Introduction to Strategic Management
Strategic management is linked with the aspect of setting objectives of the business keeping in view all the resources which are required in order to operate efficiently in the market. Further, with the motive to operate efficiently in the market it is necessary for every enterprise to analyze the overall industry in which it operates so that overall actions can be taken accordingly. Apart from this, to enhance market performance firm has to carry out internal along with external analysis as through this accomplishment of desired aims and objectives becomes easy and it is fruitful for the business in every possible manner. Further, environmental scanning directly provides base to company in identifying the range of challenges being present in the external environment and how it influences productivity of the company. For conducting the present study organization chosen is British petroleum (BP), it is one of the world’s super major oil and Gas Company. Headquarter of this organisation is located in London, England. Major activities of the business also include gas production, refining, distribution and marketing work. Business is having a high presence at a global level and majority of the customers prefer to access its services. Various tasks have been covered in the report which involves industry structure
1) Industry structure
British Petroleum operates in petroleum and gas sector where market size is quite wide and this in turn allows business to operate on wider platform. In the year 2014 the oil and gas industry of UK produced 1.42 million boepd of which 59% was oil and liquid. Further, 98% of the production comes from the offshore fields. Oil and gas members of UK expect between eight and 14 exploratory wells to be drilled. From the survey carried out it has been determined that it will increase due to rise in level of cost along with projects over run. Overall the annual investment can be low as £2.5bn within three years. During the year 2014 production of oil and gas fell by 1% and the opportunity cost has risen by 1% in the same year. Apart from this, the worldoil prices has been fairly stable. On yearly basis overall size of industry is increasing at faster pace and this is contributing in development of the companies operating in this sector. Apart from this, large numbers of companies are expanding operations in this sector as there are able to identify the range of opportunities present in the market which is fruitful for them in long term. No doubt, challenges are also present which prevents businesses from accomplishing desired aims and objectives. Therefore, with the help of this it can be stated that structure of UK oil and Gas industry is quite favourable and it is contributing in success and growth of companies like British Petroleum etc in the market.
Oil and gas sector and its main competitor is shell. Further, majority of the businesses focuses on product development as a strategy and due to this basic reason they are able to survive in the market for longer period of time. Apart from this, due to rise in level of competition British Petroleum has to modify its product range timely and additional benefits are provided to the customers who prefer to purchase services along with products of British pertroleum. So, this also contributes in the growth of organization and directly leads to accomplishment of desired aims and objectives. Without employing this type of strategy it is not at all possible for British Petroleum to operate efficiently in the market and it can directly lead to decline in level of overall performance. Apart from this, British Petroleum considers other attributes such as quality of the oil etc at the time of offering products to its target market and this leads to higher satisfaction level which is also considered to be one of the main target of business. British Petroleum analyzes strategy of each and every competitor such as Shell etc so that its market performance can be easily enhanced with the help of this (Hyde, 2014). Moreover, product development along with other type of strategies undertaken also contributes in enhancing market share of the business up to extent. Therefore, strategic group analysis has shown favorable results and it can be easily said that British Petroleum is efficient enough to meet with the requirement of target market and this is supporting business to sustain in the market.
2) Firm’s competitive position in the market
In order to operate efficiently in the market it is necessary for business to know its competitive position and on the basis of same strategies are developed by company (Njeru, Stephen and Wambui, 2014). At present British Petroleum is having the highest market share in the oil and gas sector as compared with its competitors in the market. Further, the market where British Petroleum operates is highly challenging and various hurdles are present which prevents business from accomplishing overall aims and objectives. Competitive position of business can be easily identified through actions of its competitors and it can be said that strategies of British Petroleum is much more effective as compared with its competitors in the market. Company compares its performance with those of competitors on continuous basis and their weaknesses acts as strength of the business.
In short, British Petroleum is able to take advantage of opportunities present in the business environment and due to this reason company is considered to be leader in the Oil and gas sector. Apart from this, the changes taking place in the external environment sometimes acts as hurdle (Rumelt, 2010). Competitive position of British Petroleum in the market highlights that internal strength of the company is allowing operating efficiently where business is able to meet with the expectations of the target market in efficient manner. Due to rise in level of competition it is necessary for enterprise to focus on the key operations being carried out and large number of strategies being developed supports business in accomplishing its desired objectives. Due to this basic reason presence of British Petroleum at global level has enhanced rapidly in the market and its products are purchased by every individual in the market. At present business is having strong customer base and its profitability level supports to indulge into practices of product development in the market.
