Questions on Management of Financial Resources and performance

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Q1 `Critically consider the impact the resource decisions have both internally and externally have had on BP's performance and effectiveness.

Board of directors decision to cancel further dividends in 2010 to use this amount in for future investments.

Directors have decided to revise its decision to give further dividend to the shareholders is look like un favorable decision for the shareholders of the company. The decision have to be taken to the directors of the company due to happening of tragic accident which cause loss of 11 precious lives but this amount is decided to use for long term investment helps British Petroleum to compensate the effected families, increase business performance and increase in the wealth of the company and make it competitive in the future. Further the company decided to compensate the families of the affected persons which will boost the image of the company in the existing employees of the company and cause a motivational factor for the existing employees. The company also decided that in future the company becomes able to resume the payment of dividend and this will be enhanced with improvement in the performance and position of the company helps to build the trust of the shareholders of the company of today sacrifice will gain in the future.

Board has decided to sale the assets of the company upto 30 billion and use this amount to meet the financial commitments.

In the year 2010, board of directors of the company has decided to revise its decision of the financial dependency of extra loan financing and to meet is financial requirement by issuance of further capital. Company has decided to identify non-profitable operations of the company and by sale of these assets meet its financial crunch.

Company has decided to keep focus on value of services rather than expansion in the volume of business. This will help the company to strength internally by reducing the loss of non-profitable assets and to boost investments in the profitable assets of the company. By reducing extra financing from the banks and financial institutions reduce the burden of heavy interests on the loans. This will help in increasing shareholder wealth of the company by decreasing the heavy expenses spend in payment of interest amount.

Company has decided to re-structure its risk management and assessment strategy and build separate department to oversee this area and strategy is based on Exploration, Developments and Production

The existing event cause became a tragic moment in the history of British Petroleum. To avoid such events in the future, board decided to restructure risk management policies and procedures and involve the experts in restructuring process. This will be beneficial for the company, its employees and workers and its stakeholders and cause the motivational factor for the employees and workers of the company. It helps to build the image of the caring management in the employees and workers of the company.The company has to eradicate the bad impact of this tragic event and will create such steps which build the image of caring, safer and congenial enviourment in the minds of the employees and workers.

BP management concentrate to a wide range of new upstream resource opportunities, and already have 32 project start-ups planned between now and 2016.

Board and management decisions showtheir foresight thinking for the future requirements of the company to make it completive in the global word. To take benefits form the emerging opportunities the company has made planned for the upcoming projects and to manage the resources of the company efficiently and effectively. This helps not only the company to get benefits from the emerging opportunity in the business world but also make it able to survive with the competitive race of the global economy.

These factor shows company strength to foresee the future demands regarding the energy sectors which could largely help the company to increase its share in the market from 7%.

BP management decided to expand its business by liaison with the other major market players.

Board of director of the company have decided to make a joint venture to make accesses to the areas where the company has not able to better perform independently make the company to expand its business area and to use its resources effectively with the joint venture. This helps the company to introduce it own identity that area and build a long live relations with its line partners. It helps the company to use and upgrade it exploring technology with the help of joint venture and produce the best results. The company has already signed an agreement with Russia with TNK_BP. Company has announced a second historic agreement. This will, subject to completion, see BP and Reliance work together across the gas value chain in the fast-growing Indian market. These factors shows that company strategy to expand its exploring and producing areas with the collaboration with other energy players of the world and this collaboration helps the company to use modern technology and to make investment the area of research and development.

Board and Management concentration on research and development to use its resources and to generate new ways energy generation methods

Board of director of the company realizes the change inworld demands for use of energy resources. To en cash this opportunity and to see the trend in future the company has decided to shift its concentration and use its resources to produce lower carbon energy,. The company has become leader in creating wind energy, solar energy business and invests in carbon capture storage technology. The company starting its operation to produce bio field in Brazil, UK and USA. The company is already engaged in the generation of another method of generating energy like wind energy, solar energy and have vast investment in carbon-capture and strong technology. The company decided to fully concentrate to become mature in producing lower carbon energy. All these factors reveal that the company management feel the future trend in energy sector and start to take steps to strength itself to meet the future coming energy trends which greatly help to make company strong player in the energy sector.


Q 2 Critically evaluate, appraise and analyse financial data, techniques and tools to support the business strategy of BP. (20 marks)


The industry in which BP is operating is risky due to number of factors and as a result of that company have adopted risk based approach in decision making, implementing and formulating business strategy. The number of risk involves volatile international oil price, foreign exchange currency risks and mainly operational risk in different parts of the world, like in last year a job in Mexico Gulf claimed 11 lives under the deep sea water. These above mentioned factors are not extensive but have got significant attention in risk management policy.

After reviewing latest Chairman and chief executive report available on BP website it is evident that company will continue risk based strategy to enhance company financial performance, but in response to last year now the company is focusing more on the risk minimization and managing the risk as well to ensure there must be a resilience to operational and safety risks.

If we critically analyze the financial statements there are some indicators which point out and support risk based strategy of BP as follows

In the latest balance sheet the investment in associates has increased by 2% which shows that BP is acquiring overseas companies to do a job for BP. This type of approach is very risky in entrepreneurship.

