Bp Mission Values Business Essay

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BP Mission & Values In all our activities we seek to display some unchanging, fundamental qualities - integrity, honest dealing, treating everyone with respect and dignity, striving for mutual advantage and contributing to human progress.

To translate these into guides for practical action, we build on them in our group values. By bringing together intentions previously articulated in a number of different policy statements, these make it clear that the group aims:

to have the best competitive corporate, operating and financial performance

to improve, and to be accessible, inclusive and diverse

to engage the creative talents of our employees, and develop and apply leading, cost-effective technology and intellectual creativity to enhance innovation and new ideas

to carry on its business in an environmentally responsible manner, and develop cleaner energy and renewable energy sources. The group is committed to the responsible treatment of the planet's resources and to the development of sources of lower-carbon energy

Source: BP.com

INTRODUCTION

I am doing a report on BP plc which is one of the world's largest oil and Gas Company. BP is currently operating in over 100 countries around the world and is still growing geographically. The three segments the company operates in are exploration and production, refining and marketing, gas, power and renewables (Datamonitor, 2007). In the current segments BP is operating it is able to provide fuel for transportation and energy for heat and light. BP's operations also take care of the management of natural gas and crude oil for pipelines, exporting terminals and liquefied natural gas processing facilities. This segment of operations is currently in countries like the US, UK, Norway, South America, Asia Pacific and the Middle East (Datamonitor, 2007). The segment of refining and marketing take care of the accountability for the supply, trading, refining and the transportations of the products. The four main areas of this segment are refining, retail, lubricants and B2B marketing (Datamonitor, 2007). The gas and power renewables has four operations which are trading and marketing, liquid gas, new market development and solar renewables. All of these areas contribute to the success of BP.

I am doing this report as BP is one of the largest oil and Gas Company in the world but has recently suffered from huge losses due to the Deepwater Horizon oil spill. In April 2010 the Deepwater Horizon oil rig exploded causing injuries and contamination in the sea of billions of barrels of crude oil. I will be analysing the organisation using various strategic analysis tool. The strategic analysis tools I will be using are a PEST analysis, Porter's 5 forces, SWOT analysis and a Value chain analysis. I have chosen to use these tools as I feel these are the best tools to use to understand the company's strong and weak points.

COMPANY BACKGROUND AND HISTORY

BP plc is a worldwide oil and gas company. BP's headquarter is based in London in the United Kingdom. BP is one of the three largest energy organisation in the world based on their revenues. BP is also one of the six super majors in the world in the oil and gas industry. BP (British Petroleum) operates in over 80 countries in the world and employs over 80,000 employees. BP work is active in all areas of oil and gas which are exploration and production, refining, petrochemicals, distribution and marketing, power generation and trading. BP also plays a huge part in the renewables energy which includes hydrogen, biofuels, wind and solar power.

BP produces around 3.8M barrels of oil per day and has over 22,400 service stations worldwide to sell their oil and gas. One of their larges operations is in the USA where they are the largest producer of oil and gas. As of 31/12/09 BP in the US had over 18.3B barrels of oil for commercial reserves. BP is on the London stock exchange in the FTSE 100 which shows they are one of the 100 largest organisations in the UK. BP is also on the NYSE in America.

BP's CSR has been mixed since its operations. BP has been involved in many major environmental and safety incidents over the last few decades. In 1997 BP took its first steps towards climates change to reduce GHG (green house gasses). Since 1997 BP has spent over $1 billion a year for the development of renewable energy sources and set a commitment to spend over $8 billion in 2005-2015.

On the 2nd of April 2010 BP has suffered from huge losses due to a huge oil spill called the Deepwater Horizon incident in the Gulf of Mexico. Since the incident BP has spent over £675m to clean up the incident and it is expected to cost over £2bn in total on completion of the cleanup.

Deepwater horizon incident:

Image from greenpeace.org

Graph to show cost of cleanup from April-June http://www.dailymail.co.uk

The explosion killed 11 workers and injured 16 others; another 99 people survived without serious physical injury. It caused the Deepwater Horizon to burn and sink, and started a massive offshore oil spill in the Gulf of Mexico; this environmental disaster is now considered the second largest in U.S. history, behind the Dust Bowl. BP is however doing its best to increase its safety on all its oil rigs and is always spending money to keep risk as low as possible and safety as high as possible.

