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1.0 Globalization
Globalization is becoming an irresistibly stream in this age. People
believe that globalization will bring tremendous for turn and benefit for
them. However, as the deepening of globalization, it has revealed a lot of
problem, especially for developing countries.
Globalization is the tendency of investment funds and businesses to move
beyond domestic and national markets to other markets around the
globe, thereby increasing the interconnectedness of different markets.
Globalization has had the effect of markedly increasing not only
international trade, but also cultural exchange. The worldwide movement
toward economic, financial, trade, and communications integration.
Globalization implies the opening of local and nationalistic perspectives
to a broader outlook of an interconnected and interdependent world with
free transfer of capital, goods, and services across national frontiers.
However, it does not include unhindered movement of labor and, as
suggested by some economists, may hurt smaller or fragile economies if
applied indiscriminately.
1.1 Features of Globalization
The main features of globalization are stated below.
1. Liberalization: The freedom of the industrialist/businessman to
establish industry, trade or commerce either in his country or
abroad; free exchange of capital, goods, service and technologies
between countries;
2. Free Trade: Free trade between countries; absence of excessive
governmental control over trade;
3. Globalization of Economic Activities: Control of economic
activities by domestic market and international market;
coordination of national economy and world economy;
4. Connectivity: Localities being connected with the world by
breaking national boundaries; forging of links between one
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society and another, and between one country and another
through international transmission of knowledge, literature,
technology, culture and information.
5. Borderless Globe: Breaking of national barriers and creation of
inter- connectedness; the ideal of 'borderless globe' articulated
by Kenichi Ohmae.
6. A Composite Process: Integration of nation-states across the
world by common economic, commercial, political, cultural and
technological ties; creation of a new world order with no national
boundaries;
7. A Multi-dimensional Process: Economically, it means opening
up of national market, free trade and commerce among nations,
and integration of national economies with the world economy.
Politically, it means limited powers and functions of state, more
rights and freedoms granted to the individual and empowerment
of private sector; culturally, it means exchange of cultural values
between societies and between nations; and ideologically, it
means the spread of liberalism and capitalism.
8. A Top-Down process: Globalization originates from developed
countries and the MNCs (multinational corporations) based in
them. Technologies, capital, products and services come from
them to developing countries. It is for developing countries to
accept these things, adapt themselves to them and to be
influenced by them.
9. Global State vs. Global Civil Society: In protest against the
harmful effects of globalization on the vast multitude of people
all over the world, particularly in developing countries, protest
marches, demonstrations and meetings have been organized in
different countries. These protests have taken militant forms in
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the last decade. Protest groups have tried to disturb and
paralyze the meetings of WTO, World Bank and IMF.
1.2 Advantages of Globalization:
Integrations of markets: Markets are interlinked- European Union
Cheaper Products for Consumer: Trainers are Cheap
Leads to Outsourcing in some cases which can lead to job losses:
Moving call centers to India.
Lowering of international Barriers: Now European Union can Trade
with ASEAN and NAFTA.
Providing jobs in LEDC's and help develop economy (less
Economically Developed Countries)
Helps prevent market Saturation in a specific market: stops there
being too much competitors in one place e.g too much call centers
in UK, so move to India
Standardizations of product: the same products can be seen in
some many places - e.g coke and McDonalds
1.3 Disadvantages of Globalization
Intense Competition
Widening of Gap between rich and poor countries
Harder for Smaller businesses to establish themselves
Exploitation of workers: Paying the workers in LEDC's a fraction of
what would be paid in to workers in LEDCs.
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2.0 BP
BP is one of the world's leading international oil and gas companies.
Through our work we provide customers with fuel for transportation,
energy for heat and light, lubricants to keep engines moving, and the
petrochemicals products used to make everyday items as diverse as
paints, clothes and packaging.
2.1 Brief History, Mission and Vision
1909: Anglo-Persian Oil Company formed.
1914: Deal with UK government to help Royal Navy switch coal to
fuel.
1912-1918: Increase in oil production in Iran.
1917: Acquires BP co. from the marketing subsidiary of the
European Petroleum Union.
1935: Company renamed Anglo-Iranian Oil Co.
1951: Iranian oil industry was formally nationalized.
1960-1970: Major oil discoveries in Alaska & North Sea.
1969: Signed agreement with Standard Oil Co. of Ohio which aided
BP’s transportation of the fuel in the biggest oil field in the U.S.
1982: Adopted present corporate name “BP”.
1987: BP acquired Standard outright and merged with BP’s other
interests in the United States to form BP America.
Mission Statement:
Long term commitment to prosper as an integrated, international
company with strong technology base and a focused marketing
effort.
Vision Statement:
“To improve our performance and have a steady disciplined
growth.”
Strategic Culture:
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BP’s culture rest heavily on their employees. They are the key to
BP’s future growth.
Technology is key to both up and downstream operations.
HSE- raises health standards, no damage to environment or people.
Better relationships with countries where operations already exist.
2.2 Organization Structure
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2.3 BP’s Facts and figures
(as at, or for the year ended, 31 December 2012, updated for IFRS 11
and IAS19 where relevant)
Countries of operation :Over 80
Number of employees :85,900
Sales and other operating revenues :$375,765 million
Cash flow :$20.5 billion
Replacement cost profit :$11.4 billion
Proved reserves :17,000 million barrels of oil equivalent
Retail sites :20,700
Refineries (wholly or partly owned) :15
Refining throughputs :2,354 thousand barrels per day
2.4 BP’s Four Core Values
BP specifies four core values to express the way the organization does
business and help translate the mission into practical action:
Progressive: BP is always looking for new and better ways to
conduct business. It has developed a relationship with Ford to
build hydrogen vehicles and fueling stations in California,
Michigan, and elsewhere. BP also has reformulated its BP
Amoco Ultimate fuel to reduce air pollutants.
Innovative: Through the creative approaches of employees, and
the development and application of cutting-edge drilling
technology, BP seeks breakthrough solutions for its customers.
Green: BP is committed to environmental leadership—the
proactive and responsible treatment of the planet’s natural
resources and developing lower carbon emission energy
CEO
CFO COB
BP Exp/Prod
N & S America
Africa
S.E. Asia
HSE
BP Mark/Refining
Europe
USA
Australia
Chief Exec. Oil
BP Chemical
Asia
Europe
S. America
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sources. As a result, BP now stores its gasoline in double-
skinned tanks to prevent spills and leaks.
Performance-driven: BP sets the global standards of
performance on financial and environmental dimensions, as well
as safety, growth, and customer and employee satisfaction.
2.5 List of Products and Services
Each of BP’s brands has its own heritage and personality, but they all
have one thing in common - they all symbolize, embody or provide
tremendous energy.
BP
BP is our main global brand. It is the
name that appears on production
platforms, refineries, ships and
corporate offices as well as on wind
farms, research facilities and at retail
service stations.
Since ‘BP’ petrol first went on sale in
Britain in the 1920s, the brand has grown to become recognized
worldwide for quality gasoline, transport fuels, chemicals and alternative
sources of energy such as wind and bio fuels. We are committed to
making a real difference in providing better energy that is needed today
and in the changing world of tomorrow.
BP is committed to safety, respect, excellence, courage and One Team.
