian Oil Company, now BP, has been adhering to some sets of both
written and unwritten rules, or rather policies. Mission statements as experts
would refer them to, “are statements that are supposed to guide the
undertakings of the company”. Mission statement thus spells out organization’s
overall goal, offers a direction, and oversees decision-making. In summary,
mission statements provide the framework
within which organizations policies are
articulated. A Mission statement is essentially a goal that dictates
what the company needs to do for itself and the world. Vision statement, on the other hand, mirrors an
organization’s aspirations. A Vision statement is meant to communicate the
company’s reason for being, and most importantly, how it aims to serve its
stakeholders
3.1.
BP’s Mission, Vision and Value
Statement
BP is among a few companies without official mission
and vision statements. Nevertheless, BP provides several different utterings of
what it calls, “What we do,” “What we
stand for”, and finally “What we Value.”
Consequently, it is from these three BP statements that this paper draws the
organization’s mission, vision, and value statement, given that they reflect
the ideal mission, vision, and value
statement.
3.1.1.
What we do (Jurevicius, 2013):
BP finds, develops and creates vital sources of
energy. Also, BP turns these sources into
suitable products that are prerequisite to people all over the world. It is
apparent that people needs energy; and that this need keeps growing. BP, therefore, produces the needed energy in
various forms, given that it is vital for people and the world’s progress. BP
emphasizes on the fact that it expects to be
held to a high standard in
whatever it does. Additionally, BP strives to be a safety frontrunner in the
energy industry. BP aims at being a world-class operator, a desirable corporate
national and a great employer. In short, that is what defines BP; it is who BP is.
3.1.2.
What we stand for (Jurevicius, 2013):
BP claims to stand for everything that enhances both
safety and excellence in its operations. BP admits that safety and excellence are fundamental to its success. BP’s approach
focuses on respect, consistency, and having the courage to do the correct
thing. BP believes that success derives from the effort of its people.
Consequently, BP has a resolve to learn and to perform things better. Furthermore, BP depends upon long-lasting relationships.
In summary, BP is devoted to creating a real difference in generating the
energy that the world needs at present,
and also in the evolving world of tomorrow. BP,
therefore, works as a team; as BP.
3.1.3.
What we Value (Jurevicius, 2013):
BP have five values that convey
their mutual comprehension of what they believe, how they aim to act, and what
they desire to be as an organization. The BP’s values include:
1.
Respect
2.
Excellence
3.
Courage
4.
Safety
5.
One
Team.
Given that British Petroleum does not have an official
mission statement, through the combination of a few statements, BP’s mission
statement has been forged. The forged mission statement retains all the
features of a mission statement. Nine key components have been featured, giving
adequate information regarding the business. Everyone, including its
stakeholders, as well as the general public can now comprehend what BP aims to
achieve and what policies defines them together with their undertakings.
British Petroleum mentions all the four values that are essential to a
company’s evaluation when it comes to
developing a mission and vision statement. The setback of such mission
statements is that they tend to be too long and exclusively focuses on the
product. At no any given time does BP stress on the need to satisfy its
customer’s needs. It rather focuses more on the production of rudiment sources
of energy. This shortcoming ultimately offers limited opportunities for the
organization to grow into other product arcades without making its mission
archaic.
In summary, BP’s mission is a great mission statement,
and can be used by the company to achieve many benefits. The only thing that BP
needs to do is to develop a customer-oriented mission that stresses the need to
put efforts in interacting with its employees.
4.0.
Five Force Analysis of the Energy
Industry
Of all the currently available sources of energy, Petroleum happens to be the single
largest, not only in the U.S., Europe, or Britain
but the entire world the petroleum and gas industry is crucial to the world’s
economy (Schramm, 2000). Also, it is
expansively reported, measured, and evaluated. The industry is comprised of the comprehensive practice of
exploration, refining, distributing, and marketing of the oil-equivalent
products. After mining, petroleum is first taken to a refinery plant, where it
is mechanical, thermally, and chemically
disjointed into several fractions. These fractions are in turn rehabilitated
into finished products and then taken to the market (Schramm, 2000). The largest bulk end-user products of the energy
industry are gasoline and fuel oil. Additionally, Refineries also create
non-fuel products such as road oil, solvents, asphalt, petrochemicals, and wax.
The petrochemical products are dispatched
to chemical plants, where they aid in the production of plastics and chemicals.
4.1.
The market structure
The market structure of the crude oil, petroleum and gas is
categorized as an oligopoly. Oligopoly is a phenomenon that means that a few firms are dominating the market. In cases
that call for decision making, the dominating firms must be consulted. OPEC:
The Organization of Petroleum Exporting Countries, ever since its formation in
1961, has been striving to unify the regulations that are controlling the
prices and supply of petroleum equivalent to end
users (Berry, 2015). These formulated policies are meant to enhance a
fair return on the involved parties’ investment in the venture. Nevertheless,
there are still other forces within the industry that are derailing the entire
process of progress. In the U.S., Britain, Europe, Russia, and China, to
mention a few, there are independent firms that are immensely competitive
though possess little market power. The energy industry has a cosmic buying and
selling market and is without a doubt a rather extremely large industry. In the
U.S. for instance, oil measures up to over 40percent of the country’s energy
needs. Major competitors within that market include Exxon Mobile, Shell, BP,
and Texaco.
