Management Planning: BP Oil Company

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Introduction

Most organizations follow similar set of rudiments when approaching management; hence, BP is of no exception. The core rudiments of management principles are; leading, organizing, planning and controlling. BP management, overtime, has continuously embraced planning, as one function of management in its core business activities. To understand the management planning better, this presentation illustrates how BP utilizes the management planning functions to gain competitive advantage.

BP Oil Company

BP is one of the largest oil suppliers in the world. The company had been enjoying steady operations until 2010, when it experienced the worst loss due to the oil spill that occurred in the Gulf of Mexico. It is reported that around 174 million gallons spilled over an area of 25, 000 square miles (Amadeo, 2010). The sustained loss has adversely affected the company’s performance since over $ 6 billion was immediately allocated to clean the spill while the whole process was estimated to be around $ 40 billion (Hayward, 2010).

Planning Functions, as it Relates to Goals and Strategies at BP

BP has embraced the planning concepts of management. First, the Company has utilized its time and resources to gather information relevant to planning through the situational analysis. Situational analysis, is a system that managers embrace with resources and time, to collect, evaluate and summarize pertinent information relating to planning issue under investigation (Bateman & Snell, 2011).

Although BP faces a stiff competition from other global oil distributors such as, Chevron, Corp, Exxon Mobil Corporation, Total SA, Conoco Phillips among, and Oil Libya among others, situational analysis has enabled it to have first- hand knowledge (Gardner, 2010). The situation analysis has enabled it to gather vital information to boost its strategic planning process.

The short-term strategy is a growth oriented, and it constitutes increasing energy mix that integrates all available sources, i.e. wind, oil and solar. The strategy also seeks to enhance the company’s efficiency in order to reduce an emission and, therefore, curb environmental pollution (Hayward, 2010).

The organization has a strategy to increase its portfolio balance, which currently stands at 60 per cent oil and 40 per cent gas. Long-term strategy aims at strengthening the organization expansion both in geographical and geographical frontiers (Hayward, 2010).

BP has continuously evaluated its plans to ensure it meets the organization’s strategy. This has been through establishing strategic planning benchmarks. Hence, over the last few years, BP has recorded improved performance both in profitability and in volume of business participation through effective planning strategy.

The strategy improvement has been credited to quality management planning and the ever-increasing demand for the petroleum products. Selecting a plan in line with organizational objectives is indispensable for prompt organization management. BP has different strategic plans about its marketing; however, to ensure the right strategy was in place, it assessed various strategies employed by its competitors.

After situational analysis, it streamlined its marketing department by designating five principles. The principles were in charge of; increasing safety performance among its products across the world, and improving on portfolio quality. The marketing team also endeavors to augment margin share growth and secure net investment are greater than depreciation level.

Corporate Social Responsibility, Legal and Ethical Issues affecting Management Planning at BP

Corporate Social Responsibility

BP has faced numerous critics from the society hence distorting its corporate social responsibility. This has affected the management of the organization. The fundamental issue has revolved around the environment and climate change. The issue of Oil spill in the Gulf of Mexico, which happened in 2010, created an environmental and economic issue such; water pollution, damage to aquatic life, breakdown of businesses among other problems.

It is reported that around 174 million gallons spilled over an area of 25, 000 square miles (Amadeo, 2010). The BP recognizes the importance of environmental and social challenges facing the present world. Hence, the management has played a decisive role in resolving challenges connected with sustainable development through its planning strategy.

The organization also sees that, while the firm can be a solution to environmental problem, it should not be a solution to the whole problem. The civil society, governments and other companies must create a collaborative working plan. Moreover, the company management has a plan policy statement, which commits it to critical and far-ranging business ethics.

The firms plan seeks to point out how it is meeting its commitment to a process that supports the growth and profitability of the organization. Thus, the predominant management plan includes; improving personal safety and continuous improvement on environmental impact through a sequence of actions (Bateman & Snell, 2011).

