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Abstract:This Paper will focus on the organisation called British petroleum typically known as BP. This purpose of this paper is to examine and evaluate and analyse the present strategic position of BP within the industry also as we proceed further we shall also look at the environmental analysis, structural determinants of the intensity of the competition, structural analysis and competitive strategy of BP, The whole paper has been divided into three parts, in part one we look at the general analytical techniques like SWOT, PESTEL, proposed by M.E porter , latter in Part two BP will be analysed in the light of ansoff matrix and BCG matrix, and the porters five forces, the final part consists of suggestions with respect to the above analysis
Introduction :BP is one of the world's leading international oil and gas companies, providing its customers with fuel for transportation, energy for heat and light, retail services and petrochemicals products for everyday items
http://www.bp.com/sectiongenericarticle.do?categoryId=3&contentId=2006926
British petroleum well known as BP is worlds major oil and gas company, it is one of the the world third largest company (source Wikipedia: http://en.wikipedia.org/wiki/BP) it is well know brand world wide, and in business realm it is much known as a corporation which has been actively participating in vertical integration approach in every area of fuel industry, that includes excavation of oil and extraction and production refining distribution power generation and trading, recently BP has been actively involving in the development of renewable energy resources as it is believed by the end of this century all the worlds reserves of conservative fuel deposits will vanish, however BP has its operation undergoing in 80 different countries and produced approximately 4 million barrels of crude oil, Bps largest maket share is in united states head quarted in Houston, the company has been alleged for the threat of environmental and safety concern following the recent spill in gulf of Mexico, Bp is the first company to realise that the the future demand for energy is expected to increase by 50% with in the next two decades and also on the BP website it has stated that the 85% of the energy demands will be met by the fossil fuels
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PART 1:BP SWOT ANALYSIS: STRENGTHS: BPs History/brand:BP One of the worlds well know brand which has been operating in the business since the beginning of the 19th century but formally known as the Anglo- Iranian oil company , its history itself dictates its stability with in the business, it has a strong holds in the united states market one of the largest consumer of oil and gas in the world also Larger producer in the Gulf of Mexico:As BP is has its strong root hold in the American market the company has its own refining market and distribution channels thus it has a unique and formidable infrastructure, through the network of its subsidiaries which makes competitors daunting Geographically diverse organisation:BP has been operating in 80 different countries world wide under different names like Amco, Burmah Castrol, BP express, Arco, BP connect, etc. BP also listed in NSE and FTSE and LSE. however BP amco is one of the strongest brand among all the other brand that BP operates Leadership in oil related technology:The oil related technology is defined as Oil production related technology can help maintain revenue and profits by giving the controlling firm the ability to increase production on new oil fields. Superior technology also allows better utilization of existing oil reserves from a production and refining capacity Source: (http://www.wikiwealth.com/swotstrength:superior-oil-related-technology) with the definition above that BP has gained a competitive edge among its other rivalries in increasing the production of new oil fields
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Weakness:Negative consumer perception:Though BP has been striving hard to position BP as a eco friendly brand, the recent incidents has put BP consumers on dilemma regarding the brand positioning, due to recent spills in Alaska and gulf of Mexico, also BP has increased it petrol prices in compared to its rivals Unstable Oil industry:Industries such as petroleum are at the stake due to their availability in the future , however oil industry is higly profitable , it also suffers volatility which decreases the ability of investments from the investors Opportunities:-
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Expansion of territories:BP can consider expansion of its borders to suitable oil reserves and also by acquisition of oil and gas industries in the north sea and other areas globally Pricing and high quality:BP can also reconsider by flexing its pricing policy in order to answer the tough competition, accompanied by same old high quality of fuel Threats:Instability:Many BPs oils producing regions are confronting with unstable government making business even more volatile Oil Spill:BP has been alleged for being carrying out environmental hazard activities in oil excavation following the spills in Alaska and Mexico, as well a some occasional fire accidents in the BP oil rigs, corrosion in the oil pipe lines may also be posing a major threat to the company Saturation of resources:Natural saturation of resources in the oil wells would be another major threat to the companys existence
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POLITICAL As discussed above due to unstable governments in the BPs production countries the worlds energy markets are getting more volatile Due to global warming issues and climatic disturbances governments are creating a strong barriers on oil excavations, besides encouraging such industries into find out more sustainable forms of energy On whole the global energy market is becoming more volatile due to continued oil demands from the third world countries ECONOMIC
The economy is supported by the energy reserves in that country The pace of global economic recovery holds the key to energy prospect to next several years (IEA. 2010 facts sheet ) Energy markets can envisage demand increase by nearly 60 percent according to IEA Due substantial increace in the alternative energy sources supply are expected to grow in the next few decades rapidly
SOCIAL
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This force is likely seems to be a major driver of change in the global energy market as it is being underpinned by a technological advancements of production of economical ways of alternative energy
