British Petroleum Business Strategy - Term Paper Example

Social Performance of British Petroleum (BP) School Company overview BP plc, formerly known as British Petroleum is a multinational gas and oil company with its headquarters in London. BP is among the largest companies and a market leader in the world, among the players in the energy industry; according to revenue levels, as it was the fifth-largest company in the world in terms of revenues for the year 2012. The company was the sixth-largest player in the oil and gas industry, in the areas of production capacity, during the year 2012. The main activities of the company include the exploration and the production of natural gas and crude oil; refining oil and gas products, marketing, transporting and supplying them to the end consumer. The company also engages in the manufactory and the marketing of petrochemical products. Much recently the company has ventures in power production, in the areas of solar power generation and the exploration of wind as an alternative source of energy. BP organizational structure Source: (BP, 2008) Key factors in BP’s external environment that can affect its success One general environment factor in BP’s external environment, which is likely to affect its success, is its management of the environmental impacts of its supply chain. At the group level, the company reviews the management of water resources, greenhouse gas emissions, oil spill response and the protection of sensitive ecological centres (Hertsgaard, 2013). One case that affected the success of the company for years, as well as its revenues and sales levels was the BP oil spill. The impacts of the BP oil spill included the trial suits that the company faced in New Orleans. The trials had the potential of making the company to lose billions of dollars in fines. In one incidence, the company paid a fine of USD 4.5 billion; the fine set the record as the highest one levied from a US company. The company was required to pay the fine, due to the felony of lying to the Congress (Hertsgaard, 2013). Apart from the financial losses, the overage of the media compromised the image of the company among the members of public, who are the major consumers of the company’s products. The media coverage led to losses in revenue and sales, exemplifying the effects of external environment factors on the success of companies (Hertsgaard, 2013). The second key factor in BP’s external environment is the threat it faces in operational centres like the Gulf of Mexico, among other regions affected by hurricanes (BP, 2008, p. 21). The vulnerability of the company’s plants and facilities become highly vulnerable to violent hurricanes during the months of summer. In the past, the storms have injured workers and destroyed refineries and drilling rigs. For example, in 2008, hurricanes Gustav and Ike led to rig shutdowns. In addressing the situation, the company reduces the production capacity of its facilities during hurricane months (BP, 2008, p. 23). The effects of reducing productivity include that the company losses revenues and sales by a given margin, which affects its success in the short and the long -term. 2. The first crucial stakeholder group is the company’s board of governors. The board is responsible for the oversight and the direction of the company’s business, on behalf of its shareholders (BP, N.D). The roles of the BP Company are responsible for pushing business towards the realization of its goals, and assuming responsibility for all actions. The board is; also, responsible for overseeing the strategic issues of the company; addressing political, economic, and the social issues that affect the business of the company. Another role of the board is that of setting the principles of business, including the formulation of executive limitations, in overseeing the business of the company and its workers (BP, N.D). Another crucial stakeholder group is the shareholders of the company, and their roles include the fundamental role of financing the company. The roles of the stakeholders of the company include directing the affairs of the business, through voting over key issues (BP, N.D). The shareholders of the company, particularly the majority shareholders hold the role of protecting the interests of the company, by restricting the actions and the decisions that threaten its welfare. The third crucial stakeholder group of the BP Company is the employee-base. The employees of the company hold the responsibility of acting as technical experts on behalf of the company, including through the effective performance of their work (BP, 2014). The employees are responsible for teamwork throughout the organization and with external stakeholders. The employees play the role of managing the business aspects of the company at their respective levels; employees develop the company through growing its profitability (BP, 2014). 3. Five ways the primary stakeholders of BP can influence the organization’s financial performance The stakeholders of the BP Company can influence the financial performance of the company, by influencing the management decisions of the company (Legarth & Andersen, 2012). Firstly, the customers of the company can influence the decisions of the company and also the financial performance of the company, through the provision of feedback about their desired products (Legarth & Andersen, 2012). For example, market research is primarily informed by the views of customers, among other stakeholder groups. The employees of the company can influence the decision-making of the company and also its financial performance, through offering their commitment and loyalty. This group is very important to the financial success of the company, because they are the valuable asset behind productivity (Legarth & Andersen, 2012). Business associates and suppliers also influence the performance of the company; the collaboration of suppliers with the company leads to the determination of win-win situations. The suppliers and other associate groups affect the ways in which the company does its business, mainly because the company’s activities are usually informed by the shared values and the interests of the different parties (Legarth & Andersen, 2012). The