British Petroleum and its Corporate Strategy
The organisation environment is always changing and therefore it is essential that a structured, detailed and continuous analysis of the principal dimensions of the environment is made. In order to profitably satisfy customer needs, an organisation must understand its external and internal situation including the customer, the market and its own capabilities. Furthermore, it needs to understand and adapt to the dynamic and uncontrollable factors of the environment in which it operates. Corporate strategy is a tool whereby an organisation is able to achieve and sustain success.
This report will examine the corporate strategies that British Petroleum (BP) adopts with specific focus on the Deep-water Horizon offshore oil spill in the Gulf of Mexico in April 2010. BP will be assessing using varied strategic theories and strategic choices will be suggested.
It is commissioned for Carl-Henric Svanberg, BP's chairman.
Brief Company Profile
BP is the third largest energy producers in the world. The business is integrated in finding, extracting and supplying oil, gas and petroleum. BP was privatised in 1980's and have merged with Amoco in 1998 (BP.com)
Its operating revenue as of 31st December is $297,107 million. BP's products includes petrol, diesel, maritime and aviation, fuel, lubricants, bottled fa and gas for industrial consumers which are established with strong brand image including castrol, BP Connect, and ARCO. BP innovations extended to investing in alternative energy supply from low-carbon to renewable sources (BP.com) Likewise, it is the leaders of photovoltaic cells which is comparably economical than other sources of energy.
In April 2010, the Deepwater Horison exploration rig exploded due to unstable cement seal at the bottom of the well. The disaster claimed 11 lives, devastated the Gulf of Mexico shorelines, harm ecological marine species and health impact caused by strong chemical leaked offshore.
Various strategic methods will be used to assess BP including SWOT analysis, PESTLE analysis and Porter's 5 forces analysis.
Porters 5 forces
Michael Porter's 5 forces will help BP to analyse its industrial structure. Degree of Competitive Pressure
BP's current third largest energy supplier in the world. Its main rival is the Royal Dutch Shell, ExxonMobil and Chevron. Threat of Substitute Products
Alternative energy to fossil fuel includes solar energy, tidal power, wind power, natural gas, ethanol, coal mine methane, geothermal energy, nuclear energy and more recent research of shale natural gas as an alternative (Youngquist, 2000). However, the lack information and consumer choices makes fossil fuel a number one source of energy. BP have strategically responded by investing on bio-fuels, donating solar pannels to Stanford University and supporting wind farms such as Goshen wind farm in Idaho, Sherbino and Cedar Creek wind farms (BP.com). It is important that BP continue to invest on alternative source of energy to maintain industrial and household brand. Bargaining Powers of Suppliers
Bargaining power of suppliers is relatively high due to the small number of alternative energy suppliers. Bargaining Powers of Customers
The bargaining power of customers are relatively low. Despite the fact that there are various oil company to choose from, when oil prices goes up, almost all petrol stations take advantage of the change and increase their prices. Whatgas.com analysis shows that ASDA is the cheapest oil prices around UK by showing consistent cheaper price throughout its stores. However, ASDA petrol station is not geographically available for everyone to avail this. Threat to New Entrants
Barriers to new entrants is relatively high due to considerable capital investment and large economies of scale required in order to operate in the oil industry. PESTLE Analysis
PESTLE analysis is...
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