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Effectiveness Of British Petroleum USA Business Model Canvas

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Question:

• Your business model canvas – Post-It notes discussion/observations (week 2)—summarize this area, but provide the initial canvas.
 
• Identification of theoretical/behavioral trends that you observe in the business model and organization (week 5)—summarize this, do not merely cut and paste.
 
• Discussion of appropriate theory, metaphors, and frames with which to describe your business model in operation, as well as to identify areas needing improvement and how to get there.
 
• Use of the Osterwalder/Pigneur text to evaluate and diagnose your organization’s business model, as well as an integration of the course materials into your writing and consideration.
 
• Recommendations for improvements identified using the canvas, theories, and assessment tools used in this course. What are the expected outcomes.
 
• Use eight scholarly sources besides our textbook (especially case studies) to undergird your assertions from peer-reviewed literature.
 
• Thoroughly familiarize yourself with the assignment specs and ask questions if you are unsure of expectations.

 

Answer:

Introduction

Organizations implement and adopt various types of strategic management tools and techniques to analyze their effectiveness and efficiency. In this regard, business model canvas is described as a strategic management tool that is widely used by organizations worldwide to visualize its core competencies and business components (Zott et al., 2011).  The main building blocks of a business model canvas are infrastructure, value propositions, customer relationships, resources, channels, cost structure and revenue streams (Teece, 2010). The present report is based on analyzing the overall effectiveness of the business model canvas used by British Petroleum USA. The previous assignments in this context has discussed the business model canvas used by British Petroleum USA and has elaborated on its designing, business strategies, metaphor and frames. This report summarizes the findings obtained from the previous work and provides a detailed evaluation of the company’s business model. Also, it identifies and recommends the areas of improvement in the company analyzed through business model canvas.

Evaluation of the Overall Effectiveness of The Business Model Used by British Petroleum (BP) USA

British Petroleum USA is an oil and gas company that is mainly involved in exploration, production, refining, trading and transportation of oil and gas in the USA.  The initially developed Business model canvas of the company illustrates the following building blocks:

Business Model Canvas of British Petroleum USA

Key Partners

·         Reliance Industries Limited

·         Anadarko Petroleum

·         DuPont

·         China National Petroleum Corp.

·         Conoco Phillips

·         Sempra Generation

·         Jeppesen

·         FMC Corporation

·         Petrofac JV

·         Faroe Petroleum

·         Sonatrach

Key Activities

·         Extraction of deepwater oil and gas

·         Operation of renewable energy business

·         Fracturing of unconventional gas and hydraulic

·         Development of oil sand projects

·         Exploration of oil fields in the Arctic

·         Marketing of automotive fuel

 

Value Proposition

·         Safety of workforce and communities

·         Respect for the laws and regulations

·         Excellence in disciplined management of operations

·         Courage to face difficulty

·         Teamwork for achieving the set goals

Customer Relationships

·         Understand customer needs

·         Improve offerings of product and service

·         Competitive and innovative customer experience

·         Customer satisfaction through service values

Customer Segments

·         Commercial and military airports

·         Individual customers

·         International and domestic vendors

·         Industrial institutions

·         Corporate organizations

Key Resources

·         Brands of Aral, BP and Castrol, ampm  and Wild Bean Cafe

·         Human resources -  79,800 employees

·         Petrochemical resources – 14.8 million tones

·         Financial resources – US$227.9 billion

Channels

·         Retail outlet

·         Direct distribution

·         Dealer channel

·         Service station

·         Convenience store

·         Fuel tanker

 

 

Cost Structure

·         Operational cost

·         Logistic cost

·         Human resource cost

Revenue Streams

·         Sale of oil and gas

·         Revenue from the convenience stores

It can be summarized as follows:

Infrastructure

Key Activities: The main activities of the company include production of oil and natural gas. It has also recently undertaken the innovative projects of developing oil sand and exploring oil filed in the Arctic. Also, the company has also recently focused on utilization of renewable energy sources for meeting the increasing energy demand.

Key Partners: The Company has established good partnerships with Reliance, Dupont, FMC Corporation, DuPont and many others to ensure its sustainable growth.

Key Resources:  As depicted from the business model canvas, the company has extensive resources to meet its operational and financial needs.

