Bp Energy Company Focuses Primarily On Petroleum Business Essay


Executive Summary

BP is an energy company that focuses primarily on petroleum, with a minor interest in alternative energy. However, due to recent accidents in the petroleum sector, the BP name has been blemished. With the finite supply of crude oil, it is also becoming necessary for an oil company to consider other investments. Because it has been successful in improving BP's reputation before, it may be strategic to reposition BP and place greater emphasis on alternative energy development. Although oil remains profitable, increasing public concerns of the negative environmental impacts and of the dependence on oil have changed the energy market. The alternative energy market is not as profitable as the oil industry, but an increasing need to invest in alternative energy makes it a potential market in the future.1 Recognizing this, BP entered the solar market in 1973.2 BP, however, does not gain a competitive advantage from its expertise in oil to help them succeed in the solar industry. It is important for BP, therefore, to consider whether it would be in their best interest to exit the solar industry, or whether BP has any competitive advantage to stay. This plan will show that BP can become the leader of the solar industry. It needs to, however, exit other alternative energy markets, educate the public and aggressively advertise, lobby the government, and invest in improving the technology of solar cells.

Lady using a tablet
Lady using a tablet


Essay Writers

Lady Using Tablet

Get your grade
or your money back

using our Essay Writing Service!

Essay Writing Service


The Anglo-Persian Oil Company, formed in 1908, was renamed The British Petroleum Company, shorten to BP, in 1954. In 1998, British Petroleum merged with Amoco and dropped the name British Petroleum to become known as simply BP.3 One of the world's largest integrated oil concern; BP would adopt a surprising re-positioning strategy in 1997 when Lord John Browne, group chief executive, acknowledged that BP needed to address the threat of global warming. Distinguishing itself from other oil companies, BP's reputation benefited from this new position and had been able to sustain this difference ever since.

Although the oil industry is usually considered the "bad guy," BP lead the list of Fortune magazine's Global 100 companies on corporate responsibility with the tagline "Beyond Petroleum," BP created the subsidiary BP Solar International that focused on solar energy. Due to the recent success of BP Solar, in 2005 BP invested $1.8 billion in BP Alternative Energy, which focused on hydrogen, solar, and wind power generation.

BP p.l.c is a global oil and gas company headquartered in London, United Kingdom It is the third-largest energy company and fourth-largest company in the world measured by revenues and one of the six oil and gas "super majors". It is vertically integrated and is active in every area of the oil and gas industry, including exploration and production, refining, distribution and marketing petrochemicals power and trading. It also has major renewable energy activities, including in befouls, hydrogen, solar and wind power

BP has operations in over 80 countries, produces around 3.8 million barrels' per day and has 22,400 service stations worldwide. Its largest division is BP America, which is the biggest producer of oil and gas in the United states and is headquartered in Houston, Texas As at 31 December 2009 it had total proven commercial reserves of 18.3 billion barrels of oil equivalent.] The name "BP" derives from the initials of one of the company's former legal names, British Petroleum.

BP's track record of corporate social responsibility has been mixed. The company has been involved in a number of major environmental and safety incidents and received criticism for its political influence.

Its primary listing is on the London stock exchange and it is a constituent of the FTSE 100 index. It has a secondary listing on the New York Stock exchange

Literature review

Porter five forces model


As of now, the solar cell industry outlook is very different across geographical market sectors (se. Since the incentive to enter depends on the profitability of the venture in the sector, we will discuss each sector individually.

The U.S. Market- The solar industry has not been promoted heavily in the United States due to the lack of enthusiasm of the national government. Efforts for solar panel installations, such as giving tax credits and property tax exemptions, are concentrated at the state level in selected states such as California and Arizona.12 Overall, the U.S. market is scattered so it is difficult to get a national business thriving. There are many small independent companies, but few major domestic players. Consequently, the U.S. does not have a large market share in PV cells production (see Figure 5). Currently the market is unprofitable and does not encourage many new entrants. Even foreign companies that have experienced success in Japan and Germany are hesitant to break into the U.S. market; lack of familiarity in U.S. operations and uncertainty in demands dissuade them from devoting money for the high shipping costs and tariffs. However, BP already has a familiar base in the U.S. due to its expanding petroleum market; it has the potential to penetrate and develop a localized monopoly over the solar industry In addition, the Bush administration has just recently recognized the need to devote research and development into renewable energy; this provides hope that U.S. will be more receptive to solar energy in the future.13

