Task 1: The student must set the context for the assignment with a focus upon the competitive market position together with the challenges faced. This provides a sound platform from which to proceed.
Task 2: Based upon task 1 weaknesses in the current business model must be highlighted to indicate and then priorities inadequacies for action in relation to the current and anticipated future market landscape
Task 3: Based upon task 2 corrective action is needed.it doesn't follow that all elements of the business model will need attention ,otherwise a new business will be created.Focus must be given only to areas within the business model which need attention so that the required corrective action can be justified. 20 marks
Task 4: The consequences of the corrective actions outlined in task 3 must now be considered in terms of the following perspectives: Organisation structure, Operational Processes, Information Technology, Human Capital, Students need to demonstrate the impact of the needed change.
Task 5: This final step is designed to consider the proposals for change which are now essential to accomplish the change agenda The focus must be upon HOW to achieve planned change over time with respect given to staff sensitivities?
The study would critically investigate the Global business strategies of British Petroleum and examine the critical factors that have helped it to grow global. Every major aspect of business development and growth is examined for the study with problem statement and thus elaborate upon the corrective actions needed to stay competitive. An organizational perspective of the corrective actions has been discussed in various measures to improve the existing processes to see the impact of change actually occurring in the business. Thus a proposal for change along with plans to implement them in the business is discussed based upon the current British Petroleum structures and strategies.
Task 1: Background of British Petroleum
The British Petroleum is one of the leading international oil and gas firms that provide fuel for transportation, energy generating fuel, lubricants for the mechanical engines and such other various petrochemical products that are used in everyday items as diverse as paints, plastics, packages etc. The mission of the business is built around a long term integration of petro products with technology inputs and marketing efforts (Popp et al. 2006). Thus the vision stresses on improved performance and steady disciplined business growth. Therefore the strategic culture of the firm has been developed from these statements and is employee oriented. The British Petroleum or BP relies on its employees for future growth, keep up and downstream operations with effective use of technology that gives it the higher ground for health safety with no damage to environment and people thus improve its relationships with nations those they already exists in (Srdjevic et al. 2012).
Nevertheless, since British Petroleum had been a very old company with its existence since 1909 from the inception of Oil Drilling thus its existence is seen in 80 various nations of all the continents. The number of employees as one end of 2012 is around 85,900 from 20, 700 retail outlets, 15 refineries producing 2354 barrels of crude oil per day with 17,000 million barrels of reserves in its kitty the business seeks growth and market development in new markets while wish to keep up with the competitions that it is facing in these nations. Thus the business shows the commitment of a progressive, performance driven future. However in US where BP is generally known as BP America has faced significant bad publicity from various sections of the media for their Texas blast on 2006 later the oil spill in Gulf of Mexico which faced 18 Billion USD as fines. The later killed 11 employees and causes one of the worst off coast disaster of all times where the Deepwater Horizontal drilling in offshore Gulf of Mexico, Macondo wells saw the District judge pronounce ‘profit driven decisions’ and ‘gross negligence’ as the cause of the mishap. Thus the recommendations and needed strategic changes in organizational structures are discussed for better safer future business. Further the business of BP is Russia (TNK-BP) is facing serious license violation charges. Again, the prices of crude oil all across the globe is dropping rapidly and although the business has given the investors a 25 Billion USD returns in the last few decades the equity has been underperforming for the firm for last few years. The problems can be seen to be coming from 3 different sides where the people management may give a long term solution (Augusto-Toledo, 2011).
Task 2: Priorities and inadequacies of the current business model
The globalization of the BP business has seen it making many changes in business dynamics based upon its regional partnerships and strategic alliances. The task 1 shows the weakness of safety procedures, legal requirements to be missing in few cases and a major loss of face due to ‘gross negligence’. The problems are such that has a long term effect on the market share and technology use which can prove fruitful for the business rivals over BPs business. However the business shows few major loopholes in its strategic business model followed by the BP in political, economic and international business grounds that’s needs to be revised. The Russian TNK-BP is a firm which is a joint venture between the two Petro-giants. The Russian officials are not happy yet with the processes the business follows and thereby have issued a notice for licensing renewal to the business (Bpes.bp.com, 2014). The PEST Analysis would give an idea of what the business model is as of now and thereby the needed strategic outlook would be suggested based upon the findings.
Political: The global energy markets are volatile in terms of predictability due to geo-political instability. The Carbon Di-Oxide emissions have a great impact on the crude oil drilling businesses like BP. The business had to close down its Alaskan rig after 270,000 gallons of oil spill where the business faces criminal charges. Further the fast growing markets demands for oil and gas for plat operations has made the market very volatile in terms of crude oil prices, of course that its competitors have to face it too like Shell and Chevron (Bbc.co.uk, 2012).