They make us the company we are. Everything we do has to live up to
these values Our logo - the Helios - symbolizes these values. Named after
the Greek sun god, the Helios represents energy in its many forms. Of all
the forms of energy that make up BP and its services, perhaps the most
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vital is the human energy our people bring to everything we do. This is
what fuels our brand.
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Aral
The blue Aral diamond is a trusted and
familiar symbol on the German roadside. Aral
is one of the most trusted brands in Germany.
It has been associated with quality
automotive fuels since the 1920s. Today
people also associate Aral with good food and
excellent service on the go.
Every day more than 2.5 million customers
visit an Aral station to fill up on petrol, use an on-site car wash or
purchase a beverage or snack. In fact, some 40% of Aral customers stop
by just to shop in the sleekly designed retail spaces, which stock a range
of convenience items and Aral branded motor oils, along with coffee and
food.
So in addition to being Germany’s leading fuel brand marketer Aral is
also the country’s third largest fast food retailer, after McDonald’s and
Burger King.
“Alles Super” is the Aral slogan. “Everything’s super.” So in Petit Bistros,
Aral’s onsite cafés, you’ll find Crossinos, which are made with select
ingredients to be super tasty.
It may be no coincidence then that Aral is a Super brand, one of 73
brands in Germany to be awarded this designation by an independent
organization. Or that for several years in a row Reader’s Digest readers
have named Aral Germany’s most trusted brand in fuel.
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Castrol:
Castrol is widely seen as the world’s truly
global lubricants specialist
You have probably heard of Castrol, the
lubricants brand BP acquired in 2002.
Castrol’s motor oils for automobiles and
motorbikes are particularly well known.
But did you know that Castrol also makes
lubricants for every conceivable application on Land Sea and in the air.
Castrol’s founder, C.C. Wakefield, believed in working with
manufacturers and other businesses to develop lubricants to meet their
specific needs, especially where new lubricants could ease the way for
advances in engine or industrial design. Castrol continues to work
collaboratively like this today as the preferred lubricants partner to VW,
Audi, BMW, Komatsu and others.
Castrol’s brand is about passion, excitement and performance. For many,
that means speed. Castrol has been actively engaged with motorsport
teams and Castrol-sponsored drivers have broken the land speed record
more than 20 times. Such relationships have been a proving ground for
Castrol's products and central to building Castrol’s reputation as the
world's most advanced engine oils and fluids.
Today you will find a wide range of technologically advanced Castrol
lubricants for your vehicles at a local BP station or automotive supply
shop. Castrol products are sold in more than 150 countries.
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ampm
Back in 1978, the thought of fueling-up
more than your car at a service station
was unheard of. But the folks at ampm
always saw things differently.
The very first ampm store opened its
doors in Southern California, as a value-
add-on to select gas stations. From
packaged beverages, grab-n-go
sandwiches, treats or fountain drinks - the recipe at ampm has always
been simple: provide a great value and variety to conquer the snack and
thirst cravings of our customers.
Thirty-plus years later, ampm has grown to approximately 950 covering
California, Oregon, Washington, Nevada and Arizona as part of select BP
fueling stations.
Wild Bean Cafe
Good food and quality coffee can
be hard to come by on the road,
but Wild Bean Cafe is an exception
to the rule. Tucked into many BP
Connect stations, these on-the-go
cafés offer inventive sandwiches,
fresh baked goods and delicious,
fresh-ground coffee.
Conceived as a brand that would take convenience food to a new level,
Wild Bean offers the speed and affordability of more typical service
station shops plus one more thing. Everything’s made with quality
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ingredients and served fresh. You can enjoy your food, coffee or
cappuccino in the coffee shop space or take it with you to enjoy on the
move.
Wild Bean Cafe operates in several continents around the world. You’ll
find it in parts of Europe, Australia and South Africa. We also have a
presence in China and Russia, and new branches are opening all the
time.
3.0 BP’s SWOT Analysis
Strengths:
BP is ranked at the world’s 3rd largest energy company and is positioned
as a multinational oil company headquartered in London that:
Operates petrochemical businesses worldwide through the
network of its subsidiaries and retail brands(Amoco; ARCO; BP
Express, BP Connect; BP Travel Centre; ampm; Burmah Castrol
etc)
Participates in London Stock Exchange, IPO in New York Stock
Exchange. and is listed in the FTSE 100 Index;
BP Amoco strong brand loyalty for oil;
Strong brand management driven by the ‘Beyond Petroleum’
slogan.
BO Q3 net profit increase by 83% due to record oil and gas
prices. The indicator amounts to $53.43 per share compared to
$21.27 during the same period in 2007.
Weaknesses:
Launch of controversial business with the Baku-Tbilisi-Ceyhan
pipeline;
Increase in petrol prices in the UK;
Explosion of BP refinery in Texas that caused 100 injuries and
15 deaths in 2005;
Criminal charges due to the spread of 270.000 gallons of crude
oil in the Alaskan tundra in 2006;
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Toxic spill of 2,000 gallons of methanol in the oil field
(Prudhoe Bay) managed by BP.
Closing of Alaskan oil wells.
Opportunities:
8 b. USD investment in the research of alternative fuel methods,
including hydrogen, natural gas, wind and solar over the
forthcoming decade;
Expansion of frontier areas suitable for BP’s future reserves
(post-Soviet Union territories);
Extension of strategic oil and gas acquisitions in North Sea area;
Launch of more flexible price policy to compete main rivals;
Threats:
Environmentally unsound policies due to oil and toxic spills;
Occasional refinery explosions;
Corrosion in pipelines;
Competition from Shell and Chevron
Ceasing operations in a number of potential locations with their
further re-branding (Conoco);
Sale of corporate-owned stations;
More than 5.000 shortages within coming months;
$66,71 per barrel creates considerable tensions for running oil
business;
Further lawsuits considering the company’s ecological activities;
SWOT analysis At a Glance:
Strengths
Human Resources
Technology
“Mutual Advantage”
Upgrading Refineries
Infrastructure/Leadership
Fuels in Europe
Opportunities
Technological Advances
Emerging Markets (Asia/Pacific)
Oil remains main source of
energy
Formation of European Union
Introduction of “euro”
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Improving Operational
Efficiencies
Weaknesses
Recovering from large debt
Weak market outside of Europe
Less upstream investment to
replace production in long run
Dependent on small no of gas
fields
Producing more than it needs for
its operations
Threats
Environmental Regulations
Substitute Products
Power of OPEC
Overcapacity in mature markets
Supermarkets gaining market
share
European Economic woes
Commoditization – no brand
equity in Europe
Tight oligopoly, mature market,
cutthroat competition
4.0 PESTEL Analysis
Political
Wоrld enеrgy markets arе bеcomіng mоrе volаtile due tо thе
thrеаt оf geopolіtical іnstabilіty.
Grеаtеr climate de-stabilizаtiоns frоm CO2 emіssiоns arе
leadіng govеrnments tо encourage mоrе sustaіnable fоrms оf
enеrgy.
Wоrld enеrgy markets arе bеcomіng mоrе volаtile due tо thе
grоwіng oil rеquirеments оf а buoyаnt Chіnese ecоnоmy,
crеаtіng tensiоn bеtween nаtiоns.
