British Petroleum Companys Current Strategy - Case Study Example

British Petroleum (BP) Company British Petroleum (BP) Company Introduction Featuring prominently in the top five global petroleum companies, BP is the topmost corporation in the United Kingdom. BP Company is third to Exxon Mobil and Royal Dutch Shell that are its main competitors. BP Company is the pioneer of Middle Eastern oil industry making an exploration debut in early 1900s that prompted discovery of oil in Iran. BP Company is, currently, a top refiner and leading oil and gas producer and exporter in America. It a top petrochemical producing company, operates 15 major plants in America. BP Company provides direct employment to over 83, 900 employees on a global scale. It is among the leading global petroleum and petroleum-related products exporters. Its success in the market draws from its strategic management and stakeholder relations that offer an edge over other competitors in the market (Mohsen 2011, p. 3). BP Company’s Stakeholder Groups BP Company operates a chain of stakeholders in its business cycle extending through the global production and marketing environment. Stakeholders in the operations chain include suppliers, retailers, employees, regional corporations. All stakeholder groups comply with relevant national government policies and regulations. BP Company engages different stakeholders with a view to expanding its market dominance in the industry. Considerations of stakeholders’ needs prompted BP Company to enhance full reporting of its operations. Operational reports are based on a triple-bottom line approach that embraces social, economic and environmental perspectives. BP Company seeks to establish an operational environment that primarily serves the interests of all stakeholders. It also engages with the governments and Non-Governmental Organizations around the world in policy formulation, implementation, and compliance (Mohsen 2011, p.15). BP Company collaborates with business partners under joint ventures through incorporation of varying socio-cultural and socio-political viewpoints. It thereby integrates diversity in its chains and stakeholder operations. It also focusses on working with diverse communities to create utmost value for its shareholders. BP Companys Key Competitor (s) BP Company ranks third in the industry after two major competitors: Exxon Mobil and Royal Dutch Shell. Besides the two major companies, BP Company faces competition from several other companies dealing in the production and distribution of oil. BP’s existence and adequate competition in the market depend on its ability to counter the production, distribution and stakeholder relations of its competitors. Its main competitors: Exxon Mobil Corporation, Royal Dutch Shell Plc and Chevron Corporation, have a global customer dominance and operational production. They also undertake corporate social responsibilities. Its competitors adopt business nearly similar strategies to that of BP including customer relations and product distribution (Banerjee 2007, p. 7). In its strategies to maintain a competitive against BP Company, it employs strategies that are more pro-stakeholders compared to those that are pro-shareholders. However, after the accident that befell BP Company involving oil spills at the Gulf of Mexico, it lost reputation in the world market. Based on BP Company’s loss of market, its competitors attained unprecedented market dominance (Farrell 2011, p. 55). Besides, the high integrity of BP Company’s equipment during the oil spill, its response to the incidence attracted controversial attention from critics. Controversy that faced the company caused loss of trust among its stakeholders. The competitive ranking of the BP and its competitors is measurable though an analysis of its annual returns, business reports, customer base and reach up, corporate social responsibility, profitability and production quantity. Analysis and Evaluation of BP Company’s Current Strategy BP Company is competent in setting up a global standardization for performance on financial and environmental dimensions. Its strategy establishes a system that ensures growth, safety and stakeholder satisfaction. Since its first sale in Britain in the 1920s, BP Company realized financial gain and worldwide recognition for quality petroleum products. BP Company keeps its commitment to the provision of quality products that do not affect the quality of the environment. BP Company’s corporate strategy has an influence drawn from a strong focus and profit maximization. Besides its focus on shareholder satisfaction, BP Company also takes a special focus on its wide range of stakeholders owing to its global focus other than local perspective (Mohsen 2011, p.12). The company seeks to pursue competitive leadership in relation to capital efficiencies, cash costs, and margin quality. After experienced tremendous losses during Gulf of Mexico Oil Disaster, BP allocated resources to address the environmental damages experienced. It had an allocation for abating and compensating the damages incurred after the oil spill. It used an approximated $20 billion to clear up the oil spill. The extent of environmental destruction tainted the company’s brand image causing many consumers to change their demand patterns completely (Farrell 2011, p. 55). BP Company has had a competitive advantage over its competitors by adopting a differentiation strategy. It has brands such as Bp, Ampm and Castrol in the market. Diversification into alternative