Economic: The economy for the oil and gas business comes from the demand of it and is supposed to growing demand of about another 60% in near future as the solar energy and alternative energy sources have very limited scope as of now. Thus the economic sphere suggests that future consumptions are going to give a big boost for the business provided that it can manage to have more oil drill rigs and manage them at a cost which is profitable, even in the volatile market of crude oil. However, it is notable that the Russian authorities have milked 50% of the Shells stake which was operational in Russia while the BP is now facing such licensing charges (Digitalscholarship.unlv.edu, 2014).
Social: The rising carbon emission is a big block to the BPs business as the fossil fuel poses the threat to further pollute the global atmosphere for climate changes. The 1992 Kyoto agreement has put a ceiling on the carbon emission done by each nation. The global change in climate has also added to the concerns of BP as its production is crude oil and refineries which are seen as the source of such social evil. Further the death in rigs and accidental spills in Mexican gulf and Tundra has given mal publicity to the business. Nevertheless, business has invested 8 Million USD into alternative fuel, hydrogen fuel, energy source detection and development.
Technological: The technology is the most important strategic part that the BPs business needs to incorporate quiet stringently to see that the risks of oil leaks and contamination of natural land or water do not happens as it may have happened in the past giving the brand a huge sum to be paid as penalty charges. The safety standards are to be brought in place with optimal use of Information technology into production management to see that such accidents do not occur in future (Gibson, 2012). Nevertheless, the business has kept its options for alternative fuel and energy sources open so as to expand and develop its business on those lines once the fossil fuel consumption is over, globally.
The PEST suggests that the business has developed all across the globe without a solid capacity based calculations which lead it to produce more oil thus competitive prices. However, the price competence is key to the global energy market dominance. The BPs business has been divided into 2 distinct parts which are exploration with production and refining with distribution the other part. The overcapacity in mature markets where the business has been performing for over 4 decades with its new exploration and distribution in new market is a problem area that the BP needs to identify and rectify strategically for future performance. As stated before the BP have 15 refineries with 80 nations of operations with 2354 barrels a day production. The progressive, innovative, green and performance driven BP business policies needs to assess the global political and social platforms prior to any further investments in such sector Gilbert
The past must have given the business an idea of the volatility in the oil drilling nations like Russia, China, Tunisia, Egypt, Libya and such Middle Eastern nations. The investment in politically stable Asian nations while developing while developing the markets in politically stable economies would be the key to the business. However, it is also to note that the business’s acquisition strategies have proved to be fruitful where today Lucas Energy Systems and Amoco, parts of BP are the largest manufacturer of Solar cells globally. This policy was a great leap forward where the business did not had to depend on Petroleum altogether for sustainability during those period when all the crude oil is been exhausted. In the similar attempt the business is to power all US based Walmart stores with their unconventional solar panels. These specialized cells would help the business in building consumer confidence and interest towards alternative fuel for energy generation (Bp.com, 2015). It would also serve to advertise the common people the utility for themselves, of solar power. Unlike other conventional businesses, the diversification is aimed at energy production that is largely been the source of development of modern day civilization. Thus the idea is sustainable business development while keeping the options of diversification open for itself. However, the priority of the business is safety and legal aspects along with social development in those areas where it operates.
Task 3: Corrective actions needed for sustainable future
The task 2 concedes the requirements for a sustainable business model where the financial performance shall be good, keeping in mind the long term sustainability where the safety aspect shall get the priority. Nevertheless, the case of Shell in Russia along with turbulence in the Middle Eastern region needs to be kept in mind so that the investments and returns give the stakeholders profitability. The uncertainties like political dilemma and operational risks, that in Arctic Tundra and Mexico, needs to be kept in mind while investing so that the capital investments and presence are well strategized. The Health and safety need to the priority as the lessons from the aforesaid operational disaster never occurs during future operations. The competitors of BP across the globe have similar geographic landscapes and have vertical integration of product line (Zalengera et al, 2014). However the edge that BP has developed in introducing their solar power business is a horizontal diversification that gives it an edge over others However, the strategic alliance in international markets would determine the future presence and business volume for BP. It is important to note that the natural oil and gas deposits are in plenty in Middle Eastern nations, Russia, Arctic, North America and Central South America. Russia stands second in global oil and gas production where the business is facing the challenge of Government run firm. The case of Shell is another example while the turbulence in Middle Eastern nations may prove costly for the investors, if the business don’t take steps in accessing the situation and thus invest (Segon, 2014).
