A Quick Look At A SWOT & PESTLE Analysis of British Petroleum
British Petroleum is an oil and gas exploration corporation and one of the earliest pioneers of the global energy sector. Founded in 1909 by William Knox D'Arcy in Persia, (erstwhile Iran), it was dubbed the Anglo-Persian Oil Company. Ltd. & today is one of the world's largest oil companies, thanks to its merger with the Amoco Corporation of the United States of America.
However, BP's businesses have not been without problems and controversies, but the company remains a significant influencer of the global economy. Understanding how such a prominent business behemoth tackles immense obstacles & maintains healthy profits requires systemic & in-depth analyses.
A thorough British Petroleum SWOT & PESTLE analysis is an effective way to identify all those factors & aspects that have made the company an industry giant. This article offers an overview of a PESTLE & SWOT analysis of BP (British Petroleum).
A Bit About BP
BP is one of the top 10 super-significant players in the global energy sector.
A vertically integrated company, British Petroleum operates in all areas of the oil & gas domain, including prospecting & exploration, mining & extraction, refining & processing, marketing & distribution, and even energy generation. It exerts complete control over its supply chain and since 2021, has been working on a wholly overhauled segmented business model. BP works through multiple brands and has ownership stakes in both upstream & downstream companies. Its downstream operations & stakes, such as processing and distribution, generate the highest revenues for the company.
The company has also been involved in numerous environmental and health disasters & significant violations over the past few years. For example, the Deepwater Horizon Accident in the Gulf of New Mexico was one of the biggest environmental disasters of the 21st century & BP’s recklessness cost them more than $60 billion in damages payment for environmental pollution, clean-up costs, and the like.
Yet, British Petroleum remains one of the supermajor players in the oil & energy sector and one of the biggest companies by revenue & profit.
How does BP do it? What factors make it such a force to be reckoned with and what are the things that affect its decision-making process? Let's find out.
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SWOT Analysis OF British Petroleum
British Petroleum’s SWOT analysis looks into the internal and external factors that can accelerate & impede the company’s growth.
Strengths
BP's biggest strengths are its industry dominance, vertical integrations, and global presence.
- Dispersion of Risks Through Diversification: Though the company’s primary sector of operations is oil & gas, BP has diversified into numerous other associated areas such as lubricants, non-renewable energy generation, carbon-capture projects, electric vehicle recharging stations, etc., through numerous subsidiaries. This allowed it to disperse its risks across multiple sectors.
- Loyal Customers: BP is a global brand with a giant & loyal customer base. Many swear by BP’s products and services & enjoy a long-standing relationship with them.
- Global Leadership: With a market capitalization of $105 billion in 2022, BP is one of the top 10 supermajor players in the global energy sector. With a bumper $8.2 billion in profit, a 45% rise in share prices, record $29 billion payout in dividends—the company's position as a global leader will be a significant point of analysis in any BP case study analysis or SWOT analysis of British Petroleum.
- Network: The company operates worldwide in all its sectors and Europe, North America, South America, Africa, and the Asia Pacific. The company sells through its subsidiary AMOCO in the eastern United States and ARCO in the west and has 17,150 service stations in this region. In addition, the company has around 11,850 BP branded service stations, 1,525 in the UK, and sells its Castrol branded lubricants in around 50 countries.
- Strong customer relationships: British Petroleum always maintains robust ties with its customers. The company ensures that they understand their customers in depth and their requirements, and they try to ensure that they do not let their customers with different brands by catering to all their energy needs.
Weaknesses
Weaknesses refer to areas where the business or the brand needs improvement.
- Inability to penetrate successfully in non-energy markets: British Petroleum has diverse interests in several related areas, mainly in the energy-related domains. However, the poor presence in non-energy sectors may affect the business in the long run.
- Controversies: The company got into many scandals from oil spills in various parts of the world, which drastically affected its sustainability rating and the goodwill with stakeholders. Their oil spills have also caused marine life loss and drastically deteriorated the environment.
- Ethical Issues: British Petroleum also faced several scandals from dishonest transactions from employees. They handled the controversies related to the spillage disastrously, damaging the company and creating an image that the company was not genuinely concerned about society or the environment.
Орроrtunities
- The соmраny’s global presence and position as a market leader offer a massive impetus in the alternative fuel and energy markets if it invests in research and strategic re-роsitiоning.
