Analysis of the Strengths, Weaknesses, Opportunities, and Threats of British Petroleum - Case Study Example

SWOT Analysis of British Petroleum AFFILIATION: SWOT Analysis of British Petroleum The objective of this paper is to critically analyze the strengths, weaknesses, opportunities, and threats of world’s leading petroleum company British Petroleum. This paper provides SWOT analysis of British Petroleum along with its current strategies and possible future opportunities. British Petroleum is considered as one the leading energy company of the world. The company provides many products to its customers like fuel for transportation, photochemical products, retail services, and energy for heat and light. Oil and many other natural resources around the world have been explored by British Petroleum Samy, Odemilin, & Bampton, (2010). The company is responsible for converting natural resources into power energy. Now British Petroleum is trying to find fuel resources that reduce carbon footprint and greenhouse gases. The company is trying to accomplish its sustainability mission by finding alternative fuel resources like wind power, solar power, fossil fuels, hydrogen, and natural gas. Strengths On the basis of market capitalization British Petroleum is the second largest operating oil and gas company of United State and has number of strengths. First, the strength of the company lies in its successful operations and ability to generate high revenue. Just after a year of the most annihilating oil explosion occurred at British Petroleum’s oil resource in the Gulf of Mexico, the company successfully earned profit of $5.3 billion Stonaker, (2011). This shows the strength of the company because it recovered very soon. It has been argued by many researchers that the oil spill occurred due to mismanagement and poor safety precautions but the quick recovery and ability to bounce back shows how efficient the company is in its operations. Second, important strength of BP is its increasing demand. Bob Dudley in his speech said that the demand of British Petroleum’s products is continuously increasing day by day due to our efficient production and supply, and our search for oil and gas reserves is one of our greatest strength. He further said, 96% of our demand growth comes from developing countries like India and China, this shows we are still market leader in oil and gas industry around the globe. One, criticism on Mr. Dudley’s speech is that he disguised the potential problems that BP is facing in setting up its operations in emerging countries due to their poor law and order situation and terrorism. Figure 1, BP Strategy Presentation, by Hayward, T. (2010) Source: Wood MacKenzie, Deepwater refers to all fields in >500m water depth British Petroleum is leading deep-water company because it possesses largest deep-water oil spills and these oil spills provide great strengths to the company. Due to largest deep-water oil spills BP has become leading deep-water company and has great experience in offshore projects. This shows that the company is constantly moving towards achieving its goal of becoming world’s largest oil and gas company. Houria, & Farida, (2014). The Operating strength of BP provides significant long-term growth potential to the company with high-margin oil emphasis and key success factors around the globe Smith, Smith, & Ashcroft, (2011). Smith, Smith L., and Ashcroft explained in their report that BP has widespread revenue sources which help to reduce the negative impact of market volatility and gives economic stability to the company. This statement show that British Petroleum has diverse resource base and large oil and gas reserves around the world and these resources gives strength to the company. Figure 2, BP Strategy Presentation, by Hayward, T. (2010) Source: BP internal, Discoveries and extensions of diverse resource base and reserves addition. BP’s has great financial resources that back up its energy research and due to high research it is constantly finding energy resources Samy, Odemilin, & Bampton, (2010). Recently the company signed a strategic joint venture with China and gaining popularity in Chinese solar market by providing local built-up capacity. From BP annual report it has been proved that it is successfully operating its functions in Chinese solar market and has great potential to compete with other solar energy businesses. Weaknesses Along with great strengths British Petroleum has some weaknesses that have major impact on its operations and the company is constantly trying to remove these weaknesses. Over the past few years oil and gas reserves of British Petroleum have declined and this has very negative impact on the profit margins of the company Mills, (2010). Mills is absolutely right because declined in oil and gas reserves especially in North Sea region causing low profit margin of British petroleum in that region. Mills also stated in his report that over the last few years the company is also experiencing a decline in revenue per employee as compared to its competitors. This statement of Mills is also correct because it has been proved by comparing BP’s final report with its competitors, weak revenue per employee shows the company is slowly declining and its operational efficiency is reducing. Due to lack of market knowledge and experience BP has faced problems in its initial period of expansion in Brazilian market, the lack of Brazilian market knowledge was considered as the week point of the company Smith, Smith, & Ashcroft, (2011). This shows that lack of Brazilian market knowledge was a weakness of BP and it should investigate Brazilian market before starting its operations there. The exploration of British Petroleum oil in the Gulf of Mexico on 20th April 2010 is considered as the worst environmental disaster that ignited serious environmental problems Painia, (2012). BP has faced huge financial loss due to this oil explosion in deep water horizon. It