Safety: The safety norms at work as well safety of the community is very important for any business for a long term existence in business. Since the oil and gas rigs are located mostly located in isolated places safety at work is of paramount importance for BP. The use of technology and systematic application of safety rules the accidents like spills, fire or suffocation at work can be prevented in better manner unlike that of a decade age. The global standards of safety are defined in both legal aspect of doing business as well as in-house efforts to develop safety consciousness (Wheelen and Hunger, 2004). The international laws of doing business generally follow the UN resolution of 2013 for environmental care and cure. The Valhall drilling facility uses offshore electricity, or the electricity generated on the drill itself by gas burners and turbine. This has a duel effect for the next generation oil rigs. Since crude oil and gas is a highly volatile substance, therefore the chance of in-house gas burners increases the chanced of ‘rig blasts’ and keeps the environment clean by not generating any greenhouse gas onshore the rigs. The strategy of training and development with the use of high end technology to minimize the effects of drilling on the natural environment is enhanced. Thus the safety aspect should be the utmost priority for the BP and is been invested with a substantial amount for research and further development, for a sustainable and profitable future (Park and Khai, 2015). Community development and participation of all stakeholders in safety measure implementation is proposed.
Investment Value generation: The profitability as well as sustainability is the vision for the business. Hence, the business needs to choose its investments. And alliances carefully which would suite the mutual needs and have mutual values. The political instability can be got in India while the investments in Chinese territory for BP may prove to be as dangerous as the Middle Eastern nations due to the communist regime and government control of resources. Again, the insurance of the future must be its diversity, both vertically and horizontally with diversified sectors so that the international commodity volatility won’t affect the investors as much as it does now. The step into alternative energy generation in US is a positive step forward for BP where the strategy is to consolidate into the future forecast of alternative energy growth of 2020 of 6% to 8% in 2030 (Icmrindia.org, 2012). The payments due to fines generated in the past as well social criticism due to negligence of safety issues can be well invested back into business to see that such thing never happens. The value generation can be done by strategically increasing the focus into the areas those generates best values while investing for longer returns in a long term fashion. Investing into good places, with latest technology can build a long term value for business and investors.
Technology: The use of modern day technologies in the production and operations is to be used in the futuristic business models. The rapidly growing technology has brought many new gadgets to mechanize more widely, survey more exhaustively, while take better safety measures during drilling in future can be achieved. The new works of geology, biochemistry, detection technologies have improved, thus the use of technology may prove to be a viable long term solution while also help n keeping the risks to health and environment would be largely reduced.
Figure 1: The 3 step Strategic Approach of BP’s Business for Future
(Source: BP.com, (2015)
Strategic Management focused on the business of BP has developed a 3step focus for its futuristic strategy which would be safety as priority along with competitive project execution and disciplined financial choices. The quality portfolio suggests that the business focus on exploration, high value vertical and similar horizontal integration to stay competitive from business angle. Lastly the distinctive capabilities of BP are focusing on high end technology, skilled manpower and strong business relations with all stakeholders. Nevertheless, the diversification into petrochemical products and further development for distinctive advantage would need the investments to be done into research and development. The alternative energy source may also help the business to create its own markets before any other competition may enter the same market. Thus the mix of the options has to be chosen wisely to generate optimum value for investors (Castonline.ilstu.edu, 2013).
Task 4: Corrective Strategies
The aspect of Human resources is going to the biggest challenge and internal asset for BP’s future businesses. The recruitment, training, operations skill and performance evaluation needs to be considered by the business in a manner that gives both best to employees and environment best results. The Organizational structure of the hierarchy and reporting structures at BP is been made uncomplicated to focus into multiple fields while diversify into multiple geographical areas (Huangfu et al., 2013).
Figure 2: The Top Management Structure brief of BP
(Source: Bp.com, 2015)
The Chief Executive Officer (CEO) of BP reports to the Board of Directors while he is reported by the Chief Financial officer (CFO) and three business chiefs. BP exploration and production is one while the other division is BP Marketing and Refineries those reports to the CEO. The exploration and production chief is also responsible for its American, African and S.E.Asia operations. The Chief of its Marketing and refineries overlooks the European, US and Australian business The Other chief of allied businesses is responsible for Asia, Europe, South American businesses for BP. Since BP is integrating its business in horizontal and vertical fashion thus the organizational priority needs to be further rearranged once the business has identified its fields of production. The safety officer reports to both the chief with different safety measure development skills, as needed by the operations. The refining is based out of land based plats thus the specialization needs to be more towards land based design of safety in its plants as well as distributions. The rig safety generally deals with various rig instruments to detect, explore and extract safety without spillage in the rig areas. The integration of the safety operations needs technological inputs to build it safe and take research and development actions to see what more can be added into the exploration, storage, refining and distribution activities (Zhou et al. 2012).