Economic
Ecоnоmy іs undеrpіnned bу іts enеrgy supply.
Enеrgy markets will see demаnd іncrеаsіng bу almost 60
pеrcent, wіth fоssil fuels meetіng most оf thіs, аnd nuclear аnd
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rеnewable enеrgy markets havіng limіted rеlаtive
cоntributiоn.
Altеrnаtive enеrgy sоurces аs а pеrcentage оf tоtal enеrgy
supply arе іncrеаsіng аnd arе expected tо cоntіnue tо do sо,
triplіng frоm 2 pеr cent іn 2002 tоwards 6 pеr cent іn 2030.
(Brоadhurst, А. 2002, p87)
Social
Kyotо Agrеement, signed іn 1992, hаs led tо carbоn funds аnd
emіssiоn tradіng іn Eurоpe аnd around the world, which іs
bеcomіng а legal rеquirеment.
People’s wоrldview іs startіng tо chаnge tо а cоncеrn ovеr thе
sustaіnabilіty оf thе futurе, although thіs іs nоt expected tо
chаnge dramatically to justify widespread changes to energy use
for some time.
Technology
The Іntеrnаtiоnal Energy Agency states that alternative energy
markets will be underpinned by technological breakthroughs.
Research shows technology is the key to competitiveness in the
alternative energy industry; whilst alternative energy
technologies (AETs) are underpinned by 48 critical success
factors across technological, commercial, sоcio-polіtical and
оrgаnizаtiоnal categories.
Environmental and Legal
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The Kyoto Agreement, signed in 1992, has led to carbon funds
and emission trading in Europe and around the world, which is
become a legal requirement.
New laws from government.
Higher EU pollution standards.
International Environment Organizations.
More attention has been drawn towards the concern about
sustainability of the future, other forms of alternative energy
such as solar and wind energy.
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5.0 BP’s Global Exploration Zone
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6.0 Political Economy & International Business
In response to the mentioned political influences, BP's strategy has been
changed the following way. Generally, it is possible to observe two main
tendencies. First, BP attempts to hedge political risks in the oil producing
countries by means of partnership and deals with the governments. For
instance, BP signed a contract with the Russian state-run oil company
Rosneft in 2009 (Hernandez, 2011:1). Second, the company evacuated its
personnel from northern Africa because of growing political instability in
Tunisia, Egypt and Libya. Simultaneously, BP develops its cooperation
with emerging economies in Asia, which are more politically stable,
namely India (Hernandez, 2011:1). These changes were necessary in
order to avoid political risks in the countries, which prove to be the
leading producers of oil.
It is reported that the company started producing solar panels after the
acquisitions of Lucas Energy Systems (1980) and Amoco (1998). At the
present moment, the company proves to be the largest manufacturer of
solar panels in the world. BP has launched two main types of solar
energy products, namely products for individual consumers and products
for organizations. For instance, the firm is planning to run a new solar
energy project aimed at energy supply for Wal-Mart stores (BP, 2011:1).
Furthermore, it is reported that BP invested more than $6 billion in wind
and bio-fuel energy projects during the period from 2005 to 2010 (BP,
2010:61). These changes were necessary because the PB attempted to
attract customers by cheaper and 'green' energy.
Economic Opportunity:
Oil prices increased this year.
Benefit integrated oil companies overall.
Specifically help Exploration & Production companies.
Hurt Refining & Marketing companies.
Some signs of modest economic upturn in European Union:
GDP increased 0.5% in 1st Qtr. 1996.
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Exports have grown larger than imports over the last five
years.
European International Conference held this year; two main
concerns:
Expansion of EU to the east and south.
Review of the Maastricht Treaty.
Economic Threats:
Continued slow growth throughout EU
Growth rate down from 4% to 2.5% per year over last two
decades
GDP of 15 EU states down to 6.91 billion
GDP/PPS (purchasing power standards) per head is only
18,446
Consistently high unemployment
Average of 15 EU states is 10.8%
Average of 11 “euro-zone” states is 11.5%
Country-specific inflation problems across Europe.
Productivity growth is steadily declining.
Difficulty financing new projects.
Global Opportunity:
North American SUV’s becoming more popular.
Once restructuring and deregulation happen in Japan greater
competition will occur stimulating more consumption
Relaxation of control over markets in China and Asia will boost
demand for oil.
Global Threats:
North American economy becoming more efficient, moving from
manufacturing to services.
Russian economy in shambles, many people jobless, energy
consumption falling (energy inefficient).
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Africa’s & Mid East political turmoil blocking economic growth.
Both resource rich.
Potential threat of conflicts with oil-rich countries.
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7.0 International Business Strategy of BP
In analyzing the business strategy being adopted by BP, the use of
porter’s generic strategies can be used to analyze Bp. BP over the years
has been trying to differentiate itself amongst various competitors in a
way that makes them appeal to customers compared to their other
competitors, and this differentiation approach is achieved via quality,
innovations and responsiveness to customers.
BP has different brands such as BP, Ampm, Arco, Castrol, Aral and Wild
bean cafe (www.bp.com), and also diversification into development and
production of alternative sources of energy which differentiate the
company, makes Bp flexible and also able to respond to the demands of
the market.
Differentiation strategy involves Identifying possibilities based on
competences by adding benefits, new features (product innovation) etc.
BP has used it various brands and involvement in many segments and
other capabilities of the company to develop the differentiated strategy.
Factor input in the BP plc is innovative and involves technological
creativity in nature, the processes involved in the company is flexible and
of quality which gives rise to products differentiations and uniqueness in
their productivity i.e. output to final consumers both individual and
industrial consumers. The competitive scope is of broad target because
Bp does not only produce fuel for the marine, aviation and automotive
industry, they also have plans for alternative energy source by engaging
in the development of the alternative sources of energy and by so doing
this makes by to stand out in the industry.
Bp has been identified as an organization that adopts differentiation
strategy over the years due to the proper utilization of the company’s
competences or capabilities in terms of having brands and also technical
creativity or innovation in terms of the development and production of
alternative energy source such as bio-fuels, wind and solar energy.
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7.1 Global Competitive Environment of BP
In analyzing the competitive environment of the BP, as earlier stated, a
very useful tool to consider is the five forces model of competition which
was developed by Professor Michael Porter of the Harvard Business
School in 1980, this model shows the organization’s competitiveness in
the industry and also how attractive the industry in question is. The five
forces identified by porter include:
Threat of entrants – from organizations currently outside the ‘industry’
Power of suppliers i.e. providers of inputs or materials for production
Power of buyers i.e. recipients of products/services
Threat of substitutes i.e. things customers might buy instead
Competitors/rivalry – competition within the ‘industry’
THREAT OF NEW ENTRANCE: The threat of entrance into the oil and
gas industry is Low due to the fact that there is high barrier of entrance
into the industry. Investment requirements; Some of the companies that
constitutes the oil and gas industry like BP uses heavy and very
expensive equipments at well sites For example, pumping trucks and
other huge equipments, huge capital investment expenses is involved,
such as High infrastructure cost i.e. pipeline, road access in fields, land
acquisition and wells for drilling in which Bp alone has 274 worldwide
(company monitor) the cost of Bp’s assets is $236.0 billion ( balance
sheet of Bp plc from www.wolframalpha.com). Economics of scale of the
industry is also a factor to be considered and also the availability of
human resources in terms of scarcity of subsurface reservoir engineer
and geologist all this contribute to the high barrier of entrance into the
industry.