communities surrounding the company influence the financial performance of the business, mainly because they are engaged in the decision-making processes of the company in some areas (Legarth & Andersen, 2012). The adverse effects of failing to engage this group is known to raise criticism and the blockage of planned company changes and activities. One such example was the case of the native Alaskans that expressed negative sentiments about oil exploration at the edges of Arctic Ocean (BBC, 2010). The concerns expressed by the local communities were partly fueled by the adverse effects of the BP oil spill. However, through the proper level of engagement, the local people’s mentality about oil exploration can be changed, which can allow for the continuation of exploration in the area. Through exploring the reserves in the area, the locals can benefit from the resources and the employment opportunities made available (BBC, 2010). The case demonstrates the effects of a lack of proper community engagement and education. The ownership structure and pattern of the company influences its financial performance. Strategic contingency and stakeholder theories are in support of the role played by the owners of a business, in the financial performance of a company or business (Berman et al., 1999). The theories explain the rationale for the influence of the owners of the company, by maintaining that the ownership pattern and the model of an enterprise influence the organizational structure, the strategic orientation and the management style of the business. The three areas affected by the ownership of the organization are instrumental in the financial health of any enterprise. BP is subject to the influence of the ownership system, mainly because the decision-making process covers a wide array of stakeholders, unlike in the case of a privately owned company, which can make decisions and take strategic actions in a relatively streamlined style (Berman et al., 1999). 4. One controversial corporate social responsibility concern for BP One of the most significant, corporate social responsibility concerns expressed by BP, and one which is highly controversial, is the fundamental change of the company’s business outlook. The position statement was communicated through the groundbreaking speech made by John Browne on the 19th of May, 1997. Through the speech, BPs intent to participate in the fight against climate change was made public; the company maintained that it would do all that it could to reduce its contribution to the problem of climate change. The statement of BP’s position about fighting climate change attracted the attention of its competitors, President Clinton, business press and environmentalists (Lowe & Harris, 1998). The speech was groundbreaking and a breakthrough due to the fact that BP was the first multinational companies to join the consensus to pledge its participation in fighting climate change. Secondly, the company made the commitment of cutting down the emissions produced during its production activities; the company pledged to join the global players reducing their emission of greenhouse gases. Thirdly, the company maintained that solar energy would become one of the business areas of the company, in addition to exploration, oil and chemicals production (Lowe & Harris, 1998). The concern expressed and the position taken by BP is extremely controversial, mainly because the company is one of the industry players that are directly linked to the closed-loop link between petroleum products, the consumption capacity the society and the impacts caused on the environment (Lowe & Harris, 1998). The controversial nature of the position statement can be proved from the fact that, irrespective of making the statements and taking the new stance, it continued to drill for oil and gas, which are the major contributors of green-house gases. This reality may imply that the company made the statements, only as a reaction to the increasing pressure from environmental protection spheres, while knowing that it would continue its business as usual. There is also the question, as to whether the company made the statements as a way of differentiating itself from its competitors (Lowe & Harris, 1998). These questions are particularly important, because walking the talk for BP would make its business very tough. 5. As the leader of the shareholders group, I would be highly advantaged, as the shareholders group is the major group that pressures the management and the employees to deliver profits. In many cases the shareholders group disregards the ethical concerns related to environmental protection among other areas (Marturano & Gosling, 2008). Step 1). Through the mobilization of the shareholders group, the group will start by identifying the driving forces, objections and the goals of the coalition. The driving forces include making BP a green company in its upstream and downstream supply chain. The goal is to make the supply chain green, through replacing the production of the products that contribute to the emission of green house gases, and replacing all processes with green activities. Step 2). The next step will be that of identifying the key members of the group and the company that are targeted (the ones to make the commitment to participate). The process of identifying the members of the coalition will entail the purposive recruitment of the major shareholders of the company. After getting the support of the majority shareholders, it will be easier to direct other groups (Marturano & Gosling, 2008). Step 3). The formulation of the message: after the group has made its commitment, the group will be engaged and provided with all relevant information during situational talks, so as to cultivate their interest, engagement and enthusiasm. Effectively administering the outreach plan will make the talks simpler and more productive. (Marturano & Gosling, 2008) Step 4). Packaging the message (determination of the best way to relay the message and the plan) Step 5). Distribute the message (rolling out the plan and implementing it throughout the company) Step 6). Evaluate the effectiveness of the change process. The rationale for choosing the shareholders of the company was