- The oil and energy sector is booming like never before. Oil majors such as Sinopec, Exxon, & BP have reported bumper profits this year. This is undoubtedly a ripe орроrtunity for BP to expand into new geоgrарhiс territories & scope out new procurement lines.
- BР has the орроrtunity to partner with countries & businesses to develop green & clean energy solutions. As global warming becomes graver day by day & the need for green technologies & energy sources becomes more & more essential, this is the time for the company to rebrand itself around innovation and environmental responsibility.
- BP can also focus on the further development of its many subsidiaries, such as refining, shipping, trading & marketing, service stations, lubricants, clean energy, agricultural biotech,
Threats
- Environmental issues will соntinue to be the biggest threat/obstacle to the соmраny’s growth.
- BP must put environmental factors of all its operations at the forefront of its strategies as well as соrроrаte sосiаl responsibility, wоrkрlасe safety strategies for reducing accidents, oil leaks and spills, соrrоsiоn, and other safety & environmental hazards.
- Any industry-related accident or mishap can lead to BP facing massive lawsuits and penalties, as evident from the Deepwater Horizon accident. This damages the company's reputation and revenue generation, subsequent operations in a specific region, share values and future endeavours.
- BP faces stiff competition from the other major players in the energy sector, such as Exxon, Shell, Chevron, Saudi Aramco, etc. Each of these companies is a major powerhouse, with companies like Shell labelled as the greenest big oil company.
- The increasing demand for clean energy and the rise of alternative energy companies, such as Tesla, First Solar, Suzlon, etc., is a significant threat to BP's profits and revenues. Moreover, as more people flock towards renewable energy sources, BP may lose its customer base.
- BР’s tarnished reputation, thanks to its contribution to carbon emissions and environmental pollution, will continue to be а threat to its future growth and potential unless the company takes some significant steps.
- Adverse laws & policies, global recessions, deteriorating economic conditions, and local & global rules & regulations can be categorized as threats to BP's operation.
Market conditions, inflations, and volatility of oil prices are other prominent threats.
PESTLE Analysis of British Petroleum
British Petroleum PESTLE analysis will examine the external factors influencing a company's policies and operations. For a global giant like BP, external factors play a central role in shaping the company's strategies and in the overall decision-making process.
One key thing to note is that numerous factors in the PESTLE analysis of British Petroleum will overlap across categories. This is because all such factors work in tandem and affect the strategies & operations of companies like BP.
Political Factors
- The central role of the Oil, gas & energy sector in the global economy.
- Risk of military invasion and unfriendly policies in its sourcing regions
- Corruption in the oil & gas sector
- Bureaucratic red-tape and political influence in the energy sector
- The labour industry's legal framework includes wage legislation, workweek regulations, employee benefits, etc.
- Intellectual property protection
- Trade regulations & tariffs
- Predatory price regulation mechanisms
- Favoured trading partners
- Anti-trust laws in the energy sector
- Domestic taxation system
- Industrial safety regulations in the Oil & Gas sector.
Economic Factors
- The economic conditions and policies of its sourcing regions ( the countries where it procures crude oil)
- Government policies & tactics, high-handed behaviour, intervention, etc.
- Tariff rates, customs duties, and trade regulations
- The efficiency of the local financial market
- Local infrastructure
- Labour laws, wages, etc.
- Business cycle stages of an economy
- Growth and prosperity of the economy
- Inflation rates
- Capital market interest rates
- Unemployment rate
Social Factors
- Skill level of local labour
- Population demographics
- Standard of education in the country
- Cultural demographics
- The entrepreneurial spirit among the population
Technological Factors
- Rise of non-renewable energy generation and harnessing technologies
- Advances in engineering sectors (instrumentation & control, mechanical, chemical, industrial, petroleum, etc.)
- The advent of electric vehicles
- AI, data analytics, robotic process automation, intelligent automation, industrial robotics, etc.
- The Fintech industry
Legal Factors
- International trade laws
- Labour laws
- Economic and environmental regulation laws
- Intellectual property and patent laws
- Anti-trust laws
- Employment laws
- Industrial health and safety laws
- Data protection rights
Environmental Factors
- Greenhouse Effect and global warming due to carbon emissions
- Oil spills and industrial accidents involving oil tankers, drilling platforms,
- Waste management and disposal
- Species endangerment and environmental damage
- Laws and regulations regarding environmental impact and pollution
And that's about it for this article on British Petroleum SWOT & PESTLE analysis.
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