Introduction on British petroleum Strategy
In the current global economy, oil and gas is being regarded as one of the most important commodities for sustaining an economic growth. The oil and gas industry provides a group of energy and chemicals products to various other industries such as transport, converting etc. These industries are however exposed to various risks from the supply side such as fires and oil spills. As an example,, the most recent oil spill is “Oil spill in Mexican Gulf”. In this project, I will focus on the British petroleum and its various strategies by making use of porter’s five force model and VRIO model. Further, I will highlight key issues concerning the environment and the economy as consequences from this oil spill.
British Petroleum Background
British petroleum is one of the leading international gas and oil companies. It is the third largest company associated to oil and gas. The company was founded in 1909. Recently, BP merged with the Amoco and become a BP Amoco plc. The company is mainly involved in the excavation of oil and other downstream products. Currently the company is operating in 80 nations of the world and produces almost 4 million barrels of crude oil approximately per day. The largest market share of the Organizations is in the US.
British Petroleum Strategy Prior To Oil Spill
Prior to the Oil spill the main mission of the company was to care about to the way they deliver the energy to the world. The mission statement of the company itself shows the way they care their customers, it also gives details about the way company works together to make an impact in the present time as well as in the future. In addition to this, BP also promotes great work values, which in return encourages employees in maintaining a high level of work ethics. The values of British petroleum are:
- They considered their employees as one team
- Promote courage in the work environment so as they face challenges coming across the ways
- value safety is the utmost priority
- Respect to all employees and other stakeholders of the Organizations
British Petroleum Five Forces Analysis
British petroleum operates in upstream of the oil gas value chain, which includes exploration of oil and gas, development of field and production of oil and gas. This strategy analysis of BP by using Porter’s five force model, (Porter 2008)will asses British petroleum business strategy as well as competitiveness of BP and its resources and, which helps in creating a competitive edge over the other companies in the same industry .
British Petroleum's Resources Analysis Barny's VRIO Model
Barney's VRIO model (Barney 1995) , is being regarded as the framework, Most of the Organizations engage in the strategic process by initiating with the vision statement, than internal and external analysis, business and corporate level decisions and finally, implementation of the strategies. Each and every Organizations related to any industry has always desired to achieve a competitive advantage from this strategic process. The VRIO model falls under the internal analysis step of the strategic process, however it is utilized as the framework for evaluating only on the resources and capabilities of the companies. The acronym VRIO stands for value, rarity, immutability and organizations.
British Petroleum Strategy Analysis From Planned Vs. Emergent Approaches
Strategic analysis of British petroleum from that planned vs. emergent. Mintzberg (Mintzberg 1985) have differentiated between planned and emergent strategies. Emergent strategies they are being defined as that strategy, which can be used to respond the unexpected opportunities and problems .On the other hand, planned or intended strategy, which is formulated by the top management team. Such type of strategy is cascaded down to the rest of the organization.
Since, BP is involved in oil and gas industry, it can easily expose to dangers of oil spilling and fire. Thus, they need to plan an emergent strategy so that they can manage these casualties without any difficulty and no modifications in the corporate strategy need to be done. For instance, taking about the oil spill that has taken place in the year 2010 in Mexican gulf, gas impacted almost every strategy of BP had before this oil spell. PB need to re-develop their corporate strategies and restore their images by repairing the financial and other environmental damages. In this regard they need to devise some emergent strategy, which can significantly help them in preventing such issues to happen again, the very first strategy is sealing the oil well so as to prevent future leakage. Further, BP is required to develop strategy in regards to the environment and its related issues.
Key Issues in Oil spillage Case
In 2010 the world witnesses one of the largest oil spills in the Gulf of Mexico. It occurred at one of the oil well of British Petroleum and around 4.9 billion barrels of oil was leaked within three months of the occurrence of the incident. This has a very devastating impact on the environment and economy of America and across the globe, the company faced severe criticism. To meet out the expenses, the company did not pay any dividends and further it had to sell for around 30 billion of its assets (The Gulf of Mexico Oil Spill, 2013). Further, a fall was seen in the share price of the company and because of its poor safety regulation many investors sold out their shares. Further, this spill affected the marine life also. The oil spill disturbed the balance of the ecosystem and affected the food chain of marine world. Moreover, it negatively affected the immune system of the marine animal due to which their population got affected.
BP’s strategy Impact of future Performance and growth
There are various objectives formulated by the company, in order to attain the desired objectives various strategies and policies are undertaken by the organization. One of its activities of the risk management tends to have significant impact on the performance and smooth functioning of the British Petroleum. Risk management activity mainly focuses on the three key activities; Day-to-day or routine risk identification and its management is ensured in the group functions and the operations which varies in accordance with the type of the risk. The aim of this is to effectively address different risks occurred as well as to promote the safe, reliable and compliant operations (BP's future: what the analysts say, 2010). The second key activity under this concern with the periodic review of the potential risks and the plans under risk management so that further improvement can be made if required. This sophisticated and effectual risk management activity has helped the organization in fostering the safe work environment.