PESTEL

POLITICAL

The world's leading energy markets are becoming more unstable due to the threat of political instability.

Due to high CO2 emission the governments around the world are encouraging sustainable forms of power.

World energy markets are becoming more unstable due to the increasing levels of oil requirements of a buoyant Chinese economy, creating tension between nations (Wright, 2004).

ECONOMIC

Economy is underpinned by its energy supply (IEA, 2004).

The global carbon market grew 6 percent to $144 billion last year, from $135 billion in 2008, as a rise in speculative trading offset a drop in carbon finance for developing nations(

World Bank says global carbon market in 2009 grew to US$144 billion, up 6%(World Bank, 2010)

SOCIAL

The Kyoto Agreement, signed in 1992, has led to carbon funds (World Bank, 2004) and emission trading (EU, 2004) in Europe and around the world, which is becoming a legal requirement.

Global Carbon Market Grows to $144 billion Despite Financial and Economic Turmoil (World Bank, 2004)

People's worldview is starting to alter to a concern over the sustainability of the upcoming, while this is not expected to vary noticeably to justify widespread changes to energy use for some time.

TECHNOLOGY

International Energy Agency states that alternative energy markets will be underpinned by technological breakthroughs.

Research shows technology is the key to competitiveness in the alternative energy industry; whilst alternative energy technologies (AETs) are underpinned by 48 critical success factors across technological, commercial, socio-political and organisational categories.

ENVITOMENTAL

Renewable energy is essential for limiting global temperature increase, say experts (IEA, 2011).

Energy efficiency and renewable energy will need to deliver more than three quarters of the world's greenhouse emission reductions by 2030 (2008).

On current trends, energy related emissions of CO2 and other greenhouse gases could push average global temperatures up by as much as 6°C in the long term based on IPCC projections (IEA, 2008)

Graph to show income to world bank (World bank, 2010)

Graphs to show where money was distributed (World bank, 2010)

Graphs to show projects in the world by WB (World bank, 2010)

World bank has many organisations contributing to them as well as BP plc.

LEGAL

On March 13, 2007, a draft Climate Change Bill was published following cross-party pressure over several years, led by environmental groups. The Act puts in place a framework to achieve a mandatory 80% cut in the UK's carbon emissions by 2050. (DEFRA, 2007)

Darling promises 34% emissions cuts with world's first binding carbon budgets (Guardian, 2009)

The Japan nuclear crisis has exposed an industry that lacks sufficient oversight, say some scientists, leading for renewed calls to redefine the mandate of the UN nuclear watchdog so that it can better police nuclear power plants worldwide (CSMonitor, 2011)

PORTERS 5 FORCES

Barriers to Entry

High proprietary learning curve due to technological focus on alternative energy industry.

High access to inputs

Stringent government policy and requirements to operate in industry.

Large economies of scale required to achieve cost leadership, which is central in energy provision.

Large capital requirements to set-up operations, hence large number of acquisitions and joint ventures.

Importance of ethical brand identity because of nature of market.

Large access to distribution required to ensure widespread energy provision.

Threat of Substitutes

Lower, but growing inclination for buyers to substitute to alternative energy because of higher cost.

Hence, high price-performance trade-off between substitutes (traditional energy provision being considerably cheaper and more reliable that alternative energy at this point in time).

Competitive Rivalry

High exit barriers.

Low industry concentration.

High fixed costs

Slow industry growth but alternative energy is vital for the long term future of the industry.

Very diverse rivals in rationale for strategies to invest and enter industry.

High corporate stakes for Shell Renewables and low stakes for BP Solar.

Bargaining Power of Buyers

Low bargaining influence of buyers.

Low buyer levels

Low buyer information.

High significance of product identity.

High accessibility of substitute

comparatively high buyer incentives, in terms of tax breaks and energy provider buy-backs.

Bargaining Power of Suppliers

Low concentration of alternative energy suppliers

High importance of volume to industry development and survival, because of the focus on low cost and economies of scale to compete in industry.

SWOT ANALYSIS

Strengths:

Having alliances with other strong and popular businesses is a major plus point for BP as it helps bring in new customers and make business more effective.

