Category: Petroleum

Introduction

BP is a public limited company which is established within the United Kingdom major integrated oil and gas industry. The firm deals with production of various forms of energy such as transportation fuel and petrochemical products (Uldrich, 2010, p. 30). Currently, the firm is considered to be amongst the largest gas and oil producing companies.

Over the years it has been in operation, the firm has managed to establish its market in more than one hundred countries. The firm’s operations are organized into two main segments. These include refining and marketing and exploration and marketing. The two segments are well organized into upstream activities, field development and midstream activities.

Upstream activities entail exploration of gas and oil. On the other hand midstream activities entail transportation of petroleum and petroleum products through the firm’s pipeline network. Through its refining and marketing processes the firm is able to supply its products to the market.

Considering the competitive nature of the industry, it is vital for firm’s major integrated oil and gas industry, it is paramount for the firm’s management team to be effective in formulating operational strategy. One of the ways through which this can be achieved is by undertaking a SWOT analysis. This paper entails a comprehensive SWOT analysis of British Petroleum Company (BP).

SWOT analysis

According to Dransfield and Needham (2005, p.137), a SWOT analysis enables a firm to evaluate its internal strengths, internal weaknesses, external opportunities and threats. Below is a discussion of BP’s SWOT analysis.

Strengths

BP has a strong management team. As a result, the firm has developed an edge with regard to strategy formulation and implementation. Its strong management team has not only made the firm to attain a strong financial performance but have also made the firm to operate in a social responsible manner (BP, 2011, para. 1-3).

The firm has been in operation for a number of years and has managed to venture into the global market. As a result of its global operations, the firm has managed to develop a strong financial base arising from its large market share. BP has also developed strong brand equity globally. This has culminated into its products being widely accepted in the global market hence attaining a high degree of customer loyalty.

The firm has a strong research and development team which enables it to conduct successful oil and gas exploration. Its research and development is also enhanced by the firm’s collaboration with other firms such as California Institute of Technology. The collaboration has enabled the firm to be efficient in developing solar cells. In addition, the firm also collaborates with MIT in an effort to conduct a research regarding development of clean coal technology (Uldrich, 2010, p. 33).

Opportunities

Over the recent past, various economies have experienced oil scarcity. This has led to a rise in oil and gas prices which is an opportunity for the firm to make more profit. Considering the increasing demand for alternative sources of energy, there is a high probability of BP improving its profitability by venturing into production of alternative energy.

Some of the alternative energy sources which the firm should consider include bio-fuel, wind and solar energy. In addition, BP can expand its pipeline networks to emerging economies such as Eastern Europe countries and China. This will contribute towards an increment in the firm’s market share.

Considering the high rate of growth in the vehicle manufacturing industry, there is a high probability of the firm experiencing an upward shift in the demand for crude fuel. This arises from the fact that most of these vehicles will be fueled with crude oil energy.

Weaknesses

Oil and gas form’s the firm’s core products. However, these resources are finite which means that the resources are limited. In its operation, BP has been over-relying on hydrocarbons. As a result, the firm’s survival in the long term is threatened.

The firm has a weak pricing strategy with regard to some of its products. In its operation in the United States, the firm distributes different varieties of BP and Amoco fuels. Some of these include Amoco and BP fuels. These fuels have low sulfur content. However, the price of these fuels is relatively high.

Considering the fact that consumers are price sensitive in their purchasing patterns, there is a high probability of them considering cheap alternatives. This is mainly likely to occur during economic recession. The resultant effect is that the firm may lose its loyal customers to competing oil and gas products.

Threats

Considering the increased requirement for firm’s to attain environmental sustainability in an effort to minimize increment in the rate of global warming, many firms may result into consumption of alternative energy. Incorporation of renewable energy by firms is a threat to the firm’s hydrocarbon fuel business.

The firm’s facilities which are located in various parts of the world face numerous risks such as a result of political instability which may lead to war. In addition, the high rate of terrorism is a threat to the firm. This arises from the fact that such plants are a major target.

Due to the lucrative nature of the industry, there is a high probability of competitors developing future alternative fuels culminating into an increment in industry rivalry. The resultant effect will be a reduction in the firm’s level of profitability.

In an effort to expand into the international market, the firm faces increased cultural challenges due to existence of cross cultural differences. This may limit the firm from conducting its operations in the international market.

As a result of the oil spill which occurred off the Gulf of Mexico, the firm’s popularity has been negatively affected in some areas (Hefferman, 2010, para. 1). This may limit the firm’s effort to expand its operations to such markets. The previous economic recession has a negative effect on the firm’s operation. For example, increase in the price of oil barrel to $66.71 will result into tension amongst firm’s operating in the oil business (Hefferman, 2010, para. 5).

Conclusion and recommendation

From the analysis, it is evident that BP has developed a number of strengths internally culminating in the firm’s success. In addition, the external environment also presents numerous opportunities and threats. In an effort to position itself effectively in the market, BP’s management team should consider the following recommendations.

• Considering the rise in oil prices, the firm should consider implementing a flexible price policy. This will culminate into the firm attaining price competitiveness compared to its rivals.
• The firm should consider cooperating with its business partners so as to develop sustainable energy.
• In an effort to attain environmental sustainability, the firm should ensure that its operations do not result into emission of carbon dioxide which is one of the major causes of global warming. In order to achieve this, the firm’s management team should incorporate the concept of carbon-foot-printing which entails removal of carbon dioxide a firm emits in the atmosphere.

Reference List

BP. (2011). How we operate. Web.