BP’s new strategy in order to balance their interest the is and Public expectation
The prime aim of British petroleum is to keep developing BP that well-suit the emerging energy needs of the world (The Company, 2005). After the oil spill incident in the Gulf of Mexico the company has re-developed its strategies and started implementing wide array of programmes in order to enhance the risk and safety management and also to bring back the trust of the public. Below mentioned are some strategies that are taken by the organizations to balance their interest with public expectations:
- Safety and operational risks: The S&OR function of the company is well-established; it sets out the requirement of organizations for the safety and operational risk management. Additionally, it works to strengthen the efforts towards the greater conformance with entire operating management system. The company also ensures that its operating managers are not only competent but have required dedication and commitment to foster the safety culture. Risk management activities of the organization continue to enhance the simplicity, clarity and consistency in the way it manage and report the potential risk. New risk team has also been developed which primarily aims at maintaining the overarching BP’s risk management system (The company, 2005).
- Managing water and other fluids: BR facilities and well are so designed; developed and operated that reduces the risk associated with the fracturing fluids and natural gas when they enter in the underground aquifers. Huge amount of water is required to drill and create the gas wells, the company has traced large number of water-saving innovations with a view to minimize the amount of water used in drilling and fracturing the gas wells. As well, various new technologies have been invented that make plausible to re-use the water in different operations (Gulf fisheries in decline after oil disaster, 2012).
- Sustainable development: This can be defined as the development that effectively meets the needs and wants of present without compromising the need of future generations. The company has taken several measures in order to reduce the waste and save energy for future. In this regard, BP has implemented saving energy programs which help in using the less energy and further aids in reducing the imports (Grayson and Denyer, 2010). Innovation plays the vital role in enhancing the process and usage of materials, technology designs, minimizing the costs and thus increasing the efficiency. The company views that for transportation purpose, power train technologies and combustion engines coupled with biofuel could provide most effectual way to secure and safe lower carbon future. Furthermore, the renewable sources such as wind energy and biofuel plays vital role in mitigating the challenges of secured energy and climate change for long period of time period (Hayward, 2010)
- Monitoring center: The organization’s monitoring center provides as assurance to the offshore partners regarding the rig operations conducted in the Gulf of Mexico. BP maintains constant communication, information feeds, and live video conferencing with the teams working at the rigs and the monitoring center (BP's future: what the analysts say, 2010). The company also posses the well advisor that attempts to monitor the well conditions; it utilizes the operational data to ensure the safety-critical equipments and operations.
- Long term research: British petroleum has committed to fund around $500 million over 10 years to the scientific research through the initiative named as Gulf of Mexico Research. The aim of this initiative is to improve the capacity and ability to anticipate, respond and eliminate the potential risk or impacts on coastal and marine ecosystem from the oil spills. With the research, the company is investigating the human health and ecological aspects of spills and thus establishing new tools and technology in order to respond effectively to the future oil spills, restoration and mitigation (Sustainability review, 2012).
- Compensation: The Company has faced many lawsuits that seek adequate compensation for the damages. Within few weeks of the incident of the Deepwater Horizon explosion, BP started compensating the victims for the justifiable claims for damages that were caused from the accident. The company reported $3.12 billion of the expenditure on the oil spills including cost of containment, well drilling, grants, cost of spill responses, claims, grants to gulf areas and the federal costs (Guarino, 2010).
It can be concluded from the above discussion that due to the spillage of oil in the Mexican Gulf, British Petroleum has suffered from various financial and environmental losses. Further, they have employed various measures that helped them to restore its image from the other damages. Oil spill had proved to be the drastic event happened in the history of the nation (Eilperin, 2011). This had not only affected the business organization, but it has impacted the entire economy, society, employees, community, customers as well the local businesses. Although the company has taken various initiatives to address the situation effectively; in this context the company has re-strategized its activities and operations with aim to redevelop the image of the company. This massive oil spill has also brought community insistence of holding the company accountable for the preventing and protecting the marine and the coastal environment while implementing the drilling activities. British Petroleum deeply apologized to the public and also pledged to upgrade the environmental safety programs in US and all around the world. It can also be said from the above discussion that when a company’s action results in the loss or threat to the human life, it tends to negatively impact the reputation of the organization and further leads to the crises of legitimacy (De Gravelles, and De. Gravelles, 2011).
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