Being a market leader, as BP is the key to their success as it boosts reputation, profit and market share.

Competitive pricing is a vital element of BP's overall success, as this keeps them in line with their rivals, if not above them.

Riding high in the niche market in BP industry has helped boost BP and raised reputation and turnover.

Keeping costs lower than their competitors and keeping the cost advantages helps BP pass on some of the benefits to consumers.

The services/products offered by BP are original, meaning many people will return to BP to obtain them.

BP's marketing strategy has proved to be effective, helping to raise profiles and profits and standing out as a major strength.

BP's innovation keeps it a front-runner in BP as it is regularly turning out new patents/proprietary technology.

Experienced employees are key to the success of BP helping to drive them forward with expertise and knowledge.

High quality machinery, staff, offices and equipment ensure the job is done to the utmost standard, and is strength of BP.

BP has an extensive customer base, which is a major strength regarding sales and profit.

BP's reputation is strong and popular, meaning people view it with respect and believe in it.

Being financially strong helps BP deal with any problems, ride any dip in profits and out perform their rivals.

A strong brand is an essential strength of BP as it is recognised and respected.

BP has a high percentage of the market share, meaning it is ahead of many competitors.

BP's distribution chain can be listed as one of their strengths and links to success.

High quality products/services is a vital strength, helping to ensure customers return to BP.

BP's international operations mean a wider customer base, a stronger brand and a bigger chunk of the global market.

Development and innovation are high at BP with regard to their products/services, which is a sure strength in its overall performance.

BP's position in the market is high and strong - a major strength in this industry as they are ahead of many rivals.

Having little competition, being one of very few companies providing this service/product is a major factor in BP's performance.

The online presence of BP is strong, meaning it is ahead of many competitors.

The lucrative location of BP adds to its strengths due to its accessibility (road, rail, air etc).

Supplier relationships are strong at BP, which can only be seen as strength in their overall performance.

Weaknesses:

Reputation is important, and a damaged one like BP's is a major weakness as consumers will not trust the firm enough to spend money with them.

A serious weakness for BP is the fact their products/services are of low quality, meaning people will have better-quality substitutes.

Not reducing costs in the same way as their competitors' means BP is outlaying more of their profits. Having higher costs than competitors is a major weakness.

BP's R&D work is low and insignificant, which is a major weakness in BP as it is constantly creating new products.

The lack of staff experience is a major downfall for BP as it could lead to mistakes or negligence.

Old and outdated technologies hold BP back and limits success, as other firms are making use of better and more reliable technologies.

Not having an effective marketing strategy seriously hampers the success of BP.

Over pricing, setting too high prices for BP products/services makes them uncompetitive, which is a major weakness.

The lack of business alliances is a major weakness for BP, as they will struggle to get deals, favours and partnerships.

BP is in a poor financial position which makes it weaker than its competitors.

BP's lack of innovation limits its success, as there is no forward thinking.

Good companies need loyal employees, but BP has a poor relationship with staff which affects performance.

BP does not function internationally, which has an effect on success, as they do not reach consumers in overseas markets.

Problems with stock are a weakness for BP as they need to keep up with demand.

Online presence is vital for success these days, and lack of one is a limitation for BP.

The lack of original products/services is a major flaw in BP's future success, as it shows a blinkered outlook.

BP's location is weakness for the firm, as it means they miss out on many opportunities.

BP's lack of patents/proprietary technology puts it behind its rivals and is deemed as one of their weaknesses.

The weak brand name compromises success for BP as it doesn't inspire people to buy their products/services.

A limited customer base is a major weakness for BP as it means they have less people to sell or market to.

The weak market position of BP is a limitation to their overall success, as they are well behind their rivals.

BP's limited product line is a major weakness.

BP's weak supplier relationships also have an adverse effect on success, as it cuts ability to negotiate.

BP is behind its competitors with a low share of the market, which in turn leads to lower turnover.

Opportunities:

BP could benefit from Governmental support, in the form of grants, allowances, training etc.

Looking at export opportunities is a way for BP to raise profits.

Changes in technology could give BP an opportunity to bolster future success.

BP could benefit from expanding their online presence and making more money from online shoppers/internet users.

The changes in the way consumers spend and what they buy provides a big opportunity for BP to explore.

