SWOT Analysis and Porter's Five Forces Model for Assessment of an Organization - Essay Example

1 Introduction SWOT Analysis stands for Strengths, Weaknesses, Opportunities and Threats: it is an important internal tool used in analyzing the comparative competitiveness of an organization in a particular industry (Bohm, 2009). Even though this may not give the accurate conditions of an organization, but it provides a rough estimate that decision-makers in the organization can use in designing the appropriate policies that would help the organization grow and remain a leader in its traditional industry (Fine, 2009). Also, Porter 5 Forces Model can be used to analyze the weaknesses of an organization, with the hope of finding solutions to all the problems caused by the weaknesses (Barney, 1997). Brief Information about British Petroleum British Petroleum has been one of the frontline oil companies in the world with branches in some strategic countries, which include the United States, Nigeria, United Kingdom, and so on. Mostly, the products of BP include petrol, natural gas and other oil derivatives. Recently, the company is spearheading what is referred to as Energy Mix, which attempts to find out the possibility of generating electricity through wind, bio fuel and solar. Politically, BP cuts across many political terrains and the company is bent on capturing more oil market in this 21st century (British Petroleum, 2010). BP has some weaknesses, which would be analyzed using Porter’s 5 Forces Model and SWOT Analysis. Some solution would be suggested about how to address the weaknesses so that they would not continue to undermine the company’s success. 2 British Petroleum and Porter’s 5 Forces Model Porter’s Five Forces Model analyzes a company based on the following criteria: (i) Bargaining power of customers; (ii) Threat of new entrants; (iii) Threat of substitute products; (iv) Bargaining power of suppliers; (v) Competitive rivalry within an industry (Porter, 1997). These 5 forces are analyzed below in the way that they affect the operations of BP as a giant oil company. (i) Bargaining power of customers: customers do not necessarily possess bargaining power as far as BP products are concerned. This gives the company the opportunity to fix the prices of its products (Bamberg, 2000). (ii) Threats of new entrants: Like every other company, BP has come under serious threats from big oil companies like Chevron, Exxon Mobil, Shell that compete with BP on all fronts. These threats have even become pronounced as new oil companies mount serious pressure on BP’s areas of operations (Bamberg, 2000). (iii) Threats of substitute products: The main business of BP is in the production of energy; however, the desire to go Green has threatened the survival of the company. The latest drive for environmentally friendly natural gas or bio fuel has put BP in a corner of severe competition (Rubovits & Corporate Environmental Data Clearinghouse, 1991). The current oil spill in the Gulf of 3 Mexico is one of the reasons BP has been criticized about its impacts on the environment. (iv) Bargaining power of the suppliers: The suppliers of BP raw materials have a huge sway on the Company’s finances. This increases BP budget and causes the Company more money than it would want to spend. (v) Competitive rivalry within the industry: Competition within the global oil industry is intense, but BP does not seem affected by that because it has its own satisfactory share of the oil market and gradually expanding it. The only area BP appears gravely concerned is the issue of producing environmentally friendly products like bio gas, bio fuel and natural gases (Rubovits & Corporate Environmental Data Clearinghouse, 1991). British Petroleum and SWOT Analysis (i) Strength: BP is a global oil producer with branches in many countries and with a combined number of 80,000 employees. The Company utilizes modern technology in its attempt to lead the market. There are 16 refineries owned by BP all over the world (British Petroleum, 2010). (ii) Weaknesses: The major weakness observed in BP is its communication system within the Company, between the Company and its customers. The current serious oil spill in the Gulf of Mexico was said to be due to some errors arising from poor communication among BP employees. And the reason why BP customers do not influence the Company’s 4 policies and prices. They are not given an efficient channel with which they could communicate their constant feedback to BP (Manning, 1992). (iii) Opportunities: Considering its many operating units across the globe, BP has a great advantage over other oil companies that could not boast of such a worldwide coverage. Also, as flagship British company ably supported by the British Government, BP has many opportunities to expand into countries that are allies to the Great Britain (Bamberg, 2000). The large number of workers is an added opportunity for BP to successfully have more qualified employees that will man all its operation units across the globe. (iv) Threats: The main threats to BP are both the old and new oil companies competing with the Company on all international markets. Shell, Chevron and Exxon Mobil have been the long-time rivals of BP. However, the modern-day threat against BP is the issue of environmental consideration, which is likely going to make petroleum unusable in the world. The burning issue now is that alternative energy sources should be explored, and this may replace the fossil fuel energy in the coming century. This is a serious matter that BP and other oil companies are facing as the world yearn for more environmentally sustainable sources of energy (Rubovits & Corporate Environmental Data Clearinghouse, 1991). 