Lady using a tablet
Lady using a tablet


Writing Services

Lady Using Tablet

Always on Time

Marked to Standard

Order Now

The Germany Market- The market in Germany is more active and rapidly evolving. The photovoltaic solar cell industry is a very new and growing industry and is one that has the potential to encourage entrants readily. The government is in full support of this technology, especially with the Renewable Energy Act (EEG), which guarantees large payback rates to operators of photovoltaic installations. As the location for the largest trade fair for Europe's solar technology, Germany can be assured to keep up with the innovations.14 As a result, there are many opportunities for entrants to come in with better innovation and win over the market. The potential for product differentiation is great because the technology has many far-reaching consequences: the products can target a variety of consumers, from designing large-scale solar panel systems used to generate electric power for firms focusing on the everyday consumer that can buy small solar appliances to use for the home. The major players in the market are just starting to emerge, but no one has yet a large enough corporation and production capacity to drive out smaller competitions by economies of scale. BP Solar has its base in the European market and can use its position as a large corporation to prevent entry.

The Japan Market- The Japanese market is nearing its saturation point and that discourages entrants to the market. The demand for the product has increasing every year, with installations of PV panels in residential homes becoming more and more prevalent; so many companies have been attracted by the profitability. This led to a decrease in governmental rebates for these installations. Major players have developed in this market, mainly Sharp and Kyocera Solar, with sharp controlling the market share.15

A more general barrier to entry in all three market sectors is the scarcity of silicon. There is a global shortage of ultrapure polysilicon (the raw material for silicon wafers), which is a major component in the making of PV cells.16

Buyer and Supplier Bargaining Power

The photovoltaic technology is not very well understood so there is a low concentration of consumer base. Nonetheless, due to the slow and limited production of the technology, consumer demand still outpaced the supply. In 2005, 24 publicly traded solar companies sold out.17 As of now, buyers do not have much bargaining power due to the rarity of the product, but this will change as companies expand their manufacturing facilities and work towards mass production to bring down costs. On the other hand, the suppliers for the solar companies have a lot of bargaining power. The number of firms entering the solar industry business is increasing rapidly while the availability of supply is scarce. Even large firms have to wait up to 6 months for modules. As the firms frantically try to expand the product to meet the demand, they are faced with a shortage of silicon chips and modules, which lead to doubling of prices Companies such as BP, should devote research into using the silicon resources more efficiently to counter supplier bargaining power and lower manufacturing costs.


The major substitute for PV technology right now is the standard electricity produced by coal and natural gas. The threat from this substitute is great because it has been the main source of energy for household devices. The standard electricity is still much lower in cost than the PV cells so there is very little incentive for consumers to switch to solar technology. However, with development and research, firms are cutting the cost per watt of the PV cells by 5% a year and can continue to improve the cost to watt ratio significantly until it is comparable to that of standard electricity.18 Since natural gas and coal are limited in supply, their prices will eventually increase, causing demands for alternative energy sources such as solar cells to increase. However, solar cells are not the only alternative source for generating electricity. According to Energy Information Administration, solar only accounts for 0.2% of the renewable electricity produced in the United States. The biggest sector in the renewable energy area belongs to hydropower (75.2%).19 Hydropower plants, although more prevalent and cheap, have its shortcomings, including decreased water quality and negative effects upon natural wildlife habitats. Solar cells can play upon that weakness as one of the cleanest renewable energies currently known.

Lady using a tablet
Lady using a tablet

This Essay is

a Student's Work

Lady Using Tablet

This essay has been submitted by a student. This is not an example of the work written by our professional essay writers.

Examples of our work


The current major players in this industry are Sharp, Kyocera Solar, Shell Solar and BP. Price rivalry is not significant amongst the firms because solar energy is already an expensive technology to produce. It will harm the industry to undercut prices, as the technology is not cheap and well understood enough that an increasing but small consumer demand will not compensate a reduction in price. In addition, the major players in the industry have separate geographical markets and not much overseas establishments. The high cost and the segregated consumer base minimize competition. Only with mass-production and increased popularity can price rivalry happen.


A major problem with PV technology is the lack of electronic device compatible with the cells. Synergies can include selling adapters that allow the use of PV cells with household appliances. The solar company can also team up with other electronic corporations such as Sony to produce appliances that operate with PV cells. Other possible synergies are to integrate service with the product. Access to technical assistance is often a key for PV cell installations. Since it is a new technology, consumers will need a lot of guidance in installation and maintenance. BP has already incorporated service by providing installation and free check-ups with each purchase of its solar panels.


