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Introduction
British Petroleum (BP plc) was initially called The British Petroleum Company, and after a merger with Amoco became the BP Amoco plc, and currently, BP plc. As the third largest global energy company, the British global energy company is also categorized as world’s 4th largest company. Being a major oil company, the multinational oil company BP is the largest corporation in UK. In addition to the oil exploration, the company also deals in natural gas and marketing of petroleum products (Buono, 2009).
BP’s global presence was promoted by the merger with Amoco in 1998 making it BPAmoco, which changed to BP in 2000 to date. However, Condon (2002) believes that in the US the grade BP gasoline is available as Amoco Ultimate. Most of the other gasoline centres in the US were faced with a number of challenges caused BP to exit the Southern market. Instead, BP has targeted its oil exploration activities in the Soviet such as the Russian TNK-BP that provides for BP’s 20 percent of its global reserves (Burgess, 2002).
Strategic commercial challenges and possible solutions
As a global producer, BP has to contend with the strategic commercial challenges such as fierce competition for markets and talent; investors’ expectations and market demands for sustained competitive performance; and scrutiny and in some cases public doubt.
Additionally, changes in the global economy present a cadre of new challenges, which include the absence of a framework of global rules; the organization and management of companies; cultural diversity; and the question of corporate responsibility for the externalities linked with business activity (Cox, Clegg and Grazia, 1993).
According to Daft (2009) the global environment is a threat to a company’s survival especially in foreign countries. Therefore, BP just like any other player in the market has to wrestle with its weaknesses and threats while capitalizing on the strengths and opportunities.
As such, firstly, the absence of the framework of global rules becomes a disadvantage to businesses that normally operate under regulation and legal clarity. The absence of this legal umbrella is associated with the fact that the international companies are basically established for a different age (DePalma, 2002).
In business, trade issues are mostly based on agreements with the exception of investment protection, environmental issues and the aspect of intellectual property, which are yet to be incorporated. In this context, the unforeseeable consequences of climatic changes result in lack of agreements on most aspects of trade.
The operation at a level of integration devoid of the law means that a company established in a given country is required to obey the jurisdiction rules while at the same time abiding by the law of every place it is operating in. in the process of staying up to date with the policy requirements, certain companies will be forced to adopt own rules prior to the formulated regulatory standards.
Because there will be need for a global company to keep understanding and interacting with new policies in every country of operation, companies ought to ready themselves by creating mutual advantages and not only pursing their interests. BP should therefore encourage its workforce in the various countries to watch out for likely mutual interests in addition to the primary interests in the country of operation (Doh, 2005).
Secondly, the problem of how companies are organized and managed is pegged on to the fact that competition on the international scale requires a widespread design of operations. BP for instance has the distribution scale with its spread in over 24 time zones and 110 national jurisdictions.
In the case of BP’s distribution scale, Dunning, (1997) asserts that the commonly used command and control model would not work effectively. Instead, efficiency can be achieved by the use of delegation of authority, thus establishing what a given manager is tasked with. There is also the need for the managers at different levels to understand the framework that dictates how their jobs will be conducted (Dunning, 2002).
Consequently, with BP’s more than 100 countries of operation, there will be unforeseen from one place to the other; especially, with the diversity in the cultural differences and cultural orientation. Unfortunately, unpredictable circumstances that call for urgent reaction might also cast more doubt in the quality of judgement of local managers and team leaders.
Away from the mistrust for the judgement of local managers, most situations often suffer the urgency and the limited time to get the concerned manager to respond immediately. In this case, the presence of a localised managerial team at the various establishments will help hasten decision making and resolving of unexpected circumstances (Grabinski, 2007).
Therefore, the command and control model of management will be replaced by a new combination of corporate culture, standards and values that present a universal ground over which people can confidently make decisions and judgements as expected of them. With the understanding of such a management model, the company’s growth and expansion in the global scale is highly assured (Hitt, Ireland, & Hoskisson, 2008).
Thirdly, cultural diversity is proving to be difficult to handle. This is true for companies with international presence and it is about values and norms. The monocultural nature of businesses has also been presented by the nationality of the company reflected in the workforce makeup. Although the monocultural setup would mean close understanding between people tasked with diverse responsibilities and a common sense of values, this has not been sustainable in the globalised world.
Therefore, businesses have had to employ local stuff in senior roles in order for business to thrive in the local market. Additionally, senior positions can be available globally to those who are competent and deserving. Instead, any merit should be considered while appointing holders of the positions irrespective of their background and nationality. For instance the operation across cultural boundaries means that meritocracy is vital as a toll of maintaining motivation (Hitt, Ireland, and Hoskisson, 2007).
In addition, Langit (2007) suggests that there is need to understand adapt to the many strong cultures in the countries of operation, in order for the smooth running of business across cultural boundaries. Considerably, operations in Islamic countries during tensions between Islamic communities and the west, can prove demanding in a similar way as operating in Russia where there are transitions from the rigidly centralised systems.
Thus, people who can fit into diverse cultural communities and bridge the divisions are few and far between. The ability to understand the differences in the cultural orientations and be able to merge them, calls for the search for strong and senior local people, who are ready to learn the complexities of global organizations.