5 Communication Inefficiency The main weakness perceived from both the Porter’s Five Forces Model and SWOT Analyses indicate that British Petroleum has a serious weakness in its communication: this affects the relationship among the Company’s employees; it also affects the relationship between the Company and its customers. The current dangerous oil spill would have been speedily cleaned up if there has been smooth and coherent communication among BP employees. Similarly, the customers should enjoy some privileges which include but not restricted to influencing the organizational policies in the areas of customer services and pricing determination; but since BP does not provide a direct medium with which this could be done, the customers are mostly at the mercies of the Company. The gross disadvantage of this practice is that BP cannot follow its customers’ changing trend of consumption, an issue that is important for BP continued success. Business Information Systems These two Business Information Systems would be quite useful for BP to overcome the communication problem disrupting the activities of the company: (i) Enterprise Resource Planning (ERP): ERP is the best choice for improving the communication among BP employees. ERP will facilitate the smooth transfer of information from one section of the Company to the other. Once this issue has been settled, BP can prevent operational hazard like the current oil 6 spill in the Gulf of Mexico, as all its employees are directly linked and they could communicate smoothly (Hamilton, 2003). (ii) Customer Relationship Management: CRM will bring BP and its customers together. This attitude is very good for the Company so that it could directly receive constructive feedbacks from its array of customers worldwide. In this way, the customers may also send the concerns about the prices of BP products, which may influence the Company’s decision-makers to put the customers into consideration while deliberating on the pricing of BP products (Peel, 2002). New IT Solutions to Support ERP and CRM Since new IT solutions are always manufactured, it will be helpful if the latest operating systems are used to support both ERP and CRM. Also, each section or department in BP could use customization software to make the BIS compatible with the operating system in the environment. For example, American BP offices will customize the BIS to suit its usefulness, which may be different from the one in place in the UK. Conclusion and Recommendation Communication is a vital process in any company as revealed by the analyses of BP using Porter’s Five Forces and SWOT Analysis. Without proper channel for communication, BP will always enter into some serious problems as it is currently facing in the oil spill saga in the Gulf of Mexico. But the 7 implementation of the right Business Information System will help the Company prevent such catastrophe in the future. It is highly recommended that the BIS must be constantly checked for performance; and if lapses or problems are detected, they should be quickly rectified to prevent any sudden system collapse. 8 References Bamberg, J.H., 2000. British petroleum and global oil, 1950-1972: the challenge of nationalism. Cambridge: University of Cambridge Press. Barney, Jay B., 1997. Gaining and sustaining competitive advantage. London: Addison-Wesley Pub. Co. Bohm, A., 2009. The SWOT Analysis. Munchen: GRIN Verlag. British Petroleum. 2010. About BP. [Online]. Available at http://www.bp.com/marketingsection.do?categoryId=2&contentId=7013628. [Accessed 15 June 2010]. Hamilton, S., 2003. Maximizing your ERP system: a practical guide for managers. New York: McGraw-Hill Professional. Fine, Lawrence, G., 2009. The SWOT Analysis: using your strength to overcome your weaknesses, using opportunities to overcome threats. Charleston (SC): Booksurge LLC. Manning, Peter K., 1992. Organizational communication. New Jersey: Transaction Publishers. Peel, J., 2002. CRM: redefining customer relationship management. Daytona Beach (FL): Digital Press. Porter, Michael E., 1998. Competitive strategy: techniques for analyzing industries and competitors. New York: Free Press. Rubovits, R., & Corporate Environmental Data Clearinghouse. 1991. British petroleum: a report on the company’s environmental policies and practices. London: Corporate Environmental Data Clearingghouse. Read More