British Petroleum - Strengths and Weaknesses of Internal Environment and Organisation's Performance - Case Study Example

1. Analyse the internal environment of the selected business. Identify and explain 5 strengths and 5 weaknesses of the selected organisation.

British Petroleum (BP) is a leading gas and oil multinational corporation. BP traces its roots at the beginning of the 20th century. The company, since then, has been undergoing several successes as well as challenge that have transformed the corporation to what it is currently.

Strengths

A strong brand value can be described as one of BP's strengths. The BP brand has appeared in Fortune Global 500 with an estimated value of more than $388.3 million. The company has also been ranked among the top 5 most valuable brand. A strong brand such as BP's offers the company competitive advantage against their smaller competitors within the industry. Secondly, the company's global operations enables the corporation to cater for a bigger market in addition to spreading business risks. The other third internal strength is diversified product portfolio which enables the corporation to serve different market requirements in addition to spreading business risks. BP, fourthly is one of the biggest gas and oil companies with a global presence, implying that the corporation reaps the benefits of economies of scale. The company can capitalize on these strengths to enjoy competitive advantage over its peers. Finally, BP's network of subsidiaries as well as retail brands like BP, AMOCO, CASTROL, ARCO, BP EXPRESS, BP TRAVEL, BP CONNECT etc .

Weaknesses

BP as a company has the following weaknesses. First and foremost, BP operates in an extremely capital intensive industry laced with environmental dangers. This is because of the risk of such disasters as fires and oil spills that frequently lead to considerable damages. In such instances, the corporation has to pay for these costs, which consumes the profitability of the company. Secondly, the company suffered from extensive negative perception particularly after the 2010 Gulf Oil Spill. Such a negative perspective of the company created a poor image and a reduction in trust as far as the ethical principles of the company is concerned. Thirdly is declining brand value/position and financial performance following the oil spill. BP has been struggling to deal with the consequent negative perception created to make sure that its leading position is retained .

Fourthly inappropriate management as well as safety issues. This can be illustrated by numerous incidents for the company such as the 2005 Texas refinery explosion that led to the death of 17 people and injuries to 100 others. Fifthly there has been a widespread global reduction in the production of oil. Thus, a major drop in gas and oil production has been recorded from under British waters from 2011. This is a major cause for concern for the BP company which is headquartered in the United Kingdom. Thus, the corporation is extremely worried that a major drop in production may lead to a reduction in profitability and sales. If this trend in future continues, the corporation may be forced to shut down some of its wells. The company's internal production has dropped due to investments in issues addressing the Gulf oil spill disaster .

2. Define and discuss to what extent you regard the following as key factors in your selected organisation's performance over the last 20 years:

BP Leadership

BP as a company has been engaged in numerous core safety and environmental safety incidents, in addition to criticism due to its political influence. The corporation has over the years been receiving vicious attack on its leadership style, corporate culture and expenditure reducing techniques. Thus when in 1990, Robert Horton assumed the role of the Chairman and CEO of BP, the corporation was in a difficult and trying situation since it lacked a clear mission as well as strategic policy within the senior 150 managers interviewed at the onset of 1989. Through this survey, the feelings of the managers as far as the structure of the company was concerned, which at the time obstructed operational and collaboration flexibility within various businesses (Nelson & Quick, 2012).

When in 1990, Horton took control of the company, he declared the Project 1990, whose core goals were to minimise organisational complexity so as to increase the speed as well as efficiency of decision-making by the management, redesign the central organization as well as cost minimisation. This last objective was accomplished via the transfer of authority for various decisions, ranging from the business streams to corporate centre. Elimination of management process took place during this time with the office staff cut by more 80%.

The plan of Horton to transform the culture of the company from a secretive one to that of openness was portrayed by the acronym OPEN which stood for openness, personal impact, empowerment and networking. Even though the above changes were essential, the plan developed by Robert Horton did not come to completion under his tenure. David Simon replaced Horton but continued BP transformation in another style of leadership. Horton's style can be termed as directive also known as autocratic or authoritarian leadership (Nelson & Quick, 2012).

Over the years other CEOs have come by steering the company trough controversies. Tony Hayward who replaced Lord Browne on his retirement, has been quoted saying that under Browne, the leadership was too directive and failed to sufficiently listen. On the other hand, Tony Hayward is the kind of CEO who speaks his mind and is often honest and blunt. Hayward's blunt leadership technique was admired across the board up and till the oil spill. Although Hayward could have been the right person for the CEO post after the tumultuous exit of Browne, nevertheless, the CEO's position is changing and the company currently should be looking for a problem solver (Nelson & Quick, 2012).

Corporate Culture

Corporate culture can be described as the behaviors and beliefs that determine the interaction between the management and the employees of the company. In most cases, corporate culture is not expressly defined but implied and organically develops over time from the cumulative personalities of the individuals hired by the company. The culture of the company will be reflected by the dress code, office setup, business hours, turnover, employee benefits , treatment of customers, hiring decisions as well as any other aspect of the company's operations (Monks & Minow, 2011).

BP's corporate culture has been centered on five values that show their shared understanding of what the company believes in, how it aims to conduct to itself and what it aspires to be as an organisation. Over the past 20 years BP has been exercising safety as a good business practice. Thus, everything the company does depends upon the safety of its workforce as well as the communities around the company. BP, therefore cares about the safe management of the environment and is committed to delivering energy safely to the world (Monks & Minow, 2011).

Secondly, the company respects the communities around the world in which it operates. BP's respect starts with observance of laws as well as regulations. The company strives to hold themselves to the uppermost ethical standards in addition to behaving in ways that earn them the trust of others. BP depends on the relationships it has as well as respect for one another and those that the company works with. Furthermore, excellence is another virtue that the company is committed to since it is in a hazardous business. This is achieved via the disciplined and systematic management of their operations (Monks & Minow, 2011).

Corporate Governance

The idea of corporate governance can be described as the system through which corporate entities are controlled as well as directed. The 3 key aspects of good governance are exhibited in board accountability, transparency and shareholder right. Moreover, corporate governance is all about maintaining the balance between social and economic goal and between common and individual goal with the aim of aligning as nearly as possible the interests of society, corporation and individual (Tricker, 2012).

BP failed in preventing the Mexico oil spill because of lack of coordination between the chairman and the board and interlacing all society facets in the process of corporate decision making. It is this letdown that led to the mismanagement of BP by a comparatively detached board of directors who did not assimilate quality ethical management standards into the process of making decision. The board of BP adheres to a unitary board structure, which is typified by a single board consisting of both executive as well as non-executive directors. In addition, the unitary board is tasked with every aspect of the corporation's activities with every director working to accomplish similar ends (Tricker, 2012).

The directors to the board are elected by the shareholders at the annual general meeting. The BP board focuses mostly on Agency theory that takes into consideration the principle-agent framework. Thus, the Agency Theory, in the framework of corporation and corporate control issues perceives corporate governance mechanisms, particularly the Board as agents of monitoring the working of the management or even the corporation. The British Petroleum is tasked with the oversight and direction of BP plc on behalf of the shareholders and is therefore accountable to them for all BP business aspects , being the owners of the company (Monks & Minow, 2011).

BP is of belief that good corporate governance constitutes specifying the responsibilities and role as well as the proper utilization of various processes and skills. The company's board concentrates on processes that enable it to encourage the interest of shareholders, such as the long-term strategy consideration, executive action monitoring as well as continuous executive and Board management succession. In conclusion the board provides a clear guideline for authority allocation for BP executive management via the Group Chief Executive (GCE) (Monks & Minow, 2011).