The Progression Of A National Economy Commerce Essay

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In the end of the twentieth century the world economy, as a group of national economies and their economic and political relationships, acquires a new quality of changing global environment and especially business environment - the Globalization. Globalization covers the major processes of socio-economic development and accelerates economic growth and modernization of the world. At the same time, globalization gives birth to new contradictions and problems in the global economy. Nowadays, all countries in different degrees are in process of globalization.

Globalization refers to global economic integration of many formerly national economies into one global economy, mainly by free trade and free capital mobility.1 From my point of view, the concept of "globalization" is multifaceted. In more general terms - globalization is the change of national, regional problems and features to the global scale and the formation of new economic, social and natural global environment. More specifically - globalization is a process of transformation of national economic structures in the direction of a cohesive and unified global geo-economic environment.

Nowadays, the global systems of connections and relationships that develop in various spheres of life create new communities and institutions. The interactions, interpenetrations, interdependences of national systems begin to take an intensive and organic nature.

We see the development of the global multinational corporations in economic sphere. They are the most powerful part of the corporate business, operating on an international scale and playing a leading role in strengthening of global economic relations.

In this assignment, I would like to review one of the largest multinational corporations - the British Petroleum Corporation. I think, it is very interesting to review its history (last 5-10 years) in terms of adapting to changing global environment, analyze the potential global changes and indicate how the company will need to change in order to stay competitive in the new business environment (especially concerning recent events in the Gulf of Mexico).


Nowadays, BP is one of the largest multinational corporations in the world. "On April 19, BP was the fourth-largest company in the world-worth almost $200 billion…. On June 21, BP saw half of its value-$100 billion-wiped out".2 In this part, I will review main financial, operating, staff, performance statistics of the company, because in is very important to see the change of financial situation from 2005-2009. The company presented statistics for second quarter 2010, but I want to review the whole last financial year, in order to make the review more complete.

Total equity 102,113 (est. 2009) - 80,765 (est. 2005)

Cash and cash equivalents at the end of year 8,339 (est. 2009) - 2,960 (est. 2005)

Decrease (increase) in net debt (1,120) (est. 2009) - 5,359 (est. 2005) Number of employees 80,300 (est. 2009) - 96,200 (est. 2005)

Dividends paid to share holders ($ million) 10,483 (est. 2009) - 7,359 (est. 2005)3

Total hydrocarbons produced (thousand barrels of oil equivalent (mboe) per day)

3,998 (est. 2009) - 4,014 (est. 2005)

Total refinery throughputs (thousand barrels per day (mb/d))

2,287 (est. 2009) - 2,399 (est. 2005)

Volume of oil spilled (million liters) 1.2 (est. 2009) - 4.4. (est. 2005)

Recordable injury workforce 951 (est. 2009) - 1,471 (est. 2005)4

Service stations 22400 (est. 2009) - 28500 (est. 2005)

BP Corporation owns major world-famous brands, it characterize its multifaceted activities in various spheres of business:

"BP" - core brand of BP Corporation, which identifies the company, its goals and aspirations. The brand is actively used for business development of the corporation.

"ampm" - brand under which operates more than 950 non-stop shops on the west coast of the USA (California, Arizona, Nevada, Oregon, Washington, etc.).

"Aral" - brand designed for high-performance motor oils with low emission levels and increased working life of the engine.

"ARCO" - one of the leading brands of retail gasoline on the West Coast.

"Castrol" - one of the leading brands in the field of automotive lubricants. More than 10 thousand staff employed in the company under this brand.

"Wild Bean Cafe" - brand quick-service restaurant. Brand presented in 4 continents of the world.

The main activities of the corporation's exploration of resources are concentrated in Algeria, Angola and Egypt. In this region, the company is represented mainly in the form of joint ventures with local companies. In other African countries, the company sells oil, gas and lubricants, as well as the processing of petroleum products. Asia - Activities for the extraction and exploration in this region is concentrated in China, Indonesia, Vietnam and Pakistan. Significant power chemical plants are in China, the Philippines, South Korea and Malaysia.

The main activity of BP in Colombia and Venezuela is the exploration and production. In Brazil, the company has a joint venture in the field of chemistry and a number of projects to use solar energy. In other countries in South America the company's activities focus on the sale of oil, lubricants and petroleum products.

BP Corporation attracts a lot of attention to its biofuels, wind power, solar power, carbon capture and storage departments.


