5th February 2010
Business Economics Assignment
Student I.D: 1331260
Table of Contents
10. Appendix 1
11. Appendix 2
12. Appendix 3
13. Harvard Reference
BP is a British global energy company and is the 4th largest company in the world. This report is in relation to BP’s profitability, product development, market power and placement. The report uses PESTLE analysis to investigate these areas providing an insight to the successes and failures of BP during recent years. It covers the failures of Russia which has been a failure in terms of past successes with western governments. The report also covers BP’s market power with the profitability in its products. The report looks at society and our addiction to oil and the technical advances that BP has made. Finally the report covers the Failures of BP on an environmental level which has tarnished BP’s reputation as a MNE.
On 14th April 2009, BP celebrated its 100th anniversary of its company. Throughout these years BP has developed into a multinational oil company and is currently the third largest private sector energy corporations in the world, and one of the six “super majors” (Appendix 1). Political:
BP has looked to grow its oil exploration activities in frontier areas of Russia for its future reserves. In Russia, BP owns 50% of TNK-BP (TNK is AAR, Alfa, Access/Renova owned by three Russian billionaires). TNK-BP’s aim is to become a world class oil and gas company and accounts for a fifth of BP's global reserves, a quarter of BP's production, and nearly a tenth of its global profits. However, whilst BP has enjoyed success in other countries on a political level, a crisis surrounding the decision of the Russian owners of the group in an attempt to change the composition of the board of directors and to review the initial agreement outlining how the firm operates has overshadowed the venture. The crisis has involved the Russian secret police with Russian authorities making life difficult for BP senior staff, for example, investigating them for tax evasion, breaking labour laws and ignoring immigration procedures. It is well known that the Russian owners are especially keen on getting rid of the BP appointed chief executive of BP-TNK, Robert Dudley. The Russian government has stated all along that it had no association in the conflict by claiming that the crisis is a private share holder matter within the company. However, Vladimir Putin has reiterated his warning of the risks of a British company setting up the partnership with a group of Russian billionaires. (http://www.telegraph.co.uk/finance/newsbysector/energy/2790882/Vladimir-Putin-weighs-into-TNK-BP-Russia-row.html accessed on 3/2/10 Further, former KGB thugs and ex Communist Party apparatchiks are occupying most of the top official positions in the country and that Russian oligarchs are still enriching themselves. The Russian government is now using unacceptable methods to take control of TNK-BP and it would seem that the Russian owners are acting with the backing of the state to try and seize control of TNK-BP and then sell it to some state-owned giant like Gazprom or Rosneft. As the crisis continues, this throws a deep shadow over BP’s ability to successfully politically align itself in Russia.
http://web.ebscohost.com/ehost/detail?vid=7&hid=9&sid=31959a78-46f7-46a8-b9fa-4ef4bcee14c2%40sessionmgr14&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d%3d#db=bwh&AN=11348719 Accessed on 06/01/10
BP’s Market power is considerable and an example of this can be demonstrated when in November 2009 oil prices fell to US$ 40 a barrel. Such is the market power of BP in its oligopoly (with other major oil producers such as Exxon and Shell), which allowed for oil tankers to sit...
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