BP, or, British Petroleum as the world knows it, is one of the giants in the oil industry. Initially known as the Anglo-Iranian oil company, BP took on the name of British Petroleum in 1954. Apart from selling fuel and lubricants for transportation, BP also provides petrochemicals and energy in the form of heat and light. Its scope of operation involves exploration and production of oil and natural gas, and also refining, producing, supplying, trading and marketing fuels.
BP operates across six continents: Africa, Asia, Australasia, Europe, North America and South America. BP has exploration and production activities in most of these continents. Apart from producing and selling fuel and lubricants, it also has chemical plants in a few nations. It is the leader of liquefied Natural Gas in China. BP Solar is the leader in installing solar panels in Australia. BP's global headquarters is located in London, and hence financial, legal, trading and other mainstream operations happen here. BP also has a center for Alternative Energy business in Houston.
This oil giant employs over 80,000 people across the world. Its sales and operating revenue stood at $297,107 million in 2010. Its proven oil reserves as of December 31, 2010 were at 18, 071 million barrels of oil equivalent.
BP also has a powerful retail presence in over 80 countries across the world. It sells high quality fuel, lubricants, Liquefied Petroleum Gas, Liquefied Natural Gas, installs solar panels, harnesses wind energy, and has forecourts that sell food and drinks, noteworthy feats accomplished through its 24,100 service stations around the world.
Being one of the powerful oil companies, BP has several opportunities it can work on, in order to remain a giant for posterity. The rising demand for petrochemicals and refined products in China, U.S investments pouring in for alternative sources of energy, and the increase in demand for natural gas in North America are some of the opportunities that BP can cash in on.
However lucrative the opportunities be, a company like BP cannot afford to focus only on the opportunities, and overlook the threat looming over its head. Depletion of resources in the North Sea, increasingly stringent environmental regulations, controversies, criticisms, instability in oil producing regions, site accidents, etc. are some of the threats that the company faces. If BP America is convicted in the Gulf of Mexico incident, it also faces the threat of debarment.
These threats are nothing compared to the breakneck competition that BP faces from companies such as Chevron Corporation, Royal Dutch Shell, Conoco Phillips, Totals S.A, and Exxon Mobil, who keep outperforming BP from time to time. BP's strategy of regaining the top seat involves simplification, but this strategy is not difficult for its competitors to master. Some of the other companies that compete with BP are Marathon Oil, Petron-Canada, BG Group, Repsol YPF, etc.
However, the threats and the competition have not stopped BP from supplying high quality fuel. They introduced a fuel with 'Invigorate' formula in 2008, considered one its biggest product launches. This fuel cleans the automobile engine better, reduces emissions and increases fuel efficiency. BP UK has displayed its uniqueness by tying up with Marks and Spencer to provide food and drinks to the motorists stopping over at the company service stations. BP's brands include Castrol, Wild Bean Cafe, Arco, Amoco and ampm.
BP plans to invest in alternate sources of energy, in order to meet the growing energy demands of the world, estimated to increase by 49% by the year 2030. Hence, it has set up an Alternate Energy business center at Houston, America, and is working towards developing low-carbon energy solutions like natural gas, harnessing wind power, solar energy and hydrogen power.
Despite having massive plans for the future, BP's future looks a little bleak at the moment. The Deepwater Horizon accident that killed 11 people and injured 17 others is under investigation. The company has also recorded losses in the first quarter of 2011 due to this incident. The company's stocks plummeted by 40%, and the company's value came down by $50 million.
The new CEO ,Bob Dudley, has promised to change the situation for the better, but the threat of debarment if convicted, and the peril of losing billions in revenue generated by the company activities in the US, is something that cannot be taken lightly.
- Will BP be able to withstand the test of time, and emerge from it unscathed?
- Will BP be able to do justice to the thousands of shareholders, who have invested their money and trust in it?
[...] The three basic pillars of corporate social responsibility stood as (Takala & Pallab p. Financial: The traditional pillar of businesses was to enhance profitability for its shareholders on long-term basis (Smith, 2003). Corporation worldwide aren't run as not for profit organizations. In 2013, the company launched US$8 billion share buyback programme to enhance earnings per share standing at 60.86 pence down from 135.93 pence in 2012 (Annual Report 2012). In 2012, the dividend per share was steadily increased to 20.85 pence i.e increase from fiscal year ending December 2011. [...]
[...] In 2012, the company divested noncore assets worth US$ 10.2 billion; with net proved reserves losses of 441 million barrels of oil equivalent. Uncertainties and poor due diligence of noncore asset divestment might result into loss of long term revenue mix and competitive advantage. Lower return on investment and long-term negative impact on operating margins attributed to acquired assets will hamper competitive advantage. Steep competitive pressures across price sensitive fuel retailing from supermarkets such as Tesco and Asda along with oil companies such as TOTAL, Power, Statoil in United Kingdom and other European countries might hamper net margins on long-term basis. [...]
[...] The company has steadily focusing on reducing dependency on its core market with new upstream projects in India, Iraq, Azerbaijan, Oman and Angola. Further, it aggressively divested its alternate energy business activity in United States; along with closure of low profitable service stations in United Kingdom and other European markets. Thus, overall BP Plc is steadily shifting focus towards its upstream business activity brand positioning and reduction of dependency on downstream segment on long-term basis. Although, the company has premium pricing point across EMEA fuel retailing segment; it controls dominant market positioning in core markets i.e. United Kingdom and The Netherlands. [...]
[...] Society: Majority of companies post scientific management has reduced emphasis on in-house and outside human capital as machines (Smith, 2003). The knowledge era emphasized the human capital importance for improving cutting edge technologies to enhance competitive advantage (Smith, 2003). Strategic investment towards tourism worth US$179 million in Gulf of Mexico along with research fund of US$184 million. The company plans to have gender diversity with 20% of female workforce by 2020. It has steadily increased employee training expenditure with initial capital consideration of US$500 million (Annual Report, 2012). [...]
[...] United Kingdom, vertically integrated oil companies such as Shell, Total and Esso are the closest peers on long-term basis (Oppenheimer & Co, 2012). Although, BP Plc is steadily shifting its focus towards upstream business activity; the company will be spending on acquisition of new fuel retail outlets in Austria, Bosnia and other Eastern European markets in next 2-3 years. Risks, challenges and Limitations BP Plc faces steep macro and micro risks due to its operations across 80 countries worldwide. The core risks are as follows (Annual Report, 2012): Low employee retention and higher labor disputes will hamper competitive advantage. [...]
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