POWER OF THE SUPPLIER: The bargaining power of suppliers is
Medium and this is because there is the suppliers according to oil and
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gas statistics (www.oilandgassuppliers.com) show that there are quite
a number of suppliers and also the buyers as well such as Bp and some
other companies that constitute the industry are quite a number as well
Although in the case of Bp it is vertical integrated in operation just like
some of the other major players in the industry and this means that they
can afford to provide some of their supplies due to their operation and at
the same time the industry is mainly the key customers to most of the
suppliers Considering all this, the power of the suppliers is Medium.
POWER OF BUYERS: The balance of power shifts toward buyers. Oil is a
commodity and one company's oil is not that much different from another
company’s and this leads buyers to go in favor of lower prices and or
better contract terms. The power of the buyer will be regarded has being
Medium because buyers are many and can switch from the consumption
of Bp products to another oil and gas company’s product and at the same
time an individual buyer’s decision does not necessarily have an impact
on the company and the industry is the key supplying group to the many
buyers.
THREAT OF SUBSTITUTES: Threat of substitutes is Low and
the Substitutes for the oil and gas industry includes alternative fuels such
as coal, gas, solar power, wind power, hydroelectricity and nuclear
energy which is still in the developing phase as in the case of Bp
(Bp.com) and also involves high cost of production. Oil is of great
importance; it is not only used in fuelling cars alone, it is also used to
produce plastics and other materials, majority of the means of
transportation still relies heavily on oil and Oil is needed in order to
generate electricity and the usage of the alternative sources of energy is
not that much as regards the use of oil which implies that oil and gas
would be depended on rather than the alternative due to its level of
development and high cost of production.
COMPETITIVE RIVALRY: The level of competitive rivalry is high; the
industry is characterized by big companies which produce low
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differentiated products and there is low threat of substitute and also
low threat of new entrance into the oil and gas industry.
Another tool that can also be used in the analysis of the competitive
environment of the BP is the strategy group framework by Porter,
According to porter, a strategic group is defined as a set of companies
within an industry pursuing strategies that are similar to each other and
different from firms outside the group on one or more key dimensions of
their strategy.
In terms of the oil and gas industry which BP belongs to, the level of
competition is very high because major players in the industry such as
Royal Dutch shell, Bp, Exxon Mobil, Total, chevron, and Conoco Phillips
all adopt similar strategy and competing on similar bases which is
adaptation of a vertical integration to an extent (integrated oil and gas
companies wolframalpha.com) and they also produces similar range of
products to an extent which brings about differentiation. Royal Dutch
shell, Bp, Exxon Mobil, Total, chevron, and Conoco Phillips all have a
wider geographical coverage. Although there are other companies too in
this industry as well adopting separate strategy such specialization in
drilling oil but there is high mobility barrier in the strategic groups such
as movement of being national boundaries to a multinational boundaries
and also trying to get a wider geographical coverage and this can be a
barrier for this other strategic groups to move from one strategic group
to another.
Using both frameworks, porter’s five forces and porter’s strategic
groups, we can observe that the industry’s major players are the giant
companies in the industry, and the level of rivalry is high and the
industry is somewhat attractive to an extent although the powers of both
the suppliers and buyers is medium but the threat of new entrance and
substitute is low which means that profitability is not reduced by
substitute and the industry is attractive.
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7.2 BP’s Global Operating Management System
7.3 BP’s Strategic Priorities
Our aim is to be an oil and gas company that grows over the long term.
We will seek to continually enhance safety and risk management, earn
and keep people’s trust, and create value for shareholders. We will
continue to simplify our organization and fine tune the portfolio. We will
focus on efficient execution in our operations and our use of capital. We
will build capability through the pursuit of greater standardization and
increased functional expertise.
7.4 BP’s Financial Framework
We expect our organic capital expenditure to be in the range of $24-27
billion per year through to the end of the decade, with investment
prioritized towards the Upstream segment. All investments will continue
to be subject to a rigorous capital allocation review process.
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We expect to make around $2-3 billion of divestments per year in order
to constantly optimize our portfolio. We will target gearing in the 10-20%
range while uncertainties remain. Our intention is to increase
shareholder distributions in line with BP’s improving circumstances.
7.5 BP’s 10-Point Plan
In 2011 BP put forward a 10-point plan that outlined what could be
expected from BP over the next three years. During 2012 we worked
towards the milestones we had set out for 2014. We refined our plans
and communicated further information on our longer-term strategic
objectives beyond 2014.
Through this work and the actions taken to strengthen the group, BP
enters 2013 a more focused oil and gas company with promising
opportunities and a clear plan for the future. BP’s strengthened position;
distinctive capabilities, strong financial framework and vision for the
future provide the foundation for our long-term strategy. This strategy is
intended to ensure BP is well positioned for the world we see ahead.
What you can expect:
1. A relentless focus on safety and managing risk through the
systematic application of global standards.
2. We will play to our strengths in exploration, deep water, giant
fields and gas value chains.
3. Stronger and more focused with an asset base that is high graded
and higher performing.
4. Simpler and more standardized with fewer assets and operations in
fewer countries; more streamlined internal reward and
performance management processes.
5. Improved transparency through reporting TNK-BP as a separate
segment and breaking out the numbers for the three downstream
businesses.
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What you can measure
6. Active portfolio management to continue by completing $38 billion
of disposals over the four years to the end of 2013, in order to focus
on our strengths.
7. We expect to bring new upstream projects on-stream with unit
operating cash margins around double the 2011 average by 2014.
8. We are aiming to generate an increase of around 50% in net cash
provided by operating activities by 2014 compared with 2011.
9. We intend to use half our incremental operating cash for
reinvestment, half for other purposes.
10. Strong balance sheet with intention to target our level of
gearing in the lower half of the 10-20% range over time.
Longer-term Objectives
Maintain momentum on safety and risk reduction.
Develop and apply new technologies that access new hydrocarbons
or extract and process them more efficiently
Upstream
Generate strong returns within a disciplined financial framework.
Deliver growth through increased reinvestment in higher return
opportunities.
Maintain our strong incumbent positions and a diversified portfolio
of deep water, giant fields and gas value chains.
Build material new positions for the long term
Downstream
Grow free cash flow
Reduce our exposure to refining when not part of an integrated
value chain.
Re-orientate the geographic mix of our downstream footprint to
growth markets.
28
29
8.0 Entry Strategy and Strategic Alliance
Among from several entry modes, BP chooses licensing to expand its foreign
operation. Their strategies for licensing are:
Proprietary technology: BP is the first company to identify the need to invest into
development of new ways to produce energy; it has invested 8 billion dollars to
develop and posses the new technologies in production.
Access to raw materials and other inputs: Though the tendency of this
particular barrier might not seem appropriate to BP’s production 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 to technological advancement even having the ability 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
Strategic Alliance:
In a move characterized as the "largest ever industrial merger," BP Co.
plc and Amoco Corp. have agreed to unite their businesses on a global
and comprehensive basis.