Offering

Value Proposition: The value proposition of BP reflects is values and opinions that distinguished it’s from the competitors. The company strongly emphasizes on safety of its workforce and the nearby communities to protect them from any negative impact of its operational activities. It has implemented effective risk management strategies to protect its stakeholders from any of its hazardous activities.

Customers

Customer Relationships: The Company focuses on improving customer relations through providing them high quality products and services.

Customer Segments: The customer segments of the company are distributed worldwide as reflected from its business model canvas.

Channels: The presence of numerous stores of the company attracts its customers to gain its products and services easily.

Finances

Cost Structure: The cost structure of the company as reflected by the model depicts that it has both fixed and variable costs in its cost structure.

Revenue Streams: The Company mainly realizes its sales from selling of oil and gas and revenue gained through its convenience stores.

 

Identification and Discussion of Theoretical/Behavioral Trends Observed in the Business Model of British Petroleum

Infrastructure Management: The business model canvas of BP reflects that it mainly emphasizes on investing large capital to extend its operational activities. In this context, economies of scale theory state that larger productivity of a form helps it to minimize its operational cost and thus enhance the profitability.  Thus, BP tries to attain economies of scale through extending its operational activities to serve large customer base and thus minimizing its cost structure. This helps the company to gain sustainable competitive advantage (Stampfl, 2015).

Customer Relationship Management: The business model of BP reflects that the main factor responsible for the sustainable growth of its business is achieving customer satisfaction. In this context, the theory of Customer Relationship Management (CRM) states that increased profitability and sales of an organization depend on its ability to retain and satisfy its customers (Leschke, 2013).  BP strives to achieve customer satisfaction through offering high quality and innovative products and services to the customers. The Company also believes in introducing changes in its product and services continually to meet the customer’s changing needs and expectations.

Business Strategy: The business model canvas of BP reflects that it tries to attain strategic competitive advantage through providing differentiation in all of its core component activities. In this regard, the core competency theory states that presence of multiple strategic resources and skills enables an organization to achieve a differentiated position in the market (Filet, 2013).  BP has established effective partnerships with several organizations in order to minimize the risk exposure and attain reliability in its operations.  The value proposition block of the company reflects that it implies by all the necessary laws and regulations in order to ensure its sustainable growth and development. Also, it emphasizes strongly on Corporate Social Responsibility (CSR) to protect safety to the workforce and all its stakeholders.  These all business strategies of the company help it to attain sustainable growth through achieving a strategic competitive advantage (Mason et al., 2015).

Organizational Metaphor: The Company largely focuses on achieving sustainable growth and development through paying utmost attention to its Corporate Social Responsibility (CSR) activities as reflected from its business model canvas. It provides a safe and harmonious working environment to the employees to improve their quality of life. Also, it places special importance on protecting all its stakeholders from its adverse operational activities. It is also presently emphasizes on investing in renewable energy resources to protect the environment from pollution. BP encourages teamwork to develop a morale and committed workforce enabling it to achieve its strategic objectives.

Organizational Frames: There are mainly four frames of the BP as illustrated by its business model canvas that is, structural frame, human resource frame, political frame and symbolic frame. Structural frames depict the organizational structuring, that is, division and synchronization of work activities for achieving the business objectives. The key activities block in business model canvas of BP illustrates that the company focuses on the principle of division of labor for enhancing its operational efficiency.  The company has a huge workforce and is strongly dedicated to provide them a safe working environment for ensuring their retention. The company has huge availability of skilled and trained employees that helps it to attain its organizational objectives.  The company has a strong political frame as it abides by all the laws and regulations imposed by the USA government on the oil and gas sector. It helps the company to gain support from the country’s government for exploration of oil. The last is symbolic frame developed from the culture and beliefs of an organization. BP place large importance on maintaining and providing a good cultural working environment to the employees that helps it to strengthen its brand image globally.

 

Use of the Osterwalder/Pigneur Text for Evaluation and Diagnosis of British Petroleum Business Model

Business Model Canvas was developed by Osterwalder and Pigneur in 2010 for demonstrating the value created and delivered by organizations to its customer groups (Gavrrilova et al., 2014). Osterwalder and Pigneur have stated that the main objective of business model canvas is to interlink the business strategies with its processes for creating and offering value to the customers. The business canvas model of BP has reflected that it has very well-aligned all of its strategic objectives and goals with the organizational procedures to provide valuable products and services to the customers. The different building blocks of the company are well connected with each other enabling it to offer optimum value to the customers. The major objective of a business model canvas is to gain an in-depth understanding of the value proposition of an organization that facilitates it to gain a sustainable growth (Grassl, 2012).  

