Introduction

The oil and gas industry is regarded as one of the most important industries in ensuring development of mankind. The journey of British Petroleum began with the discovery of oil in Persia during 1908. The organisation has always stayed updated with the changes in the business environment and has evolved to ensure that the business is striving towards a sustainable future. The current CEO of the company is Bob Dulbey and the headquarters of the Organisation is in London, UK. The company is the 8^th largest oil and Gas Company in the world and they deliver heat, light and mobility products and services to consumers all around the world. The company revenue earned by the company in the FY 2016 is US$115 million (Bp.com 2018). 

British Petroleum is an organisation that is proud of the tradition and heritage of the company. The organisation over the years has evolved and has established itself as a strong contender in the energy sector. Today the company stands to be the 8^th largest company in the industry. British Petroleum is proud to serve the consumers around the world with their energy products and services which have been processed with the help of latest and modern technology. The organisation does not have specific mission and vision statement like other companies but there are three statements of the organisation that clarify the mission and vision. British petroleum operates on several values and principles which drives the mission, vision as well as the objectives of the company (Bp.com 2018). The values and the principles of the organisation are responsible for the sustainable competitive advantage as it creates an image of the organisation which sets it apart from its competitors. Though the company is known for changing with the changing dynamics of the business environment, the company has focused its values on five aspects. Some of the values that are followed by the company are safety, respect, excellence, courage and team.What the organisation stands for reflects in these values coupled with their business model that reflects the intention of the company and help the stakeholders develop a bonding with the goals and objectives of the organisation. The industry in which the organisation operates has been subjected to several criticisms for impacting the environment negatively. Hence, focus of the company has been channelized in to attaining sustainable future and developing a valuable relation with the consumers (Bp.com 2018).

Some of the key constituents which are necessary for the management of the organisation to consider while formulating the mission and vision statements are: firstly the consumers and the interest of the consumers, then the product or service that is offered to the consumers form the company and lastly the value of the organisation. It should also state the current status of the organisation. These aspects bind the values that the enterprise follows while operating the business and it is very important as it helps create a company reputation which in the long-run become an asset for the organisation (Rajasekar 2013). From the value statement we can conclude the mission and vision of the company as follows:

Mission of the company

To provide the consumers with energy efficient products and services

Vision of the company

To make an important contribution towards sustainable future

Objectives of the company

• To provide the consumers with the best products and services at reasonable price.
• To create and innovate in order to meet the requirements of the customers
• To ensure sustainable development by supporting and creating sustainable measure to improve the impact the organisation have on the environment
• To enhance the standard of living of the community in which the organisation operates

The oil and gas industry is a heavily competitive market and hence it is very important for an organisation to create its own position in the market that is different from the other competitors (Hattangadi 2015).There are several tools that can be employed by the company in order to gain competitive advantage like diversification and cost leadership, but the mission and vision statement of an organization helps create a different image of the organisation in the minds of the consumers as well as other consumers (Rajasekar 2013). Sustainability of an organisation is based on the focus of channelizing the resources of the organisation towards people and planet. For example: the mission and vision statement of British Petroleum that is analyzed clearly states the approach of the organisation is based on the sustainable measures concentrating the focus of the business operation in the improvement and development of the process in which the business operates keeping up with the dynamics of the business environment as well as keeping a parity with the sustainable measures (Hattangadi 2015). The company recognizes the responsibility it has towards the society and the potential it has to change the energy sector this aspect sets it apart from the other competition of the organisation (Visniski 2013).

Scenarios and Industry Analysis

2.2. By employing relevant data from the case and your own research, conduct a five forces analysis of the oil industry. What do you conclude about that industry’s attractiveness and which of the forces is liable to change over the next 24 months.

The dynamics of the macro and micro environment in which an organisation operates critically impacts the policies and decisions made by the company. While creating policies or developing new ideas of products or services the factors of the business environment should be taken in account and the policies should be aligned with all these factors in order to ensure a continuous development of the organisation in the industry (Dobbs 2014).Furthermore, there the macro analysis help in understanding the industry better as it gives a holistic approach towards the micro analysis as well. With the help of Porter’s Five Forces framework the micro environment of the pharmaceutical industry can be analyzed. Pharmaceutical industry is one of the largest industries in any country and is characterized by high-profit margins and high sales volume. The five force analysis will give an idea about the competition in the industry and thereby show how each of the forces impact positively or negatively (Dobbs 2014).

Threats of new entrants: In order to start a new venture in the oil and gas industry a huge amount of initial capital is required. The importance of this threat depends upon the hurdles the organisation has to face while entering the industry, which is high in this case to entry. A new organisation in the industry is regarded as the threat to the profitability as new competition enters the market. There are heavy risks associated with low return on investment if the organisation fails to establish itself. The high profit margins of the organisations that operate in this industry may seem lucrative but there are equal amount of risks and barriers in entry associated with the industry. Hence, it can be said that there is a low risk of new companies to enter the market in US (Dobbs 2014).