The combined firm, to be based in London, will be the U.K.'s biggest
company. BP will hold a 60% equity interest, and Amoco 40%.
Called BP Amoco plc, the firm will be "one of the most comprehensive
and competitive energy and petrochemical enterprises in the world,"
according to Amoco. The merger shoots BP and Amoco into the ranks of
30
the top three energy majors, along with Royal Dutch/Shell and Exxon
Corp.
9.0 Value Chain Analysis
Value Chain Analysis explains the activities that goes on in business
organization and relates them into an analysis of the competitive
strength of the business it considers. According to Michael Porter
business activities could be grouped into Primary Activities which are
activities that are directly concerned with creating and delivering
products and also Support Activities which are activities not directly
involved in production, but they are activities that increase effectiveness
or efficiency. It is rare for a business to undertake all primary and
support activities.
Value Chain Analysis is a way of identifying which activities are best
undertaken by a business and which are best provided by others. Linking
Value Chain Analysis to Competitive Advantage it points out what
activities of the business directly linked to achieving competitive
advantage amongst various competitors.
31
Fig: Petroleum Value chain Model
9.1 Primary Activities
Inbound Logistics includes warehousing, materials handling,
inventory control, etc.
32
Operations are the activities that transform inputs into finished
products (e.g. machining, testing, packaging, equipment
maintenance, etc.).
Outbound Logistics includes the activities that store and distribute
products to buyers (e.g. warehousing, delivery vehicle operations,
order processing, etc.).
Marketing and Sales are the activities that provide the means for
the buyer to purchase (e.g. advertising, sales force operations,
selection and management of distribution channels, etc.).
Service includes activities which enhance or maintain the value
such as installation, repair, parts supply, etc.).
BP’s primary activities include research and development in terms of
technological innovations, production creation of fuels and other
products, marketing and sales in terms of distribution via service stations
and lastly services to the customers and the supportive activities include
the company infrastructure like buildings and equipments, information
system, human resources (skill employers) and finance in terms of cash.
9.2 Support Activities
Procurement specifically refers to the function of purchasing not to the
purchased inputs themselves. While raw materials procurement is
usually concentrated in a purchasing department, other purchasing is
often dispersed throughout a firm (temporary office staff, hotel and travel
expenses, office equipment and even strategic consulting).
Technology Development as Porter defines it is wider than R&D. It
includes engineering and process development and, while usually
associated with an engineering or development function, is also
dispersed (office automation, telecommunications, etc.).
33
Human Resource Management includes the recruitment, hiring,
training, development and compensation of all personnel. Partly
centralized but increasingly dispersed Porter points out that the skills
and motivation of employees and the costs involved may be critical to
competitive advantage.
Firm Infrastructure broadly encompasses general management activities,
as well as finance, accounting, legal, corporate affairs and quality
management. Often viewed as an overhead, these can be a considerable
source of advantage (e.g. skillful negotiations with regulatory bodies).
An organization can outperform its various competitors
through differentiating itself by trying to produce products with higher
quality and will also have to perform its value chain activities better than
the opposition. BP has the potential of adding value via marketing and
sale of its products which is the way the company handles it marketing
and sales of products to the diverse consumers or market through the
company’s various brands where it markets diversified alternative energy
sources as well as oil and gas.
The good marketing and sales or distribution flow of BP, outstanding
performances in relations to its competitors, various brands and also
diversification into alternative energy sources are all competence of the
company which the company has used through it marketing and sales
activities in adding value.
34
Fig: Value Chain of BP
10.0 BP’s Global Marketing
Multinational corporations operating in complex and diverse political,
economic, social and cultural environments have to improve, adjust and
develop their marketing strategies on a regular basis. Changing
environmental factors create new conditions for their operating, which
often require considerable and serious changes in strategic decision-
making and positioning of companies. Inflexible and rigid firms will cease
to be competitive in the market every time changes occur. The aim of the
present report is to identify the past and present changes in marketing
strategy of BP, which have occurred under the pressure of environmental
factors.
10.1 BP’s 4P
BP has some unique characteristics that influence how we follow the 4Ps
of marketing – product, price, place and promotion.
35
1. Product: Fuel is a commodity product offered by all the oil
companies in all over the world. It is difficult to offer customers a
point of difference with fuels. However, BP does so by selling petrol
and diesel that is better for the environment. BP is the only oil
company in world to sell superior fuels that are kinder to the
environment. BP’s Products Line is:
Fuels & stations
Motor Oils& Lubricants
Convenience Shop
2. Price: With common products in the oil industry, prices between
competitors are easily matched, which means it’s difficult to
differentiate our product based on price. If BP’s competitors undercut
us on price, BP see significant losses in volumes sold. A one cent per
liter price reduction requires retailers to achieve a 25% increase in
volume to break even on site. Pricing Strategy is:
Competition Based
Profit Oriented for Extremely Inelastic demand
Invigorate
3. Place: BP’s network of service stations is a vital strength in marketing
strategy – we have some of the best locations for the service they
provide. And research shows customers mainly choose fuel retailers
based on their location. They have a significant investment in ensuring
right number and quality of locations for our customers. Strategy is:
Direct and Indirect Marketing
Worldwide Retail Network
Distribution Channel
4. Promotion: Research shows that customers respond well to our
promotion campaigns, such as the AA Rewards programme. Our
loyalty programmes are a valuable point of differentiation; we use
36
them to drive sales volumes and counter our competitors’ activity.
BP’s main promotional focus is on:
Commercials
Out of Home advertizing
Pumps reward program
CSR Activity
10.2 Market Segments
This consists of a group of customers who share a common need or want.
The task was to identity the different segments in the target market in
order to target them. With segment marketing, the company offers a
better design, price, delivers the product better and is able to fine-tune
the marketing program. The segment marketing was divided into
geographic segmentation and demographic segmentation.
Geographic segmentation
Population Density
Territory
Weather
Demographics segmentation
Income
Occupation
Age
Behavioral and Psychographic Segmentation
Green Revolution and environment consciousness
Luxury of Travel
10.3 Market Promotion
BP’s strategy was a promotional campaign to transform BP’s retail brand
image at its locations in the United States. Buying gasoline is a low
37
involvement purchase and consumers have low expectations regarding
their purchase experiences. Armed with that consumer insight, BP
created and executed the $45 million Helios Power advertising and
brand-building campaign, which is an extension of BP’s “Beyond
Petroleum” corporate campaign that began in the early 2000s. The
Helios Power campaign consisted of the following marketing tactics:
“A little better” tagline. BP customers can expect to receive “a little
better” experience at its service stations and other retail outlets
compared to those of its competitors. Hand elaborates, “In this
market, a little better means a lot. People see refueling as a
necessary and unpleasant chore. However, BP can be cleaner and
friendlier, and that’s why people will choose us rather than our
competitors.” And this choice will be made on an emotional basis
because customers “like what we stand for.”
Animated TV ads. These feature a family of characters (the
Lighthouse family, the Babies, and the Beeps) and a catchy tune
designed to reinforce the emotional appeal of the BP brand. The TV
ads aired during some of the top U.S. TV shows (American Idol,
Ugly Betty) and also had exposure on YouTube. The purposes of the
ads were to generate awareness of and an emotional connection to
the BP brand and its offerings.