Organizational success and survival depends on creating value for the customers and as such value proposition of a firm is directly related to the customer satisfaction. The key activities and resources of British Petroleum help it to create value for its target customers. The value created is delivered to the customers through the help of an effective distribution channel of BP as reflected from its business model canvas (Ching & Fauvel, 2013).  Value creation for customers help the company to achieve customer satisfaction and develop friendly and cordial relations with the customers. These in turn increases the loyal customer base of the company worldwide and also gain access to new customer groups through brand building. The company has achieved a good brand image in the oil and gas sector globally with the help of creating and delivering valuable products and services to its customers. The increased customer base of the company enhances the demand of its products and services thereby increasing its productivity. The production of larger amount of goods and services by the company enables it to reduce its operational cost. Thus, increased sales of the company and reduction in the cost structure ultimately results in enhanced revenue generation for BP. Thus, it can be said that all the component activities of BP are effectively connected with each other facilitating it to achieve sustainable growth and development (Dudin et al., 2015).

 

Identification of Improvement Required in Value Proposition Building Blocks of British Petroleum USA

British Petroleum is strongly dedicated and committed to protect its employees and communities from the negative impacts of any of its hazardous operational activities (Coyle, 2010). Environment protection is one of the main concerns for the oil and gas sector companies as their operational activities results in deteriorating the quality of environment. The operational activities of oil companies mainly cause air and water pollution thus negatively impacting the flora and fauna of its nearby communities. The oil and gas companies are currently implementing and adopting measures for protecting the environment from pollution. The main strategy implemented by the oil and gas companies in this regard is investing on renewable sources of energy thus ensuring environment protection (Googins et al., 2016).  

The value proposition of British Petroleum mainly includes safety issues relating to environment and communities. However, extraction of oil and gas from non-renewable sources of energy such as coal result in causing massive pollution to surrounding air and water bodies (Spijker, 2014). The oil spill of British Petroleum in the Gulf of Mexico is regarded as one of the most environment disaster till the date. It has resulted in the death of numerous flora and fauna such as birds, fish and shrimps. Also, the oil spill has caused the death of approximately 11 employees of the company. In addition to this, the oil spill has resulted in causing huge loss to fishing and tourism businesses. This all indicates that British Petroleum need to needs to devise effective business strategy for protecting the environment and communities from the negative impacts of its operations (Sherwall, 2015).

 

Recommendations for Improvements and Expected Outcomes

The use and exploration on renewable sources of energy such as wind, biomass and solar energy is recommended to British Petroleum for meeting energy demands. This will help the company to minimize the operational risks such as oil spill and thus ensuring environment protection (Beyazay, 2015). The use of alternative sources of energy will result in reduction in the emission harmful substances such as sulphur dioxide and carbon monoxide responsible for causing global warming. Also, it will help in minimizing the emission of greenhouse gases such as carbon dioxide that is mainly released from extracting oil and gas from non-renewable sources such as coal. The reduction in emission of greenhouse gases will minimize air pollution thereby protecting the environment (Coyle, 2010).  

British Petroleum needs to implement and adopt the use of renewable sources to protect the environment and also for ensuring safety of its communities. The company is, however, taking initiatives to invest in renewable energy sources but still need to place more emphases on the use of such resources (Darby, 2016). The major oil and gas companies around the world have started exploration of renewable sources such as wind and solar for producing energy. However, BP stays behind from many of its competitors in the use of renewable resources of energy. The brand image of the company is negatively impacted by the oil spill of 2010 and this has also resulted in reduction of its sales and revenue generation (Sherwall, 2015). On the basis of all this, the company is suggested to explore and invest in the alternative sources of energy for production of energy for improving its value proposition.

The company is recommended to adopt the use of renewable sources also to sustain its economic growth and development. Renewable sources of energy are regarded as naturally replenished resources and as such cannot get exhausted in due course of time. On the other hand, non-renewable sources of energy are exhaustible resources that cannot get replenished naturally in due course of time (Beyazay, 2015). British petroleum is largely dependent currently on the exploration of non-renewable sources of energy for oil and gas production that can impede its sustainable growth. Non-renewable sources of energy such as coal are continually getting depleted due to their heavy consumption across the world for meeting growing energy demand. These resources once depleted cannot get replenished and as such heavy dependence of BP on the utilization of non-renewable resources can negatively impact its future growth and development (Coyle, 2010).  Thus, British Petroleum needs to make huge investment in renewable energy sector for ensuring its sustainability.

