A critical incident in the organization having serious effect on business

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This assignment is based on how due to some critical incident in the organization, it has a serious effect on the business of the organization, on their clients, suppliers, and also society at large. Strategic management is one of the styles of management that is getting popular in the current competitive market and it is widely practised now days. There is detailed case study on British Petroleum and the incident which took place was of the one of the biggest Oil Spill. Due to this incident, there were several other companies which had taken advantage of it and due to which they faced number of challenges. So their main responsibility at this point of time was to plan certain strategy which would have a positive impact on their business and also confidence of the society at large is regained within a span of time.

General Introduction

As per Lumpkin (2009) Corporate technique or strategy which is widely practised in very organization can be explained as the procedure to make important decision in the organization which would actually determine and then allow us to know the actual objectives, aims, goals and plan for the organization. They have to perform certain activities as per their planning to gain competitive advantage in the market. Apart from that, it would also explain what are the different activities that the organization has still need to perform, due to which their business revenue is achieved and also they can take care of their bottom-line.

The definition of Strategic Management (SM) is "science and art to formulate, evaluate and to take different cross functional decisions that would actually enable very organization so that they can achieve their aims and objectives" (Lumpkin, 2009). It simply means that, they have to plan, then implement and also study whatever outcome they receive at the end of the day. SM is important as it would facilitate the organization to take corrective and new step towards their business goals and also their customers are always delighted to receive their services and products they mainly utilize.

As per (Joyce, 2001) SM is mainly being termed as the important key for the organization, which focuses on giving excellent product and services to their valued customers. Apart from that, an organization has to face not only their internal environment but aloe they need to deal with unpredictable outside environment, and so their comes the need for SM who take care of the business processes and airtime come out with something new.

In this case study, BP has faced the major problem when running their business operation. The incident they faced was Oil Spill and this is not only regarded as the major business issue but also political issue. The job of the management is to form a proper strategic plan to deal with this serious issue and also they would be facing with number of challenges. The challenges they would be facing would be from their clients, from the government, from society and also from many other non profit organization, as oil spill is the incident which can cause too much of damage to the environment.

British Petroleum: Overview of the Organization


(Source: henrycomptonscience.co.uk) [1] 

BP is one of the biggest gas and Oil Company all round the globe. The headquarters of this organization are in London, United Kingdom. It is regarded as the 3rd largest oil and gas and 4th biggest company all round the globe if it is measures in terms of its revenues. This company is being integrated vertically, and so it is very much in oil and gas sector. It is mainly into exploration of the oil, production of it, refining, distribution, and then marketing. It also has huge petrochemical plants and it also deals in trading of the power in the UK. Other main activities of this organization are into production of renewable energy that would specially include wind power, solar, hydrogen and also bio fuels.

(Source: bp.com) [2] 

The operation of this organization is in almost 80 countries worldwide. It mainly produces approximately 3.9 million of oil barrels and would be having around 22000 stations. The largest division of this BP is in America and it is regarded as one of the biggest producer of Il and Gas in United states of America. The headquarters are in Houston, Texas. One of the incidents that BP is into is the 2010 Deepwater Horizon of the oil spill. The listings of this organization are in London Stock Exchange and also in FTSE 100. Other listings are in New York Stock Exchange.

BP is regarded as one of the biggest global brand. It mainly represent what they can do and what they are intended to do in the near future. They are mainly into business which would facilitate and provide energy to run every business. It would include households, transport. They produce the energy that would be quite affordable and also does not damage or cause harm to the environment. Their main motto is beyond petroleum and so it summarizes BP.

It has recognized very soon that exploring only natural resources would not help the world, but the world actually needs alternative energy at times of major crisis. So they are the forefront so that they can deliver better products that would be diverse in nature and also does not cause major harm to the society at large. This is thing that makes BP so unique and also distinctive in its own way.