It is one of the most essential component of global market analysis. It includes monitoring, forecasting and environmental assessment in it. This scanning divided into two parts where first one is knows as macro and second one is knows as micro. In macro environment all marker, companies, client and competitors are included. Further, in micro environment suppliers, customers and competitors are included. It also defined as a study where company analyze the social, economical and political factor in it.
External factors of British Petroleum
There are so many kinds of factor that affect the external environment of organization and they are as follows...
Due to threats of geopolitical instability energy market of British petroleum becoming more volatile. Further, the requirement of oil and refining gas is going so high due to this, energy market of the UK becoming more volatile.
Economy is one of the major external factor that affect the performance of business. In economy, market fluctuation, politics factors, terrorist attacks and wars all are included in the economy. The reason behind this is, these factors change the structure of organization and also create lots of issues. On other hand, by energy supply the economy condition of country is changing into underpinned and the alternative sources of petroleum and energy are increasing. British petroleum, every year increase their profit marketing by 6%.
For better development of business it is important for their department to manage their financial system. British Petroleum company is well established gas and oil firm and the major reason behind this is, management of BP time to time check their financial sources and as per the final report they introduce their new services and products into the market.
For British Petroleum, Europe oil company and Z energy, shell are major competitors. The main reason behind this is, they all providing the same oil products and services to the UK customers. So for best the comparative environment it is important for organization to launch new and innovative products into the marker. Further, by taking feedback from the customers maintain their brand image into the customers mind.
Social and cultural forces
This forces are based on the structure of organization and buying behaviour of customers. If company want to increase their profit so it is important for management to analyze the actual demand of their customers and as per their expectation launch new products in to the market in the field of oil and gas.
By using the latest technology, energy market of the UK will be underpinned and also adopting alternative energy technology (AETs) at their workplace. For beating the competitive environment. By using innovative technology, British Petroleum company can easily reduce their working cost and save their time as well.
Government of the UK time to time change their tax and import export policies. Due to this, lots of misunderstanding creates among all department. For example, staff members and manager cannot understand the actual tax rate and due to this the brand image of organization goes down. Further, government also show their support to oil and gas company by reducing the percentage of tax and at the time of recession they also provide all raw material in low price. For better development, UK government provide all energy and solar equipments in low prices and also show their support by opening international environment organisation.
British Petroleum company put their main target on their customers and for this they time to time take a feedback from their customers and according to their reviews change their product design and packing style of refining oil. Customers are the back bone of company, so it is important for company to create a positive relationship with them and fulfill their all necessary demand on time (Needle, 2010).
Most important opportunities for British Petroleum
In emerging market there is a great opportunity for British Petroleum like; they can easily expand their business and launch new products and services to their UK customers. For better customers services management can change the distribution structure of organization and adopt there level of distribution (Piercy and Morgan, 2015). By doing this they can also reduce the percentage of unemployment. Apart from this, company also promoted GO GREEN them during delivering their products. By this they can easily grab the attraction of their customers and increase their brand value into the customer mind (Stevens and et.al., 2013).
Most important threats for British Petroleum
The major threat behind British Petroleum company is the changing behaviour of customers and their preference (Chernev, 2012).Further, nowadays people use battery vehicles more as compare to petroleum cars. Due to this, the selling percentage of organisation goes down. On other hand, at the time of recession, the demand of customers goes down and suffering from lots of losses. Even a change in shopping habits also put their negative impact on the brand image of company. Furthermore, government of the UK time to time change their tax polices due to this, company faced lots of problems and also face some political challenges as well (Das, 2011). Because of high fluctuation in pricing, oil and gas services has increased the intensity of competition in this sector. For the same, the brand loyally goes down into the customers mind and they switch to other petroleum company.
British Petroleum Company Strength/ Weakness
BP is ranked as world's largest energy company for this company recently launch their new company in London. Organisation is having so much strength and they are as follows...