In-store give-aways. At the launch in April 2007, environmentally
friendly paper bags, T-shirts with a fun new look from the
campaign, kid’s activity books and trading cards featuring the
campaign characters, and sunflower seed packets were handed out
to customers throughout the entire network of BP stations.
Unique Web site. The www.alittlebettergasstation.com Web site
features the “Gas Mania” interactive game, selected animations,
ringtones, screensavers, a sweepstakes, and the TV ads.
38
Street teams. BP and Ford teamed up to promote the use of BP’s
Ultimate gasoline in Ford’s new Edge automobile. Videos featuring
groups of college-aged students were created to showcase the BP
brand in Florida and the ARCO brand in California.
10.4 Branding
Branding is all about creating alignment of company’s business processes
with its corporate culture. BP (BP) provides a case in point of a brand
that got way out front of its business process and culture to produce
tremendous exposure to risk. Back in 2000, BP announced a major
change in posture from "BP" to "Beyond Petroleum" and spent hundreds
of millions of dollars promoting their new position. Only BP is the only
global energy company moving to new sources of energy that includes
solar power.
BP Three Branding Themes:
BP Progressive and Profitable – (appeals to Investors Archetype)
Moving to new and profitable sources of energy for the future.
BP Business Alternative Energy Sources – (appeals to Business
Archetype) Developing more efficient and alternative forms of
energy to move you ahead.
BP Beyond Petroleum – (appeals to Public Perception Archetype)
Investing for a Greener future
BP Brand attributes supporting being only:
BP Green – BP is the only energy company investing in and
pursuing alternative energy sources; namely solar power
BP Progressive – BP is striving to find more efficient ways to
produce energy with proven leadership in solar power
39
BP Quality – BP focuses on safety and operational excellence
BP’s Brand Archetypes:
BP Investors Archetype: Investors are looking for profitable
companies with less investment risk. BP is the only company vs. its
direct competition coming up with unique and profitable alternative
energy sources.
BP Business Archetype: BP helps businesses be more energy
efficient and green through partnering. BP provides multiple
energy alternatives.
BP Public Perception Archetype: The lesser evil of oil companies,
BP is the greenest energy company with demonstrated leadership
in solar power.
10.5 BCG Matrix
Fuels
LOW
HIGH
European Downstream
LOW Market Share HIGH
Emerging MarketsExploration &
Production
40
Cash Cows:
BP 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)
Question Marks:
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 c,n 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 dog’s 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 an unstable market, despite the facing allegations from
recent gulf of Mexico disaster.
41
10.6 Product Life Cycle
42
11.0 BP’s Global Human Resources Management
BP is progressive, responsible, innovative and performance driven.” They
have further defined this statement as:
Progressive – They are restless in the research and development and
improvement in exploration and refinery of oil, gas and fuels. They
believe they have the principle of mutual advantage and can build
productive relationships between themselves, their clients and partners.
Responsible – It is committed to the safety and development of its
people and the communities in the societies in which they operate. They
aim for no accidents, no harm to people and protecting the natural
environment.
Innovate – we push boundaries today and create tomorrow’s
breakthroughs through our people and technology
Performance Driven – BP is committed to deliver on their promises
through continuous improvement and safe, reliable operations, by
learning from their mistakes.
11.1 Recruitment Policy
An organization’s overall strategies and HR policies need to be closely
integrated with chosen recruitment strategies in order to achieve
desirable outcomes. Organizations seeking culture change may favor
external recruitment options while those which desire commitment and
high quality may favor largely internal recruitment or an appropriate
blend of both options. The choices may change from time to time,
reflecting the needs of organizations at different stages. Strategies BP
use are:
Internal Talent Pool
43
BP largely favors internal recruitment of senior managers by focusing
on the internal talent pool which exists within. This is evident with senior
management appointments from within the company over the years. The
strength and experience of its management team has allowed promotion
of internal candidates to important more senior roles and created
continuing growth opportunities within the company”.
E-recruitment
BP is making increased use of e-recruitment techniques through internet
and intranet. Professional networking sites (PNS) such as LinkedIn
where senior management jobs are posted, has been frequently used as
well as BP’s corporate career website. Also increasingly being used as
part of the recruitment process are partner websites which specify the
required competencies. Competency-based recruitment methods
provides a unique opportunity to create and shape a recruitment system
based on competencies that have been identified within the organization
as being critical for success in the targeted job or role.
External recruitment services
When recruiting externally, BP makes use of external recruitment
partners to assist with recruitment of senior management staff. These
partners offer BP a range of services - attracting candidates, managing
candidate responses, screening and short listing, or running assessment
centers on the BP’s behalf. BP has systems in place to ensure its
recruitment partners develop a good understanding of BP and its
requirements. This is essential because employers and agencies that are
committed to collaborative partnerships are more likely to achieve
positive results.
Employer Branding
Employer brand is the image of your organization as an employer and
place to work as perceived internally and externally while reinforcing
why talented people would want to join and stay with an organization.
44
The employer brand is part of building an identity and employees are
defined nowadays by the company they work for.
BP has consistently focused on projecting its brand as an environmentally
friendly company looking to the future and alternative fuel sources.
When BP in 2001 renamed itself BP, they also adopted the tagline
“Beyond Petroleum to signal a focus outside the oil business. This is a
visionary and inspiring way of moving the brand in a positive direction,
creating purpose and adding value. This attracts top talent in many
different fields, sharing that vision and outlook.
11.2 Workforce Diversity
Despite having operations around the globe, spanning diverse culture,
the nationality of BP plc has been reflected in the make-up of the
workforce in general and senior management in particular. BP faces the
challenge of operating in a globalised world where this model is no
longer sustainable. HR managers have to tackle national and cultural
diversity issues, while still promoting the overall corporate strategy.
In response, BP has launched a “Global Path to Diversity and Inclusion”
strategy. Among its three main directives are: as a global company, its
leaders should reflect the local communities in which it operates; while
diversity and inclusion must be viewed as a business imperative. This is
both a welcome and challenging initiative in order to meet its changing
business needs.
As a global company of around 80,000 people, BP has a naturally diverse
workforce in terms of gender, race, nationality and culture. BP actively
embeds diversity and inclusion across the organization through our
global diversity council, the establishment of diversity plans tailored to
each Strategic Performance Unit (SPU) and support for affinity groups
45
for networking and sharing experiences. Mandatory training in
diversity and inclusion for 6,000 senior leaders also began in 2010.
HR managers are increasingly faced with the management of employees
in a global businesses operating across national boundaries. Therefore,
comparing HR activities and policies across different societies becomes a
major issue. At the same time being a strategic partner by promoting the
overall corporate strategy. Coordination of HR activities on a global
scale- e.g. comparative pay rates, performance assessments,
management employment policies, employee relocation and expatriation
etc have to be considered
11.3 BP’s Health & safety Policy
Everybody who works for BP Lubricants Americas is responsible for
getting Health, Safety and Environment (HSE) right. Good HSE
performance and the health, safety and security of everyone who works
for BP are critical to the success of our business. BP’s goals are simply
stated – no accidents, no harm to people, and no damage to the
environment.
We will continue to drive down the environmental and health impact of
our operations by pollution prevention, reducing waste, emissions and
discharges, and using energy efficiently. BP will produce quality products
that can be used safely by our customers.