Critical Incident at British Petroleum: Deepwater Horizon of the Oil Spill

Deepwater Horizon Oil Spill is one of the biggest and worst oil spills in the history of British Petroleum and the incident occurred at Gulf of Mexico, which actually flowed for almost three months in 2010. The most important thing was the spill continued even when the well was actually capped. It was regarded as one go the largest marine oil spill in the history of their petrol industry. It was due to major explosion in the oil ring and due to that, around 11 employees of BP were killed. In the month of July, the spill was actually stopped covering the head of the well. The spill had caused too much of damage to the marine life and also fishing and also the tourist.

Ships that are skimmer in nature, floater booms, barriers and anchors, barricades of sand filled were actually being in use so that they are able to protect 100 of miles of the beaches, estuaries and also wetlands so that the oil does not spread. There are special experts who actually reported severe under the water plumes of this oil that was dissolved and also not at all visible at the entire surface.

Apart from this, the government of US has claimed that Bp is very much responsible for it and they need to cover most of the damage cost and also they need to clean up the entire area. BP had admitted that it was their mistakes and so they are the party who is responsible for the leakage. The main job of Bp was to know how they are going to plan for the following activity. Those are maintaining and answering back to the investors, shareholders, stakeholders, government, clients and also the consumers at the large. They would be facing number of difficulty or challenges and because of that, their business was being severely affected and also the goodwill and shred prices of the organization had actually gone down.

(Source: nowpublic.com) [3] 

Theory of Henry Mintzberg: Paradox and British Petroleum


(Source: ebbemunk.dk/Technostructure) [4] 

Organizational chart is being prepared by the Mintzberg and he mainly applies his chart or model to the large organization to describe their structure. Accordant to him, there are mainly 5 different parts to any sort of organization. They are as follows:

Strategic Apex: Also known as Top management of the organization.

Middle Line: Also known as Middle level management

Operating core: Also known as operational process.

Technostructure: This is the people who would be designing the systems.

Support Staff: This is the individual who would be supporting outside the work environment.

They are explained in the detailed manner and from this, how the structure and theory is being related and also how BP manages the incident has been compared for the better understanding of the subject:

Operating Core:

This is the people who are regarded or the form the division of operation in any type of organization. Their main responsibility is to make sure that their business activity or the operation of the business runs smoothly. Their main responsibility would be to make sure that the production is being carried out properly and without any sort of major delay.

In reference to the incident that has been occurred in BP, this department was also responsible for the oil spillage. That is because the first incident that occurred was due to explosion and then the head of the well was uncapped. They are the ones, who needs to take care of any further incident and make sure that there their systems are in place and also have a routine check in their rig to check for any type of unpredictable incident.

Strategic Apex:

They are the top management of the organization. They have to make important but qualitative decisions. They are the ones who needs to ensure that the common organizational objectives is in line with the company vision and also at times they need to examine their strategy for improving the overall performance of the organization.

In case of BP, the main responsibility of the organization would be ensure that immediate actions is being taken and also they are addressing the issues immediately. They have to also appoint staff to clean the water as it might harm the liking beings.

Middle Line managers:

This people need to have a thorough link with the top management staff and also with operations department so that there is no such communication gap amongst them. Their main responsibility is to ensure that the work is not affected and they act as supervisors at times.


This is one of the departments of the organization whose main job would be to design the systems. They are mainly regarded as the analyst, whose responsibility or due to them the work of the other functional activates are being affected. They are the people who mainly plan, then design, then they have to implement the new systems or products and also they might have to train the people.

In case of BP, there were Technostructure and due to their failure in implementing or checking the systems, there was a huge explosion and that resulted into major oil spill.

Support staff:

This is the people, who would be working outside the company, are they are mainly comprises of specialized units, which would be existing in the organization as they are able to provide strong support to the entire organization.

In case of BP, there were lot of staff that were being recruited and brought into action to clear the entire area, so that the other parts of lands (beaches) is not being affected and also they tried to prevent the environmental damage.

Strategic Implementations: Key Strategic Decisions on Basis of Mintzberg Model.

According to (Karami 2007) Strategic management is the art and science of formulation, implementation, and evaluation of cross-functional decisions which enables the corporation to achieve its aims and objectives.