At first, I would like to review these changes in company`s strategy, because strategy determines the direction of BP`s development (safety, environment, etc.). The corporation`s activities are based on a five-year and annual plans of strategic development. BP`s management presented its strategy in March 2010, before Oil spill in Gulf of Mexico. So, I think, that after the analysis of Gulf of Mexico response program, BP`s management will present new developed strategy. It is very interesting to predict this strategy and changes in order to avoid and predict global challenges.


2005 Strategy: The BP's strategy is to increase extraction by finding the largest fields, concentrate on a limited number of the richest oil and gas basins in the world, consolidate the leading position in these regions, manage assets with declining production effectively, sale of non-competitive assets.

March 2010 Strategy (Before Oil spill): BP strategy is in investing to the safety and efficiency of production growth in order to strength corporation`s leadership in the biggest hydrocarbon basins. BP intends to develop its technological advantage and implement the program of cost and capital efficiency.


2005 Strategy: BP focuses on its core refineries, where the high level of production is ensured by the scope and flexibility of the process, as well as high quality. In the field of sales, we expanded range of products. At the retail market, the company seeks to achieve competitive advantage through better organization of supplies, attractive offers for customers and efficient supply chain.

March 2010 Strategy (Before Oil spill): BP will focus on quality and integration through value chains and efficiency in performance. Also, the corporation wants to improve its business in advantaged assets in large energy markets. BP takes into account development of operations reliability and safety.


2005 Strategy: The strategic goal remains winning the leading position among the world's gas supplies through the use of infrastructure increase in gross profit at the expense of gas target categories of consumers and to optimize the supply chain of gas and other energy sources.

March 2010 Strategy (Before Oil spill): BP focuses on investments to new emerging energy areas and it intends to develop its share in wind, solar, biofuels and clean energies technologies.


From my point of view, BP management will focus its efforts to avoid environmental crisis like oil spills and refinery`s explosion like the explosion of BP Products' Texas City refinery on 23 March 20055 and Gulf of Mexico Oil spill.

BP did a lot to improve its safety efforts since 23 March 2005. In terms of safety, BP (2005-2010) determines:

safety management (promoting safe operations, recognizing outstanding HSE performance; improving safety culture; attestation the safety situation by auditors)

operating skills and knowledge (managing operations; executive operations program; cooperation with operations academy)

personal safety. In this sphere, we can see constant decline in employees` injuries. The company presented "Safety without wires system" (Figure 1,Figure 2)6;

process safety. In this sphere, BP will apply design principles: engineering and operating efforts to implement BP`s operations;

transportation safety (Aviation safety, Safe shipping and driving);

product safety (compliance and collaboration, product stewardship in BP, product labeling and material safety).

Also, BP made a lot in terms of environmental protection. BP (2005-2010) announced such efforts:

Management systems and standards

Environmental and social responsibility in sensitive areas

Decommissioning and remediation

Minimizing impacts with technology

Regulation and compliance

Environmental performance

I saw great commitment and great financial results from BP corporations. BP did a lot in terms of employee`s safety and environmental protection. They had bad experience with refinery explosion and they did not use this experience. The result was oil spill in Gulf of Mexico. The company`s management (T.Hayward) put BP on the brink of disaster. Let`s see what will happen next.




I prepared to the Business in Global Environment Module and I read Mike Peng Global strategic management book. I saw a great idea that "Global business, fundamentally, is about not limiting yourself to your home country and about treating the entire global economy as your potential playground (or battlefield)".7 I agree with that and I think this idea determines BP global development. But more over, this idea determines the development of new global changes and adaptation to these changes.

I can determine a number of problem of economic and technological development, which not so long ago were cared only by individual states, but now these problems are becoming a global. Perhaps, the most dangerous of these problems include the provision of energy, food and agricultural products, as well as the prevention of dangerous environmental distraction.

There are many theoretical views on the potential challenges of the global environment. T.Sandler determines "involve global warming, a thinning ozone shield, contamination of water supplies, nuclear weapon proliferation, terrorism, antibiotic-resistant diseases, and increased income inequalities within and among nations."8 B.Digby thinks that "like the colonialism of the fifteenth to nineteenth centuries, globalization is being used to drive market expansion.9 I agree this statement too, because the activities of many multinational are very harmful for people and nature (like in case of Nauru Island). But the experts of the World Bank indicate that "growth prospects are very uncertain because of the situation in Europe. Nevertheless, developing countries are projected to lead the recovery with growth rates around 6 percent."10 But, we can review these like the problem like the changes of capitalism and westernization ("capitalism causes globalization")11.