energy makes BP flexible regarding its response to market demands of its current and prospective customers. It applies differentiation approach of business strategy to maintain its competitive advantage; implemented through innovations, quality, and responsiveness to its customers. BP Company has a broad target of competitive scope. It does not only major in the production of fuel for automobile but also development of alternatives. It enhances its competitive advantage through new brand innovations or technical creativity. Strategic Challenges BP Company faces several challenges related to social aspects, economic progress and environmental perspectives. Socially, the company faces conflicts of interests with other competitors in managing stakeholders’ needs and customer satisfaction in their quest for growth and development. The company’s success depends largely on the sustainable reach-up to the customers to whom it designs the services and products. After the 2010 oil spill disaster on the Gulf of Mexico, the company lost a considerable number of current and prospective customers. The oil spill tainted the company’s public reputation. The incidence further affected customer trust. The company faces challenges in implementing corporate social responsibility to its stakeholders including local communities. For instance, poor budgetary allocation of the funds and misappropriation of priorities in CSR inhibits realization of intended social goals to the community (Banerjee 2007, p.7). Economically, the company faces challenges of the recession and occasional oil crisis that caused fluctuations in sales of petroleum and associated products. Exports and sale of petroleum also depends on the global diversity in policies and legal frameworks as set and implemented by various nations or regions. The variations in currency strength across different regions also act as a determinant of the level of annual revenues received by the company. Besides, it also determines variations in revenue remittance to the central government of the respective countries of operations. There are diverse environmental challenges to the company’s operations. Policy advisers and decision makers view the environment as the greatest determinant of a company’s economic prosperity. It also determines the social perspective of the company’s strategies because it has inherent relations with the community’s wellbeing concerning the company’s operations. The company, through its operational branch in the America, experienced one of its worst environmental disasters resulting from widespread oil spills. The spill was catastrophic to the natural environment and communities using the water resources. High risks of spills and fire breakouts associated with the extraction, refinery, and distribution of petroleum products around the globe. The impacts spread negatively to the customers and stakeholders of the company. Recommendations There should be a harmonized and standardized means of reaching out to various stakeholders to have a competitive advantage over other companies in the industry. There should be a legally set process of ensuring fair competition in the business environment by the petroleum producing and exporting companies. The company should also have a clear policy on budgetary allocation for customer-based reach up programmes and social responsibility interventions. BP Company should device strategies of managing the impacts of occasional recession. Besides, countries and regions within which BP and other petroleum companies operate should harmonize their legal guidelines for managing revenue remittance to their national governments to prevent biases. The company must set prices of its products depending on the regional currencies of the importing nations. The BP must adhere to environmental regulations as set by various national government policies and environmental agencies. In addition, it must endeavor to establish a focal point for environmental management and protection. The company could consider funding environmental activities and institutions to ensure sustainability. The company could consider getting involved in such affairs as corporate social responsibilities (Banerjee 2007, p.7). The company must set budgetary allocation for abatement of environmental degradation such as rehabilitation of degraded lands, land reclamation and reforestation programmes. Adopting the recommendations would serve to maintain BP Company’s public reputation and customer confidence. Conclusion BP Company competes favorably with other dominant businesses in the industry. If the company adopts feasible strategies, it can overtake its two major competitors in the market. Because BP Company operates on a global scale, customer satisfaction should remain its utmost focus. Shareholders and stakeholders remain critical to the growth and development of the company. It should adopt sustainable strategies that would assure its stakeholders of service professionalism and proficiency. Besides, the company should embrace a triple bottom line approach to management and development of its basic operational strategies. Bibliography Banerjee, S 2007, Corporate Social Responsibility the Good, the Bad and the Ugly, Edward Elgar, Cheltenham, UK. Farrell, C 2011, The Gulf of Mexico oil spill, ABDO Pub Edina, Minn. Mohsen, N 2011, BP Market Analysis and Strategic Marketing Recommendations in the USA after the Gulf of Mexico Oil spill, Kensington College of Business and University Of Wales. Viewed 16 August 2014 Read More