On analysing the Mintzberg British Petroleum have not only make a new preventive measure strategy but also how to regain its image in the global market as well build up a new organisational structure in order to gain sustainable competitive advantage in the Market. The key strategic decisions are been analysed in the report considering the Mintzberg Model and analysis.

Revaluations of Reactionary Management Culture

British Petroleum is one corporation which recoded huge profits from its various operations but at the same time the company had experienced failure to fix up their common problem of a reactionary Management Culture which emphasises more on profitability ,cutting costs and efficiency and it neglects the aspect of preventive management in the industry. The company needs to understand this problem and take a strategic step to overcome such thinking and revaluate this type of culture and emphasize more on preventive and motivational factors.

Higher Capital Expenditure and expenditure on maintenance cost

From the above analysis it has found that the company suffered such critical incidents of iol spills due to low maintenance cost and low capital expenditure. The company needs to understand the intensity of this issue and key step needs to be taken in order to achieve the successful position in the market. From the various researches found BP can recover its image of a responsible company only if it implements higher capital expenditure as well as higher maintenance cost in its operations. This can be well understood from the incident of "the Texas City refinery and Prudhoe Bay accidents have a similar M.O. Investigations that followed the 2005¬†Texas City refinery explosion¬†found management focused on cutting maintenance and capital spending costs, and managers' performance was measured in part by their ability to meet these goals" [5] (bnet.com).

Safety Measures

This is on of the most major change that the organisation needs to implement in their future strategies and operations management. The safety system of BP have lapsed a number times in the various critical incidents giving rise of the "most irresponsible company" title to the Oil giant. The company have to install various safety instruments and needs to do more investment to bring in new equipments for warnings during such critical issues as well as safety systems for the workers. BP have observed a number of failures of equipment which are required to gas buildups during the spill as well as the warning system of for the workers was inappropriately installed causing life of many workers.

Aggressive Clean-Up strategy

Oil Spill usually causes hazards to marine as well as human life and on the major scenario affects the environmental conditions. These Environmental conditions are being restored naturally but it takes a lot of time to come back in its natural position. As per history of the organisation the company has failed majorly during crisis in clean-ups of the Oil spill and cementing the leakage.According to Dillion who was contracted by the BP to hire subcontractors in help in various oil-spill and clean up issue criticised by saying that "cleanup effort in disarray, marred by unclear lines of authority and shoddy communications among the numerous players involved-from BP and its litany of contractors and subcontractors to the Coast Guard and local law enforcement agencies" (guardian.co.uk) [6] The Company needs to understand the intensity of the problem and emphasize on faster clean-up issue and consider the environmental problems during such investment. The company needs to take up this issue seriously and be prepared in case of such situations in near future.

Explore New -Oil Rigs:

The Oil Spill in the Gulf of Mexico was been completely closed but using cements filling in the deep water horizon. Due to this effect the company had lost millions of pounds and revenue incurring cost for the clean up and compensation to the nearby regions of the Oil spill. The company in such situations can only develop or explore new markets which will help the company to recover is losses and build u its position in the Global Market as well gain a competitive advantage in the market. The company also have should take up in to consideration various Joint Ventures in order to develop its market position and growth.

"Learn from the Mistakes"

One of the company keys decisions which can help the company to gain sustainable competitive advantage is to understand the various mistakes they have done in th past and then reconsider those decision which will help the company not only grow higher in the global market but will enable a competitive advantage at their best level. The company should try and take tough decision regarding their safety measures as well as various inputs of maintenance cost. BP being an Oil Giant should understand the proximity of the situation and try creating benefits and opportunities fro the employees as well the executives of the organisation.


Market Competition

The Global market witnesses a high amount of changes in the Economic factors, Political Factors as well as Technological Changes .All the companies gets influenced by this kind of factors resulting in to market development or market failure. BP at this point of time is going through a hard tie due to its various critical incidents from time to time creating a problem for the company to compete in the International market. The degree of competition is relatively higher as compared to other sectors. Market conditions and the intervention of the competitors is one of the reason that the company might face challenges in the Global Market.