Competition in the market: The competition in the industry is an indicator of the market share and the profitability rate of the organisation active in the industry. The level of competition among the organisationdepends upon some of the aspects such asthe demand for the product or service, amount of competitors, product differentiation, economies of scale and relation in between the fixed and the variable costs of the companies. There are very few organisation in the world that operate in the industry, these companies hold a strong position in the market and are responsible for the changes in the industry. The companies that are operating in the market are usually well established organisation that has good reputation in the international market as well. Some of the major players in the industry are from the global market are: Royal Dutch Shell, Sinopec Shanghai Petrochemical, PetroChina, Chevron Corporation (Yunna and Yisheng 2014).

Bargaining power of buyers:  In the oil and gas industry the prices of the product is settled in the international market and this depends upon the global demand and supply for the energy that is supplied.Hence it can be said that the bargaining power of the buyers or the consumers in this industry are low.On the other hand, the existence of the competition in the market gives the buyer power to switch the company as most of the companies in this industry also provide varied services the prices of which is not set according to the international standards (Yunna and Yisheng 2014).

Bargaining power of the supplier: For a company that operates in the energy sector the suppliers can be divided in segments which are: Engineering suppliers, field improvement management, organisational management, pipeline installers, quality specialists researchers, and oil fields suppliers. The supply chain in this industry is varied and complex in nature. this fact owes to the conclusion that the bargaining power of the suppliers can be said to be low as there are several suppliers options for the organisation (Yunna and Yisheng 2014).

Threat of substitute products: Renewable energy sources like solar energy and wind energy is and bio-fuels like ethanol, green diesel and biogas are some of the substitute to the petroleum products that are offered by the companies operating in this industry. These substitutes can take away from the profitability of the organisation and hence are considered to be a threat (Dobbs 2014).

The energy industry is already characterized by high profit margins which is one of the major reasons of an industry being attractive. The roles of the buyers and the substitute products are going to become more in the next 24 months as immense research and development in innovating renewable sources of energy is taking place, there is also demand for clean energy as people are becoming more and more aware of the climatic changes that are impacting the environment drastically.

Resources and capabilities

3.1. Evaluating the bases of BPs strategic capabilities by utilizing the VRIO criteria. Key strategic capabilities that provide or could provide BP with a sustainable competitive advantage and reasons

British Petroleum is one of the six oil and gas supermajors in the global market. British Petroleum is number sixth in market capitalisation and number fifth in revenue generation in oil and gas sector. Primary operations of British Petroleum include an upstream segment that insists them to do exploration and production of crude oil and gas. Downstream segment of British Petroleum’s operation is related to global oil supply, products and service-oriented activities. Organisational resources are the assets that must be available to the organisation to use in the production process (Chatzoglou et al. 2017).

Organisational resources can be combined and transformed to make the products finished, these resources are financial, physical, human, technological and reputational (West et al. 2015). BP’s resources support the existing activities and value chain activities that form the organisational core competency (Roberts and Aharon 2014). The resources and competency of BP can create a competitive advantage for the organisation. The obvious resources of BP are physical assets, plants and equipment, R&D laboratories, factories, natural resources, office buildings, raw materials and work-in-progress projects and others. BP’s human resources comprise with diverse individuals who have skills in doing various activities, functions and tasks within the organisation. BP recruits many workers on contract basis on long and short-term basis. BP has been facing the issue of capital loss when the workers leave the organisation. Current employees of British Petroleum are 74,000 (Dutrenit 2017). BP has good financial capital and its revenue touched US$183 billion. Operating income of the British Petroleum was US$ 3 billion. British Petroleum has many intangible resources like brand names, customer trust, copyrights and intellectual property rights and reputation in the market. Intangible resources of the organisation are high in the industry as it has sheer variety of potential resources. The value of resources lies in the outputs that they offer to the organisation and different combinations of resources offer the best outputs to the firm.  

 A firm’s capabilities can be defined as the ability to use human resources, financial resources, quality, number, material and physical resources. Financial resources like assets, liabilities, money and credit can play an important part to have the best output from the resources. As opined by Wagner and Hollenbeck (2014), the best use of available resources can be made through require capabilities. Capabilities of BP are hidden in technological innovation, effective product development process and high-level marketing skill and leadership skills (Chatzoglou et al. 2017).

VRIO Framework:

Table: VRIO framework

(Source: Self-developed)

Fit for future:

Oil and gas industry is changing as renewable resources are getting less costly and abundant. BP is trying to meet the demand for non-renewable resources and they are taking the strategy to lower carbon future. The best competency of the British Petroleum is a logistic network of the organisation. This network helps the BP to have effective transport and global supply. Another core competency of the BP is cost field as this organisation has been operating in most productive fields and it has a partnership with other oil and gas companies (Mao et al. 2016). Focusing on the environment can provide a competitive advantage as now energy is produced in a different way for a sustainable environment. BP was the first company to start the marketing campaign towards the environment-friendly customers (Yusuf et al. 2014).

