Strategic Management on British Petroleum

Industry Analysis

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.

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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.

Environmental Scan

It is one of the most essential components of global market analysis. It includes monitoring, forecasting, and environmental assessment. This scanning is divided into two parts, where the first one is known as macro and the second one is known as micro. In the macroenvironment, all markers, companies, clients, and competitors are included. Further, in the microenvironment, suppliers, customers, and competitors are included. It is also defined as a study where the company analyzes the social, economical, and political factors in it.
External factors of British Petroleum

There are so many kinds of factors that affect the external environment of an organization, and they are as follows:.

Political

Due to threats of geopolitical instability, the energy market of British petroleum is becoming more volatile. Further, the requirement of oil and refining gas is going so high due to this, the energy market of the UK becoming more volatile.

Economy

The economy is one of the major external factors that affects the performance of businesses. In the economy, market fluctuation, political factors, terrorist attacks, and wars are all included. The reason behind this is that these factors change the structure of organizations and also create lots of issues. On the other hand, by increasing energy supply, the economic condition of the country is changing into an underpinning, and the alternative sources of petroleum and energy are increasing. British Petroleum every year increases their profit marketing by 6%.

Finance

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 that management of BP time to time checks their financial sources and as per the final report, they introduce their new services and products into the market.

Competition

For British Petroleum, Europe oil company and Z energy, shell are major competitors. The main reason behind this is that they all provide the same oil products and services to UK customers. So for the best comparative environment, it is important for organizations to launch new and innovative products into the market. Further, by taking feedback from the customers, maintain their brand image in the customers minds.

Social and cultural forces

This forces are based on the structure of organization and buying behaviour of customers. If companies want to increase their profit, it is important for management to analyze the actual demand of their customers and, as per their expectations, launch new products into the market in the field of oil and gas.

Technology changes

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 can easily reduce their working cost and save their time as well.

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Government policies

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 managers 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 at low price. For better development, UK government provide all energy and solar equipments in low prices and also shows their support by opening international environment organisation.

Customers base

British Petroleum company puts their main target on their customers and for this they time to time take 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; they can easily expand their business and launch new products and services to their UK customers. For better customers service, 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 doing so, they can easily grab the attention of their customers and increase their brand value into the customer's mind (Stevens et al., 2013).

Most important threats for British Petroleum

The major threat behind British Petroleum company is the changing behaviour of customers and their preferences (Chernev, 2012).Further, nowadays people use battery vehicles more as compared to petroleum cars. Due to this, the selling percentage of the organization goes down. On other hand, at a time of recession, the demand of customers goes down, suffering from lots of losses. Even a change in shopping habits also put a negative impact on the brand image of company. Furthermore, government of the UK changes their tax policies from time to time; due to this, company face lots of problems and also face some political challenges as well (Das, 2011). Because of high fluctuation in pricing, oil and gas services have increased the intensity of competition in this sector. For the same, the brand loyally goes down into the customers minds, and they switch to another petroleum company.

British Petroleum Company Strength/Weakness

Strength

BP is ranked as world's largest energy company, and this company recently launch their new company in London. The organization 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% of the UK petroleum market. It means it will continue grow their share 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.

Insurance

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, the company increases their profit with 78%. Further, they also increasing their brand image into the customers minds. By using website, company operates more than 270 petroleum stores around the country, covering approximately 95% of the UK.

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Brand value

Company change their marketing style and adopt digital marketing. By applying this change, management increase their brand value and grabs the attention of other competitive organizations.

UK market leadership reinforced

At workplace, company manager divides 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 create strong position into the domestic market.

Weakness

• 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.
• The company has been facing lots of financial issue for last few years and due to this, their management cannot manage the expenses of new technology. Due to this, the 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 the organization goes down and the organization is 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 and exports, and due to this, company cannot fulfil the demand of their customers (Abraham, 2012).
• The turnover of this organisation is weak as compared 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 approximately $2 billion but now, due to high competitor, the turnover of this company is going 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. The company wants 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 are only 42,552 Crore.

Further, firm are facing crisis as well, so for better position, it is important for company to manage everything in 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.

Conclusion

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 minds. 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 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 for transfer of resources such as capital, technology and human resources. It also assists British Petroleum to have a high level of control over the operations and increase the ability to understand the needs and requirements of the clients. In the case of setting the 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 compared to the competitors. It also helps in increase the cash flow within the firm and maintained the current level of inventory of the goods.

References

• Abraham, S.C. 2012. Strategic planning: A practical guide for competitive success. Emerald Group Publishing.
• Allison, M. and Kaye, J., 2011. Strategic planning for non-profit organizations: A practical guide and workbook. John Wiley and Sons.
• Carlson, S.L., Harris, M. and McLeskey, N., 2013. Strategic planning for organizational effectiveness during dynamic change. Geriatric Nursing.
• Chernev, A., 2012. Strategic Marketing Management. Cerebellum Press.
• Conduit, J. and Mavondo, F. T., 2015. Internal Customer Orientation: Antecedents and Consequences. Springer International Publishing.

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