has been criticized by many economists that this explosion indicates improper management and week safety precautions of the company and this explosion has harmed aquatic animals. All these critiques are correct because this explosion has harmed marine life and has negative impact on our ecosystem. Because of the above mentioned weaknesses BP is slowly losing its share and is trying to regain its power and revenue. Opportunities Opportunities exist in external environment such as economic conditions of the country, demographics, and other environmental factors. When we discuss about opportunities we consider the possible chances to gain success and achieve high growth. Being in the list of top oil producing companies British Petroleum has many external opportunities. BP has several opportunities to make alliance with other countries and also the acquisition in the North Sea area Painia, (2012). The company knows the increasing need of natural gas and is constantly trying to find new natural gas resources. This effort will allow the company to gain opportunity of serving majority of people around the world and increase its global market share. British petroleum is also taking opportunity to satisfy the increasing oil need of China and is achieving strong position in Chinese oil and gas market Houria, & Farida, (2014). However, the oil and gas industry of China is very strong and there are possibilities that in the future china will satisfy the oil and gas demand of its people and BP will lose its market share in China. Figure 3, BP Strategy Presentation, by Hayward, T. (2010) Source: Data based and comparison of BP restoring revenues, portfolio in 2004-2009 Comparing to other oil and gas producing companies British Petroleum’s graph of restoring is going upward which indicates that the company is taking all possible opportunities to restore its revenues. In spite of few slow revenue years the company is making all possible attempts to regain its power and restore its revenue. BP has observed a sharp decline in its refining ability during 2005 to 2006 but by improving its functions and by finding new oil and gas resources the company has increased its refining ability Aguilera, et.al (2009). The graph shows the fluctuations in BP’s revenue and indicates a sharp decline in its refining ability. In spite of all the fluctuations BP is tapping new opportunities by investing more money in research and development and improving its operations. Threats The major threats of British Petroleum that exists today are saturation of drilling efforts in North Sea region. It has been argued by many researchers that now North Sea region has been fully utilized and there are no more resources, and this is the main reason of dry drilled holes Tompkins, J. (2011). All the arguments are correct therefore BP is investing money to find new oil and gas resources on other parts of the world. Figure 4, BP Strategy Presentation, by Hayward, T. (2010) Source: BP Statistical Review of World Energy June 2009. BP estimates for 2009/2010 According to Johnston, price instability is a serious threat to BP. Johnston’s argument is correct because uncertain price environment is a potential threat to all oil and gas producing companies and British Petroleum is also been affected by price fluctuation. The independence of Scotland is another threat for British Petroleum; Bob Dudley BP’s chief executive said Scotland’s independence could threaten the investment in North Sea oil sector Bermingham, (2014). British Petroleum is the major investor of Scotland and earns good revenue from Scotland but its independence and change in regulatory policies is a potential threat to BP Economics, (2014). It has been argued by many economists that there is a potential threat of nationalization and independence of Scotland on BP. Despite of huge investment of BP on oil and gas reserves in Scotland, after independence Scotland would probable get majority of oil and gas revenue. SWOT analysis provided us clear picture of a business with respect to its present situation and past operations, it describes the challenges facing by the organization and expertise of the organization. In order to get the clear picture of an organization SWOT analysis is very important. In this paper SWOT analysis of BP has been described and from the information gathered through secondary sources it has been analyzed that BP is facing some challenges due to external environmental condition but the base of the company is very strong and it is continuously moving to achieve its objectives. REFERENCE LIST Stonaker, M. E., (2011). BP profits signal strength of oil and gas companies. Al Arabia News Johnston, P., (2010). The Security Impact of Oil Nationalization: Alternate Futures Scenarios: Journal of Strategic Security. Bermingham, F., (2014). Scottish Independence: What impacts will a Yes Vote on Scotland’s Exports: International Business Times. Samy, M., Odemilin, G., & Bampton, R. (2010). Corporate social responsibility: a strategy for sustainable business success. An analysis of 20 selected British companies. Corporate Governance, 10(2), 203-217. Smith, L. C., Smith, L. M., & Ashcroft, P. A. (2011). Analysis of environmental and economic damages from British Petroleum’s Deepwater Horizon oil spill.Albany Law Review, 74(1), 563-585. Houria, B., & Farida, D. (2014). Speaking English as a Prominent Skill in Business Field The Case of British Petroleum Company in Hassi Massaoud, Ouargla (Doctoral dissertation). Aguilera, R. F., Eggert, R. G., Lagos, G. C., & Tilton, J. E. (2009). Depletion and the future availability of petroleum resources. Energy Journal, 30(1), 141 Economics, O. (2014). The potential implications of independence for businesses in Scotland. Painia, B. (2012). The Great Advertising Campaign: The Effectiveness of British Petroleum’s Post-Oil Spill Campaign. Mills, J. (2010). The civics of sustainability: an overview. National Civic Review, 99(3), 3-6. Read More