The man barrier faced by the oil and gas companies in utilization of renewable sources for energy production is requirement of huge investment (Coyle, 2010).  The company has to invest largely for developing infrastructure and technology to harness renewable sources to produce energy. In this context, the company needs to strongly focus on adoption of new and innovative technologies facilitating it to harness energy from alternative sources. British Petroleum acquires good support from USA government and as such can gain funds easily from the government authorities for acquiring new technologies and systems to support its renewable energy project. It has to continually upgrade and invent new technologies to provide quality products to the customers with minimum environmental damage (Googins et al., 2016).

The company has to invest largely on accessing renewable energy from sources such as wind and solar through acquiring new technologies and systems. However, the investment will be largely outweighed from the numerous benefits that the company will achieve through the use of such alternative sources in energy production (Spijker, 2014). The use of renewable source of energy in the key activities of British Petroleum would not only support the development of its value proposition but will also help in the sustainable growth.

Conclusion

Thus, it can be summarized from the business model canvas of British Petroleum USA that all the building block activities in the model are well connected with each other. This helps the company to streamline its business processes and procedures and thus achieving high sales and profitability. The company is continually investing in technological development for sustaining its growth and development. The major area of improvement as analyzed through business model canvas is safety issues relating to environment and communities. In this context, the company is recommended to adopt the use of renewable sources to protect the communities and the environment from the adverse impact of its operational activities.

 

References

Beyazay, B. (2015). The Nature of the Firm in the Oil Industry: International Oil Companies in Global Business. Routledge.

Ching, H. & Fauvel, C. (2013). Criticisms, Variations And Experiences With Business Model Canvas. European Journal of Agriculture and Forestry Research 1(2), 26 -37.

Coyle, W. T. (2010). Next-Generation Biofuels: Near-Term Challenges and Implications for Agriculture. USA: DIANE Publishing.

Darby, M. (2016). BP admits it has repeatedly underestimated renewables. Retrieved August 10, 2016, from https://www.climatechangenews.com/2016/02/10/bp-admits-it-has-repeatedly-underestimated-renewables/

Dudin, M. N. et al. (2015). The Innovative Business Model Canvas in the System of Effective Budgeting. Asian Social Science 11 (7), 290-296.

Filet, E. (2013). Conceptualising Business Models: Definitions, Frameworks and Classifications. Journal of Business Models 1 (1), 85-105.

Gavrrilova, T. et al. (2014). Modern Notation of Business Models: Visual Trend. Foresight-Russia 8 (2), 56–70.

Googins, B. et al. (2016). Beyond Good Company: Next Generation Corporate Citizenship. Springer.

Grassl, W. (2012). Business Models of Social Enterprise: A Design Approach to Hybridity. ACRN Journal of Entrepreneurship Perspectives 1(1), 37 – 60.

Leschke, J. (2013).  Business Model Mapping: A New Tool to Encourage Entrepreneurial Activity and Accelerate New Venture Creation. Journal of Marketing Development and Competitiveness 7(1), 18-26.

Mason, H. et al. (2015). Trend-Driven Innovation: Beat Accelerating Customer Expectations. John Wiley & Sons.

Sherwall, P. (2015). BP oil spill: Five years after 'worst environmental disaster' in US history, how bad was it really? Retrieved August 10, 2016, from https://www.telegraph.co.uk/news/worldnews/northamerica/usa/11546654/BP-oil-spill-Five-years-after-worst-environmental-disaster-in-US-history-how-bad-was-it-really.html

Spijker, A. (2014). The New Oil: Using Innovative Business Models to turn Data Into Profit. Technics Publications.

Stampfl, G. (2015). The Process of Business Model Innovation: An Empirical Exploration. Springer.

Teece, D. J. (2010). Business Models, Business Strategy and Innovation. Long Range Planning 43, 172-194.

Zott, C. et al. (2011). The Business Model: Recent Developments and Future Research. Journal of Management XX (X), 1-24.

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