Political Issues & Problems

The political pressure from the International Countries is relatively higher than any other kind of pressure in the Business. The policies of the government keep on changing and are next to impossible to challenge them. In such scenario the company have to bow down in front of the government and are left with no other option. The resignation of the BP CEO Tony Hayward is a clear example of Political Interventions in the Business environment. According to Rex Tillerson, Chairman and CEO of ExxonMobil exclaimed that "The most difficult challenge confronting the whole industry at this point is regaining the confidence and trust of the public, the American people, and regaining the confidence and trust of the government regulators and the people who oversee our activities out there" (nytimes.com [7] )

Loss of Brand Image and Goodwill

Soon after the Oil spill at the Gulf of Mexico BP was been accused of irresponsive behaviour in the interest of the public for unknowingly or knowingly hiding information related to the Oil spill. This has led to a major setback to the company's brand name as well as image of the company. BP has already faced such situation before in the market and repeating such situation has led to the loss of confidence in the minds of the public. This will be one the major reason and challenge will affect the company's growth and development in the global market conditions.

Problems with achieving targets

BP is facing this issue since a long time. The problem with BP is that the company is trying to achieve their 100 % of their targets with only 90 % of their resources in hand. The company is bot able to meet up with its production targets at this point of time which is clreating a major issue for the company as well its venture projects. The problem is occurring as the company is facing the issue of delays in extracting the oil. This would lead to the underperformance of the company and can prove a major challenge for the company to reinstate its earlier position.

Losing Trust of their Share holders

From the recent Oil spill the company have written -off of their highest ever recorded loss in the history of the organisation. The Company has written off the loss of about £20.8 pounds just to cover the cost of the deep sea spill as well as the clean up cost for the entire incident. Also the company is planning to sell its £19 billion assets of the company in order to maintain its financial liquidity. Such issues have led the company's stake owners as well shareholders to lose the trust in the company as well its operations. Incidents like stepping down of the CEO following the Oils spill have created sense of doubts in the minds of the shareholders.


Strategic management and its implications play a major role in the development of the organisation. Also from the above project the findings are strategic management is one way where the company can reconcile its position in the global market conditions and gain a sustainable competitive advantage in the market. From analysing the Mintzberg model it is quite clear that every strategic formation are being related to the model created by them. From the example of British Petroleum it is quite vident that the reasons for company s failure were its poor strategic planning and poor and outdated strategic implications in the market. The challenges faced by British Petroleum were very high due to series of critical incidents and its complete failure to comply with the strategic planning and management of the organisation. The above analysis is a result from various books, Scholarly articles and Journal papers .The critical analysis have determined the importance, needs and impact of strategic management.


G. Lumpkin, (2009), "Strategic Management: Creating Competitive Advantages", 5th Edition, Published by McGraw Hill, USA.

Paul Joyce, (2001), "Strategic Management", 1st edition, Published by Kogan Page, London.

http://www.henrycomptonscience.co.uk/bpccr.html, assessed on 14.12.2010

http://www.bp.com/bodycopyarticle.do?categoryId=1&contentId=7052055, assessed on 14.12.2010

Azhdar Karami, 2007, Strategy formulation in entrepreneurial, Ashgate publishing ltd assessed on 14.12.2010

http://www.ebbemunk.dk/technostructure/technostructurep3.html, assed on 14.12.2010

http://www.nowpublic.com/environment/what-caused-bp-oil-spill-2010-halliburton-cementing-issue-2612965.html, assessed on 14.12.2010

http://www.nytimes.com/2010/06/03/us/03lobby.html assessed on 14.12.2010

http://www.guardian.co.uk/environment/2010/jul/16/bp-whistleblower-oil-cleanup-disarray assessed on 14.12.2010

http://www.bnet.com/blog/clean-energy/bp-8217s-history-of-oil-spills-and-accidents-same-strategy-different-day/1768 assessed on 14.12.2010