SWOT Analysis


One of BP's major strengths is that it is a major corporation with plenty of financial assets to back up its alternative energy research. In 2005, BP had profits of $22.341 billion.38 BP, relative to the small specialized alternative energy companies, has a great advantage as far as financial backing. BP has the capability to invest a great deal in research to improve alternative energy technology. BP recently signed a strategic joint venture to access China's expanding solar market and provide local manufacturing capacity.39 Since BP has been in the solar industry business for thirty years; it has the experience and is acquiring the technology it needs to be a major player in the solar industry. In 2004, the BP Solar business first became profitable.

BP, with its Energy Max solar electric ground systems technology, which follows the path of the sun from east to west, maximizing the performance of the cells, provides for a good solar option to its customers. BP has provided a number of different companies and groups solar cells. In 2004, BP Solar provided the solar panels to a Whole Foods Inc. store in Edgewater, NJ, which became the first major retailer in the Northeast to use solar energy as a power source. BP provided the solar panels to the United States Marine Corps Air-Ground Combat center. Some other projects included the Lufthansa Terminal in the Munich, Germany airport and the Tennessee Valley Authority in Chattanooga, TN.41

BP has created a number of programs to increase public awareness of the need for solar energy. BP created the BP Solar Neighbours Program, where every time a celebrity has BP solar panels installed into their home, BP will donate a solar system to a low-income family living in South Central Los Angeles. BP has the opportunity to combine with celebrities to promote the use of solar cells. It also has the BP Solar Connection Program, which is designed to raise awareness in schools the immense benefits of clean alternative energy. Through programs like these, BP is increasing the awareness and therefore the demand of solar energy. BP Solar even donated panels to ABC's Emmy award-winning reality series "Extreme-Makeover: Home Edition".


Compared to alternative energy companies not in the oil industry, BP is at a disadvantage by its negative "dirty oil" image. In March of 2006, a major BP pipeline ruptured on the North Slope of Alaska spilling thousands of litters of crude oil into the Arctic Ocean. Accidents like these are negatively impacting the companies' attempts to re-brand its image to a more environmentally friendly oil company. Environmentalists are calling BP out on the re-branding as just a way to green wash-giving a positive public image to unsound environmental practices-their public image. The BP brand is extremely strong for oil, but not nearly as much as it is for its alternative energy sector. The average person does not necessarily know that BP has entered into the solar energy market.

Another major weakness of BP Solar is that the photovoltaic industry has very little in common with the petroleum industry. BP has perfected the ability to refine able to make chips, store energy in batteries and such. In entering the solar energy market, BP had no competitive advantage over other companies to be able to use its vast knowledge in petroleum. Thus, it is extremely difficult for BP to create synergies between the oil side of the company and the solar side.


With its profits from oil, BP has a number of opportunities to invest and acquire more in the solar energy sector. BP has also begun to sell its photovoltaic cells and modules that provide power for homes at Home Depot. Currently, BP Solar has teamed up with Home Depot in offering a BP Solar Home Solutions in California, New Jersey, and Long Island, New York. The BP Solar Home Solution offers free in-home consultation, professional installation, and free six-month checkups. BP also offers a variety of services, such as someone who would help handle the paperwork, permitting application process, and rebates. The solar systems purchased include a five year full service warranty and a twenty five year limited warranty on the panels, which helps to reassure consumers on switching over to solar energy. BP can also sell to other home improvement stores such as Lowe's and Ace.

BP has a number of opportunities through the government to increase its profits. One such thing includes passing legislature that provides tax breaks to individuals and corporations that opt for alternative energy as a means of electricity. It can also encourage states like California, Arizona and Florida to pass a mandate that homes built after a certain year should be required to have some solar energy device. Though this would also be helping its rivals, it would still benefit BP Solar as well.

BP has some opportunities to create synergies between the petroleum side of the business and the solar side. It can very well use solar energy to power its operations such as its business offices, plants, and even gas stations. If BP Solar improves the technology to make photovoltaic cells more cost efficient, it can very well create connections between the two sides of the company.


With many people realizing the need for alternative energy sources in the near future, there are a number of companies specializing in specific alternative energies, including specifically photovoltaic solar cells. BP, however, is extremely diversified and has its assets in a number of different products, with the obvious being oil, but in other alternative energies as well. The extreme diversification could possibly pose problems to BP in the future. Shell, another successful oil company has entered into the solar energy market, and it is currently one of the four major solar energy leaders along with BP Solar, Sharp, and Kyocera.