Lastly, the fourth challenge if corporate responsibility for the consequences of business operations. Global companies, often times concentrate on their core business without concern for their impact on the society they operate in. for instance, the resource sector are faced with the consequences of creation of wealth resulting to the disruption of local economies.
On the international realms, company’s activities may affect labour markets and as well as other major currencies that are in use. Eventually, dispatch of products to the final consumer can benefit the user and consequently affect the environment. Such issues are of great value for companies that would like to remain sustainable. In retrospect, the recognition of the impact to the society should always be countered by amassing skills and technology to make the impact positive (Lock, 2008).
Primarily, globalisation is the first gesture toward countering the negative effect to the society companies operate in. the increase in the scale of global companies, empowers otherwise small companies with the power to increase their operations which would otherwise have been impossible individually.
Similarly, the social contract which gives room for companies to expand as much as possible, assigns responsibility to the companies to tackle the worldwide challenges instead of adopting the ‘blame game’. As a result, the companies develop systems and policies that help resolve certain issues that are occurring to partners in the industry long before they fall into similar traps.
Although natural resources is also party to the greater challenge facing global companies, preparation for these shortages has been looked into so as to ensure future sustainability of the company in the global market. Alternatively, use of environmentally-friendly resources has been another development towards countering the negative impact through emissions and effluents. Various countries have also adopted different legal actions and policies towards the parties responsible.
At a global level, social responsibility has also been adopted by international companies through developing the social and economic capacities of the countries of operation. Such concise efforts to ‘give back’ to the community can be disseminated through training, education and fostering for institutions that erect the civil society.
However, the political arena should not be domicile of their employees despite their desire to have strong societies. Instead, their participation is allowed as long as they uphold integrity without challenging their legitimacy (Nejati, Shafaei, and Mostafa, 2008).
However, standard practice requires that companies should not overstep the boundary of legitimacy; especially the primary focus of the company is purely profits. Actually, because companies invest for the long term especially in facilities and plant, there is little effect from the conflict with the political issues that would affect its operations.
Therefore, in the new global arena companies are tasked with the long term interest in expanding their operations and products which is considered a higher calling relatively compared to their role in the industrialised, developed countries with functioning systems.
According to Nelson, (2006), British Petroleum should continuously support investment in education of the people in the society in which they operate. Such investment may not have quick benefits especially in countries in Asia or Africa. However, it has long term benefits in the long run both to the company and the society as a whole.
The members of the society who are educated bring skills and knowledge to the company and society as a whole. Therefore, they are able to bring new ideas and new strategies as well as improve the existing process in both the company and the society as a whole. As a result, the company’s competitive edge is enhanced.
According to Nicholson (2007) there are four main issues that the British Petroleum must deal with in order to be competitive both at the present time and future. The first issue is that the company must learn to work efficiently and effectively in the absence of worldwide operating rules.
Secondly, it must learn to organize itself profitably across wide geographical realms. Thirdly, it must learn how to create an organisation with a global culture and must embrace meritocracy. Finally, a company must understand its role and legitimacy in the society in which it operates.
Companies that operate in international and less developed countries play pivotal role in developing trade issues. The companies work as agents of development and sustainability of domestic and international trade policies. Such companies become successful in their operations and promote economic development and relevant trade policies. To be successful, private international companies must also learn to operate in partnership with state agencies.
This poses a great challenge because state agencies’ key objectives are not to make profits and maximise shareholders wealth but improve lives of its citizens (Princeton Review, 2004). Therefore, the international companies must learn to bargain for their own interests. In addition they must understand how to develop and nurture benefits of the partnerships. Consequently, they become powerful because they have the support of the state agencies’ in which they operate (Trout and Steve, 1997).
Global disparities of wealth and purchasing power of different nations and individuals pose both a challenge and opportunity to various companies. The company should ensure that it gets the support of nearly everybody including those who may not afford to purchase its products or services.
This is achieved by developing and nurturing business models that has the ability to reach individuals and countries existing at the bottom of the economic pyramid. This is because poor population is part and parcel of company’s market and promoting business models that help them grow and develop would increase market of the company’s products in future (Sturdy, Clerk, Handley, and Robin, (2008).
Conclusion
British Petroleum is a company that has a global presence. Therefore, it is faced with both myriad of domestic and international challenges and opportunities. British Petroleum is facing competition today than ever. Other oil companies encroach their market share, global warming is biting hard and trade policies are changing at ever increasing rate.
The challenges are hard to solve and emerging opportunities demand skill, knowledge, good positioning and approval of the societies in which it operates. Consequently, British Petroleum should be able to deal with the challenges and exploit opportunities that face them with sheer boldness.
To remain relevant and competitive in the current age, British Petroleum must embrace new and appropriate technologies, help develop the society in which it operates, and invest in training and retraining its current and future workforce. Furthermore, British Petroleum should develop practical ways of handling conflicts resulting from competition for natural resources in areas where they obtain their oil. The issues of global warming are hurting the global world.
Therefore, to remain relevant and acceptable, it must adopt technology and processes that minimise emission of pollutants to the atmosphere. It should also contribute in rebuilding the damaged environment and help nations cope with environmental challenges.
Finally, British Petroleum must do the following four things to remain competitive. It should learn to operate effectively and efficiently, organize itself profitably across the vast geographical landscape, create an organisation culture that promote meritocracy and it should understand it role and legitimacy domestically and internationally.
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