I would like to determine the main global changes, to which BP must adapt.

At first, the problem of global energy resources. Experts put on one of the first places the reliable use of energy resources among the necessary prerequisites for the successful development of the world. Experts predict the sustainable increase of energy demands with the increase of population. The global economy is in front of a twofold challenge: on the one hand, many importing countries: use more expensive energy, but on the other hand - remains a problem of assured and sustainable supply of countries dependent on imports of energy resources.

Global crisis of environmental protection. Mankind suffers the threat of irreversible destruction of environment, effects of which may be the most tragic. Globalization, on the one hand, increases this threat, because globalization intensifies the development of industry and transport, and on the other, represents a chance to curb the impending environmental problems. The current ecological balance is disturbed by human activities. And the more powerful productive forces are being used, the more the environment suffers. In short, the ecological crisis has acquired a global dimension that affects the international economic and political relations. Referring to the vital interests of the countries, it generates conflicts.

Growth of potential regional or global instability due to the interdependence of national economies on a global level. Local economic fluctuations or crises in one country can have regional or even global implications. This possibility is not merely theoretical, but is very real. We can see this on the example of the Asian crisis, which began in Thailand in 1997.

Technological and innovation changes. Every company faces the problems of lack of technologies and innovations. So, It is a very challenging issues for the global companies.

Competition. With the changes of the global environment (globalization) business competitions is becoming more and more tightened. Many companies are being bought out and BP should avoid such acquisition from its competitor.

Negative brand positions. Negative brand equity occurs when a company's brand actually has a negative impact on its business - meaning that the company would be better off with no name at all.12


I will indicate how the company will need to change in order to stay competitive in the new business environment in this part.

Global forecasting and predicting of impacts. The company`s management or its business intelligence should consider all the risks, issues and alternatives, which can influence company`s development.

Change management. On the basis of global forecasting and predicting of impacts. The company should take into account change management and its issues. It requires quicker and decisive actions from company`s management.

Corporate research. It is very important to improve corporate research, because company`s management should make a competitive advantage out of consolidate corporate research.

Operating performance provides strong financial performance.

Alternative Energy focused and disciplined. It is well-know that energy demand will rise and extraction of oil and gas will drop. So, company should invest more money in new clean energies like biofuel, solar energy, wind energy and etc. The future of the company is in this new energies

Increased focus on customer satisfaction

Corporate efficiency and safety. The corporation should improve extraction and refining efficiency, because through this we can save a lot of money for corporation`s development. In order to avoid such oil spills and explosion our corporation should create safe environment for its employees and take into account environmental protection.


The main challenge for multinational corporations and political structures today is to ensure that globalization becomes a positive force for all peoples around the world. This is connected to the fact that, while globalization offers great opportunities, its benefits are very unequally shared and its costs are unequally distributed. We recognize that developing countries and countries with transition economies face special difficulties in adopting measures in relation to this main challenge. Therefore, globalization can be fully inclusive and equitable only through broad and sustained efforts to create a shared future based upon our common humanity in all its diversity. These efforts must include policies and measures at the global level that would meet the needs of developing countries and countries with transition economies and are formulated and implemented with their effective participation.

The political and economic importance of multinational corporations is so great that in the foreseeable period of time they remain an important factor in enhancing the impact of industrialized countries in many regions of the world. Multinational corporations are now an essential element of the global economy and international economic relations. Multinationals play a leading role in the globalization of production. Development of a modern system of economic relations is taking place under the influence of rapid globalization.

Every company not only multinational should develop long-term strategy in order to predict potential global changes and indicate how the company will need to change in order to stay competitive. From my point of view BP`S management did not take into account the lesson of Alaska explosion. I hope that the new BP CEO R.Dudley will more carefully in environmental areas, because such oil spills affect everybody.


FIGURE 1. Workforce fatalities.

Source: Personal safety. BP Global Web-site. ""&HYPERLINK ""contentId=7059958

FIGURE 2. Recordable injury frequency (RIF) (per 200,000 hours worked)

Source: Personal safety. BP Global Web-site. ""&HYPERLINK ""contentId=7059958