BP is in good financial position, which is an opportunity for them to explore in terms of investment in new projects.

Decrease in taxation gives an opportunity for BP to reduce prices or increase profits.

The growth of the BP industry is an opportunity for BP to grasp.

New market opportunities could be a way to push BP forward.

As the economic climate improves, so do the opportunities for BP.

BP has the opportunity to enter a niche market, gain leading position and therefore boost financial performance.

Reaching out into other markets is a possibility for BP, and a big opportunity.

Grasping the opportunity to expand the customer base is something BP can aim for, either geographically or through new products.

Takeover and merger opportunities could be explored for BP and used to acquire new customers, new resources and enter new markets.

Expanding the product/service lines by BP could help them raise sales and increase their product portfolio.

Reduction in interest rates could benefit BP as business costs would come down.

Expanding into other markets could be a possibility for BP.

Forming strategic alliances and joint ventures is an opportunity for BP to maximise profit and gain new business.

Structural changes in the industry opens other doors and opportunities for BP.

Threats:

Consumer lifestyle changes could lead to less of a demand for BP products/services.

Tax increases placing additional financial burdens on BP could be a threat.

Change in demographics could threaten BP.

The financial burden of increasing interest rates could be a threat to BP.

Regulations requiring money to be spent or measures to be taken could put financial or other pressure on BP.

New products/services from rival firms could lead to BP's products/services being less in demand.

Changes in the way consumers shop and spend and other changing consumer patterns could be a threat to BP's performance.

Being undercut by low-cost imports is a major threat for BP.

Not keeping up with changes in technology could be detrimental to the future of BP as they could slip behind their rivals.

Slow growth and decline of the BP market is a threat to BP.

Increased competition from overseas is another threat to BP as it could lead to lack of interest in their products/services.

Extra competition and new competitors entering the market could unsteady BP and be a threat.

The actions of a competitor could be a major threat against BP, for instance, if they bring in new technology or increase their workforce to meet demand.

Price wars between competitors, price cuts and so on could damage profits for BP.

A slow economy or financial slowdown could have a major impact on BP business and profits.

A decline in demand for BP products, with no likelihood of resurgence could pose a threat.

The rise and/or fall of the foreign exchange rate could threaten BP with regard to importing and exporting.

Rising costs could be a major downfall for BP as it would eat into profit.

BP could be threatened by the growing power customers have to set the price of their products/services.

Structural changes in the industry could be a threat for BP

BP could be threatened by the growing power their suppliers have to set their prices.

Substitute products available on he market present a major threat to BP.

VALUE CHAIN ANALYSIS

CONCLUSION

This paper has analysed the business environment, key drivers of change and CSFs within the energy industry and more specifically, the alternative energy market. Focusing on two competing SBUs, BP Solar, part of the BP Group, and Shell Renewables, part of the Royal/Dutch Shell Group, Analysis has shown that:

The energy industry remains dominated by oil production and is driven by changes in demographics, urbanisation, income levels, market liberalisation and demand. Despite this, the evolution of the industry will result from diminishing oil supplies, leading to renewable energy sources becoming a strategic necessity in the long-term.

The CSFs for the alternative energy industry is technology leadership, which in itself requires BP Solar and Shell Renewables to leverage their resources and capabilities to meet the 48 critical success factors across technological, commercial, socio-political and organisational categories.

The business strategies of the two SBUs are remarkably different, which is reflected in their resources and capabilities demonstrated over the last five years, and more so, over a much longer period. Here, BP Solar leverages its huge financial resources, maintaining a strong foothold in the alternative energy market, but concentrating on its core, oil business. Shell Renewables, on the other hand, has employed its skill in project management, strategic acquisitions and partnerships, to increase its stake in the market from which it hopes to gain a competitive advantage.

BP Solar has seen few impediments to its performance over the last five years, allowing it to take its planned, cautious approach to alternative energy investment. Shell Renewables, whilst being successful in its own right over the last five years, is threatened by the financial re-structuring the company must undergo in light of its oil reserve over-estimations.

The analysis of BP Solar and Shell Renewables is interesting in that it shows how the two SBUs, which currently experience fairly similar success, are taking very different strategic approaches to their entry into the alternative energy industry, based upon the different resources and capabilities of their parent companies.

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