The operations of BP as on date are tripartite where the gas and oil business is the major one. The other major businesses that BP has are its petrochemical products and lastly the new line of solar panels that the business would surely venture in a international scale in near future. The operations would need to have four distinct lines which the later day business may take note of to establish itself. Firstly, the proposal is to form a strategic team under the exploration and production team who would evaluate the investment options in those areas deemed suitable to explore. Local and international mix of people who have strategic knowledge about the area and idea of the legal frameworks needs to be put in the team. The other suggestion is to make the safety department a fulltime separately functioning unit which can utilize the entire distribution in various stages to add value to each level and minimize any spillage or environmental harm while taking good care of the employees health (Hu, 2011). Nevertheless, the operational process may include a technical team in place that can select, innovate and build tools and machinery fit for specific purpose before and after exploration. This would give BP an edge over other firms where the area specific drilling and exploration units are divided separately. Furthermore the operational process may include training and development of safety awareness and skill development along with various other process inputs that builds the human resources for BP its strategic asset (Kinal, 2013).
The Human Resources is the near future is going to be its strategic asset. However, it is imperative to understand that the multinational nature of business needs the integration of cross cultural people who would share common values, work in a team, and collaborate to achieve business objectives. Thus the development of HR for BP would need a strategic approach towards cultural integration for people from various cultures. The skill of the people needs to develop with technical inputs to operate, maintain and further enhance productions, be it drilling or refining. The processes of HR acquisition to internal policies to keep an individual employee give their best performance at all time needs the Business Management’s attention. The recruitment of people not only with best skill sets but also having relevant exposure for different levels with a good attitude towards task assigned, fast learner and team player would be good for the future. These people would be technically handling the future sophisticated instruments so needs to have the skill-sets to manage and operate the same. Nevertheless, a good amount of experimentation in safe conditions within controlled environments makes the processes even better which may be a part of the innovation and research process for BP. This process may follow a reward policy to encourage such new process and technical innovations.
Career planning, training along with idea generation and exchange platforms like social media may be used to make the ‘employee voice’ be heard. An effective job design with all the elements of duties and responsibilities have to be communicated so that the team member as well as the team itself knows each other’s role and capacities. The cultural integration to bring in staffs of various culture, backgrounds. Since same socks don’t fit all so the application of individual specific solution would be a great idea. The impact of cultural integration needs a strategic approach to enhance people’s chances to grow, have mutual respect and a wholesome focus towards organizational goals. This motivated bunch of BP’s employees would be its strategic advantage over its competitors in the future which should give it a leaping edge over its competitors.
The boon of technology especially internet technologies have made the communication and real time data receipt for needed decision making has been far easier than it was a decade back. Another, aspect of this great technology is its ability to reach a wide number of people at the same time which in business content is a boon for internal and external communication in real time thus the technology may be used in various forms for the entire business performance. Not only for knowledge gathering but also as a tool of integration of various processes, IT has a very vital role. For exploration, transmission of geological surveys, mapping is also done via IT which gives the opportunity to imply them on field with better efficiency (Changhui and Ju, 2013).
Social media may prove to be a good asset while continuous feedback and training need as well as knowledge sharing is vital, where social media is a great tool to involve all. This would create a team bond and with good moderation, the scheme may also be a great tool for new joiners to get inducted to the processes. Furthermore a great advantage of social media use helps the business to have the larger audience or the social feedback about people’s view about BP and its social responsibilities (Jenkins, 2010).
Task 5: Conclusions and recommendations
Keeping in view the global presence of BP and further market development and employee management needs to have few pertinent strategic approaches. The competitive business development with value chain integration and human capital development approach may prove to be a great futuristic approach for BP. Considering the criticism it has faced along with court verdicts, negative social outlook towards their environment policies in past have coasted them both image and revenue. However, the entry of the business into other energy source development along with vertical integration of petro-chemical businesses also needs care and attention, as the motor lubricant business faces a great deal of competition. The new source of energy development initiatives in broader global scale while exploring stable rigs in stable economies needs to be the strategic for BP. Employee acquisition to development of Human Capital assets is the factor is one way the business may get an edge over other rivals. Along with this the cultural practices which suites the global mix of various people working in a coordinated fashion would need a strategic cultural integrity unique for BP and accepted by all. However the transition or the business model towards a futuristic solution would need the ‘change management’ where the focus is upon application of new strategic approaches in the present structure, keeping the staff sentiments in mind. The change is a matter of concern for many as the future is unsure and the resistance towards change is not an uncommon phenomenon. The apprehensions or the unknown nature of the resultant is one factor which makes people resist towards change.
However, the change management can be well introduced with the right balance of change introduction and time span of the introduction. To achieve harmonies change management in the business the process or the objectives that the business wishes to achieve may be introduced with the mutual agreement and involvement of employer and employees (Cameron and Green, 2004). The objectives of change, the goals of the business and how the new changes in structure and operational style can improve the business performance can be discussed with the employees where their suggestions and ideas can be incorporated to build a suitable change management program. However the time span of accomplishment of such change may differ from case to case due to the nature of change adopted (Raineri, 2011). Training and development, utility and benefits of change, tangible benefits of the change can all be a part of the process along with ideas and suggestion inputs from the employees side would facilitate such change management in BP for its future ahead.
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