- BP is having strong brand loyalty for oil.
- Brand management driven by 'beyond petroleum' quotes.
- Company recently participated in London stock exchange and listed in the FTSE index.
- British Petroleum hold approximately 14% share of the UK petroleum market. It means, it will continue grow their shared into the gas and refining industry (Ferrell and Hartline, 2010).
- The general growth of company is based on the strategy of ROI. Further, company recently open their new petroleum company in London (Flander, 2014).
- The International segment of company growing steadily and is predicted to contribute their success over the next four years.
In fiscal 2004, company reaches the milestone of one million insurance policies into the monitors of petroleum and gas firm. Further, they also provide insurance services to their customers. Further, company rewarded in 2003 for providing the best quality of petroleum.
British Petroleum online
For the better development of organization, company update their online website. By using this website all customers can book their orders and get all the information of services and products. By using this website company increase their profit with 78%. Further, they also increasing their brand image into the customers mind. By using website, company operates more than 270 petroleum stores around the country and covering approximately 95% people of the UK.
Company change their marketing style and adopt digital marketing. By apply this change, management increase their brand value and grab the attraction of other competitive organisation.
UK market leadership reinforced
At workplace, company manager divide the whole work into the teams and allot one team leader in each team. By doing this, they reduce the work load and also develop the capabilities of their employees. By using different leadership style, manager gain the trust of their employees and creates strong position into the domestic market.
- In 2015 British Petroleum had statutory loss of GDP and it was approximately 6.4 billion due to this, the total leverage debt of company reached to 22 billion.
- Company is facing lots of financial issue from last few years and due to this, their management cannot manage the expenses of new technology. Due to this, their market value of company goes down (Parnell, 2010).
- The management system of company is so weak due to this, workers are not able to handle their clients and solve their queries (Rumelt, 2010).
- The debt ratio is high so the market value of organisation goes down and organisation are not able to beat the competitive market.
- Company high dependency is based on the UK and Europe country. So at the time of recession they are not able to do import export and due to this, company cannot fulfil the demand of their customers (Abraham, 2012).
- The turnover of this organisation is weak as compare to other oil firms.
- UK government increase the tax price in petrol.
- Company close the production of their Alaskan oil.
- Criminal charges decrease the brand value of company.
3). Firm financial condition
As per the last few decades the financial performance of British Petroleum company is not good. For example, in 2013 the annual turnover of this firm is approximate is 2 billion but now due to high competitor the turnover of this company is goes down and their manager is not able to adopt new technology at their workplace. The current ratio of asset and liability is less and the total outlet for this organization is 31,2015. Due to this, company are not able to expand their business into the international market. For the financial help, firm take help from other financial organization and every-year pay 30% interest on their borrowing amount. Company want to launch new product and services but due to high competition they do not have enough money for new services total sale of last year is only 42,552 Crore.
Further, firm are facing crisis as well, so for better position it is important for company to manage everything thins into the appropriate manner and by taking feedback from each department prepare a financial report of each. By doing this, manager can reduce the negative impact of crises.
From the current position of British Petroleum PLC, it has found that organization needs to change in its existing foreign market entry strategy. It should require to follow franchising by which it can be easy to target the large customer (Ferrell and Hartline, 2012). It will deliver unique and good brand recognition in the market place and develop a positive image in the consumers mind. On the other hand, with the help of joint venture strategy, British Petroleum (BP) can lead the oil market and increase the sales of services. It will also keep the control over the allocation and use of the resources, technology transfer, increase capabilities etc. By doing this, company will raise the market share and increase investment level in the market. Further, with the application of FDI strategy, it can be easy to grab the ownership of facilities in the target market. Along with this, it also delivers facilities of transfer of resources such as capital, technology and human resources. It also assists British Petroleum to high level of control over the operations and increase the ability to understand the needs, requirements of the clients. In the case of setting of prices of the products, British Petroleum needs to bring the changes in the existing strategy. With the help of market penetration, it becomes easy to grab the huge market share by selling the products and services at lower prices as compare to the competitors. It also helps in increase the cash flow within the firm and maintained the current level of inventory of the goods.
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