4.2.
The Industry Demand and Future
Expectations of Demand
It goes without saying that the world will not run out
of oil any time shortly. Unfortunately, the ever skyrocketing oil prices are
steadily forcing consumers towards alternative sources of energy (Berry, 2015). Scholars
suggest that petroleum reserves are now greater than the previous consumption.
However, no one can sufficiently predict their sustainability, or end. The
world may or may not run out of oil in the future. The demand is forecast to be
high in the future, which will compel new producers to venture into the market
for an equal share of the profits. Regardless of the case, the influx of new
oil producers is unlikely to increase the supply of oil, given that the supply
of oil is finite.
Though stable now, what lies ahead can only be unraveled by conducting an analysis based on
PORTER’S FIVE FORCE.
4.3.
An Analysis of Competitive Forces
(PORTER’S FIVE FORCES)
Porter’s five external forces strive to influence a
firm’s ability to compete healthily
within its industry. In this paper, Porter’s Five Forces will illustrate a
complicated oil market, which is subject to higher obstacles to entry and
phenomenal bargaining power by both suppliers and buyers (Faulkner, 2014):
4.3.1.
Threats of entry by new competitors
Energy industry’s entry obstacles originate from political and governmental pressure, the
prerequisite for hefty capital investments, the necessity for highly competent
and specialized employees, physical vulnerability and risk, and asset
specificity. Furthermore, the exploration and mining of oil are promptly regulated by the state, federal,
and extensive compliance plan. The industry lacks specialized and highly
trained worker and, therefore, money
ought to be channeled to learning
institutions, and people encouraged taking the required courses. Otherwise, there is a risk
of lacking the personnel to work in minefields and processing plants at higher
levels. Otherwise, most firms within the industry are fond of using economies
of scales, which has also been proved to be an entry barrier.
4.3.2.
Rivalry among existing competitors
In 2000, the five key competing producers were said to have held a 41percent of the
market share. These companies were closely
followed by the next five largest firms, which held about 13percent, and
then followed by other 50+ who shared the remaining 46percent on varying basis.
This means that there is a lack of stiff
competition. The market is presumably
disciplined; showing the lesser
intensity of experiencing growth, though with high exit barriers.
4.3.3.
Pressure from substitute products
As for the energy industry, the search for a substitute, or rather alternative products is
predominant. Nevertheless, to this date, very few alternatives have been
developed, though remains commercially
unfeasible. Alternatives such as coal, solar power, nuclear energy, wind power,
and hydroelectric power cannot impose enough pressure on petroleum, and thus, cannot even be referred to as
pressure-amounting.
4.3.4.
Bargaining power of buyers
Oil happens to be among a few commodities that have a
low bargaining power. Key players within the industry have myriad options at
their disposal and can easily sell their products to equally many people
without even struggling.
4.3.5.
Bargaining power of suppliers
Suppliers with about 86percent ought to have a high
bargaining power given that they have a wide selection of products that they
can sell to their clients. In the cases where buyers are not interested in one
product, the supplier can easily introduce another one that suits the client’s
need.
In conclusion, given that BP is among the five world’s
largest companies in the energy sectors, it stands to benefit for a very long
time. However, it should be keener on its
overseas ventures, so as to avoid being ousted by the other four.
5.0.
How BP is Creating Value for its
Customers
BP applies distinctive capabilities- which includes
the expertise of personnel, use of
advanced technology, and finally, being strong when it comes to forming
strategic relationships that enable them
to easily access resources and deliver on intricate projects (Our business model, 2014). The company has two main operating segments, the
upstream and the downstream. What BP essentially does is, they locate, create,
and produce crucial sources of energy. Also,
they turn the sources they discover into products that consumers need. Finally,
BP claims to purchase and sell at all the stages of the hydrocarbon value
chain. BP claims to be relentless on
safety attributes and often pass their products through rigorous testing to
ensure that they are both safe and fit to use by their consumers. Their
commitment enables them to comprehend that operating in technically demanding
regions and politically instigated locations can be challenging and requires
particular thoughtfulness to local environments (Our business model, 2014).
British Petroleum Creates value by supplying energy,
supporting economic development, and finally, aid to improve the quality of life for lots of people. BP’s
activities also create jobs, promote the advancement
of infrastructure, encourage investment, and finally contribute revenues for
the local communities, as well as governments. BP’s business model entails
everything from exploration to distributing, and finally to marketing.
Consequently, they have adopted a diverse,
cohesive portfolio that stresses on the adaptability to prevalent conditions.
BP’s integration across the group enables them to share practical excellence
more proficiently across its key areas such as operation risk and safety,
procurement, environmental and social acts, and technology, to mention but a
few. Finally, the stages of hydrocarbon value chain provide opportunities for
BP to create value since the process
calls for a successful execution of undertaking that are fundamental to the
energy industry. This is easily aided by
the company’s idiosyncratic strengths and capabilities in conducting those
duties (Our business model, 2014).