BP will:
consult, listen and respond openly to our customers, employees,
neighbors, public interest groups and those who work with us
work with others – our partners, suppliers, competitors and
regulators – to raise the standards of our industry
46
as a minimum, comply with all applicable laws and regulations
and any other requirements to which the company subscribes
openly report our performance, good and bad
recognize those who contribute to improved HSE performance
BP is committed to continual improvement of our HSE performance and
management systems. BP’s business plans include measurable HSE
targets. BP is committed to meeting them. There are thirteen elements to
the BP Health, Safety and Environmental Management Systems
Framework.
1. Leadership and accountability
2. Risk assessment and management
3. People, training and behaviors
4. Working with contractors and others
5. Facilities, design and construction
6. Operations and maintenance
7. Management of change
8. Information and documentation
9. Customers and products
10. Community and stakeholder
awareness
11. Crisis and emergency
management
12. Incidents, analysis and
prevention
13. Assessment, assurance and
improvement
11.4 Career Development Interventions
It is generally agreed that increasing emphasis on human resources
development provides for increases in productivity, enhances
competitiveness and supports organizational growth. BP has a set of
systematic and planned activities designed to provide its senior
managers with the necessary skills to meet current and future job
demands.
BP has a global approach to developing its leaders that is focused on the
main behaviors that are critical to achieving high performance. The
company adheres to a single, common leadership framework, with a clear
47
and focused set of expectations. This model is used throughout BP to
help select, assess, develop and reward leaders.
Continuous Professional Development
BP runs a series of development programmes called Managing Essentials
to help managers apply the leadership framework in their own teams; in
both the US and the UK, BP continues to work closely with around 20
core pursuing continuous improvement in performance. CPD in BP
comprise a balanced mix of activities which include work based activities,
courses, seminars, and conferences, as well as self-directed informal
learning.
BP runs three specialist development programmes designed to build
excellence in the 3 important functional areas of operations, finance and
human resources. The Operations Academy, set up in partnership with
MIT, provides BP’s senior managers with a systematic and rigorous
approach to managing safe and efficient operations.
Senior Leadership/Management Development Programmes
The Executive Operations Programme enables senior leaders to support
the changes made by operations-level management, reflect on their own
contributions to the process and commit to systematic and verifiable
change across the organization. To date, the group chief executive, his
executive team and approximately 90 group leaders, including the
strategic performance unit leaders, have participated in this programme.
Coaching
BP also utilizes coaching for senior leadership development. For
instance, BP Angola has worked closely with i-coach academy to design
and deliver a coaching programme to work alongside a leadership
development initiative aimed to support Angolan Leaders.
48
A large number of coaches are intentionally selected in order to offer a
diversity of style and approach whereby each participant can be matched
with the most appropriate coach. Participants are also afforded the
opportunity available to develop a learning community within their
cohort which would offer peer support and challenge during the
programme and beyond.
Thus far, positive outcomes have been recorded regarding BP’s coaching
program. Most participants acknowledge it provided the necessary
learning interventions which fulfill the needs for effective transition into
more senior leadership positions including stakeholder management,
influencing skills, performance management, and feedback skills.
E-learning
BP has also developed e-learning initiatives as a HRD method for its
senior managers. Since 2006, BP embarked on one of its largest global
safety and operations e-learning training initiatives. An e-learning
solution provider, Kineo was selected in 2007 at the start of the
curriculum development to lead the blended design of the technical
modules. The programme- Operating Essentials, driven by the Health,
Safety and Operations team, is designed to enhance operations and
maintenance Leaders to manage teams and operations effectively, across
BP’s global business.
12.0 BP’s Financial Analysis
12.1 Income Statement and Balance Sheet
Income Statement: 31/12/2012 31/12/2011 31/12/2010 31/12/2009 31/12/2008
49
(Millions) (Millions) (Millions) (Millions) (Millions) Revenue: 375,580.00 375,517.00 297,107.00 239,272.00 361,143.00 Operating Profit / (Loss): 13,724.00 33,001.00 (9,140.00) 21,733.00 30,682.00 Net Interest: 465.00 (650.00) (489.00) (318.00) (220.00) Profit Before Tax: 18,809.00 38,834.00 (4,825.00) 25,124.00 34,283.00 Profit after tax from continuing operations:
11,816.00 26,097.00 (3,324.00) 16,759.00 21,666.00
Discontinued Operations: Profit after tax from discontinuing operations:
n/a n/a n/a n/a n/a
Profit for the period: 11,816.00 26,097.00 (3,324.00) 16,759.00 21,666.00 Attributable to: Equity holders of parent company:
11,582.00 25,700.00 (3,719.00) 16,578.00 21,157.00
Minority Interests / Other Equity:
234.00 397.00 395.00 183.00 509.00
Total Dividend Paid: 34.00 29.00 21.00 56.00 55.05 Retained Profit / (Loss) for the Financial Year:
n/a n/a n/a n/a n/a
Earnings per Share: Basic: $0.61 $1.36 $-0.20 $0.88 $1.13 Diluted: $0.60 $1.34 $-0.20 $0.88 $1.12 Adjusted: $0.61 $1.36 $-0.20 $0.88 $1.13 Dividend per Share: $0.34 $0.29 $0.21 $0.56 $0.55
Balance Sheet: 31/12/2012 31/12/2011 31/12/2010 31/12/2009 31/12/2008 (Millions) (Millions) (Millions) (Millions) (Millions) Assets: Non-Current Assets: Property, Plant & Equipment: 120,448.00 119,214.00 110,163.00 108,275.00 103,200.00
50
Intangible Assets: 35,902.00 33,202.00 22,896.00 20,168.00 20,138.00 Investment Properties: n/a n/a n/a n/a n/a Investments: 21,424.00 31,442.00 29,453.00 29,826.00 28,681.00 Other Financial Assets: 4,989.00 5,922.00 5,104.00 5,004.00 6,049.00 Other Non-Current Assets: 6,449.00 5,704.00 10,434.00 5,042.00 3,786.00 189,212.00 195,484.00 178,050.00 168,315.00 161,854.00 Current Assets: Inventories: 27,867.00 25,661.00 26,218.00 22,605.00 16,821.00 Trade and Other Receivables: 39,178.00 45,047.00 38,816.00 31,493.00 32,688.00 Cash at Bank & In Hand: 19,548.00 14,067.00 18,556.00 8,339.00 8,197.00 Current Asset Investments: 319.00 288.00 1,532.00 n/a n/a Other Current Assets: 24,069.00 12,521.00 9,090.00 5,216.00 8,678.00 110,981.00 97,584.00 94,212.00 67,653.00 66,384.00 Other Assets: n/a n/a n/a n/a n/a Total Assets: 300,193.00 293,068.00 272,262.00 235,968.00 228,238.00 Liabilities: Current Liabilities: Borrowings: 10,030.00 9,044.00 14,626.00 9,109.00 15,740.00 Other Current Liabilities: 67,556.00 75,274.00 69,253.00 50,211.00 54,053.00 77,586.00 84,318.00 83,879.00 59,320.00 69,793.00 Net Current Assets: n/a n/a n/a n/a n/a Non-Current Liabilities: Borrowings: 38,767.00 35,169.00 30,710.00 25,518.00 17,464.00 Provisions: 45,398.00 41,482.00 33,326.00 31,632.00 28,306.00 Other Non-Current Liabilities: 18,822.00 19,617.00 28,456.00 17,385.00 20,566.00 102,987.00 96,268.00 92,492.00 74,535.00 66,336.00 Other Liabilities: n/a n/a n/a n/a n/a Total Liabilities: 180,573.00 180,586.00 176,371.00 133,855.00 136,129.00 Net Assets: 119,620.00 112,482.00 95,891.00 102,113.00 92,109.00 Capital & reserves: Share Capital: 5,261.00 5,224.00 5,183.00 5,179.00 5,176.00 Share Premium Account: 9,974.00 9,952.00 9,987.00 9,847.00 9,763.00 Other Reserves: 15,694.00 13,226.00 14,059.00 13,932.00 9,284.00 Retained Earnings: 87,485.00 83,063.00 65,758.00 72,655.00 67,080.00 Shareholders’ Funds: 118,414.00 111,465.00 94,987.00 101,613.00 91,303.00 Minority Interests / Other Equity:
1,206.00 1,017.00 904.00 500.00 806.00
Total Equity: 119,620.00 112,482.00 95,891.00 102,113.00 92,109.00
12.2 Ratio Analysis
51
Dec 31, 2012
Dec 31, 2011
Dec 31, 2010
Dec 31, 2009
Dec 31, 2008
Turnover Ratios
Inventory turnover 13.48 14.63 11.33 10.58 21.47
Receivables turnover 14.46 13.45 12.25 10.59 15.79
Payables turnover 12.64 12.59 10.80 10.45 17.94
Working capital turnover 11.25 28.31 22.90 28.71 –
Average No. of Days
Average inventory processing period
27 25 32 34 17
Add: Average receivable collection period
25 27 30 34 23
Operating cycle 52 52 62 69 40
Less: Average payables payment period
29 29 34 35 20
Cash conversion cycle 23 23 28 34 20
*Source: Based on data from BP Annual Reports
Ratio Description The company
Inventory turnover An activity ratio calculated as revenue divided by inventory.
BP PLC's inventory turnover improved from 2010 to 2011 but then slightly deteriorated from 2011 to 2012.
Receivables turnover An activity ratio equal to revenue divided by receivables.
BP PLC's receivables turnover improved from 2010 to 2011 and from 2011 to 2012.
Payables turnover An activity ratio calculated as revenue divided by payables.
BP PLC's payables turnover increased from 2010 to 2011 and from 2011 to 2012.
Working capital turnover An activity ratio calculated as revenue divided by working capital.
BP PLC's working capital turnover improved from 2010 to 2011 but then deteriorated significantly from 2011 to 2012.
Average inventory processing period
An activity ratio equal to the number of days in the period divided by inventory turnover
BP PLC's average inventory processing period improved from 2010 to 2011 but then
52
over the period. slightly deteriorated from 2011 to 2012.
Average receivable collection period
An activity ratio equal to the number of days in the period divided by receivables turnover.
BP PLC's average receivable collection period improved from 2010 to 2011 and from 2011 to 2012.
Operating cycle Equal to average inventory processing period plus average receivables collection period.
BP PLC's operating cycle improved from 2010 to 2011 but then slightly deteriorated from 2011 to 2012.
Average payables payment period
An estimate of the average number of days it takes a company to pay its suppliers; equal to the number of days in the period divided by payables turnover ratio for the period.
BP PLC's average payables payment period declined from 2010 to 2011 and from 2011 to 2012.
Cash conversion cycle A financial metric that measures the length of time required for a company to convert cash invested in its operations to cash received as a result of its operations; equal to average inventory processing period plus average receivables collection period minus average payables payment period.
BP PLC's cash conversion cycle improved from 2010 to 2011 but then slightly deteriorated from 2011 to 2012.
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13.0 Recommendation
BP Company’s project, is a significant step toward the growth of the
company, but the Chief Executive officer should ensure that the
established Centralized Developments organization enhance the integrity
in the project implementation process. The strategy should also establish
a body of expertise in greenhouse gases in order to reduce emissions that
may hinder the attainment of the project goal. The other
recommendation is that BP should invest much on renewable energy
sources like wind power, solar panel and bio-fuels because they present
little or fewer risks on people health and environment. In the transport
area, the CEO should ensure more investments in the pipeline because
this would ensure safety on the environment. Road transport can cause
danger to the people for instance if a transits explode. Another
recommendation is that, though BP Company has assigned a treaty with
the World Bank to allow it access funds through loans, the Company
should not rely more on the loans because, its payment may contribute to
the downfall of the company if misappropriated. There is also a need for
the BP Company to consider reorganize its 4 P’s of marketing viz.
product, price, promotion and placement so as to secure a competitive
advantage over the other six competitors in the industry. With this
regard, the company may employ competitive strategies like
benchmarking against the competitors.
It is recommended that BP should use the diversification strategy as a
future strategic option in order to continue responding to the
environmental challenges. The company should diversify its product
range associated with the production of solar and wind energy for
individual and corporate customers. It is expected that these products
will be popular in the emerging markets such as India and China where
incomes are not high, but energy consumption patterns are growing very
fast. Furthermore, it is recommended that the company should increase
expenditures on infrastructure maintenance and employee safety.
Together with alternative energy production, this will positively influence
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corporate reputation after the recent safety scandals and 'green
washing'. Finally, it is recommended that BP should continue
popularizing efficient use of energy by individual consumers and
industrial enterprises.
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14.0 Conclusion
BP is back in business in the deep waters of the Gulf of Mexico, having
recently received its first permit to drill since the explosion on their
Deepwater Horizon rig last year that killed 11 people and ruptured the
Macondo well hemorrhaging millions of barrels of oil into the Gulf — the
largest offshore oil spill in U.S. history. That explosion destroyed ten
years of green marketing for BP — which adopted “Beyond Petroleum”
tagline and cheery green and yellow sunburst logo in 2000 — as the
ensuing environmental disaster plunged the brand into a nightmare as
deep as the waters it drills.
The “meet our people” and storytelling strategy is “one small step” in
BP’s post-Gulf branding, focused on its human resources rather than
product or promises.
It may be concluded that the main strategic changes undertaken by BP in
response to the turbulent and dynamic environment are contracts with
the governments to avoid political risks, moving to more stable countries
such as India from the northern Africa, acquisition of the solar panel
manufacturers, investment in wind and solar projects, moving
manufacturing facilities to China, investment in energy efficiency,
reduction of carbon content in fuels, participation in 'green' activities an
'green washing'. The company had to transform its generic strategy from
cost leadership to differentiation since cost reducing practices had led to
oil spills and leaks. It may be summarized that the identified changes
were necessary. Nevertheless, the company could have been more honest
and open in its CSR projects.
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Aulds, T. (2010) 'BP: 500,000 pounds of emissions released', The Daily
News, [online] Available at: http://galvestondailynews.com/story/157738/.
Bamberg, J. (2009) The History of the British Petroleum Company,
Cambridge: Cambridge University Press.
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Available at:
http://www.osha.gov/dep/bp/bphistory.html
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