BP

Strategic Management: The

Environment

Roxana Olteanu //olteanu_roxana12@yahoocom//!"#"$1$%"&
Oana ' Ma(alina Mihaila// oanama(alinamihaila@gmailcom//!"%$))2"))
Oana *n(reea Tu(orache// Oanaa_a@yahoocom//!")%2+2#&%
BP, a British multinational oil and gas company, is headquartered in London,
England, United Kingdom. It is the fifth-largest energy company by maret
capitali!ation, the fifth-largest company in the "orld measured by #$%# re&enues,
and the si'th-largest oil and gas company measured by #$%# production. BP is
&ertically integrated and operates in all areas of the oil and gas industry, including
e'ploration and production, refining, distribution and mareting, petrochemicals,
po"er generation and trading. It also has rene"able energy acti&ities in biofuels
and "ind po"er.
BP,- vi-ion an( mi--ion -tatement- are to help the "orld meet its gro"ing
need for heat, light and mobility. (We strive to do that by producing energy that is
affordable, secure and doesnt damage the environment. BP further defines its
mission to be (Progressive, responsible, Innovative and performance driven.
In analy!ing the competiti&e en&ironment of the BP, "e used the fi&e forces
frame"or "hich allo"s us to e'plore the competiti&eness in the industry and also
ho" attracti&e the industry in question is.
The threat o. entrance into the oil and gas industry is lo" due to the fact that
there is a high barrier of entrance into the industry. )he barrier is high due to
technological focus on alternati&e energy industry, high access to inputs, strict
go&ernment policy and requirements to operate in industry, large economies of
scale required to achie&e cost leadership and large capital requirements to set up
operations.
The /argaining 0o1er o. -u00lier- is medium and this is because according to
www.oilandgassuppliers.com, there is quite a number of suppliers and also
buyers. *lthough in the case of BP it is &ertical integrated in operation, +ust lie
some of the other ma+or players in the industry, this means that they can afford to
pro&ide some of their supplies due to their operation and at the same time the
industry is mainly the ey customers to most of the suppliers.
Po1er o. /uyer-, )he balance of po"er shifts to"ard buyers. -il is a commodity
and one company.s oil is not that much different from another company/s and
this leads buyers to go in fa&or of lo"er prices and or better contract terms. )he
po"er of the buyer "ill be regarded as being medium, because buyers are many
and can s"itch from the consumption of Bp products to another oil and gas
company/s product and at the same time an indi&idual buyer/s decision does not
necessarily ha&e an impact on the company and the industry is the ey supplying
group to the many buyers.
Threat o. -u/-titute- is lo" and the substitutes for the oil and gas industry
include alternati&e fuels such as coal, gas, solar po"er, "ind po"er,
hydroelectricity and nuclear energy. )hese are still in the de&eloping phase, as in
the case of BP, and also in&ol&e high cost of production. )he usage of alternati&e
sources of energy is not that high due to its le&el of de&elopment and high cost of
production, in comparison to oil usage for "hich the demand is high.
)he le&el of com0etitive rivalry is high0 the industry is characteri!ed by big
companies "hich produce lo" differentiated products and there is lo" threat of
substitute and also lo" threat of ne" entrance into the oil and gas industry.
)he industry/s ma+or players are the giant companies in the industry, and the le&el
of ri&alry is high and the industry is some"hat attracti&e to an e'tent. *lthough the
po"er of both the suppliers and buyers is medium, the threat of ne" entrance and
substitute is lo"0 "hich means that profitability is not reduced by substitute and
the industry is attracti&e.
Proceeding "ith the quest of analy!ing BP/s strategic position, "e used the
PE1)EL frame"or of macro-en&ironmental factors, as the en&ironmental
scanning component of strategic management.
Social - 2ore attention has been dra"n to"ards the concerns on sustainability of
the future though this may seem a little impact at the moment due to una&ailability
of production of more economical forms of alternati&e energy such as solar and
"ind energy.
Political - 3orld energy marets are becoming more &olatile due to the threat of
geopolitical instability. 4reater climate destabili!ation is leading go&ernments to
encourage more sustainable forms of energy. )he global energy maret is
becoming more elastic due to continued oil demands from the third "orld
countries.
Economical 5 )he economy is supported by the energy reser&es in the country.
6ue substantial increase in the alternati&e energy sources, supplies are e'pected
to gro" in the ne't fe" decades rapidly.
Technological - )his force is liely seems to be a ma+or dri&er of change in the
global energy maret as it is being underpinned by a technological ad&ancements
of production of economical "ays of alternati&e energy.
2egal/Environmental 5 7e" la"s from go&ernments, higher EU pollution
standards, international en&ironmental organi!ations, more attention has been
dra"n to the concerns on sustainability of the future.
BP o&er the years has been trying to differentiate itself amongst &arious
competitors in a "ay that maes them appeal to customers compared to their
other competitors, and this differentiation approach is achie&ed &ia quality,
inno&ations and responsi&eness to customers.
BP has different brands such as *mpm, *rco, 8astrol, *ral and 3ild bean cafe,
and also di&ersification into de&elopment and production of alternati&e sources of
energy "hich differentiate the company, maes BP fle'ible and also able to
respond to the demands of the maret.
)he core capabilities of British petroleum include the ability of BP to pay out large
di&idends to its &arious shareholders, ability to portray a &ery good green image,
and also generating lo" carbon energy. In addition to the abo&e capabilities, BP
has e'ploration success o&er the years, good mareting and sales or distribution
process, outstanding performances in relations to its competitors, &arious brands
and also di&ersification into alternati&e energy sources, such as "ind and solar
energy.
)he industry is some"hat attracti&e as sho"n by the Porter/s fi&e forces and the
strategy groups but the there is high le&el of barrier into the industry. BP has a
substantial maret share and also bargaining po"er, such as the si!e of the
organi!ation, geographical co&erage and the financial resources "hich BP
possesses.
BP has competiti&e ad&antage by adopting differentiation strategy "hich is in
alignment "ith the company/s core competencies &ia the use of branding and
product technology or the di&ersification into alternati&e energy sources in
differentiating itself from other competitors.
-&er the years, to a great e'tent, BP has aligned its core capabilities to the
company/s business strategy and also adding &alue &ia its mareting and sales
acti&ities "hich is also based on the mareting and distribution competencies of
BP.
Bibliography,
""".bp.com
"""."iiopedia.org
http,99""".iea.org9
http,99""".ft.com