The company, however,
can even further better the quality of their products by adopting more
technological approaches to its production. Also,
BP should employ more skilled workers in its refinery plants. Research also
ought to be conducted by the company so as to ensure that improvements are made
to its products from time to time, so as to suit the current needs. Finally, BP
must be cautious of its activities and their impact on the environment. Oil
products are known to be extreme environmental pollutants. Measures ought to employ, which will ensure that the environment is not polluted.
6.0.
British Petroleum Can undertake Management Strategies for them
Gain Competitive Advantage
In
many areas of modern economic conditions, businesses are changing very rapidly.
Rapid technological change leads to the emergence of new technologies on which
new kinds of products and services. Around new technologies and products are formed
into new markets. The economy is growing, increasing individual and community
well-being, changing consumer needs and demand structure (Rousseau, 2009, 121).
For values of economic growth is attached more and more countries. The world
economy at the expense of new technologies and the harmonization of consumer
demand is becoming global. Parallel within enterprises occur spontaneous
processes, blurry structures and management systems that violate the standards
process, reducing handling (Pietersen, 2009, 32). Under pressure from internal
and external circumstances, businesses are forced to change their policies,
systems and governance structures. Otherwise, their effectiveness in an
increasingly competitive environment can be quickly compromised. Those who
manage to beat the competition and the first to offer the market a new, more
effective management decisions tend to get a competitive advantage. Today,
every type of organization has to go
through live many changes in nature and scale different with temporalities and
rhythms variables. These changes appear on the one handouts as more or less strong, of questioning, ways of acting and
thinking found unsatisfactory and also as the
development of proficient talents leading the business to a situation perceived
as more satisfactory (Duck, 2009, 109). Change management can become
problematic, correct malfunctions an organization through the development of
new talents is also the subject of
"managerial learning". Therefore, it is important to address the
issue of the connection between
change and organizational learning (Okumus, 2008, 283).
First
of all, the combined benefits of change management. Statistical studies showed that there is indeed a correlation
between the use of change management and improved business results (D'Aprix,
2009, 15). Change management helps to avoid such
adverse effects, and factors such as reduced productivity, active and passive
resistance to change, turn off workers from the labor process, the friction in
the team, professional attrition, layoffs of their volition, the conflicts
among the staff, the slow absorption change, avoidance of work, the division
staff to "we" and "they” (Davenport, 2010, 65). The
implementation of changes at the
level of the organization is helpful
to create a coherent, unified approach to change, one language. This makes the learning curve is shorter; the changes
become more persistent and consistent, and thus are supported by shared
resources across the organization. However,
this approach creates the opportunity
for continual improvement (Dent & Goldberg,
2008, 25). At the same time, informal, impromptu, which does not apply to the whole
organization approach to change is much less effective, as it creates the risk
of conflict of various contradictory approaches, and makes employees more
likely to evade the changes to sabotage them, rather than support (Dimitriadis,
2009, 554).
Change management involves two kinds of
components: the "technical" and "human." The
technical include limits and goals change, and who performs the alterations,
those who provide the capital, those who sanctions and supports the project,
who is implementing the project at all levels, as its wheels and cogs (Eby,
2009, 419). Components of working with people - is to create an understanding of the need for change and change
management, the desire to change and maintain change management, as well as
knowledge and abilities needed to perform certain roles in change management
(Eccles, 2010, 70).
The
British Petroleum and all other companies in
their respective industries are facing intense competition from their competitors, therefore; all the organizations
have to evolve constantly for their subsistence and success. As a result,
change becomes an ever-present feature of organizational life, both at
operational and strategic levels (Burnes, 2004). Under these circumstances,
studying how to implement organizational changes becomes an important subject in business,
engineering, and environmental management (Garengo, 2009, 440). There are many
different definitions of organizational
change, but they all carry the connotation of “changing how an organization
functions or performs”. For instance, “Organizational change is the revision of
established work routines, the revision of existing patterns of communication,
the reshuffling of work groups, or the hiring of new employees” (Bamford, 2003,
546). “Organizational change alters how an organization functions, changes who
its members and leaders are, what form it takes, or how it allocates it resources”
(Collyer,2000, 222). “The intention of any organizational change is to move the
organization from its current state to a more Desirable State.”
7.0.
Conclusion
The world still needs cheap, efficient, and stable
sources of energy. The energy industry besides being heavily resourced and highly
competitive, nothing seems to be happening, regarding
developments and innovativeness. The traditional means of production are still
the ones being used. Despite the rumors and claims that the market is a
competitive one, this may not be the case, competition is only among the five
leading producers, and the following five. The rest are just trying to survive
within a market that tends only to favor
a few. To avoid high exit rates, company’s within the energy industry needs to
be creative and innovative. The world is still looking for commercially
feasible sources of energy. Until then the existing players must unite to
determine how progressively they can advance together.
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