Shift to gas and advantaged oil in upstream

 BP has been investing more on the large-scale gas project in core basins. This has been providing opportunities to select more regions to collect natural gas to optimise the earning to have long-term value. Natural gas has the potential to increase earning within the short-term frame. In addition, the capability of the organisation has been maintained in the extraction of oil to evolve in consumer paradigm. This new diversification strategy can help the organisation bring competitive strategy.

Market-led growth in downstream

British Petroleum has objective to build competitively advantaged businesses in manufacturing and expand the marketing. BP has ownership of many of the oil field and BP has been taking the global oil exploration strategy. BP strengthens the competitiveness of petrochemical plants and refineries. BP grows fuel marketing and lubricant fuels. BP has the capability to manage the corporate culture and change. BP has proprietorship of many of the oil refineries and crude oil mines. BP has made its merger with Amoco and they both made the largest multinational oil company (Asiedu 2015). BP has ownership of many of the oil field and BP has been taking the global oil exploration strategy.

Business and Corporate Strategies

Suggesting how BP can use its competitive strengths to create a sustainable competitive advantage in the competitive global competitive environment.

In order to understand the position of the company in the business environment it is essential to understand the strengths, weakness as per the internal business environment as well as the opportunities and threats based on the external business environment. The business environment discussed above provides an organisation both advantages and disadvantage in terms of growth and development. TWOS analysis is being used in this assignment to gather insight regarding the scope that the organisation has as well as the barriers that it has to overcome in order to gain competitive advantage (Wheelen and Hunger  2017).

Strength opportunities

British Petroleum is one of the first organisations to develop a business model that revolves around sustainability and conserving the environment, the company has the scope and resource to diversify the focus towards renewable energy source, as there is a continuous growing demand for clean and reasonably priced energy source. British Petroleum and other organizations in the industry have undergone criticism for their impact on the climate and environment. Developing an alternative will also add to the goodwill and good reputation (Mao et al. 2016).

Strength threats

The objective of British Petroleum to develop a sustainable future ensures that the organisation leverage strategic technologies (Yusuf et al. 2014).To be able to do this the organizations continue to exploit oil and gas reserves that which has reached its limit.In order to reduce the environmental footprint and research on new energy reserves the company has to employee significant financial investment which is also at risk as there is uncertainty and risks associated and no certain return on investment(King2015).

Weakness opportunities

The substitutes that are discussed above in the report are a threat as well as a product diversification idea that the company can implement. But there are certain barriers to the growth and expansion of these renewable concepts as well. The first weakness of the concept is the practicality of the resource followed by viability, scalability, and compatibility. Therefore there is a question on the rate of return on investment in the long run (West et al. 2015).

Weakness Threat

The major threats of British Petroleum are the competition in the market and the achievement of the sustainable plans that are organized by the company. The weaknesses of the other organisation are important in this case as it ensures opportunities for the company.

Business level strategies

The business level strategy of British Petroleum can be differentiation strategy; therefore BP needs to provide a unique feature in quality, design and reliability. If an organisation provides a unique feature, the consumers are willing to pay the extra price for this. BP needs to provide reliable and quality products with differentiated features to achieve market positioning to gain competitive advantage. British Petroleum has started working on biofuels in Brazil where they operate most advantaged and sustainable feed-stocks to create both low carbon power and low carbon ethanol. BP has been into the project of onshore wind energy near the US (King2015).

Corporate level strategies

Market penetration: BP management has to penetrate the new market using the strategic alliance. They can tie-up with another oil and gas company in order to extract crude oil. BP can open new subsidiaries in potential places to serve the existing customers as they are valued.

Market development: BP management can enter a new market with light asset strategy. The product will be same as they provide oil and gas and the new market will be Asian countries. The organisation can enter the markets like Bangladesh where the market needs fuel for four wheelers and CNG gases. BP can renew management contracts in most of the international and domestic market in order to develop the market (King2015).

Strategic choice of British Petroleum

BP needs to focus on climate change issue as greenhouse gas emission can damage the environment. BP is working in oil and gas industry and BP is emitting 1290 million tonnes of greenhouse gas (Wheelen and Hunger 2017). Therefore, BP is shifting the attention towards the renewable and it is a credible decision from management. In the market for oil and gas, the ever-growing demand for clean and affordable energy is seen. In order to gain competitive advantage, BP needs to leverage strategic technologies in order to intensify the extraction in existing fields. BP should reduce environmental footprint in order to invent new hydrocarbon reserves (Wheelen and Hunger 2017).

Conclusions

It can be concluded form the above discussion that British Petroleum is an organisation that focuses on innovation and development to grow and expand the business. The organisation has over the years survived many ups and downs in the course of operation. Some of the major threats of the company are the competition from the substitutes as well as other competition in the market. The organisation has opportunities and scope to improve and overcome the barriers with the help innovation and input in the internal business resources as well as keep up with the dynamics of the external business environment.

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