As in the Group Executive report BP has sold its assets of 30 billion to fulfill its financial commitments. This is very risky policy to fulfill financial commitments through the sale of company operation in different parts of the world. As in the cash flow statement sale proceeds from the sale of fixed assets is 7,492 million in 2010 as compared in 2009 is only1,715 million and more significantly finance has been arranged through the sale of business as in 2010 is 9462 million as compared in 2009 is 966 million and in 2008 is only 11 million. This is worrying situation for the company.

If we look at group balance sheet of financial year 2010 financial debt of the company has increased in both current and long term liabilities portion which will have significant impact on the finance cost of company. The current portion of provisions has been increased many times as compared to last year, in 2009 1660 million and in 2010 9489 million.

For the year ended 2010 the group income statement shows some of the worrying indications such as revenue has increased only..24% but purchases have increased by .25% and production related expenses have increased .32% if we compared it with the financial year 2009. Exploration cost has been reduced to 843 million as compared to 2009 which is 1116 million. This thing is indicative that BP is not exploring new resources which will have significant impact on the future performance of the company.

Conclusively in the end it seems company has been little bit miss managed specifically in 2010. Which may be the reason that three key personal had left the company at three key positions. Overall company is starving for finance which has been managed but unfortunately in a very unpopular way which may have long term significant effects on BP future profitability.


Q 3 Identify and critically assess the management and performance of tangible and intangible resources in business strategy and planning.


Tangible resources

Tangible resources are those resources like equipment, vehicles which have actual physical existence. The British petroleum tangible resources include a large human resource of the company and include company buildings, refineries, oil wells, pipelines, petrochemicals, service stations, office equipment, furniture and fixture, land improvements etc.

Tangible resources is one of the vital factor to evaluate the business performance of any company. In the year 2010, companies keep focus to hire specialist workforce which possess expertise in performing their given task. In the current year the outstanding results to the oil spill proves the company human resource capability and commitment. Company operates Europe, the US, Canada, Russia, South America, Australasia, Asia and parts of Africa. Company utilizes its fixed asset resource around 60% in Organization for Economic Co-operation and Development (OECD) countries, 42% of our fixed assets located in the US and around 20% in Europe.

Company has mobilize its tangible resources effectively and efficiently to obtain maximum output by using tangible resources. During the year as per latest financial statement company has made investments in acquisition of fixed asset of an amount 16,510 million and 1,997 million from acquisition to other energy players of the world which shows company commitment to introduce new and upgrade it exploring and producing technology.

Intangible resources

Intangible resources are things like corporate images, brands and patents that are present but cannot be grasped or contained.

Intangible resources in BP, other than goodwill, include expenditure on the exploration for and evaluation of oil and natural gas resources, computer software, patents, licenses and trademarks.

Exploration licenses and lease hold property acquisition cost are the intangible resources which company uses to make it competitive in the oil exploration and producing energy resources. The company holds no licenses that expire within the next three years which is the sign of management outlook on future time for the company. It results the company management would have a significant impact on BP's reserves or production.

In this year company management keep focus to hire professionals' petroleum engineers and scientists to help company for implementation of company plans. The services of these professionals are one of the great assets of the company. From the previous review it shows that the company has no any previous plan to hire such professionals in the past.


Q 4 Evaluate, apprise and analyses international aspects of financial strategy of BP?


British petroleum management fully committed to increase its share in the international market of oil exploring and producing companies form 7% to 10% by 2020. Before the month of April 2010, BP had drilled safely in the deep waters of the Gulf of Mexico for 20 years. The governments of Egypt, China, Indonesia, Azerbaijan and the UK have shown the confidence on oil exploring strength the British Petroleum company.

British Petroleum Exploration and Production segment covers upstream and midstream activities in 29 countries in 2010 including Angola, Azerbaijan, Canada, Egypt, Norway, Russia, Trinidad & Tobago (Trinidad), the UK, the US and other locations include Asia, Australasia, South America, North Africa and the Middle East. Company Exploration and Production activities also include gas marketing and trading activities, mostly in Canada, Europe and the US.

In Russia, Companyhas an associate through its 50% shareholding in TNK-BP, a major oil company with exploration assets, refineries and other downstream infrastructure.

In Refining and Marketing, company market its products in more than 70 countries, with a particularly strong presence in Europe and North America, and also manufacture and market its products across Australasia, in China and other parts of Asia, Africa and Central and South America.

In the US, company own or have a share in five refineries and market fuel primarily with brands of the ARCO and BP.

In Europe, BP own or have a share in seven refineries and the company market extensively across the region, primarily under the Aral and BP fuel brands. The company long-established supply and trading activity is responsible for delivering value across the crude and oil products supply chain. Company petrochemicals business maintains a manufacturing position globally, with an emphasis on growth in Asia.

Company lubricants business blends and markets lubricants globally, primarily under the Castrol brand, and is a growing business through market growth and the development of new products.

Company management continues to seek opportunities to broaden its activities in growth markets such as China and India.

We conclude that BP strategy is quite successful to make coverage in exploring and oil producing companies of international markets which greatly help the company to make it competitive among the rest of the oil producing and exploring companies. Company strategy is to build its business relationships to major player of the region and to make liaison with oil exploring and producing companies. However, the company should keep focus to build own business set ups to avoid by sharing its own business strengths with other companies which help the company to exploit other market players and to make a strong position in the regions.