that they are the main group that pressures the board of governors, the managerial function, and the employees of corporations to make profit at all cost. Through the commitment to compromise the profitability of the company, the shareholder group will be able to direct the other groups into the course of the change. In fostering collaboration levels among the different target groups, all through the development of the change model and the implementation of the changes, the creation of relationships and building trust will be an instrumental strategy. The steps taken to encourage the creation of relationships and building trust include maintaining openness and continuous communication amongst the different groups (Harvard Business Review, 2011). Openness will be maintained among all groups, including the employees, who will be guaranteed the security of their employment. The outlook of the change plan will also foster the building of trust and the creation of relationships, because all stakeholders will be guaranteed of their security and engagement. Secondly, irrespective of the obvious inequalities between the different groups, for example shareholders and employees, the different groups and the members of the groups will be considered equals. Through treating all group members and groups as equals, the levels of communication and openness will be fostered. Thirdly, the goal of changing the company into a green company will be shared among all groups and the members of groups. Through sharing the goal among all members, the importance of changing to a green company will be justified, and the support of all attracted (Harvard Business Review, 2011). Fourthly throughout the planning process and the implementation of the change, accountability will be shared among all groups and members of groups. For example, among the shareholders group, it will be emphasised that all shareholders must be accountable for the outcomes of the program. The other strategies to be used, towards ensuring that collaboration levels remain high; all groups will be offered equal hearing; communication will remain simple and the ideas of groups or members of groups will be accepted and reviewed (Harvard Business Review, 2011). Additionally, the different groups will compensate each other’s strengths; critical thinking and creativity will be encouraged all through the change process, and group decision-making will be the primary force behind the change process. 6. The challenges to face the process of forming a coalition include the bias caused by the needs of feeling recognised and fulfilled (through personal development and to experience security and identity). In addressing this potential challenge, the different groups or members will be encouraged and guided on finding common grounds (Rodgers, 2007). In the cases of inter-member conflicts, the moderation of others groups will be very important, because some members of the groups may compete due to their differences. In order to settle at a level of compromise, the benefits of compromise must outweigh the losses. The second challenge that may be encountered is that, the different groups, particularly the shareholder (owners of the company) will experience a loss of control over the other groups; routinely, shareholders manipulate other groups. Through the process of coalition, some groups may also feel that their identities are lost, which may trigger disagreements among the groups (Rodgers, 2007). In resolving these coalition problems, the steps taken to overcoming the challenge include: a. Identifying the roots of the conflict b. Looking beyond the incident in question c. Requesting for solutions d. Selecting the solutions that the conflicting parties can support e. Agreeing on a common solution The third challenge that may face the coalition is that of conflicts of group values, where the values of different groups are challenged or concerns are not addressed satisfactorily. In addressing conflict values, the conflicting members or groups, the process used for challenge number (2) will be employed (Rodgers, 2007). For example, the stakeholders group may have a conflict of values about the speed of shifting to the production of green energy sources like bio fuels, wind and solar energy. References BBC. 2010. Native Alaskans say oil drilling threatens way of life. BBC News US & Canada. Retrieved from: http://www.bbc.co.uk/news/world-us-canada-10549107 Berman, S., Wicks, A., Kotha, S., & Jones, J. (1999). Does stakeholder orientation matter? The relationship between stakeholder management models and firm financial performance. Academy of Management Journal, 42, 488-505. BP. (2008). Annual Report and Accounts 2008. Retrieved from: http://www.bp.com/content/dam/bp/pdf/investors/BP_annual_report_accounts_2008.pdf BP. (N.D). BP p.l.c. Board Governance Principles. BP Plc. Retrieved from: http://www.bp.com/content/dam/bp/pdf/investors/bp_board_governance_principles.pdf BP. (2014). Learning and development. BP Plc. Retrieved from: http://www.bp.com/en/global/corporate/careers/working-at-bp/learning-and- development.html Browne, J. (1997). ‘Addressing Global, Climate Change’, Speech at Stanford University, Stanford, CA, 19 May. 1997. Harvard Business Review. (2011). Harvard Business Review on Collaborating Effectively. Boston, MA: Harvard Business School Publishing Corporation. Hertsgaard, M. (2013). The worst part about BP’s oil-spill cover-up: It worked. Grist. Retrieved from: http://grist.org/business-technology/what-bp-doesnt-want-you-to-know-about-the-2010- gulf-of-mexico-spill/ Legarth, L., & Andersen, B. (2012). An examination of how British Petroleum communicated to their stakeholders through one of the worst oil spill ever, in April 20st 2010. BA MMC: Bachelor Thesis. Retrieved from: http://pure.au.dk/portal/files/45317258/BA_thesis_301207.pdf Lowe, E., & Harris, R. (1998). Taking climate change seriously: British petroleums business strategy. Corporate Environmental Strategy, 5(2), 22-31. Marturano, A., & Gosling, J. (2008). Leadership: The Key Concepts. London: Routledge. Rodgers, C. (2007). Informal Coalitions: Mastering the Hidden Dynamics of Organizational Change. Bibury, Gloucestershire: Chris Rodgers Consulting Limited. Read More