Ethical Issues

Ethical issues have revolved around the wildlife and the environment, because of the 2010 oil spill in the Gulf of Mexico. The magnitude of the damage has been felt in the ecosystem and the wildlife. This predicts future damage. However, the BP has outlined various plans to avert this issue. The plan includes; adhering to environmental ethics, abiding to laws of the land and having a contingency plan in place.

Legal Issues

BP has faced legal challenges with various governments. For example, in the US, BP oil spill brought a terrible brand to the environment and economic activities of the Gulf region. Weiss (2010) asserts that, the compensation evaluation in physical damages in contrast to actual claims is estimated $20-50 billion.

This is believed as one of the grant judgments ever made to the one in which more than $5 billion was awarded to plaintiff of Alaska oil spill in American history (Weiss, 2010). However, BP in recent reports has shown plans of waiving $75 million on environmental harm and to foot costs in any weight they may occur.

The management realizes the necessity of having an elaborate legal framework plan in place. The firm has lived to respect the law relating to the environment, wildlife and property. In addition, the firm is working with the government and the civil society to ensure environmental system is not altered. Additionally, a compensation fund has been set aside for emergencies.

Factors that influence BP’s; Strategic, Tactical, Operational and Contingency Planning

Economic Factors

Undoubtedly, every firm is manipulated by the political environment in which it operates (Bateman & Snell, 2011). Despite BP being a world leader in petroleum products, the firm has faced a devastating economic financial crisis.

As a business cycle, condenses economic agility, the BP has not been spared as it has received reduced sales and sustained substantial losses; this has been a result of legal issues because of BP Oil in the Gulf, dwindling oil prices, inflation and changes in the foreign exchange rates. This in turn, has affected rapid implementation of; BP strategic, tactical, operational and contingency plans.

Environmental Factors

Another factor, which has hindered appropriate implementation of the aforementioned plans at BP, is the environmental factors. Each firm’s operations are governed by the environmental factors, and the law set by the government. BP being a producing firm is exposed to excessive taxation to compensate for heavy pollutants it emits (Amadeo, 2010).

Apart from the local environmental issues, the firm has to comply with global environmental factors pertaining to environmental preservation and protection such as the Kyoto Protocol. The Corporation’s renewable fuels sub-sector has been adversely affected by the environmental issues; rendering to its reduced output. Failure of any firm to comply with the set environmental law may force the government to issue operation prohibition accompanied by substantial fines.

Legal factors

According to Bateman & Snell (2011), Inclination to profit maximization principle may lead a company to violate the workers right and the rule of law.

To preserve and govern the firms’ operation’s governments set the minimum wage limits, under-age employment policy, working time and the general laws to regulate firms (Gardner, 2010). The BP can only operate in whatever it is mandated to do. Failure to comply, the company is likely to attract government restrictions. Hence, this has restricted apt implementation of the aforementioned plans.

Conclusion

Management planning is critical for modern businesses, Apart from increasing efficiency; management planning has helped BP to leverage its strategic functions. BP, in determining planning strategy, it has embraced situational analysis in gathering pertinent information vital for planning, continual evaluation of existing and plans of competitors and control among other planning strategies to ensure the right plan meets the firms strategic needs.

Moreover, the corporate social responsibility, ethical business operations and legal have affected its business operations. The issues cited relate to the environment and wildlife because of Oil spill at the Gulf of Mexico. Further, the economic, legal and environmental factors have hindered its vision of formulating strategic, tactical, operations and contingency plans.

References List

Amadeo, K. (2010). Gulf Oil Spill.US Economy.Retrieved from https://www.thebalance.com/bp-gulf-oil-spill-facts-economic-impact-3306212

Bateman, T.S., and Snell, S.A., (2011), Management: Leading and Collaborating in a competitive World. New York: MacGraw-Hill Irwin.

Gardner, D. (2010). Bp Market Plunge Wipes Billions Off UK Pension Funds as Shares In Oil Giant Suffer Fresh Falls. Retrieved from https://www.dailymail.co.uk/news/article-1282870/BP-shares-plunge-15-oil-giant-admits-oil-spill-August.html#ixzz1IqpQPk00

Hayward, T. (2010). BP 2010;Strategy Presentation. New York, NY: BP Corp.

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