Dransfield, R. & Needham, D. 92005). GCE as level applied business double award for OCR. New York: Heinemann.

Hefferman, M. (2010). BP oil spill: a company out of its depth. Web.

Uldrich, J. (2010). Green investing: a guide to making money through environment friendly stocks. New York: Adams Media.

Organizations the world over have used diverse ways to implement corporate social responsibility (CSR), ranging from a focus on “social” responsibility to the inclusion of environmental responsibility, green supply chain, corporate citizenship, and sustainability programs (Flammer 758). The present paper not only investigates how British Petroleum (BP) implements socially responsible practices into its operating procedures, but also evaluates the impact of these practices on the company’s stakeholders.

Company Overview

With well-established operations spanning all continents, BP is a leading integrated oil and gas company engaged in providing “customers with fuel for transportation, energy for heat and light, lubricants to keep engines moving and petrochemicals used to make everyday items as diverse as paints, clothes and packaging” (British Petroleum 1). The company has over 80,000 employees, with most of them based in Europe and the United States. In 2013, the economic value generated by BP stood at $403.3 billion, while its economic value distributed to others stood at $342.6 billion (British Petroleum 4).

Stated Commitments to CSR

BP’s stated commitments to CSR include (1) supporting communities’ efforts to increase income and improve standards of living, (2) striving to be a world-class operator, a responsible corporate citizen and a good employer, (3) working to avoid, minimize and mitigate environmental impacts in its areas of operations, (4) engaging in joint venture partnerships with other companies to address carbon and climate risk, (5) empowering employees, and (5) investing in alternative energies (British Petroleum 4-23).

BP’s CSR Performance

In terms of employee/labor relations, the company has performed well in encouraging women participation in leadership, facilitating workforce diversity and inclusion, attracting and retaining the best talent through strategic recruitment, rewarding employee performance through executive remuneration and other benefits, building capability through leadership development, and entrenching a code of conduct that defines its commitment to higher ethical standards (British Petroleum 20-23).

In terms of environmental impacts, BP has received much support globally for its hands-on standpoint on environmental challenges, most notably for not only investing heavily in technologies aimed at reducing the carbon footprint, but also advocating for the use of alternative sources of energy such as biofuels and wind energy (British Petroleum 15-18; Christiansen 1). In particular, BP has performed well in:

1. monitoring national and international climate and energy policy developments,
2. encouraging the growth of natural gas and other sources of low-carbon energy,
3. educating customers on the efficient use of fuels and engine oils, and
4. mass planting of trees to reduce the carbon footprint (Flammer 761).

The social impacts of BP’s CSR initiatives have been witnessed in terms of the company’s attempt to support communities’ efforts to increase income and improve standards of living through supporting small business ventures, investing in healthcare and education, and offering employment opportunities to the local people. However, it should be remembered that the company has been accused of human rights abuses in Columbia, corruption and lack of transparency in Angola, and associating with tainted companies (Christiansen 8-12).

Lastly, it can be argued that BP has performed extremely well in complying with the law, national and international standards, as well as social, economic, and environment reporting initiatives. Although the company faces diverse and complex laws and regulations owing to the fact that it has operations in around 80 countries worldwide, it has been largely successful in managing the applicable legal and regulatory health, safety, security and environmental obligations through its operating management system (British Petroleum 35).

Assessment

Drawing from the above exposition, it is evident that BP’s CSR policies have a substantial effect on its actions, as witnessed by how the company has continued to allocate huge amounts of money to drive the mentioned CSR initiatives. The company’s actions are clearly driven by:

1. its desire to maintain a low carbon footprint in the atmosphere,
2. its aspiration to develop human resources potential to the fullest potential, and
3. its obligation to support the local communities in their efforts to increase income and improve living standards.

CSR policies are known to affect the company’s competitiveness, reputation, and stock price in national and international markets (Flammer 759). Consequently, BP is more likely to attract more talented employees due to its attractive employee/labor relations, not mentioning that it is likely to develop a positive reputation in areas it has engaged in activities to support local communities in their efforts to increase income and improve living standards. In recent years, customers have been found to increasingly identify with responsible organizations that not only take care of the environment, but also practice green supply chain operations to reduce the carbon footprint (Sharma & Mehta 69-71). This implies that BP will continue to be competitive as it is engaged in all these efforts, lending credence to the assertion that the company will be better off than it would have been if it stuck to a framework where its only responsibility is to avail profits to shareholders.

Conclusion

Overall, it is evident that BP has done remarkably well in its CSR policies and initiatives. Owing to its quest to conduct its operations using the triple bottom-line approach (social, economic, environmental), the company continues to win the hearts of many supplies, customers, employees, community members and other stakeholders, implying that it will continue fulfilling its obligations to its shareholders, the community, as well as the environment. However, the company needs to limit its association with tainted companies as well as seal loopholes that could lead to corruption. The company also needs to invest more in reducing the carbon footprint in the environment, bearing in mind that it deals with products that have been largely criticized for their increased contribution to global warming.

Works Cited

British Petroleum 2013, BP Sustainability Report 2013. Web.

Christiansen, Atle Christer 2002, Beyond Petroleum: Can BP Deliver? Web.

Flammer, Caroline. “Corporate Social Responsibility and Shareholder Reaction: The Environmental Awareness of Investors.” Academy of Management Journal. 56.3 (2013): 758-781. Business Source Premier. Web.

Sharma, Surya Kant and Sunita Mehta. “Where do we go from Here? Viewing Corporate Social Responsibility through a Sustainability Lens.” Journal of Contemporary Management Research. 6.2 (2012): 69-76. Business Source Premier. Web.