Part 2:The Ansoff Matrix :- the ansoff matrix is a 2x2 matrix with products market mix for existing and new markets , it was first proposed by H. Igor Ansoff, it is a growth markets matrix helps the organisation to take its strategic decision it also helps us to analyse how BP has diversified itself from British petroleum to beyond petroleum
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http://tutor2u.net/business/strategy/ansoff_matrix.htm
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Market penetration:-
Existing product
New product
Existing market
Market penetration
Product development
This involves BP extending Bio-fuels that are produced in its geographical frontiers, a sustainable way, and solar more retail outlets, direct energy wind energy etc distribution etc New market Market development Diversification
Advertising and marketing Clean and renewable solar flexing the pricing policy in energy for homes, roads and UK and acquiring person businesses owned retail outlets in prime locations
varied products for each and every market segment like homes business and also diversified products like lubricants motor oils etc are also available to support its deliberate strategy into market penetration Product development:this strategy is best applied when a particular product or service is
in maturity or a decline stage however due to global environmental fuel crisis it has become necessary to dig for a new energy resources, however this strategic approach give an
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Market development:BP has been aggressively and readily applying this market strategy, as it is presently operating in 80 different countries, also as a part of further market development, BP hold its own distribution channels besides having dealer distribution channels, recently in India, BP has targeted a new demographic group ie., CNG( compressed natural Gas) for domestic purposes, In which BP has gained a significant market share. However, still there is a plenty of room to grow in this area by expanding more into Africa and Russia and Europe Diversification: Although diversification is an extremely risky strategy, to secure BPs future BP has invested 8 billion dollars in the development of economical ways to produce renewable and alternative energies, as there are some speculations that solar energy will be utilized more by 50% than its present usage (data monitor 2004). In order to gain expertise in this sector of energy production bp has invested such a hefty sum, to regain its losses due to recent oil spills. BP has acknowledged the importance of diversification strategy, once the expertise is gained then it can be a market leader by choosing emerging industry markets entry strategies BCG MATRIX:-
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(http://tutor2u.net/business/strategy/bcg_box.htm)
BCG Matrix : Cash Cows British petroleum has a big market share in oil and gas industry with its wings extended in 80 different countries, however these SBU are with high market share with less room for the growth as it is a mature market, these SBU need to be managed well with right strategy to maintain the profits
STARS: BP is presently well established in most of its operating countries however, there is still room to grow to stars as it the fourth largest in terms of revenue making followed by royal Dutch and Exxon Mobil (cnn, 2010) (http://money.cnn.com/magazines/fortune/global500/2010/full_list/)
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BP is trying to venture into new markets by investing into sustainable and renewable energy resources, since it has small share in high growth market as it is predicted that market for these renewable energies were likely to rise rapidly Also BPs CNG products can be another question mark as it has high growth which can be replaced by petrol in the developed nations
DOGS: BP business can be effected by electrification of rail transport in the third world countries, Wherever BP is operating in. Due to the market for supplying diesel to locomotives are at the dogs state, because it has relatively low growth and small share, and this market might sooner vanish. However BP can continue with this present SBU, as it cannot affect the other SBUs
BP has a stable market share in a unstable market, despite the facing allegations from recent gulf of Mexico disaster
Part 3:Suggestions for BP for its entry into emerging energy industry:Michael. E. porter (1980) suggested some of the common early barriers like Proprietary technology Access to raw materials and other inputs Risk, which raises the effective opportunity cost of capital and there by effective capital barriers
Proprietary technology:-
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Access to raw materials and other inputs:Though the tendency of this particular barrier might not seem appropriate to BPs production of wind and solar energy as they are freely and abundantly available in nature however BP still can gain competitive advantage by reserving the copy rights of the technology that is being/will be used to convert the alternative resources into energy. Thus generating revenue
Risk:Traditionally established companies are often not the first to be in the new emerging industry due ot technological advancement even having the abilty and obvious strengths , but climb the band wagon latter, and tries to establish by placing high higher opportunity cost, in this case BP has some relatively obvious strengths like knowledge of the customers and brand strength, so it is advisable that BP continue to press by investing into research of alternative fuels
References:Bibliography :Books:M.E. Porter competitive strategy: free press 1980 Exploring corporate strategy (2006) by G. Scholes, Armstrong et al Ft prentice Hall
Websites:Page 12
http://www.worldenergyoutlook.org/docs/weo2010/factsheets.pdf www.franteractive.com http://www.businessweek.com/mediacenter/podcasts/international/international_08_11_06.htm http://search.businessweek.com/Search?searchTerm=bp+podcast&resultsPerPage=20 http://www.oneworkplace.com/images/dynamic/case_studies/BP.pdf www.ft.com http://www.managementparadise.com/forums/principles-management-p-o-m/208706-pest-analysisbritish-petroleum.html Pestle http://www.ivoryresearch.com/sample1.php http://podcast.ft.com/index.php?sid=42 podcasts ft
http://www.1000ventures.com/business_guide/strategy_bcg_matrix.html
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